The California New Car Dealers Association is recommending its members close 1,400 showrooms across the state to comply with the state's indefinite stay-at-home order and closure of nonessential businesses to slow the spread of the coronavirus.
The move, if followed, could put thousands of the nearly 140,000 people employed at California dealerships temporarily out of work through layoffs, furloughs or terminations.
"We can assume there'll be a lot fewer people working in auto sales very soon than there were last week or last month," Brian Maas, president of the California dealers association, said Monday.
On Tuesday, dealer associations in states including Wisconsin and Maryland sent out notices that dealership sales operations in their states could remain open under their respective state stay-at-home orders.
The Wisconsin Automobile and Truck Dealers Association, in a statement, said “Wisconsin dealers retain essential business status for sales and repairs.” The tweet links to Gov. Tony Evers’ order that lists exceptions to businesses that need to close such as “auto and motorcycle supply, repair and sales.”
The Maryland Automobile Dealers Association on Tuesday said that all auto dealership departments can remain open, according to a post on its website. The post links to updated guidance from Maryland Gov. Larry Hogan.
And it's a pattern likely to play out across at least 16 states whose governors have issued various stay-at-home orders and closed nonessential businesses. In most cases, auto service and repair and parts supply have been deemed essential, meaning dealership service departments can continue to operate. A few states have temporarily banned dealer sales outright.
The California association last week was left searching for answers after more than a dozen counties and municipalities in the state issued their own orders closing nonessential businesses before Gov. Gavin Newsom on Thursday issued a statewide stay-at-home directive. It wasn't immediately clear whether dealerships were deemed essential under Newsom's order.
Late Sunday, the California association sent an alert to members after consulting with lawyers that read, "Dealers should not continue operating open, traditional in-person sales departments."
The alert said that the statewide order "does not specifically allow vehicle sales, so there is risk if dealers continue vehicle sales in California."
But Maas said the association believes dealers can operate a "skeleton crew" to complete certain immediate transportation sales such as a vehicle coming off lease.
"There are going to be some transactions that need to occur, and it's our view that as long as the dealers are respective of the order," those can continue, Maas said.
Some dealerships have opted to shut completely such as CarMax Inc., which has closed 27 stores in the state.
CarMax now has about one-third of its stores closed nationally. The used-vehicle retail giant increased its national store closure count by 30 on Tuesday. CarMax said 75 stores are closed for varying periods of time in 16 states. New closures on Tuesday were announced in Connecticut, Delaware, Illinois, Kansas, Kentucky, Louisiana, Massachusetts and Texas, the company said in a news release.
Risk avoidance
The California association recommends minimizing face-to-face transactions and that dealers ramp up vehicle home delivery and online sales.
But the association warned dealers there is still some risk.
"Although dealers have a good-faith basis to continue limited vehicle sales, it is still possible that local or state law enforcement may shut down such operations," according to the alert.
Across the country, in states such as Massachusetts — where Gov. Charlie Baker on Monday ordered the closure of all nonessential businesses' physical locations as of noon Tuesday until April 7 — state dealers associations are seeking clarity on certain sales. Automotive repair and maintenance facilities are deemed essential and can continue operating.
Robert O'Koniewski, executive vice president and general counsel of the Massachusetts State Automobile Dealers Association, told Automotive News on Monday that he is advising the state's 425 franchised dealerships that sales showrooms should not operate normally, though service can continue.
But the association believes there is room for limited sales opportunities in certain situations, he said. O'Koniewski said those scenarios could include customers who complete much of a transaction digitally but need to sign paperwork and take delivery of the vehicle in person, customers whose vehicle repairs will cost more than their vehicles are worth and want to instead buy a new vehicle and customers whose vehicle leases are expiring.
O'Koniewski said he has asked Baker's office for clarification on those situations.
In those limited sales windows, "I don't see that being any different than, I order a pizza and I go to pick it up," he said.
Lindsay VanHulle contributed to this report.
