The novel coronavirus is expected to deal a heavy blow to the auto industry's U.S. sales numbers for March, but there is reason for optimism amid the uncertainty: Most of the lost customers will eventually come back.
Analysts say demand will be bottled up for now. The key question is how long it will take for life to get back to normal as restrictions in various markets keep consumers away from dealerships. J.D. Power said 25 states had enacted stay-at-home or essential-business mandates as of March 25 that affected 199 million people, or 60 percent of the U.S. population.
The industry is "far better prepared" to weather this crisis, and "is in a healthier position, after experiencing the 2008-2009 Great Recession," LMC Automotive said.
"There are some people that are going to defer their purchase," Eric Lyman, chief industry analyst for ALG, told Automotive News. "We see there's so much data present that tells us that the majority of these sales aren't going to be lost. They're simply going to be deferred to a period of more stability and economic confidence."
As automakers wait for that confidence to return, they will have to withstand a rough patch that includes the suspension of most North American production and the closure of some dealership showrooms.
Automakers are to report March sales, or first-quarter sales for those companies that no longer release monthly numbers, on Wednesday, April 1. Edmunds sees sales falling 31 percent in March for General Motors and Ford Motor Co. and 28 percent for Fiat Chrysler Automobiles. Toyota, Edmunds says, could see a 36 percent decline, while Honda dips 42 percent and Nissan drops 46 percent.
Analysts watched sales crater as March went on.
J.D. Power said retail sales stood at 543,000 through March 22, a 19 percent dip from its baseline expectation. For the week leading up to that date, the company said it saw sales fall on weekdays before a bigger plunge over the weekend. Sales came in 43 percent below expectations that Saturday and 64 percent lower Sunday.
Retail sales for the week were down 35 percent from J.D. Power's forecast.
Before the virus outbreak, J.D. Power projected March sales of 1.48 million units, a 0.5 percent drop from a year ago. It now expects just 669,000 to 754,000 sales for the month.
ALG has gamed out several scenarios, resulting in 2020 U.S. sales coming in as high as 15.3 million or as low as 11.2 million. Lyman said the scenario he expects falls in between, at 13.2 million units.
Edmunds is forecasting a seasonally adjusted, annualized selling rate for March of 11.9 million.
"We've got a sales decline that is well in excess of any traditional economic impact," said Thomas King, president of J.D. Power's data and analytics division. "So there are consumers who want to buy, have the ability to buy, but are not able to, so we are going to see pent-up demand. What is unclear right now is what is going to be the economic environment in the second half of the year?"
King said used-vehicle demand is just as bad, if not worse, than that for new vehicles. In addition to few consumers buying them, King said dealers are reluctant to acquire more used inventory from wholesalers. There is potential for discounts on used models to increase, he said.
While used-vehicle prices are holding steady for consumers, J.D. Power found auction pricing dipped 7 percent, or about $1,000, for the week beginning March 16. Lower used-vehicle prices could cause a ripple effect that strains consumers and retailers.
"This is an area of additional risk for many industry constituents, because if used-vehicle prices do dip, that will hurt retailers' ability to generate profits on used vehicles," King said. "In a recovery phase, it'll hurt consumers' ability to buy new vehicles because their trades will be worth less and will also potentially impact owners of large fleets if when they send vehicles to auctions, the amount of money they obtain is low."
The COVID-19 crisis could change how some consumers look to buy vehicles. Kerri Wise, TrueCar's vice president of industry relations and education, said people are more open to remote services these days as they practice social distancing.
Wise said once they get a taste of digital retail technology that moves more of the buying process online, "Dealers are going to have to adapt to those new expectations."