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ford assembly plant.JPG Ford
Automakers have stopped vehicle production at facilities such as this one, Ford's assembly plant in Kansas City, MO.

ALG Offers Best, Mixed and Worst-Case Auto-Sales Predictions

“We cannot stress this enough, automotive sales will return,” says ALG’s Morgan Hansen.

U.S. auto sales are expected to drop below 14 million because of the coronavirus crisis, ALG, a subsidiary of TrueCar, predicts.

“While events continue to unfold daily, it seems the most likely outcome is vehicle sales landing in the mid-13 million range for 2020,” says Eric Lyman, ALG’s chief industry analyst.

That compares with five straight previous years of light-vehicle sales of more than 17 million annually.

eric lyman  (002).jpgALG offers varying predictions based on three different scenarios.

The first is “optimistic,” with sales of 15.3 million. It’s based on movement restrictions lifting by May 1 and stimulus packages that are deployed and result in a positive impact. (Eric Lyman, left)

Next is “mixed” with sales of 13.2 million. That forecast is predicated upon multiple social-distancing periods limiting outside activities, a supply disruption due to auto production stoppages (all major automakers have suspended production) but also positive impacts of potential stimulus packages.

The worst-case situation (which ALG calls “cautious”) foresees sales of 11.2 million. That would occur in a situation of ongoing social distancing and limited out-of-home activity through summer, a prolonged downturn, limited success of stimulus packages and increased unemployment throughout 2020.

All scenarios are absent severe impacts and “speculative pessimism” from:

  • Widespread supply chain or vehicle production disruption.
  • Prolonged social distancing beyond six months.
  • Prolonged closure of auto dealerships beyond 45-60 days.
  • Delayed or ineffective stimulus packages.
  • Significant and sustained declines in macro-economic fundamentals (demand).

But ALG tries to stay positive.

“We cannot stress this enough, automotive sales will return,” says Morgan Hansen, ALG’s vice president-data science. “The aging U.S. vehicle fleet and growth of the millennial market are underlying pillars of strength in mid to long-term auto sales. “Natural replacement demand remains steady at roughly 15.5 million vehicles per year. Sales below this figure are not ‘lost,’ but merely deferred until we see a return to our daily routine.”

Lyman adds: “Online shopping and digital retailing will play a critical role in mitigating the drop in vehicle sales. Automakers are already rolling out innovative incentive products to stimulate consumer demand, but the industry must iterate on existing sales practices and become more accommodating to shoppers in a ‘stay at home’ environment.”

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