June auto sales will defy bragging about but at least they’re on an upward trend, although July deliveries aren’t expected to set off firecrackers either.
As this month closes, sales have improved “but not by much,” says Charlie Chesbrough, senior analyst at Cox Automotive, which owns several digital companies serving the industry.
Supply constraints – especially of popular pickup trucks – may limit market gains achieved since the trough month of April when the economic effects of the coronavirus pandemic hit the auto industry hard.
Lower inventory combined with an apparent pull-back of generous financing incentives automakers had offered to jumpstart weak spring sales will keep June U.S. light-vehicle sales from showing strong sequential growth, “much less rising to anywhere near pre-Covid-19 levels,” says Haig Stoddard, senior analyst for Wards Intelligence.
Wards Intelligence expects June’s seasonally adjusted annual rate to total 12.9 million units. (See chart below.) That compares with May’s 12.2 million and April’s awful 8.7 million.
Moreover, it is well below June 2019’s 17.2 million-unit SAAR and the 16.8 million deliveries that were predicted, pre-pandemic, for 2020.
With automakers still ramping up production after closing nearly all plants during the entire month of April, inventory entering June reached a 9-year low for the period, Stoddard says.
Playing a role in tamping down auto sales to long-time lows are extensive job and wage losses related to the pandemic, he adds.
Unemployment reached about 14% in May and buyer confidence was “yellow” on a green-yellow-red basis, says Jonathan Smoke, Cox Automotive’s chief economist. Then again, “it could have been a lot worse,” he adds, noting it’s still relatively easy for consumers with good credit to get an auto loan. (That’s not the case in the subprime sector where lenders have retrenched in recent months.)
Wards Intelligence forecasts raw light-vehicle volume in June to total 1.1 million units. That’s a daily selling rate over the month’s 25 selling days of 43,800, 24.6% below like-2019’s 58,064 over 26 selling days. June 2019’s total volume was 1.51 million units.
“With June 30 inventory expected to remain relatively close to May’s total, sales are not expected to get much stronger in July from June,” Stoddard says. (Stoddard, left)
The pandemic-related bottoming out of automotive sales occurred the week of April 20 when deliveries were 50% off, according to Cox Automotive data.
“Since April, demand has been strong, but supplies are limited because of factory shutdowns,” Chesbrough says. “How long will this inventory last?”
He cites a cliff-diving chart showing supply going from a peak of 3.5 million in April to 2.6 million in mid-June. Days’ supply for the same period went from 180 days to about 70. The highest days’ supplies are for hybrid/alternative-energy vehicles and subcompact CUVs. The lowest are for compact cars, compact CUVs and pickup trucks.
Chesbrough notes that last year retail sales were down, but strong fleet sales helped the industry sell more than 17 million light-vehicles. That’s flipped this year, with fleet sales off dramatically as businesses and car rental agencies delay or back off volume purchases.
“Fleet is likely to remain suppressed throughout the year,” Chesbrough says.
Year to date, retail sales are off 20.2%; fleet, 28.2%; and retail leasing 26.9%, according to Cox data.
Automakers’ incentives spurring consumers to purchase vehicles challenge retail leasing, which Cox Automotive predicts will drop from nearly 30% to 24% this year.
The company forecasts total 2020 new-vehicle deliveries of 12.9 million units and used-vehicle sales of 34.1 million.
Chesbrough calls it “a topsy-turvy market” with “so many moving parts.”
Adds Mark Schirmer, Cox Automotive’s director-public relations, notes: “It’s challenging to make predictions this year.”