Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Unused rental cars fill the Dodger Stadium parking lot in Los Angeles on April 7, 2020.

Lucy Nicholson/Reuters

Collapsing demand from rental car companies, corporations and government agencies has sapped U.S. auto sales during the coronavirus pandemic and a recovery will likely be slow, threatening auto workers whose jobs depend on fleet sales.

Weak fleet orders are expected to hurt June sales, which automakers will report on Wednesday. Cox Automotive forecasts fleet sales will fall nearly 56 per cent to 1.3 million vehicles after plunging 83 per cent in May and 77 per cent in April.

In the short term, fleet sales are not a major concern for automakers focused on ramping up production to beef up anemic dealer inventories for higher-profit sales to consumers. They will become a challenge when inventories are replenished, however, since production must be maintained to keep automakers profitable.

Story continues below advertisement

Any sustained production cuts could trigger job cuts in an industry that accounts for roughly one fifth of U.S. retail sales.

“If we don’t see a rebound in 2021, this will be a problem for automakers,” said Zohaib Rahim, economic and industry insights manager at Cox Automotive. “But right now they’re using all their production to supply dealers.”

Commercial sales are seen coming back in 2021, but government orders may take a hit next year once the pandemic’s impact on tax revenue becomes clear.

The rental car industry – where Hertz Global Holdings Inc filed for bankruptcy protection in May – faces a deeply uncertain future. Around 62 per cent of nearly 2.8 million vehicles sold to fleet buyers in 2019 went to rental car companies.

Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, says the car models facing greater risk because of their reliance on lower-margin rental fleet sales include Nissan Motor Co Ltd’s Altima and General Motors Co’s Chevrolet Malibu.

U.S. fleet sales are dominated by GM, Ford Motor Co, Nissan and Fiat Chrysler Automobiles NV (FCA) and accounted for 16.4 per cent of new vehicle sales in 2019.

In 2019, fleet sales accounted for nearly 22 per cent of GM’s sales, with about half going to rental fleets and the other half to corporations and government agencies. Fleet sales accounted for nearly 28 per cent of Nissan’s 2019 sales, with almost 93 per cent of those sales going to rental car companies.

Story continues below advertisement

John Ruppert, Ford’s general manager of commercial and government fleet sales, said the impact on commercial sales has been mixed. Ford is the market leader for higher-margin commercial and government fleet sales.

On the positive side, Ruppert said work-from-home policies have boosted orders from telecommunications companies and created new demand for delivery vehicles.

However, after a historic decline in oil prices, Ruppert said it “could be some time in 2021” before industry-wide vehicle orders from oil and gas producers recover.

Contract talks for commercial fleet orders usually begin March or April, but did not this year as the economy shut down.

“We’re seeing those contract talks happening now in earnest,” Ruppert said. Some orders could be delayed a quarter or two, he said, meaning overall commercial fleet sales should recover some time in 2021.

Ruppert said government orders are based on the previous year’s tax base, so 2021 orders will reflect this year’s pandemic.

Story continues below advertisement

FCA is “bullish” on fleet sales in the second half of 2020 thanks to commercial and government purchases, U.S. head of sales Jeff Kommor said.

“Despite vehicles sitting idle for a few months in 2020, most commercial and government fleet operators have a schedule they adhere to maximize their residual value,” he said.

The Kansas City, Kansas, plant where GM makes the Malibu will be shut down for an extra week this summer, which a spokeswoman said reflected both consumer and fleet demand. GM does not intend to halt Malibu production, she said.

“Rental companies have been an important customer of ours,” she added. “We expect that to continue in the future, when the rental market recovers.”

The Malibu and Altima sedans have both seen a long decline in consumer demand. Nissan spokeswoman Lloryn Love-Carter said the Japanese automaker “continuously considers a number of opportunities to drive efficiencies within our manufacturing operations.”

Nissan declined to comment on fleet sales.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies