COVID-19 sent new vehicles sales tumbling 48 per cent in March compared to this time last year, but experts say the worst is yet to come.
Sales of new vehicles in Canada were up through January and February, with only a slight decline in the first half of March, according to the latest figures from market-research firm DesRosiers Automotive Consultants. It was in the second half of March that the impact of the novel coronavirus really hit the Canadian car industry.
Although numbers from individual automakers vary, every manufacturer took big hits in first quarter sales. Porsche sales fell 42 per cent. Infiniti sales dropped 50 per cent. Fiat Chrysler Automobiles reported a 19 per cent drop, while Land Rover, Subaru, General Motors, Lexus and Ford all saw sales decline 10 to 15 per cent.
“Our current ‘baseline’ scenario shows a decline for new vehicle sales of approximately 25 to 30 per cent for 2020,” DesRosiers wrote in an e-mail. “The ‘less severe’ scenario shows a decline of approximately 10 to 15 per cent while the ‘more severe’ scenario sees a precipitous fall in excess of 60 per cent for the year.”
The downturn in sales seemed to accelerate through March, according to Robert Karwel, senior manager of the automotive practice at market research firm J.D. Power Canada. Earlier in the month, he predicted the industry would be down 20 to 30 per cent. By the third week of March, he was predicting a 30 to 40 per cent drop. It’s not yet clear how bad it’s going to be, he added.
Karwel did find one potential glimmer of hope for the industry. “This year, we’re probably going to have close to 400,000 retail customers coming off leases,” he said. “Potentially, those lease-return customers can help mitigate the [sales] downturn.”
HELP PAYING FOR YOUR CAR
Many Canadians may have difficulty making their monthly car payments. As businesses closed their doors and employers laid off workers, the federal government received over 2.13 million EI claims during the past two weeks. In response, most automakers have announced programs to help alleviate that financial strain on new and existing customers.
Hyundai, for example, is offering payment deferrals to existing customers, as well as extensions on expiring leases for customers in self-isolation.
In an attempt to mitigate the precipitous decline in sales, several automakers have also begun to offer payment deferrals and lower interest rates on new vehicle purchases.
Ford is offering six months of payment relief. “Customers can defer the first three payments, and Ford of Canada will pay for three months,” the company said in a press release. Fiat Chrysler is offering new customers no payment for 120 days on all 2019 and 2020 models, across all brands.
DEALERS SHIFT TO ONLINE SALES
This puts dealerships in a very difficult situation. Their lots are chock full of new vehicles in anticipation of the big spring selling season, which, obviously, is not going to happen, according to Tim Reuss, chief executive officer of Canadian Automobile Dealers Association (CADA).
In many provinces, dealerships are shifting to an entirely online sales system for new vehicles, he said.
In Quebec, however, there was confusion as to whether dealerships were allowed to sell vehicles online or not. “It is not 100-per-cent clear, but there seems to be a willingness and acceptance that [selling vehicles online] is the right approach,” Reuss said on Tuesday.
“Dealers, as I’m sure all other businesses in Canada are, are very anxious and uncertain as to where this going,” Reuss said. Many dealers have already had to lay off employees, he said, but noted that the federal government’s wage-subsidy program “might alleviate some of that situation.”
Businesses that have seen a 30-per-cent drop in revenue are eligible for the subsidy. “Our dealer members have definitely seen at least that decrease in revenue, if not much, much more,” said Reuss.
There is no historical precedent to rely on when it comes to predicting the fallout for the automotive industry. “Nothing, not even the wars, not even the Great Depression matches what’s going on today,” said Dennis DesRosiers, who has been tracking car sales in Canada since the 1970s and has data going back to 1961.
“What we still don’t know is how long it will be or what the ramp-up will be once we get through it,” he told the Globe and Mail.
Looking at how the situation has unfolded in China may provide some answers. “In China, [car sales] were down roughly 20 per cent in the first month, and 80 per cent in the second month of the virus,” said J.D. Power’s Robert Karwel. “I wouldn’t be shocked if the fallout from the virus unfolds here in a similar fashion.”
There’s a sense of foreboding in the industry as everyone buckles down for a storm, Karwel said. “But,” he added, “we all know what happens after the storm; the sun come comes out.” People will still want and need to drive after the pandemic. “There’s no doubt in my mind, it’s going to come roaring back. It might just take longer than we think.”
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