Spring is normally the most popular time to buy a car. But with more people staying home during the COVID-19 outbreak, car sales will likely suffer, experts say.
“The immediate impact is a cooling effect – people aren’t wanting to go out shopping,” says car industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants. “I’m fairly sure the impact will be negative, but the degree of negativity is still to be determined.”
Right now, Canadian sales figures are only available until the end of February. Sales figures for March won’t be out until the end of the month.
“There was no apparent impact in January and February – both months were up quite nicely,” DesRosiers says.
In the United States, sales are already down in areas that have seen a concentration of coronavirus cases.
“It’s already having in an impact – let’s be pretty clear,” says Peter Nagle, senior researcher, automotive economics with IHS Markit. “Regions like Seattle, San Francisco and greater New York are trending lower in the first days of March – Seattle is down 10 [per cent to] 12 per cent over March last year.”
But, with the number of cases increasing daily, the exact effects are impossible to predict, Nagle says.
“If we become Italy, it will get much worse,” Nagle says. “If we shut down sales for a month, we could lose [one to] 1.5 million units nationally in the U.S.”
But most people can’t delay car purchases indefinitely, DesRosiers says.
“The bulk of consumers aren't buying in a whim, they're buying it because of a need,” DesRosiers says. “The need doesn’t go away because there’s a virus out there.”
That means sales should recover later in the year, says Robert Karwel, senior manager of automotive practice in Canada for J.D. Power.
“We are mostly likely looking at just a delay in purchases, not necessarily a cancellation of purchases, at least in most cases,” Karwel says.
If unsold cars sit on dealership lots, Karwel expects car makers to ramp up incentives to attract more buyers.
Long-term effects still unclear
If manufacturing plants shut down because of the pandemic, production could slow down, but there likely won’t be long-term shortages of vehicles, Karwel says.
“I wouldn't be so concerned about being able to build cars, especially if consumers aren't buying them to begin with,” Karwel says.
Worldwide, the car industry imports more than US$34-billion from China every year.
So far, there haven’t been significant parts shortages because of massive shutdowns there last month.
But, in the long run, fears over potential shortages might spur companies to start looking to other places.
“Perhaps having so many suppliers overseas in one place is not such a great idea,” J.D. Power’s Karwel says. “I think we might see a return to greater domestic manufacturing of parts and materials – and more diverse sourcing of parts and material.”
Eventually, that could mean more jobs here in Canada, Karwel says.
The pandemic’s long-term effects on the industry are also tough to predict, DesRosiers says.
With fears about the coronavirus spreading in shared spaces, DesRosiers thinks it’s likely that fewer people will consider giving up their cars to switch to car sharing or ride hailing.
"You’re an idiot if you use an Uber or a Lyft right now – those vehicles were disgusting to begin with,” DesRosiers says. “Nobody is going to want to get rid of their own vehicle.”
It’s also unlikely that the coronavirus will seriously slow the push toward electrification, IHS Markit’s Nagle says.
“That’s more driven by the global environment – the regulatory frameworks in Europe and China are pushing for electrification at a quicker pace than we are in North America,” Nagle says. “There was some concern that the lockdown in China could reduce the supply of lithium-ion battery cells, but they’ve returned to work and the supply of cells doesn’t appear to be diminishing.”
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