Sales show early signs of recovery

uto sales are unquestionably ugly — and probably will be for a while — but they appear to be getting better, not worse.

J.D. Power believes the recovery already has started.

The company said retail sales, compared with its forecast from before the coronavirus pandemic, showed signs of stability in the first half of April. Retail sales were 55 percent below expectations for the week ending April 5 and rose slightly in each of the following two weeks.

Retail sales grew during the week ending April 19 in 24 of the country's top 25 markets, though demand was still down significantly year over year, J.D. Power said. The exception was Denver, where sales were flat.

Thomas King, president of J.D. Power's data and analytics division, said the industry still faces a difficult environment but that the regional data shows sales are gradually getting back to a "more normal" pace. Stay-at-home orders in many cities and states have not affected auto sales as severely as expected, King said.

"We didn't see the change in behaviors that we saw in places like [San Francisco] apply in places like Texas and Phoenix. Now we're seeing the recovery," King told Automotive News.

"We have likely experienced the worst of the decline," he said, though the current level of decline is still "extremely damaging to the industry."

After Pennsylvania's governor lifted restrictions last week, all 50 states offer vehicle sales in some fashion, although 26 limit dealerships to online or remote sales. The federal government also recently updated guidance that many states are relying on to classify auto sales as an essential service.

"Many consumers still may not even be aware that you can complete this transaction from your house," said Tyson Jominy, J.D. Power's vice president of data and analytics. "Consumers have been so trained in how cars are purchased in this country that unless you saw that email, or got a phone call or text from your dealer, you may not even know that they can do this for you."

LMC Automotive said it expects light-vehicle sales "to bottom out in April in Europe and North America, but the recovery, while broadly V-shaped, is unlikely to be rapid in the subsequent months. ... A deep, though short-lived, economic recession has now become the consensus expectation."

Consumer sentiment will be key in the months ahead.

Jonathan Smoke, chief economist for Cox Automotive, said sentiment was 27 percent lower on April 20 than Feb. 29 and "not likely to recover substantially until we get more consistent positive news about the pandemic and the economy."

No-interest financing has continued to gain steam as automakers work to attract shoppers. Cox said 0 percent deals accounted for 20 percent of financed new-vehicle transactions in April through last week, vs. 6.6 percent in March and 2.4 percent in February."The market remains down, but the trends that we keep seeing are showing improvement each and every week," Smoke said, "and much of it seems to be coming from the markets that are recovering much more than the national totals show."

Cox projects that 69 percent of consumers who are delaying a purchase would come back to the market for the right deal. But with unemployment surging and consumers fearful of becoming infected, it could take up to two years for some people to bounce back, said Dale Pollak, executive vice president of Cox Automotive.

"These are levels and rapidity of unemployment claims the likes of which we've never seen in our country," Pollak said during a webinar last week. "What you have to understand about those sort of levels of unemployment claims is that there has to be a lot of financial stress in households. It's our belief that it's going to take a period of time — perhaps 18, maybe 24 months, maybe even longer — for those households to reclaim their jobs and dig out of the hole that they're in today and going further into being laid off and furloughed or just simply unemployed."

TrueCar's ALG analytics unit predicts the industry's annualized selling rate will be 7.7 million units in April, down from 16.5 million a year ago. Automakers that still report sales on a monthly basis are scheduled to release their April numbers on Friday, May 1.