Steel Markets

Coronavirus Crisis Crushes Auto Sales in April

Written by Sandy Williams

Auto sales were expected to be low in April and predictions were correct. Edmunds estimates U.S. sales fell 36.6 percent from March and 52.5 percent compared to April 2019.

“April auto sales took the biggest hit we’ve seen in decades,” said Jessica Caldwell, Edmunds’ executive director of Insights. “These bleak figures aren’t just because consumers are holding back on their purchases — fleet sales are seeing an even more dramatic drop as daily rental business has dried up. Like many other industries, the entire automotive sector is struggling as the coronavirus crisis continues to cripple the economy.”

Toyota U.S. auto sales plunged 55.7 percent year-over-year, followed by declines of 54.1 percent at Honda, 46.6 percent at Subaru, 44.5 percent at Mazda, 38.7 percent at Hyundai and 38.2 percent at Kia.

Detroit automakers no longer report monthly, but analysts suggest GM, Ford and FCA’s April sales were likely down 40 percent or more due to impacts from the coronavirus.

Cox Automotive estimates car sales hit a record low seasonally adjusted annual rate of 8.6 million. But the silver lining, if there is one, is that “sales volume only ended up as the worst April of all-time, not the worst month,” said Cox.

“Our expectation is that the worst of the sales decline is now in the review mirror,” said Charles Chesbrough, Cox Automotive senior economist. “Sales in May should continue to show improvement over April; however, we are likely still months away from returning to the strong sales pace we started the year with.”

It is currently a buyer’s market, if consumers can get to dealerships. Automakers in April offered zero percent financing and terms spread over as many as 84 months. Incentives are likely to extend into May as economic activity slowly returns.

Pickups continued to be the big seller in April and the trend toward larger vehicles is expected to continue as gas prices remain low and incentives encourage buyers.

“April is likely the bottom for auto sales, so hopefully there’s only room for improvement from here,” said Caldwell. “But with employment and consumer confidence at new lows, the question remains: Will people be in the position to purchase new cars? Although automakers are doing their part by offering landmark incentives, those might not be enough if consumers cannot recover financially from this crisis.”

Auto companies are anxious to reopen manufacturing but are complying with state guidelines as to timing and required safety protocols. Employees will be required to wear personal protection equipment (PPE), follow CDC guidelines and be screened for fevers. The UAW is advocating COVID-19 testing at all facilities before production resumes, although availability of such tests may take weeks or months to procure.

Kia, Hyundai and BMW, all nonunionized plants in the South, restarted production on Monday and Toyota is planning to restart on May 11. Mercedes-Benz restarted production in Alabama on April 27. Volkswagen orginally said the Chattanooga, Tenn., plant would restart on May 3, but has delayed that reopening. Canadian production is phasing in as U.S. production returns. Automakers in Mexico are still on shutdown throughout May.

Ford facilities will come online all at once following the lifting of Michigan’s stay-at-home order, which terminates on May 15. The Wall Street Journal is reporting that Detroit automakers will resume production at U.S. plants on May 18 after working out a timeline with Michigan Gov. Gretchen Whitmer and the United Auto Workers.

“The reality of our industrial system in the U.S. is it’s completely intertwined,” said Ford COO Jim Farley. “In the U.S., we’ve looked at it as a complete ecosystem, and we have to bring up the system all at once.”

Ford and FCA vehicle sales started the year relatively strong, but plummeted in March as COVID-19 halted production and kept consumers at home. U.S. sales in the first quarter dropped 7 percent year-over-year to 618,335 vehicles with a significant decline in March. Ford reported a net loss of $2.0 billion for the first quarter of 2020 and revenue of $34 billion.

FCA sales in the first quarter declined 10.4 percent to 446,768 vehicles. Total revenue fell 16 percent to $22.3 billion, and FCA recorded a net loss of $1.8 billion.

General Motors will report results on May 6.

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