ALG is predicting a tough time for new vehicle sales in the U.S. for 2020.
The outlook for new vehicle sales this year is growing steadily more pessimistic, according to the latest new vehicle sales forecast from ALG Inc., a subsidiary of TrueCar Inc.
In its latest report, ALG offers three “scenarios” for vehicle sales in 2020 and the most optimistic indicates sales could reach 13.1 million if restrictions on movement are slowly lifted nationwide through May and the government stimulus measures succeed in lifting the economy. ALG places the probability of sales reaching this level at only 10%.
“COVID-19 continues to add pressure on economic health as many states extend stay-at-home restrictions well into May and unemployment and layoffs continue to expand into other industries, leading to a slower recovery,” said Eric Lyman, chief industry analyst for ALG, a subsidiary of TrueCar. “This completely diminishes the likelihood of recovering 2020 sales to pre-Coronavirus sales rates.”
(U.S. car sales tumble sharply — but not as bad as originally feared.)
A more likely scenario is that annual sales drop to 12.6 million units, provided that restrictions on movement nationwide are lifted through May and there only moderate disruptions in local areas from subsequent outbreaks of the pandemic created by COVID-19. The scenario also assumes that economic activity generally slowly increases throughout 2020.
Automakers may have to endure a sales year of just 11.5 million units, according to ALG.
ALG pegs the probability for this scenario at 45%.
However, a third scenario, which has the same probability of 45%, calls for sales to drop to 11.3 million units. Under this scenario, ALG suggests the virus triggers a second round of national movement restrictions in early fall.
The new restrictions slow any signs of recovery through 2020 with increased unemployment.
(Pandemic will have “a permanent effect” on auto industry.)
“We believe 12.6 million is now the most likely scenario,” added Lyman.
“However, for the U.S. market to achieve that figure this year, multiple rounds of stimulus must bridge business and household finances through the initial spring lockdowns. We will also need a sharp decline in unemployment over the summer as businesses reopen under modified operating rules to accommodate continued social distancing in an effort to avoid secondary outbreaks,” he said.
ALG also says while there is a floor under the sales of new vehicles, the impact of the sudden auto recession will linger for months to come.
The depth of the dip in 2020 sales will be dependent upon a second round of shelter-in-place orders.
“Even in a contracting economy, the demand for new vehicles in the next three years will make up for many lost sales in 2020,” said Morgan Hansen, vice president, Data Science at ALG.
“ALG forecasts a cumulative shortfall of new sales of three to nine million units over the next three years, based on varied vehicle ownership patterns, scrappage, and population growth. Even accounting for diminished driving habits, a quick recovery of 15.5 million sales by 2022 is extremely likely, outpacing the year-over-year sales growth rates in the early 2010’s.”
(Car dealers struggling to cope with coronavirus turn to online, “touchless” car sales.)
Added Lyman, “We know that the threat of COVID-19 is not going away in 2020 and new car sales will depend on consumers’ ability to adapt to new ways of conducting not just retail transactions but daily life. Automakers are extending financial support and providing various incentives to consumers. Dealerships are also quickly adapting with digital solutions during these times of social distancing.”