As May begins, analysts are focused on the sales numbers from April to see how the auto industry fared coming out of the first full month of global coronavirus impact. All in, 24 states allowed dealerships to remain open, and 23 states allowed only remote sales. This in contrast to some other countries, like India where the nationwide lockdown led to 100% year over year drop in April with zero car sales. In early April, J.D. Power preliminarily reported that the drop in retail sales was about 55% from pre-pandemic predictions—although steep, the drop was not as bad as many had feared. Sales improved as the month continued, with sales estimated down about 39% by April 26.
For those automakers who release monthly figures, the April figures show a significant drop from last year, with some losses mitigated by new models. Honda and Acura reported a 54 and 57% decline respectively. Genesis sales dropped 49%. Mazda declined 45%, and Subaru fell 47%. However, Hyundai fared better than many, with only a 39% decline, and Kia fell 38% year over year. Both Hyundai and Kia were buoyed by new models in their lineups.
China offers some insight into the future for U.S. sales. Sales in China were down 80% in February (with an even greater decline in early February), but then recovered to 40% in March. China is also encouraging sales through government incentives. Some local governments are providing cash subsidies for car purchases. And as part of its coronavirus incentive plans, China extended electric vehicle subsidies and tax breaks by two years to 2022, with investments in infrastructure as well.
In the U.S., there is hope that lifting of government restrictions, automaker incentives and COVID-19 government relief will help with recovery. Auto dealers and automakers rolled out steep discounts and creative incentives, including 0% interest loans, delaying payments by 3-6 months, even making 6 months of payments for consumers who have lost their jobs. There are signs the incentives are working, with gains in late April. Analysts in the Wall Street Journal, Forbes, and Car & Driver predicted that April would be the bottom for the sales drop, with sales starting to recover in June and thereafter. Whether the pent-up demand converts to strong gains remains to be seen, but the industry remains cautiously optimistic.
Foley has created a multi-disciplinary and multi-jurisdictional team, which has prepared a wealth of topical client resources and is prepared to help our clients meet the legal and business challenges that the coronavirus outbreak is creating for stakeholders across a range of industries. Click here for Foley’s Coronavirus Resource Center to stay apprised of relevant developments, insights and resources to support your business during this challenging time. To receive this content directly in your inbox, click here and submit the form.