US car sales plunge despite deals and Covid stimulus

Carmakers reported sharp drops in second-quarter US vehicle sales as discounts and financing deals weren’t enough to offset factory and dealership closures from the COVID-19 pandemic.

Carmakers reported sharp drops in second-quarter US vehicle sales as sweet discounts and financing deals weren’t enough to offset factory and dealership closures from the COVID-19 pandemic.

General Motors reported a 34 per cent drop in second-quarter sales compared with a year earlier, with demand picking up in May and June. Toyota’s sales fell by about one-third, while Fiat Chrysler Automobiles reported a 39 per cent decline.

Overall, second-quarter US vehicle sales are projected to have fallen by about one-third, analysts estimate, after car plants and some dealerships closed for extended periods this northern spring.

Most car companies reported second-quarter sales results on Wednesday.

Still, the drop wasn’t as steep as feared, and sales have improved steadily since late March.

Heavy sales promotions and federal stimulus cheques that went out to millions of Americans spurred car demand despite spiking unemployment and stay-home orders across many states, dealers and analysts say.

Now, the industry’s sales rebound faces a tough summer test, as carmakers rein in discounts and the effect of the stimulus fades.

“I’m not sure what the next six months is going to be,” said Mike Maroone, a former president of AutoNation who owns dealerships in Colorado and Florida.

Carmakers earlier in the spring rushed to offer recession-era discounts and financing deals, which bolstered sales of profit-rich pick-up trucks and sped a rebound in retail sales as dealers got better at selling cars online.

In recent weeks, retail sales, or sales to individual buyers, have tracked just 4 per cent to 6 per cent below pre-COVID-19 forecasts, according to research firm JD Power.

“The market and the retail consumer continue to recover beyond anyone’s expectations,” Bob Carter, Toyota’s sales chief for North America, said recently.

But now many dealerships are running low on inventory as carmakers ramp up output after several weeks of factory downtime.

Deals are drying up as car companies spend less on cashback offers and pull back on attractive seven-year financing deals that brought customers to dealer lots during the pandemic.

Since hitting record highs in early May, company-sponsored discounts have fallen nearly 13 per cent, according to JD Power.

Promotional loans stretching out seven years accounted for a smaller portion of the market in June, representing 9.4 per cent of transactions last month, compared with 12 per cent in May.

Ward’s Intelligence estimates US car dealers last month had 32 per cent fewer vehicles on their lots compared with a year earlier.

Pick-up truck supply was down 50 per cent, as demand for trucks outpaced the rest of the market.

“The marketplace is growing less inviting,” said Jessica Caldwell, an analyst for car-shopping website Edmunds.com.

“Current sales paint an optimistic picture given the circumstances, but between COVID-19 and today’s politically charged climate, the industry needs to prepare for uncertainties ahead.”

GM said its fleet business — deliveries to businesses, government buyers and rental companies — suffered, but retail sales fared better, down 24 per cent.

The company blamed thin supply after factories closed for nearly two months.

Fiat Chrysler cited a drop in fleet sales.

Nissan’s second-quarter US sales fell by nearly half, hurt by a drop in fleet sales. Honda’s second-quarter sales fell 28 per cent.

Hyundai Motor America said sales last month fell 22 per cent after demand from rental-car companies evaporated, but sales to individual retail buyers rose 6 per cent.