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Monday, 06 July 2020 22:52

Reflecting Toll of COVID-19, FCA, GM Sales Drop By a Third, Portending Uncertain Recovery

Written by Jordyn Grzelewski and Kalea Hall, The Detroit News

Index

New vehicle sales for two of Detroit's automakers dropped by about a third in the second quarter, reflecting the coronavirus pandemic's toll on the auto industry.

Results could have been much worse, analysts say, even as they express concerns that market conditions could deteriorate again in coming months.

 

Fiat Chrysler Automobiles NV on July 1 reported a 39% year-over-year drop in U.S. new-vehicle sales in the second quarter. General Motors Co. reported a 34% drop. Ford Motor Co. was set to deliver its sales July 2.

 

"[No one] thought this was going to be a really great quarter. We expected double-digit declines," Jessica Caldwell, executive director of insights for auto-information website Edmunds.com, Inc., told The Detroit News. But, "thinking back to where we were in mid-March, this result wasn't as bad as we thought it would be, fearing the worst."

 

The industry, while facing a steep drop-off in demand from fleet customers, such as rental car companies, has been buoyed by higher-than-expected consumer demand. Individual customers, driven in part by what Caldwell described as "once-in-a-lifetime" incentives, have steadily returned to dealer showrooms (or, increasingly, to dealer websites) for new metal and new ways of taking delivery.

 

Still, the sequential month-to-month improvement in the second quarter does not ensure a rebound and instead might portend a slow and potentially bumpy return to normal. Industry analysts are forecasting a years-long road to recovery and have pointed to several shorter-term obstacles posed by the COVID-19 pandemic and state-by-state reopening plans.

 

Lagging vehicle inventory at dealerships, which automakers are rushing to fill, might cause some shoppers to hold off on buying. Twenty-one million Americans remain unemployed. Coronavirus cases are now surging across parts of the South and West, raising the likelihood of another widespread shutdown. And, amid widespread economic hardship, consumers are increasingly turning to the used-vehicle market, especially as dealerships pull back on incentives.

 

July 1's reports came on the heels of an eight-week North American production shutdown by Detroit's three automakers. The shutdown, from late March to mid-May, took place mostly in the second quarter and cost the companies billions.

 

FCA delivered 367,086 vehicles in the second quarter, down from 597,685 in the second quarter of last year. GM delivered 492,489 compared with 746,659 in 2019's second quarter. For the first half of the year, FCA's sales are down 26%. GM's were down 21%.

 

One potential bright spot, FCA, GM and analysts noted, is that retail sales, which plummeted in April, started to rebound in May and June.

 

"This quarter demonstrated the resilience of the U.S. consumer," Jeff Kommor, FCA's head of U.S. sales, said in a statement. "Retail sales have been rebounding since April as the reopening of the economy, steady gas prices and access to low-interest loans spur people to buy."


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