Cars and Drivers

US Car Sales May Be Cut in Half

Douglas A. McIntyre

Published: April 1, 2020 6:50 am

In 2009, in the depth of the Great Recession, U.S. car sales dropped to 9 million. For the decade before that, sales averaged over 16 million a year. Since 2014, they have bested that level, staying above 17 million per annum. That is about to change. American car sales fell enough in March to indicate domestic car sales could fall by half, at least for several months. Car company balance sheets will be tried more than at any time in the past 10 years.

Like estimates for the fate of every other industry as the pandemic takes hold, car forecasts are based largely on how long the worst of it will last. Some estimates show the economy rising by July. Most forecasts are for longer. If there is the second wave of illness in the fall, the economy could be ruined for all of 2020.

Car sales in the United States cratered in March. In the early part of the month, the disease was not widespread, so visits to dealerships were not hampered in many places. Nevertheless, industry research firm Edmunds forecast car sales were down 35% last month, from 1,620,183 in March of last year to 1,044,805.

Some car manufacturers will suffer more than others, but the figures for every company that sells cars show a breathtaking drop. Among the Big Three, GM’s sales are expected to decline by 31.3% to 186,428. Ford’s sales are expected to retreat by 31.0% to 159,957. Fiat Chrysler’s sales are seen as plunging 28.1% to 144,102.

Japanese manufacturers are expected to do worse. Edmunds forecasts Toyota sales will be off by 36.2% to 137,094. Honda sales will drop by 41.8% to 86,379, and Nissan’s sales are expected to fall by 45.5% to 82,168.

One challenge to new car sales is that many people do not have to buy new cars now. The average length people own cars has risen to 11.8 years. It speaks to the rise in durability that the industry has built into its products. Many people will simply wait another year.

Another high hurdle is a reluctance to take out debt in a deep recession. The industry’s sales for the past four years have been fueled by low-interest loans, some of which extend for seven years. No matter how low these rates are, or even if they drop further, the prospect of buying a car on favorable terms is one that will not appeal to anxious consumers.

In the last half of March, sales dropped much more than 35% and were certainly much lower. Car sales are running down by 50%. It is impossible to think otherwise.

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