COVID-19 has had a staggering impact on industries all over the world, and the automotive market has not been immune. Though there have been both positive and negative implications of the pandemic on the auto industry depending on whether you’re a manufacturer or consumer, there’s no question that this virus will continue to leave its mark on this space for years to come.
In order to truly understand how COVID-19 is affecting the automotive industry, it’s important to approach the subject from all possible viewpoints for a comprehensive understanding.
Sales Have Dropped Considerably
Consumer spending plummeted in the first few months of 2020; Americans worried about whether or not they’re going to be able to pay their mortgage or feed their family simply aren’t interested in buying a new car right now.
This could spell trouble for industry professionals, who may soon have an excess of supply without enough demand; in turn, consumers may see incentives springing up in the coming months as a way to get cars moving off of lots.
Used Prices Are Already Lower
As a result of sluggish sales, used car prices are already lower than normal, which is an obvious blow to automotive industry pros. For consumers in the market for a new car, now may seem like a perfect time to buy, but those who were hoping to trade in their car as part of the process will be sorely disappointed by the value that they’re offered.
Not only are dealers unable to provide high trade-in values at the moment simply because they don’t have much money coming in, but they also have an excess inventory as a result of so many leases ending during the pandemic.
Manufacturing Is Delayed
Amidst scares of viral outbreaks in workplaces, many assembly lines and plants have been shut down completely, causing production in the industry to come sputtering to a halt. Not only that, but the export of Chinese parts has been disrupted, meaning manufacturing would be delayed even if business was allowed to continue as usual in the rest of the world.
With the market already dealing with the effects of decreased demand, the pressure created by manufacturing delays has led to speculation that some manufacturers may begin discussing mergers and acquisitions sooner rather than later.
Auctions Are Beginning to Rebound
At the worst of the pandemic, auction volume saw a year-over-year decline of 80% due to the fact that many auctions were forced to stop their physical sales. Recently, auction sales have increased to reach a point that’s only around 20% below where they were the previous year; while this is not a triumph, it’s a step in the right direction.
Wholesale prices are expected to continue to remain low for the remainder of 2020, meaning that retail prices are bound to remain similarly bottomed out.
No market has escaped the reaches of COVID-19, but the automotive industry has been especially hard hit; it’s difficult to tell how quickly or how well things will bounce back once the virus has run its course.