What Should Auto Dealerships Expect In the COVID-19 Situation?

COVID-19 is here and is affecting everyday American lives. Orbee Auto has implemented a telecommute policy as of March 16th to practice social distancing and protect the health of our employees. From cancellations of major sporting events to closing of restaurants across the country shows the wide-spread impact of the pandemic.

Slowdowns at auto dealerships have started happening in the U.S. around last Thursday with the largest slowdowns in the areas hit hardest by the coronavirus. Orbee has been monitoring website traffic since the beginning of this month, and we still have not seen a large drop in traffic with the 800 dealerships we help track.

(some samples of dealership website traffic in last 30 days)

Source: Orbee

However, when exploring Google Trends, you can see that the interest in either the big three domestics or the import brands have decreased starting from March 8th and have lost ~15-20% in consumer interest in searching for these makes.

(Big 3 Search Trends)

(Imports Search Trends)

Source: Google Trends

parts by air freight or switching parts suppliers. The slowdown in automobile sales in China could have also helped with mitigating the shortage of parts.

There are a couple of areas we can look at to see what effect the automotive industry will face in the coming weeks to months.

Using China as a benchmark

China seems to have turned the tide on their fight against the coronavirus with less than 100 cases reported since March 6th. A stark difference compared to the middle of February when they were reporting more than 5000 cases per day. Looking at the chart below, you can see the U.S. trailing ~45 days compared to China as the U.S. is in day 7 after 500 or more confirmed cumulative cases while China is at day 53. 

Source: Databrew.cc

With the ~45 days trailing in mind, China’s car sales went down by 18.7% YoY in January 2020 and a record setting 79% in February 2020. The U.S. could expect to see a similar decrease in sales in March after sales slowing down in the second half of this month and a much larger decline in April as the number of COVID-19 cases increase and more mandatory quarantine comes into effect. 

Source: Tradingeconomics.com

Seattle, which was hit hardest by the coronavirus early on, has already suffered a 20% decrease in car sales last week according to J.D. Power sales data which supports the initial 20% decrease in sales that the U.S. can face in the second half of March.  However, the size and length of impact on the automotive industry will vary based on how the COVID-19 situation is handled at the local and national level. There are further uncertainties as to what lasting impact this will have in our economy that remains to be seen.

What factors will determine the severity of the initial economic impact?

COVID-19 confirmed cases and consumer sentiment (fear level) will dictate how much of an impact COVID-19 will have in the U.S. for the automotive industry.

Confirmed Cases in the U.S.

Early travel bans from China have slowed the onset of coronavirus cases in the U.S. to earn valuable time to combat the virus. Based on the chart from Databrew.cc, we are approximately 10 days behind Italy in the spread of COVID-19. The U.S. also has been quick to implement cancellation of events and closure of schools and restaurants, which should stop the spread of the virus. Practicing social distancing could also help slow the spread of the virus to flatten the curve.  

Lack of proper testing for the COVID-19 virus is a blindspot in the U.S. with one of the lowest testing per capita compared to other countries in Europe or Asia.

Source: Covid Tracking Project

South Korea focused on aggressive testing and tracking potential carriers using investigative techniques to limit exposure while Italy had ¼ the testing per capita and relied on quarantine and lockdown. The two methods, while not conclusive, have lead to two very different results, with Korea being able to curb the spread of the virus within 20 days of reaching the breaking point while Italy has yet to contain the outbreak.

Proper testing and social distancing will determine how much impact COVID-19 will have on the U.S. Automotive industry. Stay tuned as I will post more updates. Also you can read the 5 ways you can prepare for the COVID-19 situation here.

As always, please let me know if you need any help or have any questions on how to get through this safely with minimal economic impact.  Our entire team is here to help our clients and friends get through this.