As we predicted in a a report we published just days ago, the U.S. auto industry is on the verge of total collapse. Numbers out of major automakers on Wednesday this week confirmed a worst case scenario: that the global pandemic is doing severe (and potentially irreversible) damage to an industry that was in ugly shape even before the coronavirus outbreak began.
GM saw sales plunge 7.1% and Fiat saw sales drop 10% for the first quarter of 2020, both larger than expected declines, according to Bloomberg. It’s also worth noting that the industry didn’t quite grind to a halt until March, and so Q2 numbers could wind up being far worse.
Toyota’s sales fell 37% in March, with even its best-selling RAV4 dropping 25%. Nissan had the weakest quarterly results, posting a 30% drop in sales for the first three months of the year. More than 25% of Nissan’s dealers are being negatively affected by state ordinances limiting sales.
David Kershaw, division vice president of the Nissan brand in North America, said: “We obviously saw quite a big tail-off in business. We’re feeling it in arguably one of our best regions, which is the northeast. They are obviously significantly impacted.”
Names like Volkswagen, Honda, Hyundai and Mazda all saw drops of over 40% for March. If automakers that report quarterly continue to follow this trend, Q2 numbers may be a sight to behold.
The things that were barely holding the industry up to start 2020, namely low rates and modest consumer confidence, don’t matter. Businesses are closed, would-be buyers are strapped for cash and the country’s economy has simply been turned off.
The industry’s annualized selling rate has slowed to just 11.4 million, marking its lowest point since April 2010.
Recall, just 2 days ago we highlighted predictions that the SAAR could continue to plummet to between 9 million and 10 million vehicles. Those numbers are well below the 10.4 million autos sold in 2009, the year GM and Chrysler both filed for bankruptcy. J.P. Morgan has an even more pessimistic view, with estimates of a pace of 6 million to 7 million vehicles over the next month.
And things simply may have to get worse before they get better. Just yesterday we had reported that Ford was suspending production at its North American plants “indefinitely”.
Citing risks associated with the coronavirus, the automaker has not set a timeline to bring its facilities back online. The company is currently working with the UAW to establish new guidelines for safety procedures before re-opening.
The union announced the death of two Ford plant workers on March 28 as a result of the coronavirus.
And today’s sales numbers should not come as a surprise to Zero Hedge readers, as we noted days prior that the entire U.S. auto industry had basically entered full collapse.
Jessica Caldwell, executive director of insights for market researcher Edmunds, told Bloomberg: “The whole world is turned upside down right now.”
Morgan Stanley analyst Adam Jonas put it simply: “There are basically no U.S. auto sales right now. Investors have fully embraced the reality that the U.S. auto industry may be shut down for one or two full months. We’re now being asked to run scenarios of six-month or nine-month shutdowns.”
“Automakers reacted quickly to the coronavirus crisis with attractive incentive offers and payment programs, but these unfortunately appear to fall on deaf ears. Consumers were understandably distracted by the rapidly changing news cycle and changes to everyday life.”