70ºF

Why the startling drop in auto sales may not be as bad as it looks

DETROITTwo thirds of the Big Three have released their second quarter sales numbers and they are not good.

GM’s year-over-year-sales were down 34%, selling nearly 500,00 vehicles; and it was even worse for FCA with its second quarter sales falling 39%, selling 367,000 vehicles.

Analysts expected numbers to drop amid COVID-19, but not this much.

GM sold 17 million vehicles in 2019 and is excepted to be closer to 13 million in 2020.

Tyson Jominy, with J.D. power, said it’s best to stay calm.

“To a casual observer potentially a stock trader it may seem kind of shocking,” Jominy said. “I think below the surface, there is a more interesting, less scary story.”

It lies here with rental car companies. Hertz went bankrupt and the travel and leisure industry crashed during the virus -- and carmakers sell cars to them.

“When you look at the pieces we see stronger retail sales than we see in these numbers reported which is total inclusive of a very large decline in the fleet side,” Jominy said.

So the customer is on the dealer lot buying up an ever dwindling inventory because the auto companies were shut down for two months.

Autotrader analyst Michelle Krebs said fleet sales should pick up to make for a good year.

“The end of march into April, that was the bottom and frankly we thought it was going to be May that would be the bottom,” Krebs said. “It’s come back faster than we thought. Now I don’t think we can expect it to continue to increase increase, there are going to be bumps along the way -- especially with inventory shortages.”

Ford will release its numbers Thursday. It’s expected they will have similar numbers.

RELATED: GM and FCA keep sparring while Ford rolls out big new incentive


About the Authors: