The COVID-19 outbreak is having a dramatic effect on everyone’s lives across the country. While most people are primarily focused on ensuring the safety and long term health of their loved ones, the secondary impact on the economy could prove devastating on its own.

Due to city-wide lockdowns and shelter in place mandates across the country, many small businesses have had to close their doors either temporarily or permanently. This change is going to impact all industries across the world, including the automotive industry. Below there are several automotive trends to watch for during COVID-19 that could shape the years to come for the industry.

Vehicle Demand Declines

Through the month of March, many communities across the country have put forth efforts to shelter in place, limiting the number of businesses in non-essential industries to either move their commerce online or temporarily halt operations. This has either required car dealerships to close or has reduced the amount of visitation. For the first few weeks of March, it was clear that this was having an impact on the amount of people that would step foot into a car dealership. A recent study showed that the amount of dealership visitation for the first two weeks of Marchwas off 25 percent compared to the prior year.

This has led to long term worry about the industry. Just a few days ago, numbers for the first quarter of 2020 were released and every single car manufacturer reported a decrease of sales ranging from 6-35 percent. While Lincoln (Ford’s luxury brand) did report a modest increase of 2.3%, it pales compared to the 13 percent dip from Ford. However, the Detroit-powerhouse will be able to supplement revenue, as they have been punched as one of the factories assigned to produce medical PPE.

Overall Driving Declines

Another major impact into the auto industry is the massive decline in traffic, and the ensuing dip in fuel purchases. Major metropolitan cities like Atlanta and Dallas across the country have already released reports that show they have seen a substantial decline in traffic across city roads and interstates. This has also led to a dip in carbon emissions as well (silver lining!).

The national average of gas prices has dropped nearly 21 percent since March 2nd, and nearly 27 percent YTD. This indicator suggests that traffic won’t be picking back up anytime soon. Luckily for some essential businesses like shipping and construction, the dip in fuel costs help alleviate overhead. Additionally, for our essential workers, the dip in traffic has almost entirely cut down your morning commute.

As a whole, the traffic counts in the United States this weekdropped as much as 30% compared to the same week during the prior month. This also does not take into account the increased traffic that can come with spring break. Some cities that have had larger outbreaks have had even more significant declines. New York reported a few days where they had a 43% decline in traffic and San Francisco reported a traffic decline of 50% or more. This data points to the fact that there could be a near-term demand reduction for vehicles.

New Car Promotional Offers

With the report that sales have dipped so dramatically for some manufacturers, expect some drastic actions to be taken in order to turn the tide in Q2. To combat that trend, manufacturers are offering promotions that exceed anything in the past. Due to low market interest rates, most of the major car manufacturers are able to provide interest free financing for up to 84 months. At the same time, the finance companies are providing initial loan payment deferrals for up to six months. Both of these offers are new and unique to the industry.

Car manufacturers are also providing a new purchasing option where they will bring a vehicle to your home to test drive. This avoids the need to go into a local dealership to make a purchase. Customers can then continue to customize new vehicles using the manufacturer’s website.

Potential Impact on Public Transportation

While there are many factors that could influence a decline in new car sales, the wayconsumers treat public transportation, ride sharing, and carpooling services could affect demand for car sales in coming years. If consumers continue to be weary of being in tight quarters on a train or bus, they may opt to purchase their own car for when they need to commute to work or get around town. If this does occur, it could lead to a reduction in public transit usage and an increase in vehicle sales.

Overall, the automobile industry has gone through dramatic changes over the past fifty years. The industry has dealt with a variety of economic cycles, but likely has not ever seen something that led to this wild of a demand swing. However, the industry will continue to forge ahead and do its best to maximize sales and deliver good service to its customers until demand returns to where it once was.

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