Dealers brace for slow sales due to virus, want to be exempted from shutdowns
Washington — Auto dealers are bracing for slower sales in the face of the coronavirus pandemic. They are also asking to be treated as "essential operations" and left out of government-ordered shutdowns.
Nationwide, dealerships are resorting to bringing sanitized test-drive vehicles to the homes of potential buyers who are leery of visiting showrooms in the era of social distancing and self-quarantines. They are working out financing over the phone or internet.
Facing the prospect of expanding shutdowns as state and local government scramble to prevent the further spread of the virus, the National Automobile Dealers Association and Alliance for Automotive Innovation, which represent dealerships and carmakers respectively, said the Trump administration should make sure dealerships are exempted from any state or federally imposed restrictions on U.S. residents' movements.
"As our nation continues to confront the coronavirus’s challenges, we want to underscore the importance of ensuring that consumers have access to a safe and well-functioning motor vehicle fleet," NADA President Peter Welch and Alliance for Automotive Innovation President John Bozella wrote in a letter to the president.
"Motor vehicles, both new and old, are critical to ensure that the public can get food and other necessities of life, as well as to continue to interact with one another in a manner consistent with public health officials’ recommendations," the letter continued. "Given the importance of safe transportation in addressing the coronavirus outbreak, we have an obligation to ensure that motor vehicles remain safe and are properly maintained."
The comments come as major cities like New York have considered "shelter-in-place" orders in an effort to combat the spread of the virus. San Francisco and five surrounding counties have already issued such an order that extends for three weeks.
The Centers for Disease Control and Prevention have recommended that U.S. residents avoid gatherings of more than 10 people and avoid discretionary travel for at least 15 days.
The groups calling for dealerships to be exempted from such lockdowns said "it is vital that vehicle repair, maintenance and sales facilities be considered essential operations when federal, state and local officials impose certain requirements due to the coronavirus outbreak.
"These facilities perform needed safety recall repairs, manufacturer warranty work, and
safety-critical maintenance, including brake repair, steering repair and much more. And they provide replacement vehicles when necessary," the groups wrote. "We note that many local jurisdictions, when issuing closure orders for non-essential businesses, have included motor vehicle facilities on the list of those that are essential... Similar guidance is needed nationally."
ALG, a subsidiary of the online pricing and information website TrueCar, estimates that in a quick-recovery scenario — in which the economy and auto industry recover by the end of April back to levels prior to coronavirus disruption — new-vehicle sales will reach 16.4 million this year, which would be down 500,000 vehicles, or 2.9%, from ALG’s initial 2020 forecast and down 3.8% from 2019 sales.
In a scenario where the coronavirus results in a longer-term economic slowdown, ALG forecasts that sales will only reach 14.5 million, down 2.4 million, or 14.2%, from ALG’s initial 2020 forecast and down 14.9% from 2019 sales.
Jim and Amy Walen, owners of Chrysler Dodge Jeep Ram of Seattle and Hyundai of Seattle, went to work last Friday and business was going OK. In just a few days, the spread of the coronavirus has led sales to drop “way down,” Jim Walen said.
Both dealerships have now started allowing customers to order vehicles without having to come into the dealership. The can find their new car online, it will be brought to them sanitized so they can check it out, and all the paperwork can be done online or over the phone. They can also video-chat with customers to let them see what's on the lot.
“We have never seen society come to a stop like it has,” Walen said. “I believe this will pass. We do have to hunker down and be very creative in the way we run our businesses. We are hoping where this can be a convenience to people.”
Sales have slowed somewhat at the Royal Oak Matthews-Hargreaves Chevrolet dealership. Walt Tutak, general manager at the dealership, expects them to drop more with businesses closed and people staying home. The dealership is now advertising home-pickup for service and delivery of vehicles.
“If nobody is working at all and all the businesses are shut down, I’m sure the only ones coming to a dealership are the ones who need service done,” or who are in “dire need” of a new car,” Tutak said.
Lyman, Chief Industry Analyst for ALG, called the current situation “unchartered waters” for the retail automotive industry because brick-and mortar-dealerships are “such a critical part of the sale in the auto industry.”
Eric Lyman said this doesn’t mean auto shopping will come to a standstill since consumers can still shop online and often do before heading out to test drive.
“People are still going to need cars in our future and even a temporary decline will lead to pent-up demand,” he said.
During the recession, the auto industry saw people put off purchases and then there were several consecutive years of growth in the industry.
“We don’t expect that long-term demand to be affected negatively,” he said.
In light of the news that General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles all said Wednesday they will temporarily suspend production amid coronavirus concerns, Jessica Caldwell, Edmunds' executive director of insights, said dealerships are appropriate stocked for now. But they're likely to be in for at least some short-term pain, she said.
"These automakers are currently well-stocked with inventory and as more of the country moves to follow shelter-in-place orders, vehicle sales will inevitably be softer," Caldwell said. Stimulus packages from Washington "could help sales get to a bit of a healthier place when normal life resumes," Caldwell added.
"The greater challenge is that once the country gets past the worst of the pandemic, automakers will need to be prepared to get back online quickly to capitalize on the wave of deferred consumer demand," she continued.
In the Washington, D.C., metropolitan area, multiple dealerships are offering remote test-drives and in some cases concierge service for maintenance trips in bids to combat virus-related traffic declines.
"We will bring the test drive to you!" Brown's Nissan in Fairfax, Va., wrote in an email to customers. "We offer home or office delivery using our Brown’s Happy Test drive located on our website... Select delivery of your new vehicle at home or at the dealership, it’s that easy! You don’t even need to come into the dealership."
"We would be happy to bring any vehicle to your home or office if you do not wish to visit our location," Lindsay Chrysler Dodge Jeep Ram in Mansassas, Va. wrote in a similiar email to customers. "If there is any reason you prefer not to visit our dealership, we are available via Facetime, screen shares, phone, chat and text. Just let us know your preferred method to communicate."
Safford Chrysler Dodge Jeep Ram Fiat of Springfield, Va., is encouraging customers who live within 10 miles of its store to utilize concierge or shuttle service for maintenance trips.
"We realize that your vehicle may need repairs or regularly scheduled maintenance," the dealership wrote. "If your vehicle is in need of repair or is due for service, we will pick up your vehicle do the service and return it back to you."