COVID-19 continues to plague the light vehicle market, but May’s sales pace is still expected to be a giant step forward on the path to recovery.

According to a forecast released by Cox Automotive, new light-vehicle sales volume in May is expected to finish near 1,050,000 units, down 33% compared to last May but up 49% from last month.

According to a Cox Automotive news release After incorporating seasonal adjustments, the annual vehicle sales pace is expected to finish near 11.4 million, up from April’s historically low 8.6 million pace but still far below May 2019’s robust 17.4 million level.

May is usually a critical month for the industry as it kicks off the summer sales season. When sales are reported in early June analysts will be searching the results for signs of an industry in recovery. According to Charlie Chesbrough, senior economist at Cox Automotive in the news release: “Recent trends suggest daily sales are showing significant gains over March and April’s collapse. Data reveals the market hit a bottom around the first of April, and since then has been making a slow but steady recovery. The opening of dealerships and whole states, over the last few weeks is greatly contributing to the upward sales trend. The key question for the market going forward is whether these modest but steady sales gains will continue into June or does the sales recovery stagnate.”

Multiple Headwinds Could Impede Sales Recovery

As the industry drives into the summer selling season, a full sales recovery faces multiple headwinds. This crisis is unique because the industry is facing a negative demand shock and a negative supply shock simultaneously. Vehicle factories have been mostly closed since late March and are only beginning to restart. That means new-vehicle inventory is at the lowest volume in more than a year.

Low inventory means less choice for consumers, particularly with popular vehicles like pickup trucks and SUVs. As sales begin to recover, inventory levels will be drawn down even further, quickly causing some brands to face serious shortages. At a minimum, selection may become more limited as the desired model may be in stock but not in the consumer’s preferred color or trim, potentially resulting in the consumer delaying purchase, switching brands, or moving into the used-vehicle market, according to the news release.

In the COVID-19 Digital Shopping Study 2.0 recently released Cox Automotive assesses how the global pandemic has impacted vehicle shopping habits, how vehicle consideration has changed, and how luxury and non-luxury shoppers’ purchase decisions differ. The study found that once consumers feel safety measures are in place and businesses are open, nearly half of in-market shoppers expect to transact in 30 days or less.

With the economy in recession and unemployment elevated, the study found that consumers are interested in the “right deal.” Price incentives and low-to-no APR are still the leading offers that can trigger a shopper to move forward who may have been delaying their purchase. The study also finds that nearly half of consumers in the market have reconsidered their price point for a new vehicle, and consumers are also looking to lower their down payments on a new vehicle purchase. Even before COVID-19 hit, the auto industry was wrestling with a new-vehicle affordability issue. In the aftermath, the problem will likely be accentuated.

Use of Digital and Virtual Tools Increases Sharply
Both consumer demand for and dealership use of digital and virtual tools has increased during the global pandemic, according to Cox Automotive data.

For example, online shopping sites, Autotrader.com and KBB.com, have seen record-breaking traffic on weekends, likely as shoppers spend time online instead of on dealership lots. Vehicle description page views are up relative to overall traffic, and the volume of online chats and text messages sent to dealerships via the shopping websites has increased by 150%.

On Autotrader.com, the volume of digital retailing “deal sends” – when a customer makes an offer online – is up more than three-fold year over year. The Cox Automotive COVID-19 Digital Shopping Study found that consumers want to do more online, with 2-in-3 now more likely to purchase a vehicle completely online, the release stated.

May 2020 Sales Forecast Highlights

  • In May, new light-vehicle sales, including fleet, are forecast to fall to 1,050,000 units, down nearly 33% compared to May 2019. When compared to April, sales are expected to rise by roughly 347,000 units, an increase of 49%.
  • The SAAR in May 2020 is estimated to be 11.4 million, far below last year’s 17.4 million levels but a big improvement from last month’s 8.6 million pace.

May 2020 Forecast

Sales Forecast1

Market Share

Segment

May-20

May-19

Apr-20

YOY%

MOM%

May-20

Apr-20

MOM

Mid-Size Car

80,000

139,275

50,993

-42.6%

56.9%

7.6%

7.3%

0.4%

Compact Car

80,000

144,587

53,536

-44.7%

49.4%

7.6%

7.6%

0.0%

Compact SUV/Crossover

170,000

264,432

107,081

-35.7%

58.8%

16.2%

15.2%

1.0%

Mid-Size SUV/Crossover

180,000

255,310

123,682

-29.5%

45.5%

17.1%

17.6%

-0.5%

Full-Size Pickup Truck

190,000

231,240

151,633

-17.8%

25.3%

18.1%

21.6%

-3.5%

Grand Total2

1,050,000

1,575,903

702,862

-33.4%

49.4%

Cox Automotive Industry Insights data

2 Total includes segments not shown

All percentages are based on raw volume, not daily selling rate.

Source: Cox Automotive