10/24/2020 U.S.

Auto Sales Showed Signs of Recovery in Third Quarter - WSJ

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https://www.wsj.com/articles/u-s-auto-sales-show-signs-of-recovery-in-third-quarter-11601569086

AUTOS INDUSTRY

U.S. Auto Sales Showed Signs of Recovery in

Third Quarter
Cheap credit, demand for SUVs and pickup trucks drive faster-than-expected bounceback for car
industry

General Motors said its third-quarter U.S. sales fell nearly 10% from a year earlier, a slower decline
than in the second quarter.
PHOTO: TY WRIGHT BLOOMBERG NEWS

By Nora Naughton
Updated Oct. 1, 2020 4 38 pm ET

The U.S. auto industry’s recovery gathered momentum in the third quarter, with sales at
auto makers rebounding from coronavirus-related lows and buyers returning to
showrooms.

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10/24/2020 U.S. Auto Sales Showed Signs of Recovery in Third Quarter - WSJ

Strong demand for trucks and sport-utility vehicles is driving the comeback, which is
occurring faster than many had expected this summer. Also contributing is an increase in
urban consumers turning to car ownership, as well as easier credit conditions that make
car payments more affordable.

U.S. light-vehicle sales, seasonally adjusted

annual rate

.million vehicles

Trucks
Cars

Aug. 2019 '20

Source: Motor Intelligence

While sales at many car companies are still down compared with a year ago, analysts said
the selling pace in September was expected to be closer to what it was earlier this year—
before the pandemic brought business to a near-standstill this spring.

General Motors Co. GM -1.55% said Thursday its third-quarter U.S. sales fell nearly 10%
▲

from a year earlier, but the drop was narrower than the 34% decline posted in the second
quarter, when all of its North American factories were idled temporarily to protect
workers from the spread of the virus. GM has said its production has mostly returned to
pre-pandemic levels.

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The Detroit auto maker has benefited financially from surging demand for the big pickup
trucks that have long been its sweet spot, as well as cost-cutting measures put in place
years in advance.

UNDER THE HOOD

•Ford Financial Chief to Leave Company

Rival Fiat Chrysler Automobiles NV also reported a 10% drop in third-quarter U.S. sales,
but the decline was slimmer than the 39% decrease it posted for the second quarter. Ford
Motor Co. is expected to release its third-quarter sales Friday, and numbers from Tesla
Inc. are also expected in the coming days.

Car-shopping website Edmunds.com estimates total U.S. auto-industry sales for the third
quarter will still be down 11%, but that is an improvement from the nearly 31% plunge that
occurred in the second quarter.

Leading the recovery is rising demand from consumers buying cars at dealerships, as
opposed to fleet operators and other businesses that purchase vehicles in bulk and are
still reeling from the crisis.

A shortage of available vehicles—a hangover from the car-factory shutdowns this spring
—is helping to drive prices higher as car companies and dealers have pulled back on sales
promotions and other discounts.

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10/24/2020 U.S. Auto Sales Showed Signs of Recovery in Third Quarter - WSJ

Car shoppers on average paid a record $35,655 for a new vehicle in September, up 5.6%
from the same month last year, according to research firm J.D. Power. That trend has been
helping to boost profitability for many dealers, even as sales hover below previous-year
levels.

Jerry Seiner Dealerships in Salt Lake City achieved one of its best third quarters for sales
and profitability, Chief Executive Chris Hemmersmeier said. Customers gravitated mostly
to new, high-end pickup trucks, which Mr. Hemmersmeier said are still scarce.

Yet he worries that without more government stimulus, customers on the lower end of
the wage scale will be locked out of the market as the economic effects of the pandemic
wear on through the end of the year.

“We’re still going to need those customers,” he said.

September sales were boosted in part by the Labor Day holiday weekend, when many
dealerships offer discounts to lure customers, but the overall performance points to
strong underlying demand for new vehicles, said Thomas King, J.D. Power’s president of
data and analytics. “This is despite tight inventory for many of the most popular
vehicles.”

South Korea’s Hyundai Motor Co. is among several auto makers leading the industry’s
comeback. Hyundai, which recently expanded its lineup to include popular full-size SUVs,
said its U.S. sales increased 5.4% in September, compared with a year earlier, and fell only
1% in the third quarter.

The Japanese car companies, which have a smaller presence in the truck markets that are
now booming, have been slower to recuperate. But for some, September was looking up.

Toyota Motor Corp. TM -0.10% said its third-quarter U.S. sales were down nearly 11% over
▲

the year-earlier period, but it posted a 16% gain in September, with SUVs such as the Rav4
and Highlander carrying the company’s performance.

Honda Motor Co. ’s third-quarter sales fell 9.5%, but the auto maker’s September sales
increased 12%.

Nissan Motor Co. , which relies more on fleet business and has been undergoing a
restructuring, posted a 32% decline in third-quarter sales. The company no longer
provides monthly sales figures.
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10/24/2020 U.S. Auto Sales Showed Signs of Recovery in Third Quarter - WSJ

While individual shoppers have flocked back to the market, sales to fleet operators and
businesses have remained depressed, particularly to rental-car firms such as Avis Budget
Group Inc. and Hertz Global Holdings Inc., whose operations have been hit hard by travel
restrictions related to the pandemic.

Fleet sales are expected to account for just 11% of new-vehicle purchases in the third
quarter, compared with 17% during the July-to-September period in 2019, according to
Edmunds.com.

“The last piece of the puzzle for the industry’s recovery is fleet sales,” Edmunds analyst
Jessica Caldwell said in a written statement. “It will likely take a bit longer for this side of
the business to make as dramatic a comeback as its retail counterparts.”

Appeared in the October 2, 2020, print edition as 'Auto Sales Show Signs of Pickup.'

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