Automotive industry analyst, ALG, a subsidiary of TrueCar, Inc. (NASDAQ:TRUE) has updated its estimate for 2020 U.S. auto sales based on expected impacts from the coronavirus spread. After topping 17 million units in 2019, the industry observer had already predicted a slight drop in 2020 even before the current crisis emerged.
Now, however, ALG has put forth three potential scenarios, the worst of which forecasts a drop of 34% from its original prediction.
Optimistic, mixed or cautious
In its new estimate, released just a week after its last update, ALG predicts 2020 sales could fall into one of three categories. Its most optimistic scenario would have coronavirus-related restrictions lifted by May 1, 2020, and a successful federal stimulus package. Sales of 15.3 million vehicles are predicted under that scenario, which would represent a reduction of almost 10% from original forecasts.
ALG believes at this point the most likely scenario to be 2020 sales of about 13.2 million units, taking into consideration current social distancing efforts and temporary manufacturing shutdowns. It believes a low volume of 11.2 million could come to fruition if current efforts to contain the virus extend through the summer and cause a prolonged economic downturn, and if stimulus plans have limited success.
Morgan Hansen, Vice President of Data Science at ALG, stressed that underlying factors, including an aging fleet and demand from millennial consumers, support a replacement demand level of approximately 15.5 million vehicles per year. He believes that any lower level of sales will not be permanently lost, but rather made up when the pandemic effects recede.