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U.S. Auto Sales Have Collapsed, but the Worst May Be in the Rear View Mirror

By Daniel Miller – Updated Apr 23, 2020 at 8:55AM

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Retail vehicle sales are down by almost 50%, but not every segment has been hit equally, and there are signs that buyers are beginning to come back.

J.D. Power on Wednesday delivered U.S. auto sales data that was one part devastating and one part encouraging. The country's retail vehicle sales are down roughly 50% from where they were forecast to be prior to the coronavirus pandemic. That's a massive drop-off -- but not as steep as the ones experienced by China and Western Europe during the first full months after COVID-19 initially impacted them, according to Jeff Schuster, senior vice president of forecasting at LMC Automotive, a partner of J.D. Power.

The retail sales decline likely would have been even worse had automakers not moved rapidly to bolster their online sales capabilities and marketing, and offered 0% financing and other incentives. 

"We're now expecting a pattern that is more of a sustained level of a 40 percent to 50 percent decline over a longer period of time, instead of the really deep hit and then a relatively quick recovery," Schuster told Automotive News.

Rows of vehicles at a car dealership.

Image source: Getty Images.

In fact, last week was the third consecutive week of improving retail sales after the declines bottomed out with a 59% drop during the last full week of March. Detroit automakers Ford (F -3.60%), General Motors (GM -5.08%), and Fiat Chrysler Automobiles (FCAU) are better-positioned for the current sales environment than their foreign rivals as large pickups remain the best-performing segment while sales of compact cars have been hit the hardest.

J.D. Power now predicts that total retail vehicle sales in the U.S. will land between 11.3 million and 12.5 million units during 2020. Prior to the pandemic, it had forecast sales of 16.8 million units. Still, those three consecutive weeks of recovering sales are an encouraging sign for the auto industry.

Daniel Miller owns shares of Ford and General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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