Auto sales in April plunge into “unexplored territory” with 75% decline

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TORONTO – Auto sales plummeted in April to levels not seen in decades as restrictions and economic uncertainty around COVID-19 took hold, DesRosiers Automotive Consultants said on Friday.

“The month of April reached a new milestone in unknown territory, with light vehicle sales falling 74.6% from 2019 levels,” the firm said in a note.

Sales for the month totaled approximately 45,833 units, up from 180,616 last year. DesRosiers says that although his records are not complete, he believes the level is the lowest total for April sales since 1951.

The drop in sales in April came after a 48.3% drop in March sales from the previous year, with restrictions effective mid-month. The two months easily overshadowed the previous record for a monthly decline of 27.7% established in February 2009. Since the beginning of the year, the market has shown a downward trend of 36.7% compared to 2019 levels. .

Similar declines in activity are also occurring in the used vehicle market.

Cox Automotive Canada recorded a 15% drop in pre-owned vehicles funded through its online portal in March compared to last year, while in the first 26 days of April it fell 74%, said President Maria Soklis by email.

“April is now showing the full impact of restrictions put in place to reduce the spread of COVID-19. “

DesRosiers notes that April could be the lowest point in sales as the provinces speak of starting to reopen the economy. The Ontario government, for example, announced on Friday that car dealers could reopen by appointment only starting May 4.

Other areas of the automotive sector have not yet changed substantially, but may see significant changes soon.

Jim Matthews, owner of Lease Busters Inc., said he hadn’t seen a big increase in the number of people looking to terminate their lease in April because people didn’t know how to react, but the trend could begin to change significantly in May.

“There is going to be a tidal wave of inquiries and sellers, people who want to get out of their lease once things have calmed down. “

He said that during the Great Recession, he had seen a jump of about 30% of people looking to get out of their lease, and expects something similar, although automakers have allowed people to defer certain rental payments so that the effects can be spread out.

Many people can simply switch to more affordable leases, while others will have to completely terminate their leases, either because of financial constraints or because working from home means less need for this second car, said Matthews.

The reduction in driving in general due to the shutdown could lead to a decline in overall market activity this year, DesRosiers said in a note.

“With millions of people staying at home with very little use of their vehicles, vehicle wear and tear will decrease considerably and, as a result, demand will decrease in the automotive sector. “

Fewer kilometers traveled means fewer vehicles scrapped or put on the secondary market and more vehicles still in the system to possibly exert pressure on prices.

Rental companies could also create excess supply by being forced to unload part of their fleet because they lack liquidity and demand, said Ryan Brinkman, analyst at J.P. Morgan.

He said that the auto leasing arms of Ford and G.M. could also see billions of dollars in losses in the United States from the crisis.

TD chief economist Thomas Feltmate said in a report that he expects sales to drop nearly 23% this year to 1.5 million, noting that the magnitude of the shock means that it will take a while to recover.

“The sentiment has been damaged and it will probably take at least several months before a return to” normal “” sales levels.



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