Car sales plummet in April, setting stage for possible auto industry shakeup

A Canadian auto industry analyst says two months of plummeting car sales caused by the coronavirus crisis could set the stage for a major shakeup affecting everything from car manufacturing to dealerships, even the development of electric and autonomous vehicles.

Dennis DesRosiers of DesRosiers Automotive Consultants said that April sales of Canadian automobiles fell by nearly 75 per cent, the second straight month of double-digit declines after March sales fell by 48 per cent as the epidemic took hold across Canada. 

"Virtually 100 percent of showrooms across Canada were closed for all of April. The manufacturing shutdown in March pretty well happened globally. They're just not making vehicles," he said. "It's really devastating.

DesRosiers said the auto industry has weathered economic storms before, such as the energy crisis of the 1970s, or the financial meltdown of 2008, but he said there was a fundamental difference between those events and the coronavirus crisis. 

Auto sector has been rocked before, but not like this

"Consumers were still driving," he said. "If you're not driving, you're vehicle is just sitting there in the driveway and so you don't need to replace it."

"Until we start driving again, it's going to be very difficult to get people into showrooms."

Even if people wanted to go, however, those showrooms still aren't quite open. On Monday, car dealerships in Ontario were allowed to resume face-to-face sales for the first time in weeks, but with new physical distancing restrictions.

The province has decreed any sales or test drives must be by appointment-only and customers and staff must adhere to strict social distancing measures. 

CBC News called and visited several car dealerships in the London, Ont. area this week to find out how businesses were operating under the new restrictions, but all of the dealerships either declined to comment or did not respond to the request, with some sales staff admitting that they did not yet understand the new restrictions well enough to talk about them. 

Among the dealerships visited or contacted by CBC News, very few sales staff seemed to be working and an April survey by the Canadian Auto Dealers Association seems to reflect that. The survey suggests 96 per cent of car dealerships have been forced to lay off staff during the crisis, with 78 per cent of respondents saying they've had to lay off 10 staff or more. 

DesRosiers said he believes dealerships with fewer staff will likely be the new normal in a post-pandemic auto dealership.

"I think you're going to see everyone run a lot leaner.  One of the things that I think a lot car dealers are discovering is how well they can function with fewer people. You're going to see them take their people back slower than what a lot of people are hoping.

How COVID-19 could affect the future of the auto industry

DesRosiers said while car dealers will eventually rebound, other parts of the auto sector will be hit harder and may take a while to get back up, including the development of more affordable electric or autonomous vehicles, which depends on a public sector that's been financially stretched by the pandemic.

"What's the government to do? Support a small business with its deficits or support a wealthy guy buying an electric vehicle? I suspect you're going to see an awful lot of money vacate the electric vehicle industry. They were struggling to find the money for EV and autonomous technology before all this."

"There were a lot of analysts that thought we'd be at a 10 per cent EV market this decade, but I think that's unrealistic now."

The other place DesRosiers thinks the pandemic will hammer the auto industry is luxury car sales, which has seen high growth for the last decade, he said.

"One of the reasons that was doing so well is because we had a lot of what I like to call 'pretend' luxury buyers, people who aspire to have a luxury vehicle but can't afford one."

DesRosiers said sales of lower end luxury cars have been the fastest growing part of the industry for the last decade. Sales were so good, manufacturers began making cheaper versions of prestigious brands to attract more buyers at the lowest end of the price range. 

Because the coronavirus has upended so many lives through quarantines, layoffs and lockdowns, many of the people who want a prestigious brand may no longer be able to buy in a post-pandemic world. 

"Well if you were a pretend luxury buyer, you're out of the market. You could barely afford it when times were good, when times are struggling like this, who knows how long it's going to take back?"