The outlook for the rest of 2020 is decidedly better than it was a few months ago, but it will be far from a banner year for auto sales.
A recovery began almost as abruptly as things fell apart in the spring, according to analysts who gave an economic overview of light-vehicle production and sales in a Zoom presentation Aug. 5 during the Center for Automotive Research Management Briefing Seminars.
But it will take that recovery a long time to get back to the 17 million-plus U.S. sales levels of previous years.
IHS Markit is calling for light vehicle sales of 13.3 million this year, compared with 17.1 million last year. Mike Wall, the firm's executive director of automotive analysis, noted that the coronavirus is still "dictating the story to some extent" because the pandemic is still continuing to unfold.
In addition to its baseline forecast of 13.3 million vehicles, IHS Markit has a pessimistic outlook of 11.6 million sales for the year and an optimistic forecast of just 14.2 million.
LMC Automotive is forecasting 13.5 million light-vehicle sales this year. That's up from its April forecast of 12.9 million. LMC doesn't expect U.S. sales to hit the 17 million mark again until 2025, said Jeff Schuster, LMC Automotive's president of Americas operations and global vehicle forecasts.
Cox Automotive is calling for light-vehicle sales of 13.6 million this year.
Production forecasts also have been revised in recent months. In January, IHS Markit's forecast for North America showed a 200,000-vehicle increase in 2020 production. Its current forecast shows a reduction of about 3.7 million from last year.
"This was the year we'd make up for some of that GM strike and some additional localization," Wall said. "So obviously, suppliers and auto makers alike have had to course-correct rather significantly."
Looking at retail, Jonathan Smoke, Cox Automotive's chief economist, said it appears the U.S. recovery has lost some momentum in recent weeks. Based on a sampling of same-store data, the strong recovery began at the beginning of April. But different U.S. markets have been at varying stages of recovery, reflecting the uneven impact of the coronavirus by geography.
By June, U.S. auto retail was seeing its best performance all year, Smoke said. July ended up delivering improvements in both new-vehicle and used-vehicle sales.
But Smoke said momentum will be difficult to maintain. One reason is a low supply of both new and used vehicles. The retail supply of used vehicles is at 35 days, vs. a typical 45 days.
That has led to pricing challenges. Wholesale prices were down about 10 percent at one point this spring, but as of last week, they were up 12 percent relative to the beginning of the year.
Smoke suspects that while consumer demand is not necessarily declining, pent-up demand for used vehicles powered some of the earlier stages of the recovery.
All the while, consumer sentiment remains a potential headwind.
Smoke said consumer sentiment is down 24 percent since Feb. 29, according to data from Morning Consult. It had been improving until Memorial Day weekend, when social unrest and continued uncertainty around the pandemic took hold and made the metric more erratic. Last week, consumer sentiment stabilized for the first time in eight weeks, Smoke said.
But risks remain because of the uncertainty of how schools will or will not reopen for students this fall, and "the most polarized presidential election that many of us will have experienced" is just 13 weeks away, Smoke said.
He added: "I really don't think that's going to help consumer sentiment in the near term."