April's U.S. auto sales were dismal when looking at the raw numbers but encouraging when put into context.
As deliveries dropped by an estimated 50 percent last month, the coronavirus's impact may have crested. Sales have been improving for a few weeks and—barring a resurgence of the virus in coming months—recovery may be at hand.
"I would like to think that the worst is over," said Randy Parker, vice president of sales for Hyundai Motor America. "Right now, we're planning—based on J.D. Power and third-party analysts—that the market is only going to be down roughly 30 percent in May. As local governments lift restrictions, more of our retailers will come back online."
Toyota Motor North America reported a 54 percent drop last month, while Hyundai limited its fall to 39 percent. Mazda was off 44 percent, and American Honda sales dropped 54 percent. Most auto makers did not report April numbers.
One positive trend outlined by J.D. Power, which had initially expected an 80 percent decline in April, showed a rebound in retail sales over the course of the month. Industry retail sales were down about 60 percent the last week in March compared with the pre-virus sales forecast but only by about 40 percent the last full week in April. J.D. Power estimates retail sales fell 46 percent last month.
"The week ending April 26 marks four straight weeks of improving conditions," J.D. Power said in a report. "U.S. retail sales are now in recovery." Fleet sales were in free fall—down 74 percent, according to ALG—but consumer demand showed signs of resiliency despite rising unemployment. ALG put overall sales in April down 52 percent compared with the year earlier.
"The 0 percent financing for 84 months plus the deferred payments, which the domestic auto makers really led with, have really taken off and done a lot to spur demand," said Eric Lyman, senior vice president at ALG. Hyundai was helped by its Assurance job-loss program, and auto makers in general brought compelling offers to the market.
Analysts are now starting to worry more about supply than demand, now that U.S. assembly plants have been down for several weeks. That's particularly true for pickups, which have suffered the least, said Tyson Jominy, vice president of automotive consulting at J.D. Power.
"The story changes so rapidly as to what we're watching," Jominy said. "And now we're watching inventory."
Pickup sales were only off by about 10 percent in April.
"Supply of pickup trucks in general is the one thing we're watching very closely because that's the metric right now that could really knock the sales out of this recovery," he said.
Parker said the key to outperforming the market was to move aggressively with incentives while keeping vehicles flowing from Korea. Dealers moved quickly to online sales, he said, limiting the drop in retail deliveries last month to 28 percent.
Bob Carter, head of sales for Toyota Motor North America, said the auto maker found positives amid the sea of red numbers and predicted things could return to near normal as early as August.
"The last 10 days of April compared to the last 10 days of March, we were up 20 percent," Carter told Automotive News. "I'm 100 percent convinced that we're beyond the bottom. My expectation is that April was the low point. May will be better than April. June will be better than May. On a national basis, we'll come into a 90-day recovery period, and my prediction is that by August, things should be pretty good."
Carter said inventories were down year over year, though still fine, and he said there could be shortages of some vehicles in the months ahead. At Hyundai, Parker said he didn't see supply problems for any model, including the hot-selling Palisade crossover.
Carter said the sales departments of roughly one-third of the 1,482 Toyota and Lexus dealers in the U.S. were closed in April because of the pandemic, though almost all continued selling cars online with home delivery. He said the "vast majority" of the auto maker's 84,694 sales in April were online. "That's going to be our new normal now."