How COVID-19 Is Changing the Market
The U.S. auto market will change tremendously and rapidly in the near future. And, of course, the change is under way now.
Examples are outlined in a COVID-19 Valuation Services Update published by J.D. Power dated March 30. 2020.
For instance, the report showed that wholesale activity slowed significantly with week over week volume declining 52%.
Volume was down 53% in California the second week in March.
Volume in Florida, Pennsylvania and Texas was down 40% - 56%.
New York and the Pacific Northeast experienced declines of 78% and 59% respectively.
New retail sales deteriorated rapidly over the past three weeks, falling 1%, 15% and 35% on a weekly basis beginning with March 8.
Key variables dictating the severity of the sales loss are the length and duration of consumer and business restrictions. As restrictions are removed, sales will be driven by economic conditions and the effect of government and manufacturer stimulus actions. There is likely to be significant pent-up demand that will be released in May or June, but the net effect will be mitigated by a general reduction of demand due to economic conditions.
Typically, used prices rise through the first quarter as consumer demand strengthens along with the receipt of federal tax refunds. Will the market come roaring back after the social distancing measures are removed or will consumers be reluctant to purchase immediately?