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Car sales are returning, but they are still not back to pre-pandemic levels

Major carmakers reported that sales in the third quarter had declined compared to a year ago – but far less than the significant decline in sales in the second quarter.

“It’s coming in better than we thought,” said Michelle Krebs, a senior analyst at Cox Automotive.

Temporary shutdowns of car plants earlier this year also limited the inventory of some of the more popular models.

Better than the train

Although the pandemic has given some headwinds to car sales, it also helps boost sales in some respects, according to Elaine Buckberg, GM’s chief economist. Studies show that some consumers see private car ownership as a safe place, especially compared to public transportation or riding greetings for local trips or flying for longer trips.
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She said the pandemic has also created savings from pre-holiday, entertainment and restaurant meals that some buyers use for new car purchases. And some city dwellers have increased interest in owning a vehicle as some seek to relocate to the suburbs and others want to flee the city over the weekend, she said.

The jump in new housing construction has also helped drive demand for pick-up trucks, and the rebound in the stock market after the sale earlier this year has restored household wealth for some buyers who may have postponed some purchases.

Will not return to normal anytime soon

Although some consumer demand for cars is showing renewed strength, it turns out that a large drop in fleet demand is difficult to overcome for most brands, said iSeeCars analyst Karl Brauer. Fleet sales to rental car companies, which typically account for 10% of sales alone, have almost stopped, as air travel has greatly curbed the demand for car rental.

Uncertainty about the economy, the election and the pandemic will continue to act as a drag on sales, he said. Krebs also noted that credit is tightening up, especially on the subprime part of the business.

“The rates are low if you have good credit,” she said. “But we’re seeing more and more people knocked out of the new car market because they can’t get credit.”

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Krebs and Brauer both predict full-year U.S. sales of about 14 million vehicles, down from 17 million in 2019. Although Krebs does not yet have a forecast for 2021 sales, she noted that her company does not believe the industry will return to 17 million anytime soon.

Some automakers said sales in September were ahead of where they were in 2019, though the timing of the Labor Day weekend a year ago, when it was counted as part of August sales, makes direct comparison from month to month month somewhat difficult.

GM (GM), a leader in U.S. sales, reported a 10% drop in sales in the quarter compared to a year ago, far better than a 34% drop in sales in the second quarter. Although it did not break sales in September, it said industry and GM sales both rose markedly in September.
Fiat Chrysler (FCAU) reported a 10% decline in the quarter after sales fell 39% in the second quarter.
Toyota (TM) does not break sales in September and said they increased by 16.2% from the previous year, partly due to the difference in the calendar. Its total sales in the third quarter fell 11%. Sales had fallen by 35% in the second quarter.
Other automakers are due to report results later Thursday, though Ford (F) does not report results until Friday and Tesla (TSLA) has not yet said when it will report sales in the third quarter.

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