Automotive Sector Remains Resilient and Car Companies Show Discipline

The pandemic related losses in the automotive sector are undeniable and are having a vast ripple effect in the general economy, with the industry representing 5 to 7% of US GDP.

That said, the car business is faring much better than the restaurant / hospitality, live events and entertainment industries, which are mortally wounded or totally shut down.

Based on July stats the US car marketplace is on track to sell some 13.3 million units for the year, down from nearly 17 million vehicles in 2019. However July sales do show progressive increases from previous months.

Paradoxically because of pent-up demand, extra money in the economy from government stimulus checks and lower consumer spending overall, availability of new and pre-owned vehicle market is very tight.

For consumers this means fewer discounts and incentives, with average vehicle transaction prices at nearly $40,000. Dealerships are fast-tracking digital marketing programs, downsizing staffing and benefitting from low fuel costs with brisk sales of high-margin full and mid-sized trucks and SUVs.

With a history of poor downside management General Motors, for example, has posted relatively modest losses for 2020 compared to its competitors.