General Motors is pushing hard to restock dealer lots after sales improved later in the second quarter, but rising cases of Covid-19 in states where pick-up trucks are popular could hit the brakes for US carmakers.
The Detroit company reported on Wednesday that US vehicle sales fell 34 per cent in the second quarter compared with a year ago, as the pandemic hit both supply and demand for carmakers. Still, retail sales began to recover later in the quarter: April’s sales were 35 per cent lower than in 2019, while sales in May and June were off by 20 per cent or less.
Pick-up trucks presented a bright spot for GM. But that business is threatened by growing Covid-19 cases in the southern and western US, where pick-up trucks typically sell well for all US carmakers. Texas is averaging about 5,700 new cases a day, an increase of 343 per cent since May 31, hitting a record high on Tuesday of nearly 7,000 new infections.
“The imposition of any measures that limit dealer operations in a particular location would have a chilling effect on vehicle sales there,” said Steve Brown, automotive analyst for Fitch Ratings. “Since pick-ups and other vehicles by the Detroit Three are popular in places like Texas that are seeing rising Covid cases, Ford, GM and [Fiat Chrysler Automobiles] could be disproportionately hit by any imposition of shelter-in-place orders that limit customers’ ability to go to dealers in those locations.”
GM is monitoring the situation, said company spokeswoman Lauren Langille. While it remains too early to tell how the rise will affect third-quarter sales, she said, “We expect the second half of the year to improve.”
GM shut down plants in March as the virus spread across the US, and autoworkers feared contracting the disease in the close quarters of an assembly line. Along with other carmakers, it offered generous financing incentives, which increased demand for vehicles, driving down dealer inventories.
Leaner inventories mean the company can “divert the right units to where they are needed to meet demand”, Ms Langille said. Dealers also embraced online sales tools to make it easier for customers to buy without visiting a dealership.
Now GM’s pick-up truck and full-size SUV plants are running at three shifts, while “nearly all” plants making cars and crossovers — vehicles with the look and features of an SUV, built on a car chassis — are operating at pre-pandemic productivity levels. The carmaker plans to operate most US plants through the two-week traditional summer shutdown as it tries to restock dealers’ lots.
There is a risk for carmakers that some sales this spring may have been “pulled forward” from later in the year because customers wanted to lock in zero per cent interest for seven years, Mr Brown said.
“The combination of shelter-in-place orders and the suspension of virtually all vehicle production for two months has created dislocations in the market that make it difficult to truly understand the strength of underlying demand right now,” he said.