Coronavirus Pandemic

US car dealers make house calls as wary shoppers stay home

A Tesla car in a Manhattan dealership in January in New York. Tesla is expected to see a sales decline this year even with its much-anticipated Model Y crossover SUV.
A Tesla car in a Manhattan dealership in January in New York. Tesla is expected to see a sales decline this year even with its much-anticipated Model Y crossover SUV.PHOTO: AGENCE FRANCE-PRESSE

Dealerships are unveiling an array of tactics to counter dwindling sales, including zero per cent financing deals

Lured by an advertisement for zero per cent financing, a customer phoned Chuck Olson Kia in Seattle saying he wanted to buy a Sedona minivan.

But with more than 400 confirmed coronavirus cases in Washington state, he said there was no way he would go to the dealership.

So the salesperson instead sent an employee to his home with paperwork and closed the sale of the loaded US$40,000 (S$58,000) vehicle.

Given the circumstances, the dealer was fortunate the buyer even agreed to meet in person at his house.

"If they will let us, we'll come to them," said Mr Jim Ault, sales manager for the dealership, which sells Chevrolets and Kias. "Volume is down, but we're still in business."

That one deal will hardly make up for the economic damage inflicted by the coronavirus.

Mr Ault said his sales are probably down more than 20 per cent so far this month and analysts are forecasting an ugly year nationally for manufacturers and dealers.

So they are unveiling an array of tactics to mitigate the damage, including the zero per cent interest-rate gambit from Kia and Chevrolet - which hearkens back to the "Keep America Rolling" campaign General Motors (GM) offered after the Sept 11, 2001 terrorist attacks.

"I remember the '94 earthquake and 9/11 and the recession, where we just had to press on and work hard," said Mr Beau Boeckmann, president of Galpin Motors in Los Angeles, which sells brands including Ford, Honda and Volkswagen.

"This one, we really don't know what to do. Right now, we're just playing it minute by minute and that's something I've never had to do before."

To be sure, the plight of the dealers is not nearly as dire as restaurants and retailers that have been forced to shut down.

If they will let us, we'll come to them. Volume is down, but we're still in business.

MR JIM AULT, sales manager for a dealership in Seattle which sells Chevrolets and Kias

Since cars still need mechanics to keep running, dealerships have been spared the harshest restrictions that have brought commerce in other segments of the economy to a screeching halt.

But few doubt that the virus will have a huge impact on the industry.

LMC Automotive, a research firm, has lowered its 2020 forecast by about 750,000 vehicles to as low as 16 million this year, down from about 17 million last year, said Mr Jeff Schuster, LMC's senior vice-president of forecasting.

Morgan Stanley's Mr Adam Jonas sees the market falling even further, down to the recessionary level of 15.5 million. That will spill over to dealers and parts suppliers.

Mr Joe Spak, an analyst at RBC Capital Markets, slashed price targets for all 22 of the auto-related companies he covers and downgraded four of them in reports on Monday.

Tesla will see a sales decline this year even with the much-anticipated Model Y crossover sport utility vehicle coming, he said. Ford Motor will post its first annual loss since 2009 and GM will burn US$3.5 billion in cash.

None of those outcomes seemed plausible before the virus outbreak.

With that kind of damage in the offing, GM is offering zero per cent financing for 84 months, with 120 days of deferred payments.

It is marketing the programme under various names, such as "Chevrolet Cares" or "Cadillac Assurance".

Kia has offered zero per cent for at least 60 days, and other manufacturers are expected to follow with similar incentives to try to stimulate sales.

GM positioned its zero per cent financing deals as an economic saviour after the Sept 11 terrorist attacks.

The "Keep America Rolling" campaign resulted in an annualised selling rate of almost 22 million vehicles in the next month and kept the economy from a deep slump, Mr Schuster said.

The new campaign will help, especially in markets that have not been hit as hard by the virus, said Mr Mike Bowsher, who owns the Carl Black Automotive Group, which has stores in Georgia, Florida and Tennessee.

He said his sales this month are still down 10 to 15 per cent.

The pandemic has altered traditional selling techniques. In some cases, he said, shoppers will go to the dealership, but ask to fill out paperwork and have their trade-in appraised in the parking lot. They would prefer not to walk into the showroom and be around other people.

"It's unusual times, you have to do unusual things," said Mr Bowsher, co-chairman of the Chevrolet Dealer Council.

At dealerships, workers are swabbing the car interiors with disinfectant wipes before and after they enter the service bay and on the showroom floor, said Mr Rhett Ricart, a Ford dealer in Columbus, Ohio, who is chairman of the National Automobile Dealers Association.

Dealers are reducing opening hours of showrooms, where traffic has slowed to a trickle, keeping on skeleton crews rather than closing altogether, so that workers continue to get paid.

"I haven't heard any talk of not being able to get a car or a manufacturer saying they couldn't build it at this point in time," Mr Ricart said.

Auto auctions, where dealers buy and sell used cars, have already closed. That will have an impact on the used-car market and hurt availability.

But Mr Ricart said shutting down dealerships would inflict severe damage on the economy. Dealers have been deemed essential in San Francisco, which has tighter restrictions on which businesses can remain open during the pandemic, he said.

"If you close car dealerships, how are cars going to get service for the doctors to get to the hospital and the trucks running down the freeway carrying goods?"

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A version of this article appeared in the print edition of The Straits Times on March 21, 2020, with the headline 'Coronavirus Pandemic US car dealers make house calls as wary shoppers stay home'. Print Edition | Subscribe