Posts by George Augustaitis
For a deeper dive into the current state of the economy, it’s important to look beyond traditional economic and automotive data and look more generally at consumer behavior. In around eight minutes, I’ll walk you through the importance of a variety of indicators I’m keeping a pulse on, including:
- Gross movie sales
- OpenTable seated diners data
- Hotel occupancy rates
- TSA checkpoint data
- Gasoline consumption
- Public transportation turnstile entries
One of the most recent issues in the auto industry that’s come to light due to COVID-19 is the tightening of credit among banks. In under 15 minutes, I’ll discuss how these changes in financing and lending impact car shoppers—and what that means for dealers. Watch this video to learn:
Automotive sales, both used and new, typically follow a seasonal sales pattern. The first sales spike of the year occurs in March and is fueled by a combination of factors, including economic tailwinds (tax refunds and annual bonus payments) and increased OEM spend on incentives as brands close the fiscal year or react to the competition. CarGurus US used lead submission data has always followed a similar seasonality path.
However, it should come as no surprise that COVID-19 has completely changed seasonality in the markets. This year, lead submissions fell off a cliff at the end of March, with nearly every state hitting a low between March 27 and April 11. During that time period, jobless claims climbed to all-time highs, consumer sentiment fell 17.3 points to 71.8, and other economic indicators saw major disruption. Additionally, companies completed first rounds of layoffs, and businesses like dealerships shut down in many places due to state restrictions. All of this uncertainty and turmoil, plus the risk of contracting the virus, contributed to the steep decline in leads and sales.
But it’s not all doom and gloom. The data shows that most states rebounded quickly after reaching their trough with lead submissions beginning to recover mid-April and continuing until the middle of June. However, state-by-state recovery has been as unique as each state’s handling of COVID-19.
Historically, consumers have turned to the used vehicle market during recessionary times as an alternative to a new vehicle purchase. That’s because used cars tend to be more affordable, allowing consumers to avoid the burden of a high monthly payment when money might be tight.
But there’s another factor driving the current shift to the used vehicle market—in particular, Certified Pre-Owned vehicles (CPOs)—and that’s low days’ supply of new inventory. The shortage of new vehicles is a result of plants remaining closed, and it’s making it difficult for consumers to find the specific new cars they want. While new and used vehicle sales posted double-digit losses in June, CPO sales posted an increase of 8.5% as compared to June 2019.
Since the last week of March, most people in America (if not the world) have seen their life change in some way, shape, or form because of COVID. One such change has been consumer’s driving habits. For many, the daily commute has been eliminated along with frequent trips to the store, gym, school, childcare facility, etc. While many, if not most, will eventually return to their previous driving habits, the current decrease in driving and increase in staying home has the potential to impact shopping activity. In particular, I wondered about how such a significant shift in consumer behavior might be influencing shoppers’ search behavior for vehicles.
To answer this question, I looked at new vehicle search volume on CarGurus for the first half of 2020 and compared it to the search volume we saw for the same criteria in 2019.
In the US, the automotive market’s recovery from COVID-19 will be as unique as the recession it spurred—and it will vary by state. The main reason for this is that consumer demand is highly affected by the increase or decline of COVID-19 cases in a particular state. Areas where the wave of infections came early saw a steep pullback in leads in late March and early April but have since started to recover. In contrast, states where cases of the virus are just now peaking are seeing leads decline rapidly and are at, if not below, early-February levels.
In this article, I’ll look specifically at two states, New York and Texas, and how COVID-19 has impacted each market.
As dealerships were forced to shut down their showrooms, auction lanes closed, jobless claims peaked, and car sales fell off a cliff in April, the industry was laser-focused on consumer demand. Fortunately, May brought incentives, stimulus checks, and pent-up demand, which drove consumers back to dealership lots. However, because inventory has not been replenished, the industry’s problem has shifted from demand to supply.
The COVID-19 pandemic has had a sweeping impact on the economy. Almost overnight, it brought businesses across the country to a near halt, resulting in a record number of jobless claims and a recession unlike any other.
In this presentation, I’ll take a look at many of the unique factors—decreased consumer confidence, supply chain disruption, and increasing pent-up demand—that continue to make this COVID-19-driven economic downturn so unique. I’ll also cover how the recession continues to evolve and what it means for the auto industry.
Not only were vehicle sales in May up from April, they were better than expected—a welcome surprise for the automotive sector. The increased sales numbers came after COVID-19 caused dealership closures, a shift to online sales and appointments, declining confidence in job security, and one of the largest stimulus programs in the history of the US. And while many view these sales results as a leading indicator of growth in the sector, the better-than-expected sales numbers were more likely a result of pent-up demand and market tailwinds.
Below, I’ll dive into the five tailwinds propelling sales numbers the most.
Pent-up demand, stimulus checks, and the hope that we are past wave one of COVID-19 has spurred the recovery of US leads on CarGurus. Total lead volume is now above early-February levels.
However, not every sector of the vehicle market has seen the same recovery. For example, we know that demand for higher-priced vehicles has returned quicker than lower-priced vehicles, but each vehicle segment has behaved differently. Most notably, the electric vehicle (EV) and plug-in hybrid electric vehicle (PHEV) segments.