Automotive market poised for a unique, state-by-state recovery

Posted by George Augustaitis on June 26, 2020

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.

New York and Texas: Two very different recovery curves

New York and Texas are two states that are experiencing extremely different recoveries from each other due to the timing of when COVID-19 cases rose and fell. In New York, COVID-19 was rampant early on in the pandemic. As the fourth most populated state in the US, it also saw one of the highest number of infections in the country. On the other hand, a widespread COVID-19 outbreak occurred much later in Texas, the second most populated state, and continues to trend upward today.

Swift action led to an earlier recovery in New York

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The impact of COVID-19 on New York was extreme—and the state’s response measured up to it. The state government deemed auto sales non-essential, although for a limited period of time, and implemented strict quarantine rules in an effort to flatten the infection curve. Although the number of total cases did eventually hit a plateau, the sweeping spread of the virus throughout New York caused one of the larger declines for total leads submitted on CarGurus.

As compared to early February, the total number of leads submitted in New York hit its low in late March/early April. However, as the number of cases plateaued and New York deemed vehicle sales essential, leads increased. By early May, total leads in New York were well above early-February levels. And as new COVID-19 cases in New York have continued to decline, the number of leads submitted has remained above early-February levels.

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Impact of COVID-19 lagging in Texas—until now

Texas felt the impact of COVID-19 much later than New York did, and its infection curve looked much different. For instance, on May 1, New York reported 308,314 new COVID-19 cases. That same day, Texas reported only 29,229 cases. While the amount of testing done does affect the number of cases reported, the lesser impact of the virus in Texas allowed the state to remain open longer—and reopen sooner than other states. While good for the state in the short term, Texas has recently reported major increases in the number of COVID-19 cases, and these spikes could hinder auto shopping in the state.

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Because the number of COVID-19 cases in Texas was lower throughout March and April, the decline in total leads was not as drastic as it was in New York. Similarly, there wasn’t as much of a recovery because leads never really fell off a cliff. That was all before the recent increase in COVID-19 cases, which has caused the start of the second pullback in leads.

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How dealers can adapt

Particularly in states where COVID-19 cases are on the rise, dealers should expect consumers to be extra cautious when leaving the house to purchases a vehicle. To put consumers at ease, dealers will need to adjust their day-to-day operations. According to CarGurus’ recent COVID-19 Sentiment Study, 61% of those planning to buy a vehicle this year would prefer to use contactless services like virtual appointments, at-home test drives, or home delivery. These might be relatively new services for dealers but they’re likely here to stay.

Another measure dealers should take is to communicate what they’re doing to make the shopping process as safe as possible for consumers. Here are a few ideas:

  • Email your customer base with information about the steps you’re taking to keep your employees and customers safe.
  • Post on social media to provide insight into your process for sanitizing everything from your showroom to your test drive vehicles.
  • Share testimonials and reviews from customers who bought a vehicle from your dealership during the current pandemic—bonus points if they can speak to a contactless service you’ve started offering.

Anything you can do to make potential customers feel comfortable and secure throughout their car shopping journey during COVID-19 will ultimately help you win the sale.

Topics: covid-19, economic analysis, new york, recovery, texas