Study: Auto industry could see effects of COVID-19 for years to come
The global auto industry is facing an economic context that will affect sales processes and customer relations for years to come, according to a study by San Juan-based research firm Abexus Analytics.
That trend will be no different in Puerto Rico, where new car sales have plummeted by 96% since the island went into lock-down mode to fight the spread of the COVID-19 pandemic, according to the latest numbers revealed by the United Automobile Importers Group.
That number sharply contrasts the stateside market, where the reduction has been between 12% and 27%, according to the research report called “Auto industry in the context of COVID-19.” On an international level, that drop is estimated at 22%.
“If we look at China’s experience, which has managed to reopen its economy in the past months, the impact of COVID-19 over sales is projected between 15% and 25%, depending on the ability of other countries to control the pandemic,” according to the study.
The effects of the arrival of COVID-19 to Puerto Rico — job losses, business closings and a drop in demand — will yield positive and negative results for the new car sales industry.
The firm mentioned lower interest rates, local and federal incentives — financial aid packages, bonuses, increased unemployment payments and the availability of U.S. Small Business Administration loans — and pent-up demand over the past four months could fuel positive activity in coming months.
“In other words, the purchases that were put off after the earthquakes and the economic shutdown aren’t lost forever. Those consumers will once again buy as the economy stabilizes, presenting the possibility of an increase in sales as the year progresses,” the study confirmed.
But, the loss of some 200,000 jobs on the island could negatively affect new car sales, although the majority are expected to recover. But that will take time as the economy bounces back and could lead to a jump in repossessed vehicles toward the end of 2020 and early 2021.
“Social distancing means fewer clients at stores and more distrust when visiting establishments that are open to the public. This could drive a change in the interaction between consumers and sales representatives,” the study concluded.
Another potential blow to the auto industry could come if a second wave of COVID-19 contagion occurs in Puerto Rico, which could lead consumers to postpone purchases.
The analysis firm predicts new vehicle sales for 2020 could reach 81,500 units, but the uncertainty could cause that number to fluctuate between 70,000 and 90,000.