SALES of new cars in T&T declined by 33.9 per cent in June, the first month the industry sold any vehicles after the two-month lockdown, caused by the public health restrictions imposed by the Government to reduce the spread of the deadly Covid-19 pandemic.
New car companies in T&T sold 654 units in June 2020, compared with 990 vehicles in June 2019, according to David O’Brien, chairman of Massy Motors, the country’s largest new vehicle merchant. Massy Motors is part of the Massy Group, T&T’s largest conglomerate by revenue.
“I would not say that the 34 per cent decline in new car sales in June was a surprise. Our sales in our first month back after the lockdown were not as bad as they could have been. At least new car sales did not fall off a cliff,” said O’Brien.
“Speaking as Massy, we feel that July new car sales will be better than June and the industry will continue to improve from there,” he said.
Asked if he could discern any trends in the June sales, the executive said Massy Motors has seen an increase in demand for used vehicles.
“We sold more used cars this June than we did in June 2019,” he said.
Last month, Massy Motors, announced that it was placing 68 employees on furlough, that it would rotate an additional 35 members of staff one-day on and one-day off and that ten executives would have their salaries cut by 20 per cent.
O’Brien said last month that although the country’s car dealers, like other aspects of retail trade, were given the green light to resume business on June 1 after the Covid-19 lockdown, the company decided to take the measures because of the difficulty of predicting when T&T’s new car market would get back to pre-Covid-19 levels.
The number of new cars sold in T&T before the Covid-19 pandemic averaged between 1,000 and 1,200 per month, O’Brien said
As a non-essential service, Massy Motors continued to pay its 460 employees 100 per cent of their compensation in March, April and May although it did not sell any cars during the months of April and May, the company executive said.
The expenditure-reduction measures, which impacted 113 of Massy Motors 460 employees in total, took effect from June 1 and was due to last three months, O’Brien told the Express in an interview on June 5.
Massy Motors took other steps to reduce its expenditure by closing down its Chaguanas showroom at the Mid-Centre Mall and by moving out of a rented property in San Fernando.
Asked why the company waited until the resumption of retail business to take the employee decisions, O’Brien said: “Once the business became operational, we realised we did not need 460 people to run a business that was likely to see reduced business.”
Speaking to Express Business on Monday night, O’Brien said in July, Massy Motors brought back 25 per cent of the employees who were furloughed in June.
“Our hope is that everyone will be back to work on September 1, which is in line with the three-month furlough we announced in June,” he said.
Sales down in US too
The decline in sale of new cars in T&T is in line with the fall in sales in the US.
CNN Business reported earlier this month that major automakers in the US reported a more than 30 per cent drop in US sales in the second quarter, the biggest plunge in sales since the Great Recession and the auto bankruptcies of 2009.
Sales were also hurt by record job losses limiting spending money, as well as mass work-from-home policies that temporarily put commutes on hold.
General Motors, the largest US automaker, saw a 34 per cent sales drop for the second quarter of 2020.
GM said sales fell most sharply in April and showed signs of recovery in May and June.
“GM entered the quarter with very lean inventories and our dealers did a great job meeting customer demand, especially for pickups,” said Kurt McNeil, GM’s vice president of sales. “Now, we are refilling the pipeline by quickly and safely returning production to pre-pandemic levels.”
Fiat Chrysler reported a 39 per cent decline in revenue, pointing to the drop in rental fleet sales. Rental car companies typically buy about ten per cent or more of US car sales in the course of a normal year.
Toyota also reported a 35 per cent drop in second quarter US sales, although it saw an improvement as the quarter progressed. June sales were off 22 per cent, the company said.
Despite the signs of improvement later in the quarter, it’s unlikely there will be a rapid increase in sales throughout the summer, said Jonathan Smoke, chief economist for Cox Automotive. Cox is forecasting a 35 per cent drop in total US sales for the second quarter once all the automakers report and the data are in.
A Cox survey showed one-third of those who intend to buy a car said they will delay their purchases, driven by factors such as general uncertainty in the market and continued unemployment concerns, CNN Business reported.
“The industry is facing the potential for a cruel summer for automotive sales,” Smoke said in a recent presentation.
Another auto research firm, LMC, projects a 33 per cent drop in sales in the quarter and a 22 per cent drop over the course of the full year.
“There is still plenty of risk ahead, with the possibility of continued outbreaks,” said Jeff Schuster, president of global vehicle forecasting for LMC, adding that some of the current sales are likely being driven by pent-up demand that could soon fall off.
Credit rating agency Moody’s this month downgraded more than US$130 billion of automakers’ debt, warning that further downgrades are possible given the industry challenges not only in the United States but around the globe.
“Autos are among the industries coronavirus hit hardest and the pandemic adds to what were already substantial challenges for carmakers,” a note said. “We estimate vehicle sales will slump at least 20 per cent in 2020 and will take several years to recapture 2019 levels.”