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Auto sales forecasts for 2020 differ between J.D. Power, Cox analysts

August 21, 2020
Two forecasters offered contrasting takes on U.S. auto sales for the rest of 2020 vary, one more optimistic and one more pessimistic, in separate webinar presentations this month.
 
The optimist is Tyson Jominy, J.D. Power vice president of data & analytics. During a webinar hosted by The Wall Street Journal, Jominy said a lack of new-vehicle inventory is the biggest factor holding back sales.
 
He acknowledges an increase in subprime delinquencies but said auto lenders are not "stacking" risk as they had in the run-up to the Great Recession, for instance, by offering long loans to subprime customers with large amounts of negative equity.
 
Provided automakers can ramp up production to meet demand in the fourth quarter, Jominy said sales have "a shot to get back to zero." That is, 0% change by the end of 2020 in monthly sales from a year ago.
 
The pessimist is Charlie Chesbrough, senior economist for Cox Automotive. He’s more worried about consumer willingness and ability to buy. During a webinar hosted by the American International Automobile Dealers Association, Chesbrough said business shutdowns and job losses this year have damaged the U.S. economy and consumer confidence so badly that it could be three or four years before auto sales recover to pre-pandemic levels.
 
"The key takeaway is, we’re still in a very, very difficult position economically," Chesbrough said. "Even though tens of millions of people were losing their jobs, the hope was that once everything opened back up again, all these jobs would be reopened, too, and everybody would get back to work."
 
Since then, businesses are running more efficiently with fewer people, less office space and less travel. Meanwhile, he said Wall Street is applauding the trend with higher stock values. "What we’re concerned with now is if all these furloughed employees are going to become permanent layoffs."
 
But both analysts concur on many points, too. They agree lease customers who have been extending their leases during the pandemic represent additional pent-up demand when they eventually return to the market.
 
Both also acknowledge inventory is a major problem for both new- and used-vehicle sales. The recent drop in new-vehicle sales means fewer trade-ins today, and fewer nearly-new used vehicles three years from now, Chesbrough said.
 
And both worry about the potential for a "W-shaped" recovery. That is, an uptick in COVID-19 cases could cause a repeat of widespread business shutdowns. Jominy calls that scenario "the elephant in the room." But he also argues businesses can recover more quickly because of their prior experience.
 
 

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