With new infections of coronavirus continuing to decrease, the less-affected European manufacturers are about to resume production again. Yet with market trust shaken and British trade group the Motor Manufacturers and Traders Society (SMMT) forecast a 25 per cent decline in new car demand this year, what does this imply for new cars prices?
Factory orders that were made before the crisis broke should be fulfilled, although perhaps four to eight weeks later than anticipated. Deals would have to be made with customers forced to keep the old cars longer, particularly for cars on lease plans for Personal Contract Purchase (PCP) with a fixed contract value.
Forecasting cars prices
“Although visibility is minimal in the current unparalleled climate, most analysts anticipate a market shock considerably higher than in 2008/2009, but for a potentially shorter period,” said Ryan Brinkman, the automotive analyst at the bank, in a customer note on April 8.
This indicates “(1) a fall in the prices of used vehicles possibly approaching -15 per cent in 2008/2009; and (2) that this price drop is likely to occur over a much more compressed timeframe,” he added.
A surge of used cars for sale from rental-car fleets would also fuel the dramatic price decline, JPMorgan reports. Thousands of rental-car fleets are still left idle as travelers return home.
It’s not certain whether anyone would really be there to purchase the vehicles-particularly at a discount. That’s troubling dealerships that have already faced extreme headwinds from rivals. Like Carvana and Americans who can’t afford new leases any more.
JD Power expects a 65 percent fall in April car retail sales as its base case. The business estimates that a bad situation could see revenue dropping by almost 80%. Due to projections, events will pick up after an 8 per cent decrease from the previous year by July.
The slump in car demand is now wreaking havoc on dealerships. Which most manufacturers rely on for buyers to get their cars. Dealers surveyed by JPMorgan in March said car sales were in a terminal decline. Even before stay-at-home advisories hit most country.