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Car sales in crisis: A rocky road for manufacturers and dealers

May 5, 2020

China on the way back to (nearly) normal life

Test drive a freshly disinfected vehicle, delivered to your front door, with the keys dropped off by drone and respiratory masks provided for the whole family, in addition to an attractive discount. Things that may seem almost impossible to European consumers are already a reality in China. A new normality is slowly returning to the country. Production will restart under strict hygiene conditions and the renewed demand for cars will also be encouraged by digital solutions with as little personal contact as possible.

Shock-induced paralysis in Europe 

This is having drastic consequences, as current figures show. After a good start to the year for almost all brands, new registrations in Europe and the USA have almost completely collapsed in recent weeks. The reasons for this are complex. On the one hand, consumers are massively insecure due to health fears and constrained by government-imposed measures, while on the other, financial uncertainty is leading to a postponement of major investments.

Mission impossible: Buying a car?

Even the few customers who’d like to buy a vehicle have little opportunity to do so at present. The production facilities of many manufacturers and suppliers are currently closed. Germany, for example, hasn’t built such a small number of cars for decades. In addition, local manufacturers have lost their most important sales channel with the enforced closure of car showrooms. It will be months before comprehensive e-commerce solutions are available from manufacturers. And any remaining vehicle purchases usually fail at the final hurdle because the vehicle registration offices are closed.

Car dealers suffer the most

The consequences for car dealerships are drastic. Little significant cash flow is being generated, and valuable capital, in the form of demonstration vehicles and used cars, is currently generating only costs. Workshop business is also at an all-time low. Many traders are unlikely to survive this crisis, meaning the consolidation of the industry could be rapidly accelerated by COVID-19.

What’s next for automotive sales? 

What happens next? In a special report, the German Council of Economic Experts describes a probable scenario in which an economic upturn can occur within three to six weeks, after an approximately five-week shutdown. In this scenario, we also expect car sales in Europe to slowly return to normal over the summer of 2020 as forecasted by the German Council of Economic Experts.

But in reality, how strong is uncertainty in consumer and investment behavior? What incentives can stimulate demand? Can manufacturers and dealers create new sales channels in the short term?

What lessons must we learn from the crisis in the long term?

Over the coming weeks, we’ll share the answers to these key questions in further blogs, giving additional insights into the current situation and its ongoing development, as well as concrete options for action. Our next blog will focus on the findings of our representative customer survey.

In the meantime, our recent research paper COVID-19 and the automotive consumer shows how consumer attitudes have shifted in the pandemic. Visit How to get ahead in automotive recovery to learn how we help automotive players respond to the current events.

Many thanks to the co-authors Marc Matthies, David Rissman and Manuel Müller-Ost.

This article is an English adaptation of a post initially created in German.