The numbers are in and the economic consequences wrought by the COVID-19 pandemic landed a body blow to new car sales in California, with dealers reporting a drop of 48.9 percent in the second quarter of this year compared to the same three-month period of 2019. Year-to-date vehicle sales are off 26.9 percent.
The statistics reflect the full effect of safety and social distancing protocols that kicked in by mid-March and dramatically curtailed or even temporarily shuttered some showrooms across the state.
“Obviously, with the fuller impact of the pandemic, it was very clear sales were going to drop at the end of the first quarter, beginning of the second quarter,” said Brian Maas, president of the California New Car Dealers Association. “The good news is they didn’t drop nearly as far as we initially feared. And while a nearly 27 percent drop is not ideal, it’s a lot better than it could have been.”
Dealerships have reported signs the market is regaining some footing as the economy tries to crawl back to some sense of normalcy. Economists with the new car dealers association predict new vehicle registrations in California will finish the year 22 percent lower than in 2019, falling from 2.09 million units to 1.63 million. They project the number to rise to 1.81 million in 2021.
“Obviously, if there’s a significant outbreak and further shutdown orders come, our economists’ prediction could be thrown out the window,” Maas said. “But assuming that we’re on the path that we’re on, it makes sense that the market has stabilized.”
That’s exactly what Dave Miller, general manager of John Hine Mazda in Mission Valley, is seeing.
“Our business has been good since May, June and July,” Miller said. His dealership sold 513 new cars and trucks through July, which isn’t that far off from the 547 new vehicles it sold through July 2019.
Like dealerships all over the San Diego area, Hine Mazda has instituted protocols to help prevent the spread of the virus.
In its service department, customers’ vehicles are cleaned upon arrival and when the technicians are done, cars and trucks are cleaned and sanitized. Vehicles on the lot have their shift knobs and steering wheels wiped down and when they are delivered to a buyer, a sheet lists all the measures taken to ensure cleanliness.
Masks are required from everybody and a full-time employee constantly circulates through the dealership, disinfecting surfaces and touchpoints.
“A lot of it is visual, (customers) see that it’s happening,” Miller said. “And they’ll call you out on it if it’s not.”
The overall downturn in California roughly mirrors what’s happening nationally, with new registrations in the U.S. down 23.5 percent for the first six months of the year. San Diego County has fared somewhat better, off 19.4 percent.
Used car sales in California are withstanding the effects of the pandemic better than new vehicles, down 14.4 percent so far this year.
Prospective car and truck buyers “are going to look seriously at used vehicles because they’re obviously less expensive than a new car,” Maas said. “I think that’s because a customer who is really on a budget or concerned about things being tight looks around and says, ‘You know what, I’m going to look at this used car instead of this new car.'”
Another reason? Dealers are having trouble getting new cars onto their lots because the pandemic led to slowdowns and shutdowns at manufacturing plants.
Miller’s dealership has actually sold more used vehicles through July of this year than it did through July of last year — 451, compared to 438.
“There’s a lot available out there,” Miller said, saying the number of leased vehicles with contracts about to expire has added to the inventory. “We used to stock on average 75 to 80 and now we’re trying to maintain about 100 used cars.”
Statewide, registrations for all-electric vehicles, or EVs, are holding up pretty well — 45,601 through the first six months of this year compared to 48,861 last year, which represents a 6.7 percent decline.
Deliveries for the Tesla Model 3 accounted for more than half of the EV registrations in the state so far this year.
Overall, the Honda Civic is the best-selling car in California but five “light trucks” — SUVs and pickups — cracked the Top 10, reflecting the steady shift in customer preference toward roomier vehicles.
Because of the pandemic, dealers say more customers do their homework before coming to the showroom and once they get there, they are focused on buying something.
“People would casually go, ‘I’ll go out this weekend and maybe look around and visit a bunch of dealerships,'” Maas said. “I don’t think that’s going on now.”
In the meantime, Miller feels guardedly optimistic.
“Unless there’s a flare-up and more orders coming down from the state, I think we’re on our way out of this,” Miller said.
Top-selling vehicles in California
Through June 2020
1. Honda Civic 29,974
2. Toyota RAV4 27,076
3. Toyota Camry 25,950
4. Tesla Model 3 24,850
5. Ford F-Series 24,204
6. Toyota Corolla 21,771
7. Chevy Silverado 21.132
8. Honda Accord 19,962
9. Ram Pickup 19,306
10. Toyota Tacoma 18,165
Source: AutoCount data from Experian