The World Is Burning But People Are Still Buying Cars

Car sales are up for Volvo, car sales are up in the U.S., and Renault is finally getting a big loan. All that and more in The Morning Shift for June 3, 2020.

I’ll preface all this by saying that it’s pretty hard to give a shit about cars right now! The world, and our country very specifically, is not in a great place, and doing anything other than marching in the streets and demanding justice at the moment feels strange. No one gets to sit this one out, not even the car blog. So please donate if you can. If you can’t, at least keep yourself properly informed. And as always, be safe.

1st Gear: Car Sales Are Recovering After A Historically Bad Month

Annualized sales in the U.S. in May were a little over 12 million, which is bad considering that before all of this started people thought a hair under 17 million cars would sell in America this year. But it is better than April, when annualized sales were 8.6 million.

From Bloomberg:

The annualized rate of car and truck sales rose to 12.2 million in May from 8.6 million in April, according to Ward’s Automotive Group. The earlier reading was the lowest seasonally adjusted figure in data going back to 1976.

Automakers said Tuesday that although retail demand is recovering, deliveries to fleet customers have plummeted. Hertz Global Holdings Inc., which filed for bankruptcy last month, has canceled car orders along with its peers Enterprise Holdings Inc. and Avis Budget Group Inc. as the coronavirus has ravaged the travel industry.

I have heard anecdotally of at least one (1) person within my community/world in the market for a car. That person might even work at Jalopnik and might even be making a panic buy, though I will not name and shame.

2nd Gear: Related: Toyota, Subaru, Hyundai, Honda Are Also Doing Better

It’s sort of remarkable that the rebound is almost all due to retail sales, as car rental companies take an absolute beating. That is to say, we’re still seeing a bump in car sales overall even as fleet sales are, well, not doing great.

From Automotive News:

U.S. deliveries fell 26 percent at Toyota Motor Corp., 17 percent at American Honda, 13 percent at Hyundai, 19 percent at Subaru, 24 percent at Kia, 2.5 percent at Volvo and just 1 percent at Mazda last month.

With fleet volume depressed, light-truck and retail sales are driving the rebound.

“What was becoming evident in late April became clear in May: The automotive retail market is recovering thanks to retail demand that re-emerged after being locked out of the market during the height of the crisis,” said Zo Rahim, an analyst with Cox Automotive.

[…]

Deliveries dropped 27 percent at the Toyota division and 19 percent at Lexus, much smaller declines than the drop of 35 percent or more that both brands suffered in April and March.

American Honda said volume slipped 16 percent at the Honda brand and 24 percent at Acura. Both brands posted declines of 54 percent or more in April.

Some originally speculated that the recovery would be V-shaped, and this is sort of along those lines but more U-shaped, with a smaller rebound and then, presumably, a bigger one once the rental car business comes back.

3rd Gear: Sales At Volvo Have Also Rebounded

Sales are up 40 percent in May compared to April, though still down year-over-year.

From Reuters:

While still down 25.5% in May from a year earlier, the Swedish car maker sold 44,380 cars in the month compared to the 31,760 sold in April, helped by improving showroom traffic trends in Europe, a quicker than expected recovery in the United States, and strong growth in China.

Volvo said China sales grew 21.8% in May, while U.S sales inched down 2.5% year-on-year but bounced back strongly from April as states started to ease restrictions in place due to the pandemic.

4th Gear: Renault Is Finally Getting That Big State Loan

Last week, a French government official said Renault could “disappear” without a big loan from the government, which it now is in the final stages of getting. It’s to the tune of five billion euros.

From Yahoo:

French carmaker Renault (RNO.PA) has confirmed it has finalised a €5bn (£4.45bn, $5.6bn) state-backed loan to help it survive the coronavirus pandemic that has devastated the automotive industry.

The French government, which owns a 15% stake in Renault, will back up to 90% of the borrowed amount, the carmaker said.

[…]

French president Emmanuel Macron recently unveiled an €8bn rescue package to help the country’s struggling car industry survive the coronavirus crisis.

Macron stressed however that the government will want to see carmakers commit to safeguarding jobs in France. He also said that the focus must be on boosting electric- and hybrid vehicle production.

None of this will stop overall job losses at Renault, however, which will total around 15,000 when all is said and done. Renault and its partner Nissan are in a bad place.

5th Gear: GM Thinks It’s Learned Some Lessons From The Shutdown

It will permanently reduce some costs, CEO Mary Barra said. The pandemic apparently gave it some time to do an accounting.

From Reuters:

“We were quickly able to take out significant costs and we are being very conservative about what costs we turn back on,” Barra said during an investor event with Credit Suisse. “I believe we will come out of this with a lower cost structure that is permanent.”

Barra said those permanent cost reductions could include fewer vehicle platforms and reducing the complexity of those platforms to be more focused on producing the versions consumers want most.

She said that the pandemic had given GM the opportunity to go through all of its line item expenses and eliminate redundant processes.

“We’ve found things that we don’t need to do and things we can do more efficiently,” Barra said.

Every time this happens an automaker executive says something about how it will now focus on making cars people want, I mean what were they doing before.

Reverse: Space

Neutral: How Are You?

I’ve been out sick for a couple days, a combination of what I suspect to be food poisoning and general despair about the way the world is. The images on the TV screen have been highly upsetting and in response I’ve been eating enormous amounts of deli meats. Anyway: How have you been?

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