Many businesses are barely hanging on because of the restrictions put in place to blunt the spread of the coronavirus and the auto industry is no exception.
In an online survey of new car dealers in California, 40% of the respondents said their operations during the crisis are sustainable for only one to three more months.
“It’s a cash flow business,” said Brian Maas, president of the California New Car Dealers Association, the trade organization that conducted the survey. “When you press pause on that and there’s no money coming in and no customers coming in, it’s difficult to keep folks on staff and do the normal things a dealership would do.”
Of the roughly 1,200 members in the car dealers association, 322 replied to the survey. Among the findings:
— 40% reported sales dropping by 80 to 100% since the virus hit California
— more than 10 dealerships have laid off as many as 60 employees, and
— more than 70% reported enhancing their online sales and delivery capabilities.
About 90% of dealerships are still open, the survey said, largely because many have kept their service and parts departments open with reduced staff.
The survey was conducted March 30. “Since then, sales have even more dramatically stalled,” Maas said.
Dave Miller, general manager of John Hine Mazda in Mission Valley, said his dealership has furloughed 43 of its 107 employees but has not laid off any workers.
New vehicle sales in March dropped about 50% and business in the service department was off 40% but Miller said his dealership appears to be able to hang in longer than those surveyed who predicted they could only last one to three months under current circumstances.
“We had an OK month,” Miller said. “We didn’t make money but it wasn’t devastating. We had months like that in different market conditions in the past … It’s hard to tell what’s going to happen in the future. I’d probably be more comfortable saying not sustainable if this were to continue for six months.”
On the sales side, Miller’s dealership is handling customers by appointment only. Other dealers around the San Diego area have eliminated sales completely.
“There’s just so much uncertainty,” Miller said.
Some dealers have considered taking advantage of the federal government’s recently passed CARES Act, aimed at helping small businesses during the crisis. Paycheck protection loans can provide up to $10 million in lending from the Small Business Administration.
There’s a provision on the back end stipulating that if businesses retain or rehire employees to levels similar to 2019, some of the loan can be forgiven.
“We’ll have to wait and see whether those loans come through and how fast they come through,” Maas said.
Nationally, just about every car maker reported double-digit declines in first-quarter sales. Of the few manufacturers that reported monthly sales figures, the results were grim: Toyota’s overall sales for March were down 37 percent.
“One of the arguments we will make to policymakers at the right time is that car dealerships need to among the first folks opening when the shelter-in-place orders start to recede,” Maas said, adding that most showrooms have enough space to accommodate customers while also enforcing social distancing rules.
In addition, purchases of big-ticket items like cars and trucks equal a boost in sales tax revenue for the state. “If we’re not selling cars, we’re not generating sales tax and governments are going to have all kinds of deficits and financial strife as well,” Maas said.
In the meantime, dealers like Miller long for the day when business returns to some sense of normalcy.
Stay-at-home mandates and social distancing “is hurting our business but I think it’s going to get us to the end of this thing quicker,” Miller said. “It’s very ironic.”
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