The situation in the United States now doesn’t look great, but things are starting to get better. In many states, the rate of cases has slowed down. Some states with very few cases are beginning to re-open. Things have changed for cars since the pandemic began. Some of these things point to post-pandemic America being a good place for automakers to sell cars and an even better place for consumers to buy them. Distrust in the cleanliness of other forms of transportation such as aircraft and rail will likely contribute to this, as may all of the following factors.
Fuel prices are remarkably low
The price of oil has been remarkably low. Some states saw numbers below a dollar for regular 87 octane. A few weeks ago oil futures famously went negative. This means a lot for the sale of trucks and SUVs in the United States. Since oil prices have remained relatively low since the oil crises of the 1970s, the sale of these types of vehicles has remained steady and profitable. The demand for SUVs post-pandemic will be higher than ever, and with the price of oil so low the cost of driving them will be very affordable.
Manufacturer incentives are very generous
The big 3 are all currently offering relief for lease payments, and incentives to purchase their vehicles—especially trucks and SUVs. Ford is offering as much as $6,000 cash back on the F150, while GM and FCA follow suit with $7500 on the Silverado and employee pricing for the Ram 2500 & 3500, respectively. Car sales have slowed greatly during this period, and manufacturers are doing everything they can to get cars off of dealership lots.
The big three made good product decisions, for once
Many were skeptical of Ford’s move to end the sale of cars in the United States. If oil prices were to go back up, or the attitude of the public changed, this could dig Ford further into the financial hole it’s already in. GM also announced they would phase out passenger cars, and is set to release their new Hummer SUV. Although the Hummer is electric, they put a bet on the rising demand for these types of vehicles, and it’s set to pay off. Chrysler has also made similar moves, focusing development on their RAM trucks and Jeep SUVs. The Grand Cherokee is also set to be overhauled for the first time in a decade as well.
As of today, Trucks like the F150 are outselling cars. This is in addition to SUVs outselling cars 2:1. Combine this with the low price of energy and gasoline; there’s a great business case to be made for what these manufacturers are doing.
More than ever, people see cars as safe spaces
Almost all fast food restaurants are now strictly drive-thru. Even those that are not national chains typically offer curbside pickup, so the person never has to leave their car. Much of the testing for COVID-19 is done at drive-through testing facilities. In order to maintain social distancing rules, raves are being held in Germany as a drive-through ordeal. A drive-through strip club has opened in Oregon. Drive-in movie theaters are also seeing a resurgence for the first time in decades. The car is seen as a safe space to do things during this pandemic, and even as the cases slow down, this will likely remain a popular belief.
Used car prices have declined
The price of used vehicles at auction has declined by 17% as of April 19th. That’s a reduction in value of nearly one fifth. This may not be good for automakers who like to see the value of used cars higher, but it is good for the consumer. There’s a possible flip-side to this, though. Car buyers post-pandemic may see new cars as the cleaner, safer option as compared to used cars. This, of course, is not relevant if both cars have been sanitized, but it’s something that may have an effect in the mind of the car-buying public.
What do you think?
This is a complex situation with a lot of moving parts. However, the post-pandemic future for the car in the U.S. looks like a good one. The period after this all ends could be one of the best times to purchase a vehicle, new or not. If you received a stimulus check and remain employed, it’s even better. Cars will likely be seen as the safest means of transportation in terms of cleanliness, and the least expensive in terms of cost—that’s my theory anyway. What do you think?
