By Desiree Homer
Is It a Sign of V-Shaped Recovery After All?
Sonic Automotive Inc. offered an earnings update last week regarding the auto group’s financial performance. Jeff Dyke, the leader’s President, says the numbers suggest a better than expected outcome and might be indicative of the “V-shaped recovery.” Many automotive experts began predicting the V-shaped models early on during the pandemic shutdowns. But as the affected weeks rolled into months, and the economy started taking a more paced and measured approach to reopen, the industry analysts changed their tune. They said dealers should expect a more of a slow and steady return to a new normal, instead. Sonic’s latest announcement just indicates no one really knows what to expect next. But rebounds are definitely on the horizon, and around the corner.
Tracking the Rollercoaster of Data
Ok, so the experts might not be able to predict the impending rebound any more than weather anchors can predict the coming storms. Dealers can primarily rely on the data, both nationally in trends and locally, as each market varies in pandemic impact. Chief Executive for Sonic, David Smith, shared that Echo Park’s sales have “experienced a V-shaped recovery” and goes on to share that the company is forecasting a pre-pandemic level of performance by the end of the month. But is that true for other dealers, and should this recovery model apply across the board? A Cox Automotive study shows 1Q declines were around 12% from 2019. March sales alone fell to 11.4 million, from the 16.8 million it posted in February. They will offer their Mid-Year Review on June 25, and we’ll see what the data says dealers are seeing in various corners of the country.
What Kind of Recovery Did the Industry Experience Overseas?
Considering the Coronavirus hit other parts of the world before the U.S., specifically China, it can help to consider the trajectory at which those areas of the world experienced auto industry recoveries. The latest data suggests most of China’s automotive sectors saw significant declines in January and February. By April and even May, their reopening strategies are proving to have more a V-shaped rebound. The government’s officials are incentivizing a more rapid consumer demand, and it seems to be working.
Dealers Preparing for Recovery, Regardless of the Models
Sonic may be experiencing a V-shaped recovery, and dealers can hope for similar rebounds in their markets. However, being cautiously optimistic might be the best strategy. There are too many moving parts and contributing factors to the auto industry’s recovery. Bernie Moreno talks about a few of those factors in a recent Dealer News Today episode. Moreno, a 30-year veteran in the industry, predicts a “perfect storm is coming.” Everything about how consumers buy and lease cars is expected to change, including entirely 100% digital sales models. Moreno also discusses the new vehicle production bottleneck dealers might need to prepare for in the coming weeks.
Sonic may be seeing the V-shaped rebound, while others may experience a more staggered return to pre-pandemic revenues. But the good news is, the recovery is happening, and that should provide the hope behind the data.