2020 is on track for the worst sales year in the U.S. since the 2008 recession.

Call it the season of the twitch. If there’s one thing as constant in the spring as March Madness, April rain and Memorial Day sales, it’s the start of the prime auto selling season. But one of the many consequences of the coronavirus pandemic is havoc wreaked on what’s known as the “seasonality” of the auto sales calendar.

That point was made very clear in a blog post by George Augustaitis, Director of Automotive Industry and Economic Analysis at vehicle research and shopping site CarGurus.com CARG .

In that post, Augustaitis lays out the traditional season cadence, writing, “the end of the fiscal year, the model year changeover, Labor Day, and the end of the year have always led to stronger months in March, May, August/September, and December.”

The March-April period, in particular, represents the first real seasonal sales spike of the year. Between 2010 and 2018, March represented 9.3% of annual new vehicle sales, and an additional 8.4% came in April, Augustaitis wrote.

But the combination of the sudden stop to most commerce, high unemployment rates and resulting recession brought on by the coronavirus pandemic has led to plunging consumer confidence and plummeting vehicle sales. So much for the spring selling season along with expectations of getting the traditional seasonal cadence back on track.

There is strong evidence, however, seasonal anomalies will eventually be corrected as automakers begin to resume production, other parts of the economy reopen and some people return to work.

A J.D. Power analysis shows the week ending May 10 was the sixth consecutive week retail auto sales improved—recovering about 5% per week, each of those six weeks. In part, due to heavy incentives, including offers of zero financing for as long as 84 months, sales in the profitable full-size pickup truck segment have remained fairly stable. But other segments including midsize pickups, compact SUVs and premium vehicles are starting to improve as well.

Regarding incentives, TrueCar TRUE reports average savings below manufacturer suggested retail price (MSRP) was about 10% in April, compared with 8.6% at the same time last year.

Overall sales are still far behind last year’s annualized 17 million unit pace, with full year projections around 12 million, but any improvement is heartening, given current conditions.

The positive trajectory has been enough for Thomas King, J.D. Power President, Data & Analytics and Chief Product Officer to declare during a webcast last week,“As the sales recovery progresses and we get widespread improvements in sales volumes across all segments, we are generally seeing a reversion to an industry that looks more normal, certainly not completely normal, but is starting to resemble its former self.”

It’s pretty bold to swing around that word “normal” while the industry is just starting to fire up its factories again, but King isn’t alone in his optimistic assessment. While not going as far as to use “normal” in his analysis, Cox Automotive Chief Economist Jonathan Smoke offered an upbeat view in a video this week opining, “We’re seeing recovery continue. We clearly had a much stronger end to April than the way the month began and that recovery has continued into May.”

Reality check. Recovery and normalcy must be considered stretch goals. A report by Boston Consulting Group (BCG) points out, “As a result of the COVID-19 crisis, the automotive industry faces a collapse in sales volume of at least 20% in 2020 as stay-at-home decrees prevent customers from traveling and keep factories shuttered. That predicted decline is above and beyond the annual decline of 3% that the industry has experienced since 2018.”

BCG suggests automakers resist attempting to accelerate recovery by beefing up incentives and slashing prices and suggests each company create a pricing task force “Operating in a virtual war room, this global, multifunctional team—which should include members from the pricing, commercial, production, and distribution functions—will be responsible for implementing clearer and tighter pricing governance throughout the organization.” A novel idea precipitated by a novel virus.

The question remains, can the auto industry’s seasonal sales calendar eventually return to its normal cadence? CarGurus’s George Augustaitis believes it can—his optimism based on consumers receiving their federal stimulus checks, pent up demand, an continuing incentive offers that could lead to “delayed seasonality spikes in late Q3, Q4, or possibly Q1 of 2021.”

Staying in the half-full mode, Augustaitis believes the auto industry’s seasons of content will return…eventually, concluding, “While we don’t know exactly when those sales will return, we know that they will.” When they do, it will be a well-greeted season.

source: forbes