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How COVID Has Changed The Automotive Industry

Although many businesses began to reopen back in May, the pandemic continues to impact our daily lives and the society we operate in. The economy has suffered due to this crisis, and the automotive industry is no exception.

J.D. Power reported that car sales in April were down 45 percent compared to the same time in 2019. The Center for Automotive Research estimates that a one-week shutdown of the auto industry could result in a loss of $7.3 billion in overall earnings, and much of the automotive industry was shut down for eight weeks earlier this year.

Despite this, car sales are recovering quickly and some sectors of the industry are doing as well as, if not better than, before. Car retailers are quickly adapting to demands for online and reduced-contact transactions, and the used car industry is thriving.

It’s easiest to understand the impact of the pandemic on the automotive industry if you consider the individual sectors that make it up.


An individual car contains tens of thousands of components, which are received through hundreds of different suppliers. When the manufacturing plants for car parts as well as the completed vehicles were shut down for nearly two months, the rest of the auto industry suffered for it. With the manufacturing process delayed or halted entirely at different phases, issues arose such as postponed model launches, disruptions in the supply chains, and auto dealerships struggling financially.

The car manufacturing industry employs nearly two million people who were unable to work during that time. While many manufacturing plants have reopened, many are still operating at a reduced capacity. Part suppliers haven’t been able to return to their previous production levels either.

The reduced availability of certain supplies and the extended closure of manufacturing facilities has created shortages of certain new vehicles. While the reduced car sales during that time frame offset some of that shortage, there are still certain areas where it’s difficult to find new models.


During the height of COVID closures, new vehicle sales were off nearly 70 percent in markets that were highly impacted by the virus. Between a recession and increased unemployment rates, the likelihood of a major purchase with ongoing expenses like a new vehicle dropped on many people’s priority lists.

One study of people who were in the market for a vehicle at that time found that nearly half of those consumers had changed their preferred price point due to economic changes.

Fleet sales are also down as rental companies and travel-based businesses are seeing less activity. The exception to reduced demand has been for electric cars, which are growing more popular, particularly within luxury markets. Demand has increased for single or double seater vehicles as well, such as mopeds or two-seater cars as people are traveling and socializing less.

Dealerships, which had to close their showroom floors and thus their primary source of revenue, have been left looking for new ways to continue to make sales with reduced inventory and reduced demand. Many companies have been offering incentives such as deferred or zero-down leasing to encourage customers who may be more financially hesitant to make purchases.

While showrooms are opening back up, many are still operating with modified or restricted hours and policies. To navigate this, car dealers are having to adapt and modernize quickly. Online shopping has taken on new importance in the age of coronavirus and for a purchase as serious as a new vehicle, it’s important that online services run smoothly.

Online Sales

Though online shopping has taken precedence over brick and mortar locations in many industries over the last several years, car shopping has remained largely face-to-face until the pandemic. Now, in order to keep up with demand, many companies are learning how to conduct all or some of the sales process online, depending on customer needs and preferences.

The same study that found consumers looking for less expensive options also found that two-third of them felt more comfortable purchasing a vehicle online. The remaining one-third largely consisted of truck drivers and those between the ages of 55-80, who were found to believe in-person negotiations went better. Additionally, scrap prices should see a healthy increase in the months to come.

While experts in the industry have watched the rapid adaptations made to an increasingly web-based market, they predict things won’t return to their former state even after pandemic fears have calmed. The online purchasing process is easier and more flexible for everyone involved. One dealership owner said 80 percent of his recent car purchases had begun online, and the number of individuals making online offers on cars is up 150 percent.

Auto Shipping

The automotive transport industry fared quite a bit better than the rest of the auto industry as a whole. While it experienced an economic dip at the beginning of the pandemic, business has returned nearly to normal and with the increase of online sales and requests for car shipments, may be better in the near future. In coming months, car shipping companies are also projected to see increased profits as people relocate for work or move out of cities when travel becomes safer and more commonplace again.

Used Cars

The used car sector also had a different outcome due to the pandemic, seeing improved profits in the wake of the recession as many people sought to sell their cars to make or save money. The sale of used vehicles dropped by 38 percent in April during the initial shutdown, but in June had risen 17 percent above J.D. Power’s forecasts for that month.

At the beginning of the closures, the used car market was saturated with newer than normal cars at low rates. As time has gone on, however, many used cars are selling for the same amount as before, if not at an inflated price. There are predictions that the demand for used cars will continue to increase as the summer carries on.

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