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US vehicle sales headed for crash after slowest pace in a decade

An industrywide shutdown of factories that began in March is now going to last longer than hoped

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The Covid-19 pandemic has devastated an industry that just a few weeks ago looked poised to benefit from another year of healthy consumer confidence, cheap financing and a strong labour market in the US.

CARMAKERS gave an early glimpse of the damage a global pandemic is doing to the US vehicle market, with General Motors Co and Fiat Chrysler Automobiles NV falling short of estimates and the industry selling vehicles at the slowest pace in a decade.

Sales fell 7.1 per cent for GM and more than 10 per cent for Fiat Chrysler in the first three months of the year, both bigger declines than expected. While neither company provided a breakdown by month, demand collapsed midway through March. Brands including Volkswagen, Honda, Hyundai and Mazda reported drops of more than 40 per cent for the month.

Carmakers sold cars and light trucks at a seasonally adjusted annualised rate of 11.4 million, the lowest since April 2010, according to Ward's Automotive data compiled by Bloomberg.

The novel coronavirus pandemic has devastated an industry that just a few weeks ago looked poised to benefit from another year of healthy consumer confidence, cheap financing and a strong labour market in the US. Analysts are now all over the map in issuing estimates for how low sales will go, with virtually no one expecting a speedy recovery. China is recovering slowly from its bout with the virus, while Europe is preparing for the worst.

Ford Motor Co's sales plunged 21 per cent in March and 13 per cent in the first quarter, according to Benchmark Co analyst Michael Ward, who cited preliminary data from Ward's.

Toyota Motor Corp's US sales sank 37 per cent in March as many of its showrooms were shuttered. The downdraft spared no models, with deliveries of its best-selling RAV4 compact SUV dropping 25 per cent last month.

Nissan Motor Co, whose sales woes predate the spread of the virus, had the weakest first-quarter showing among major manufacturers, posting a 3 per cent plunge in deliveries. An ageing product lineup and managerial instability has weighed on the company for more than a year. Now, more than a quarter of the company's 1,075 US dealers are affected by state ordinances limiting their sales operations.

"We obviously saw quite a big tail-off in business," David Kershaw, division vice-president of the Nissan brand in North America, said by phone. "We're feeling it in arguably one of our best regions, which is the north-east. They are obviously significantly impacted." Honda Motor Co rounded out the three largest Japanese carmakers with a 48 per cent plunge in March. Combined sales of its namesake and Acura brands dropped 19 per cent for the quarter.

Analysts on average were estimating the annualised light-vehicle sales rate would slow to 11.2 million in March. The industry pace last fell below 12 million in 2011, when a tsunami wiped out production of cars and parts in Japan for months and disrupted the global auto supply chain.

An industrywide shutdown of factories that began in the middle of March is now going to last longer than companies including Ford had initially hoped after President Donald Trump extended to April 30 the social-distancing guidelines aimed at containing the virus. With a global recession increasingly likely, US consumers are expected to be less interested in making big-ticket purchases like new vehicles even once they're able to leave their homes.

In addition to trouble on the retail front, rental-car companies are paring back vehicle purchases as they seek to be included in the federal government's rescue of travel-related companies including airlines. Hertz Global Holdings Inc and Avis Budget Group Inc's moves to slash expenses and shrink their supply of cars may mean sales to fleets fall even further than deliveries to consumers. BLOOMBERG

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