EL CAJON, Calif. — Normally, the showroom at El Cajon Ford is busy, with its staff selling about 40 cars and trucks a week. But these are not normal times. The dealership’s showroom has been empty for days and this week’s sales count came to zero.
That’s because management decided to close down all sales on March 21 due to the stay-at-home orders put in place by Gov. Gavin Newsom aimed at trying to blunt the spread of the coronavirus.
“Right now, we have no sales people anywhere in the store so they don’t have to worry about getting sick,” said Paul Dyke, El Cajon Ford’s general manager.
While some car dealers in the Golden State are still selling vehicles — though on a very restricted basis, such as through Internet purchases — Dyke decided to suspend everything on his dealership’s sales side. His Internet manager fields questions from customers who might be curious about various models but no transactions are completed.
“We just made a decision that we’re going to ride this out and then see where it goes,” Dyke said in a telephone interview. Like so many others, he is working from home.
The dealer’s service department, which under the governor’s order is authorized as an essential business, is still open, but at half-staff and its business is about 50% of normal. Dyke said he’s had to furlough about 25 employees in service and parts.
The dealer’s staff of 30 sales, finance and managers are waiting to go back to work.
“The sales department, we’re kind of hanging in there day by day to see what’s the best thing to do,” Dyke said.
Brian Maas, president of the California New Car Dealers Association, said his organization has sent a legal memo to members around the state, offering them guidelines amid the COVID-19 crisis.
“All the orders all across the country have said auto service can remain open but there’s considerable confusion, frankly, about whether or not sales can stay open,” Maas said.
His group recommends dealers close their showrooms “but limited sales activity, particularly if it’s done online or remotely is acceptable.”
Phone calls made to a random number of dealers around San Diego showed some sales offices closed while others reported their showrooms still open.
John Hine Mazda in Mission Valley, Calif., is encouraging customers interested in buying a vehicle to make appointments online first and then can meet with a sales person. General manager Dave Miller said the dealership has reduced its sales staff from 15 to about three, and they are focusing on Internet sales. “We have been taking cautions with everything we do,” Miller said.
With “social distancing” on the minds of many, Dyke said El Cajon’s service department tries to reduce the amount of physical contact needed to do business.
“You can drop the car off, leave a note on your car, then the service rider can go out and get the keys and the note and call the people. You don’t have to be face to face,” Dyke said. “It’s the same at pick up. We can take payment over the phone and they can just come pick up the car and we can minimize social interaction. And we’re wiping down the cars when they come in. We’re wiping down the cars when they leave to protect customers and employers.”
Dyke said his dealership will reassess its sales policies after they have been put in effect for 14 days.
“Hopefully, in a couple of weeks we can bring business back to normal,” he said.
Hope is one of the few things the auto industry is running on these days.
Vehicle sales across the country are expected to fall 35.5% in March alone, compared to the same month last year, according to Edmunds.com, a car research site.
IHS Markit, one of the industry’s top economic analysts, reset its forecast for 2020 last week and predicted 2.4 million fewer vehicles sold in the U.S. Even with a fiscal package from Congress, the firm expects to see a drop in sales of at least 15.3 percent.
Scrambling to offer financing for customers whose paychecks are in jeopardy because of the pandemic, carmakers have quickly produced television ads to lure potential buyers.
General Motors has offered zero-percent financing for 84 months (that’s seven years) to “very well-qualified customers” and let them put off making their first payments for up to 120 days. Ford offers a similar deal, giving buyers the option to delay payments for 90 days.
“Everything has become desperation,” said Patrick DeHaan, the head of petroleum analysis at GasBuddy, a tech company that helps drivers find the cheapest places to fill up.
Automakers “know what could come around the corner potentially if they don’t head this off,” DeHaan said. “You go to your car dealer and negotiating $5,000 off (the price of a new car) yesterday wouldn’t have worked. Today it’s, ‘Here are the keys.’ ”
Even a sharp decline in gasoline prices has not offered any help.
A price war between Russia and Saudi Arabia has cratered the price of oil in recent weeks, leading to falling prices at the pump.
The average price for a gallon of regular gas in San Diego was $3.08 on March 27, a drop of 43 cents compared to a month earlier, according to GasBuddy. Nationally, the average price hit $1.99, marking the first time in four years the price fell below two bucks a gallon.
Under typical circumstances, cheaper gas prices would offer a customer an incentive to buy a new car.
But in the wake of the COVID-19 outbreak, millions are staying home and not driving to work or school to pick up and drop off their kids, leading to a plunge in the number of miles driven. Freeways normally jammed with traffic during rush hour are clear. Road trips and weekend getaways are on hold.
“There’s nobody on the road,” said Maas of the new car dealers association.
It’s led to a dynamic that people in the car-making and car-selling business can’t ever recall seeing before: Falling gas prices but less driving.
“Your kids are home from school, but in this climate, how many people are going to go for a road trip to Yellowstone?” DeHaan said.
DeHaan took to Twitter recently and reported his firm’s internal data is showing an unprecedented drop in demand for gasoline of 50% to 70 percent, with some states down 65% to 75 percent.
A veteran of 34 years, Dyke said the coronavirus effect on business is very different than other economic shocks.
The terror attacks on 9/11 hit car sales hard “but that was a week-long and we figured out how to get things going after that,” Dyke said. “And the recession (in 2008 and 2009) was tough but at least you were selling some cars and still had a normal business.
“I think the hardest thing right now is not knowing what’s really going on day-to-day. It just seems like you don’t have a really good script to follow.”
California car sales experienced a striking resurgence after the Great Recession. After bottoming out at 1.04 million new registrations in 2009, the new car dealers association reported seven consecutive years of increasing sales and four straight years in which registrations topped 2 million.
Sales leveled off in 2019 to 1.89 million but as recently as last month, the new car dealers association expected numbers to dip slightly to about 1.82 million.
But now, all bets are off.
“Uncertainty is not the friend of any business person and particularly a retailer of large-ticket items,” Maas said. “If people are uncertain about their job status or their financial health, it makes it much less likely that they’re going to buy a car.”
On Thursday, the U.S. Labor Department reported 6.64 million unemployment claims in the week ending March 28, the largest single-week total in the nation’s history.
“All those people have to find jobs in two or three months, then feel good about the job they found and only then they’ll think about buying a car,” Maas said. “You can’t turn off an economy and turn it back on like your water faucet. It’s going to take a little while for this to ripple through the economy. And I think our dealers are trying to figure out, hey, I just need to survive through this thing.”
The slowdown might also affect the growth in sales of electric vehicles, or EVs. California is the nation’s No. 1 market for zero-emission cars and policymakers in Sacramento have set a goal of having 5 million EVs on the state’s roads by 2030. As of Feb. 24, the figure was 700,110.
In a report in late March, IHS Markit predicted EV sales around the world would stagnate this year “and likely” into 2021.
“A faltering global auto market will have a big hit on sales of EVs,” the report said. “EVs also face another headwind with low oil prices, making them less competitive in terms of fuel cost savings vis-a-vis their internal combustion engine counterparts.”
In El Cajon, Dyke said his dealership is looking at ways to reduce their bills.
“We’ve been able to slow down some of them, like advertising but we still have rent and different other things like utilities and all the stuff that goes with running a dealership that has 150 people.”
He said the dealership “should be OK for six, eight weeks” under the current restrictions.
When told he sounded remarkably calm, Dyke said, “Well, I guess I handle stress may be different than some. I know we’ll get through it, we’ll figure it out. It’s terrible times but we always come out the other side.”
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