ALG, a subsidiary of TrueCar, and the industry benchmark for determining the future resale value of a vehicle, is providing an updated 2020 new vehicle sales forecast to account for the quickly evolving Coronavirus pandemic and the latest economic outlook.
ALG projects that in a quick recovery scenario, where the economy and auto industry recover by the end of April 2020 back to levels prior to COVID-19 disruption, new vehicle sales will reach 16.4 million, down -500,000 vehicles or -2.9% from ALG’s initial 2020 forecast and down -3.8% from 2019 sales.
In a scenario where COVID-19 is prolonged with a longer-term economic slowdown, ALG forecasts that new light vehicles sales will reach 14.5 million, down -2.4 million or -14.2% from ALG’s initial 2020 forecast and down -14.9% from 2019 sales.
“In the rapidly moving, highly volatile global economic environment caused by the COVID-19 pandemic, we believe it’s prudent to provide a revised range of auto industry projections to new vehicle sales for 2020. The range is based on various scenarios provided by expert third party forecasts of macro-economic impacts from the Coronavirus outbreak,” said Eric Lyman, Chief Industry Analyst for ALG, a subsidiary of TrueCar. “A quick recovery by the end of April would lead to roughly half a million lost sales, while a prolonged slow down through the end of the year would result in a nearly 15% year-over-year sales decline in 2020. While forecasts are changing day to day, our current likely scenario has new vehicle sales for 2020 landing in the mid 15M unit range.”
ALG is also reducing residual values in its latest Residual Value Book. This update is based off current third-party economic outlooks in COVID-19 impact and other key factors such as the stock market declines and drops in oil futures.
“Short term market volatility does not necessarily translate into long term changes,” said Morgan Hansen, VP of Data Science at ALG, a subsidiary of TrueCar. “While ALG expects a short term drop of roughly 2 percentage points of MSRP in wholesale used market values, our benchmark 36 month forecast only expects a decline of 0.7 ppts of MSRP. These values are based on current expert third party macro-economic forecasts that put the probability of prolonged economic downturn risk at 50%.”
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SOURCE: TrueCar
