Why do Recessions Happen? Will the Auto Industry Recover?

BY Kathy Crosett
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"Why do recessions happen?" is a question that many of us have been dwelling on. Business people in the auto industry are also thinking, "Is it too soon to wonder if the automotive industry recovery is under way?" Automotive dealers and manufacturers experienced a plunge in business during Q1 2020. And Q2 will likely show that consumers who were sheltering in place aren’t very interested in buying vehicles. As we begin to reopen the economy, some automotive groups are recalling furloughed workers. And some parts of the industry are showing signs of life.

Why do Recessions Happen? Will the Auto Industry Recover?

New Consumer Interest in Vehicle Ownership

After several years of embracing public transportation and ride-​sharing options, consumers may be changing their minds about not owning personal vehicles. Riding on a subway could expose us to a high viral load. We do not know if the people standing next to us are asymptomatic carriers of the coronavirus. Similarly, we can’t be sure if the ride-​sharing vehicle we are about to enter has been disinfected properly, if at all. Ford chief Jim Farley says, “This pandemic could affect how customers live and work for many years to come, with zero-​touch now as an integral part of their lives.” With so many consumers also wanting to take those old-​school Sunday drives to get out of the house, a personal vehicle seems much more appealing as a safe travel option.

Financing Promotions

While automakers are shifting strategies about the kinds of vehicles they will be rolling out in the long term — fewer ridesharing options and more personal options — they are enticing consumers with short-​term promotions. Several companies are currently offering 90-​day payment deferrals, loyalty cash and remote purchase options.

Luxury Segment

While financing promotions appeal to consumers looking at the lower end of the market, industry trackers are also seeing activity in the luxury segment. According to Cars​.com data reported on Mediaradar​.com, consumers have started searching for luxury brands. Searches in the past couple of weeks for cars that cost over $30,000 is much higher than normal. In addition, Alex Vetter, CEO of Cars​.com says, “We’re seeing that 20% of the people who don’t own a car are now considering buying one.” These consumers may still have jobs and are looking for safe ways to travel in the coming months. Also, analysts note that while luxury auto makers only cut ad spending by 16% between March and April, mass auto makers reduced it by 30%.

Automotive Industry Recovery

Luxury auto buyers may be returning to the market already. And, as consumers get called back to work, they will be rethinking their daily commute and personal safety. Auto makers that craft the right marketing messages can start to grow sales again. To learn more about consumers who purchase luxury automobiles, check out the AudienceSCAN profile available at AdMall from Salesfuel.

Why do recessions happen isn't a question you have time to dwell on. Focus on the future, or you will get left behind!


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