New car showrooms in February were empty right across the biggest vehicle market in the world. That’s China, not the United States. The result: sales plunged a staggering 80 per cent in February, according to preliminary numbers from the China Passenger Car Association.
I was not surprised to see that car sales stall in China during February, a month when the full extent of the horror that is the Wuhan Virus – or Covid-19 or the Coronavirus – came into focus in that country. A new ride would surely be the last thing on the minds of some 1.3 billion Chinese living through a health crisis.
But who expected to see new car sales almost entirely collapse in a car-mad country such as China? Indeed, as Bloomberg reports, the viral outbreak has paralyzed a car business that has been struggling with a two-year decline.
China’s auto industry has been caught in an economic maelstrom shared by industries right across all the country’s industries. Thus, “millions of companies in China are in peril as consumers stay home and output at factories remains disrupted.” Indeed, investment manager Pimco says the Wuhan Virus may cause a stunning six per cent contraction of China’s GDP or gross domestic product. This is what it looks like when a health crisis becomes an economic one.
The Chinese government has so far been reluctant to offer economic support for the car industry. But local Chinese authorities have begun to make moves designed to support consumers and car companies and their dealers.
Some municipal governments, for instance, have begun offering rebates of up to $1,000 or more to buyers. China’s central government, notes Bloomberg, could choose to spur car sales in several ways: reduce the 10 per cent car-purchase tax; ease congestion-related purchase bans; and, offer incentives for rural residents to buy new-energy vehicles.
So, how far will new car sales plunge this month in Canada – the month when the full impact of the pandemic has come into focus here? No one knows yet, but it’s obvious that a big double-digit drop is quite likely, if not assured. Note that one of the big drivers of sales in British Columbia, the March Vancouver auto show, has been postponed indefinitely.
We have seen the federal government and the Bank of Canada act quickly, decisively and comprehensively to reduce interest rates and assure liquidity in the credit markets. A huge one per cent interest rate cut from the Bank of Canada, for example, has made the cost of borrowing for a new car substantially cheaper – and funds to make that loan available are assured, which is in sharp contrast to the financial crisis of 2008-2009.
I think it’s quite certain that car manufacturers and their dealers will be anxious to deliver a jolt to car sales as soon as it’s appropriate. That time is probably not now – not when health authorities across the country are promoting social distancing and similar strategies to limit community spread of the virus.
New car showrooms will be lonely places for the next few weeks, then. But this might be a very good time to get your shopping ducks in order, to use the internet to compare prices, watch for deals designed to juice sales in a pandemic-stalled marketplace and act on a purchase when appropriate.
This Wuhan virus will pass. The speed at which health and economic authorities have acted in Canada has been smart and I would say inspiring. But ultimately, the health of the Canadian economy largely depends on consumer spending. We don’t want to see a health crisis in Canada become an economic one.
It’s a stretch to suggest that as we emerge from the other side of this crisis, buying a new car might be seen as an act of economic patriotism. Let’s not be silly. But we should all be mindful of the negative impact this virus is having on our economy.
If Canada is to avoid a truly nasty recession this year, Canadians need to buy things – to be active consumers, to whatever extend makes sense for each of us. But if you do have the urge to buy a new vehicle, you’ll find deals out there in the weeks and months ahead.