Sun, Apr 19, 2020 page16

• The hottest new car models smell of disinfectant

  • By Chris Bryant / Bloomberg Opinion
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  Judging by the number of motor vehicles being stolen in New York City, vehicles have become no less desirable during the COVID-19 lockdown.

  Burglary rates are not a reliable economic indicator, but they are far from the only sign that vehicle demand could prove more resilient than might appear from recent record sales declines.

  If unemployment does not surge even higher — a big if — vehicle sales might recover faster than other discretionary purchases, especially if dealerships put in place the right financial incentives and rigorous hygiene measures to reassure customers.

  

  A model poses next to the Kia Sonet Concept vehicle at the Auto Expo in Greater Noida, India, on Feb. 5.

  Photo: AP

  After all, once stay-at-home orders are lifted, we would seek to regain personal autonomy while continuing to shield our families from the virus. A car could feel as essential as wearing a face mask.

  Right now, of course, the industry is reeling: Automakers are burning cash because production lines are at a standstill, weaker parts suppliers and dealers risk collapse, and banks as well as automakers’ captive finance operations are bracing for a surge in loan defaults. As showrooms have shut their doors across the globe, sales declines have accelerated. This month would probably be worse.

  Restarting production lines after such a prolonged hiatus would also be a huge challenge. Protecting factory employees is not straightforward, and cross-border supply chains could cause unexpected complications, particularly if the virus is still spreading widely in some countries.

  However, the outlook for sales is not entirely bleak. Vehicle sales have rebounded in China, with dealers surprised at how quickly consumers have returned to showrooms now that travel restrictions have been eased.

  It makes sense. Commuters who previously took a crowded bus or train might feel uncomfortable doing so for a while. Abandoning mass transit is terrible from an environmental and traffic perspective, but after a public health crisis, people would probably feel safer traveling in their own vehicles.

  This does not bode well for car-sharing either, which until recently was another popular low-cost alternative to vehicle ownership. Now it suddenly feels unhygienic. Taking an airplane is even more unappealing; if people holiday closer to home this year and next, they might opt to drive rather than fly.

  Of course, millions of Americans have lost their jobs and would not be able to make big-ticket purchases in the coming months, especially since those hit hardest were already among the most financially vulnerable.

  However, the premium end of the market might hold up better, particularly as higher-income consumers would not have as many conflicting pressures on their budgets.

  Bars, restaurants, hotels, concerts, sporting events and beach resorts all face a more protracted path back to normality if social distancing remains the norm. That is bound to encourage getting behind the wheel of a car, where physical distancing is sort of the point.

  Plus, anyone in the market for a vehicle can expect a bargain: Dealers are offering interest-free financing and loan payment holidays to quickly move inventory and bring in some cash.

  Customers hunting for a second-hand deal might find especially good deals because airport-dependent car rental firms have been downsizing their fleets. Driving would be cheaper, too, as oil prices have collapsed.

  Prospective buyers might soon be offered even more financial goodies. On both sides of the Atlantic there are calls for governments to revive vehicle purchase incentives — known colloquially as “cash-for-clunkers” — which proved effective at stimulating demand in the last recession. While worth considering, any subsidies should be directed primarily toward hybrid and electric vehicles. Even though the climate crisis might have slipped from our attention, it certainly has not gone away.

  In Germany, where efforts to curb the virus appear to be bearing fruit, car showrooms would be allowed to reopen soon, even as restaurants remain shut.

  True, the car lobby is powerful in Germany, but also their argument that buying a vehicle can be made as safe, if not safer, than popping over to the supermarket seems reasonable. Dealerships tend to be pretty spacious, and cars parked on the lot can be viewed without entering the premises. There usually are not too many customers visiting at the same time.

  Where dealers remain open, the industry has already come up with some neat ways to keep clients safe.

  In the US, used car retailer CarMax Inc permits customers to take a test drive without a salesperson sitting next to them, and vehicles are sanitized when someone has touched or sat in them.

  For the foreseeable future, the new car smell that buyers savor most would be alcohol-based disinfectant. Putting buyers at ease like this could help revive the auto industry and preserve thousands of jobs.

  Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.

  This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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