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Post-coronavirus Resurgence of Car Sales in China Potentially Bodes Well for U.S. Market

Strong March sales of Tesla electric vehicles in China may portend sunnier skies for the U.S. auto industry. As China moves well past the peak of the COVID-19 pandemic and restarts its economy, Tesla registrations topped 10,160 units in March in the country, a 260% increase over COVID-19 constrained February sales of 3,900 units, according to the China Passenger Car Association (CPCA).

Mr. Elon Musk from his factory site in Shanghai

More broadly, CPCA reported China market sales in March were down 40.8% versus a decline of 80% in year-over-year February sales. China averages nearly 45,000 new car sales daily, while February’s pace clocked just 7,100 units, as per CPCA. Sales rose steadily throughout February as dealers increasingly resumed work over the course of the month.

As with any trend, a month-over-month comparison is not a reliable measure. However, these sales figures may be a positive harbinger for a speedy recovery in auto sales in China, the world’s largest new car market. It could also provide a model for a similar improvement in the U.S. as the Trump Administration contemplates reopening the economy.

The surge in March sales is good news for Tesla’s Shanghai plant, which opened in December of 2019. The Chinese government forced it to close on January 29 for ten days, according to Tesla’s finance chief, Zach Kirkhorn. The plant reopened on February 10 and recently announced a long-range variant of the Model 3.

The story is very different for Tesla in the U.S., though, as the Fremont production facility suspended manufacturing on March 24. Further, the company furloughed all non-essential workers on April 7 to conserve costs and keep long-range plans on track. In an email shared with Reuters, Tesla’s in-house counsel Valerie Capes Workman wrote normal operations would resume May 4, “barring any significant changes.”

Sales of light vehicles fell around the world in the first quarter, as more than 185 countries are reporting cases of the coronavirus. In Europe, sales were down 27% in the first three months of 2020 versus 2019, according to Michigan-based LMC Automotive. But there was a wide variation in country-by-country sales, often in close correlation with the impact of COVID-19 on the population. Hard-hit Italy saw an 85% decline in March year-over-year sales, while Finland sales were down just 0.9%.

Similar patterns of sales in line with the virus may emerge in the U.S. with talk of the economy slowly reopening. As of April 14, there were 622,923 cases of coronavirus in the U.S. Five Northeastern states – New York, New Jersey, Massachusetts, Pennsylvania, and Connecticut – accounted for 342,795 cases or 55% of all reports. These five states account for 17,066 of the 27,586 reported deaths in the U.S., or 61%. By contrast, twenty-three states had fewer than 2,500 cases, and thirty-nine had fewer than 500 deaths.

Unemployment figures have not followed the same pattern, though, as virtually every state reported a surge in unemployment claims in March. According to NBC News, more than ten percent of eligible workers in twenty-one states and territories filed for benefits in the last month. Four states, including hard-hit Pennsylvania and Michigan, plus Hawaii and Rhode Island, reported 1-in-6 workers lost their job. Over two million Californians filed in the last four weeks alone. More than sixteen million people nationwide are out of work as a result of the coronavirus.

Just as China gradually returns to full productivity, the U.S. is crafting plans to do the same. The Trump Administration is wrestling with balancing the health of the nation with the wealth of the economy while eyeing a strategic loosening of stay-at-home guidelines set to expire April 30. There are many nuances to reopening the country, and every case and every job lost represents someone’s story.

“I’m going to have to make a decision, and I only hope to God that it’s the right decision,” President Trump said during a recent daily news briefing. “But I would say without question it’s the biggest decision I’ve ever had to make.”

Deliberately and thoughtfully loosening the lockdown would enable businesses to resume with the potential for many jobs to be restored or saved. Revenue would begin trickling back into businesses of all sizes, and spending would slowly recover as furloughed workers return to work and salaries are reinstated.

Recognizing the need to keep the virus at bay, local authorities may suggest specific measures remain in place, such as wearing masks in public. Social distancing in restaurants and other crowded spaces may continue. A federal task force made up of over 100 top-level executives from a wide range of industries will guide the president’s plan to restart the economy, with public health officials also playing a pivotal role in the project.

And yes, the major U.S. automakers have a seat at that table.

The author of this story, Rebecca Lindland, is a seasoned automotive industry veteran with more than 20 years of analyst experience with IHS Markit, Cox Automotive, and other organizations.