Lithia Motors Warns Auto Sales Drop After Stay-Home Orders Kick In; Service Business Partly Offsets

Lithia Motors Inc., the nation’s third-largest dealership chain, reported that once shelter in place policies were enacted in late March, aimed at containing the COVID-19 pandemic, its car and truck sales fell on average about 50%.

That’s an ominous sign for the rest of the auto retail sector and for the second quarter, since the second quarter began with stay-home orders mostly in full swing.

Anticipating worse to come, Lithia said it reduced headcount by 37%, mainly by furloughs. It also cut or put controls on spending for marketing, vendors, and inventory. As of Dec. 31, 2019, Lithia had 14,320 full-time employees at 188 retail locations, according to its annual report.

“We have not yet realized the associated cost savings and expect to see these benefits early in the second quarter,” Lithia said in an April 13 preliminary report of first-quarter results. Based in Medford, Ore., Lithia expects to report final first-quarter results on April 22.

“We expect to be able to have team members return to work as future volume levels recover,” the company said. In the meantime, where vehicle sales are allowed, Lithia is providing in-dealership appointments and home delivery, with social distancing rules in effect.

First-quarter results varied a lot for Lithia’s vehicle sales depending on the individual market, the company said. Vehicle sales fell as little as 15% in some places after stay-home orders went into effect, to as much as 75%, or even to “virtually no sales” in Pennsylvania and Vermont, where vehicle sales were shut down because they weren’t defined as essential businesses.

A couple of states, Montana and Texas, had “very little year-over-year change,” the company said.

 Averaging out the entire first quarter, Lithia’s preliminary results weren’t as bad. The dealership chain said that for the entire quarter, its new-vehicle sales were down 10% to 11% on a same-store basis.

Used-vehicle sales actually increased for the quarter, up 2% to 3%, Lithia said. Service and parts, and body shop operations stayed open in the first quarter in all Lithia’s markets, so that part of the business was flat to up about 1% for the quarter, partially offsetting the drop-off in vehicle sales, Lithia said.