Lang Aftermarket iReport: Vehicle use disruption, thanks to COVID-19

“Americans have cut back on their use of cars and light trucks in response to the regulatory and economic fallout of the 2020 Virus. Reduced vehicle use is reflected in two key aftermarket metrics: the number of vehicles in operation (VIO) and annual miles driven.

“The economic impact of the 2020 Virus (triggered primarily by government mandates) will abruptly end the eight-year long rise of vehicles in operation (VIO) and the nine-year string of annual mileage gains.”

— Jim Lang, publisher, Lang Aftermarket iReport

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Aftermarket Impact of the Virus to 2023 and Beyond: In-Depth Report coming in July
“This iReport, along with more special iReports focusing on the 2020 Virus through June, will provide a preview of the comprehensive and detailed report to be published in July by Lang Marketing, with five monthly updates of key developments to be issued from August through December.”

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Economic Impact of the 2020 Virus

The 2020 Virus started as a health crisis and has erupted into near economic chaos in many areas of the U.S. Never before have the social and economic activities of Americans suddenly been changed so massively.

While there are signs that many mandated restrictions will be lifted in the coming months, their economic consequences have been profound and could last for many months and even years.

Three Major Developments

Social distancing and the temporary shutdown of many American businesses have caused three major developments that significantly affect vehicle use: an economic downturn, soaring unemployment, and a surge in remote working.

Economic Downturn

The level of economic activity in the U.S., as measured by the GDP, has fallen abruptly, down 20% or more in the second quarter. The economic downturn and the uncertainty that it has engendered have caused consumer confidence to plunge and Americans to cut back on vehicle use.

Unemployment Surge

The May unemployment rate is over four times greater than the percentage of Americans without jobs just three months earlier.

This does not include the millions of Americans who have been furloughed and in other ways have had their work hours significantly reduced, and the self-employed and small business owners who have been impacted.

Since two-thirds of consumer driving is employment related, the impact of job-killing mandates on vehicle mileage has been quick and profound.

Remote Work Boom

The number of Americans working remotely has jumped by more than 30 million in May, many times the level prior to the 2020 Virus outbreak.

While many people who are working remotely now will return to their offices over the next few months, a significant and permanent increases in remote work is likely across the country, a development that will reduce vehicle use by tens of millions of Americans.

Impact on Vehicle Use

Reduced vehicle use will continue for a number of months (well into next year) and will affect two key aftermarket metrics: vehicles in operation (VIO) and annual miles driven.

Vehicles in Operation

It is possible that the pace of new car and light truck 2020 sales will fall below the level to offset annual vehicle scrappage. This has not happened since 2011.

Lang Marketing anticipates little if any car and light truck VIO growth during 2020, with the strong possibility that VIO growth in the U.S. will not return (or will do so at a very modest pace) for the next year or two.

Miles Driven

Miles driven in 2020 will suffer the sharpest decline since World War II (over 75 years ago).

It is unlikely that monthly driving will return to 2019 levels at any time this year, with the annual percentage decline for 2020 at least five times higher than what was recorded during the first year of the 2008 Great Recession.

Six Major Takeaways

• Americans have cut back on their use of cars and light trucks during 2020 in response to the economic downturn, surging unemployment, and increased remote working.
• The abrupt slowdown of the economy has caused new vehicle sales to plunge at an unprecedented rate. New vehicle 2020 volume might not be sufficient to replace the cars and light trucks that are scrapped (taken out of operation) this year.
• The percent of Americans unemployed during May is four times greater than the unemployment rate just four months earlier. Since two-thirds of car and light truck mileage is related to employment, this will have a significant impact on 2020 miles driven.
• The number of Americans working remotely surged by more than 30 million in May and many will continue to work remotely for months or even permanently. This will reduce vehicle use by tens of millions of Americans.
• There will be little if any growth in the number of vehicles on U.S. roads during 2020, with the strong possibility that VIO growth will not occur (or will proceed at a very modest pace) over the next year or two.
• 2020 miles driven will suffer their greatest annual decline since World War II (75 years ago). The percentage plunge in 2020 miles will be at least five times greater than the mileage reduction during the first year of the 2008 Great Recession.

Copyright 2020 by Lang Marketing Resources, Inc.

NOTE: Special thanks to publisher Jim Lang for granting us permission to publish the Lang Aftermarket iReport.