California car dealers are essential businesses during the pandemic. But customers stay away

They’ve been labeled an essential business in much of California and have stayed open during the coronavirus pandemic. But California’s car dealers are struggling to get buyers into their showrooms.

Although 97 percent of the state’s car dealers are open, the vast majority have seen sales decline dramatically, the California New Car Dealers Association said this week.

The association said one-third have lost 80 percent or more of their sales in the past month. Nearly 38 percent have seen a drop in sales of 60 percent to 80 percent.

The reasons are two-fold: An estimated 2.7 million Californians have lost their jobs as the COVID-19 “stay at home” orders crush the economy. And many of those still employed are leery of walking into a dealership.

‘There’s a lot of uncertainty regarding their job stability,” said Scott Lasher of Lasher Auto Group, which owns multiple dealerships in the Elk Grove Auto Mall. “There’s a lot of people who are afraid to go do things.

“It’s a mild train wreck,” he said. Lasher’s sales are down by half.

Although repair service has been deemed essential in California, some counties, including Placer and Los Angeles, have told dealers they must restrict their sales departments to e-commerce. Where showrooms are allowed to stay open, the complexities of social distancing make it difficult to sell a car in person.

If a potential customer wants a test drive, Mel Rapton Honda in Sacramento requires the salesperson to sit in the back and wear a mask. The customer has to be alone; family members aren’t allowed on the test drive.

The Rapton dealership just purchased 300 protective masks for customers who want one for the test drive. Also, any customer who wants to visit the showroom has to call in advance.

“No actual walk-ins,” said general manager Katina Rapton. “If they do walk in, we ask that they call ahead and make an appointment so we can staff it properly.”

Rapton said her dealership has installed acrylic shields to separate cashiers and other employees from customers. “We’ve gone through extraordinary measures, expensive measures,” she said.

Furloughs for salespeople

Sales have plunged as much as 60 percent nonetheless. All but six of the Rapton dealership’s 20 salespeople have been furloughed, along with about three-quarters of the 40 repair technicians. The cutbacks represent the first major downsizing in the dealership’s 59 years in business, she said.

“We have never had to do a mass layoff ever, this has been very hard for us,” she said.

Lasher Auto has avoided furloughs so far, retaining its entire staff of 420 workers. Scott Lasher said his company just learned it was approved for a “paycheck protection program” loan from the U.S. Small Business Administration under the federal coronavirus stimulus package.

The program, which exhausted its $349 billion appropriation Thursday, offers forgivable loans to businesses. Congress is considering putting more money into the program.

The dealers association said that of the 288 dealers it surveyed, 57 said they’re worried about their financial sustainability if the crisis lasts another three months.

Lasher said he’s counting on business to start bouncing back sooner than that.

“The economy will open back up in June, hopefully,” he said. “President Trump wants to get the economy going again. OK, what is Gavin going to do about that?”

Gov. Gavin Newsom has expressed caution about reopening the economy quickly. Earlier this week he laid out a series of criteria for allowing businesses to start getting back to normal. But he didn’t offer a timeline on when the shutdown orders could be lifted.

This story was originally published April 17, 2020 at 12:08 PM with the headline "California car dealers are essential businesses during the pandemic. But customers stay away."