The ASX small caps in the automobile industry are bracing for a car price crunch

It’s fair to say that people prohibited from non-essential travel can’t drive very far — and this is taking its toll on the industry.

US car auction company Manheim estimates used car sales dropped nearly two thirds in the last week of March.

The problem is anticipated to get worse as people and companies sell cars to get cash fast.

Dale Pollak, an executive vice president of Cox Automotive, said last week, “Six months from now, there will be huge, if not unprecedented, levels of wholesale supply in the market.”

Early signs are beginning to appear. Most notably Avis and Hertz have said they are trying to offload some of their fleet and Ford is seeking to raise capital after making a $US600m first-quarter loss.

ASX small caps bracing for impact

Overall ASX small caps in the sector have not yet seen an impact on their bottom lines but are bracing for impact.

New Zealand-based used car seller Turners (ASX:TRA) expects it’s full-year result to be a $28-$30m profit. But that’s because New Zealand’s financial year runs from April 1 to March 31.

And Turners says it expects “adverse impacts” for the next six months. It has deferred it’s upcoming dividend and extended it’s debt facility with the Bank of New Zealand by $50m.

However, Turners expects stimulus programs will make a “substantial difference”.

Also in the vehicle business is SG Fleet (ASX:SGF), which provides fleet management services. It told its shareholders a fortnight ago new deals were being done but enquiry levels had begun to decline and secondhand vehicle demand was expected to drop.

But it reminded shareholders most of its revenue was lease payments, paid monthly on an annuity basis.

A company at the other end of the supply chain, Advanced Braking Technology (ASX:ABV) delivered an update to its shareholders a week ago.

While its main customer base is in mining and civil construction, which is still operating, it conceded it might be affected if clients defer capital expenditure.