In a major setback for the auto industry, the recent cyberattack on CDK Global, a leading provider of sales software for auto dealerships, is projected to result in a significant drop in vehicle sales for the month of June. It is estimated that around 100,000 vehicles, accounting for more than 7% of total sales, will be affected compared to the same period in 2023.

The anticipated decrease in sales is not indicative of weak customer demand but rather a consequence of the disruption caused by the cyberattack. Many dealerships have been without full access to their systems for more than a week, with no assurance from CDK Global regarding when operations will be back to normal.

Explaining the impact of the CDK software outage, Tyson Jominy, Vice President of Data & Analytics at J.D. Power, highlighted the essential role of a dealer management system (DMS) in running an auto dealership. The DMS acts as the financial backbone, connecting all aspects of the dealership, including vehicle sales, financing, and inventory management. The outage has left dealerships struggling to conduct transactions efficiently and has severely hampered their operations.

Unfortunately, the timing of the cyberattack could not have been worse for the auto industry. June is historically one of the most crucial selling months, coinciding with the start of the summer season when families plan road trips and are eager to purchase new vehicles. The disruption caused by the cyberattack has thrown a wrench into the industry's expectations for strong sales in June.

J.D. Power estimates that total new vehicle sales for June will reach approximately 1,273,600 units, reflecting a significant 7.2% decrease compared to the same period last year. This includes both sales to regular consumers as well as fleet sales to businesses and rental car companies. On an annualized basis, this implies a selling rate of about 15 million units for the year, falling short of the industry's target of 16 million, according to Jominy.

The financial impact of the sales decline on dealerships could be substantial. With the average transaction price for new vehicles standing at $45,000, the loss in revenue will be keenly felt. However, there is some hope that some of the sales lost in June might be recouped in July if the CDK systems are restored by then.

Thomas King, President of the Data and Analytics Division at J.D. Power, emphasized that the disruption to dealer software systems will distort the sales figures for June and not accurately reflect consumer demand for new vehicles. He noted that a significant number of sales that would have occurred in June are now likely to be postponed until July. However, the uncertainty surrounding the restoration of CDK systems adds variability to the final sales tally for the month.

CDK Global powers the business operations of more than half of all auto dealerships across the United States, serving around 15,000 dealerships. However, those dealerships that do not rely on CDK's DMS are able to continue business as usual and may even be experiencing an increase in sales, according to Jominy.

In order to navigate the outage, CDK customers have resorted to manual workarounds, including recording sales with pen and paper. While it is still possible for consumers to purchase vehicles from these dealerships, the absence of the DMS system has made it challenging for dealerships to finalize transactions and obtain loan approvals, creating a slower and more tedious process.

As the industry eagerly awaits the resolution of the CDK Global cyberattack, automobile sales are expected to recover, with the majority of delayed sales likely to occur in July once the situation is rectified. Nevertheless, the lasting impact on June's sales and the overall full-year sales figures remain uncertain, dependent on how swiftly CDK systems can be fully restored to enable dealerships to resume normal operations.