CARMEL, Ind. -

In light of the COVID-19 coronavirus outbreak, KAR Global is taking a precautionary measure, announcing a temporary air travel restriction for its employees through March 31.

In a news release, KAR stressed that this temporary measure is a proactive one, and “not in response to any heightened or specific threat of exposure or spread of the virus across its 200 operating locations and communities.”

As part of the restriction, KAR has decided not to participate in a few upcoming industry events and has cancelled in-person customer events and meetings where air travel is needed.

However, the company emphasized that its operating locations will remain open. That includes its 75 auto auctions, which continue to host sales as scheduled. KAR’s online and mobile marketplaces will also remain open.

“Safety is always one of KAR Global’s highest priorities, and this includes protecting the health and wellbeing of our employees, their families and the communities in which we live and work,” KAR chairman and chief executive Jim Hallett said in a news release.

“While reports on the extent of the outbreak and the severity of infection have been inconsistent, there is no question the virus is capable of impacting large populations and geographies,” Hallett said. “We’re committed to doing whatever we can to help reduce the risk of exposure and any further spread of this virus.”

Dealers can visit KARGlobal.com for updates and ADESA.com for physical sales schedule changes.

“To be absolutely clear, we remain fully operational and open for business,” Hallett added. “But we continue to monitor this evolving situation and will strictly adhere to any federal, state and local measures or mandates.

“Should any locations become locally impacted, we have contingency and business continuity plans in place to mitigate any disruption to our business. And our online and mobile app marketplaces will continue to provide dealers a digital alternative to attending sales in-person.”

Impact to wholesale market

As far as the potential impact of the coronavirus to the overal wholesale auto market, it is dependentant on a number of factors, such as the global new-vehicle and parts supply chain and how the U.S. and global markets react or overeact, via metrics like consumer confidence and spending, oil prices and gross domestic product. 

That's according to Black Book, which boiled down potential impacts as part of its latest Market Insights report. 

Potential market impacts tend to fall under short-term (up to 12 months) and long-term impacts (one to three years). 

“If there are no immediate major market meltdowns beyond last week’s market correction (i.e. consumer confidence does not dramatically change), we believe that the wholesale market will strengthen in the short term,” Black Book said in the report. 

“On the other hand, prolonged economic slowdown due to the disruption of trade and the decrease in consumer confidence (resulting in a large drop in GDP) will have a negative effect on wholesale prices,” it said.

On the demand side of the wholesale market,  Black Book, calling it a short-term impact, contends that a boost in online activity would offset any drop in attendance at physical auctions. 

“We believe that this shift will have a minimal effect on wholesale prices,” Black Book said. 

Also on the short-term basis, the wholesale demand could be impacted by a disruption in the new-vehilce supply chain.

“There are reports that indicate delays in new inventory delivery due to factory closures in Asia. If this continues for the next several months, we will see an increased demand on newer, used vehicles that will cause the strengthening of used prices on 0-4-year-old models,” it said.

The macroeconomic factors could have a short- and long-term influence on wholesale demand, Black Book said, citing factory closures as well trade and travel disruptions could lead to a slowdown in the economy or a mild recession. 

In terms of wholesale supply, Black Book sees potential short-term impact from disruption to the parts supply chain. 

“Similar to the new vehicle supply chain, there are concerns about the automotive parts supply chain. Effects of the virus could result in the reduction of available used units on the wholesale market (due to difficulties to repair / recondition of units),” Black Book said. 

“Limited supply of desirable vehicles may cause wholesale prices to increase on cleaner, newer models,” it added. 

Lastly, Black Book emphasized: “We urge everyone to consult qualified medical professionals for any questions related to the actual virus and precautions that should be taken. Staying rational, calm, and informed is important and could save lives.” 

More broadly speaking, S&P Global Ratings examined potential global credit and economic impacts, some of which tie into automotive.

“Industries reliant on consumer discretionary spending (such as travel and high-end retail) and cross-border supply chains (such as auto, electronics, and chemicals) are particularly exposed from a credit perspective, given the increased pressure on revenue and earnings. Fallout for equities and double-digit spreads for some credits illustrate the ferocity of COVID-19's impact on capital markets,” S&P said in a news release.

“While epidemiologists continue to investigate the transmissibility, severity, and other features of the virus, the level of uncertainty remains very high. The spread and timing of the epidemic — and the government, business, and consumer response–will ultimately determine the overall impact on economic and credit conditions globally, including the speed and shape of recovery. Downside risks include the epidemic spreading beyond the second quarter of 2020 or escalating into a full-blown global pandemic,” it added.