CoVid-19 Industry Updates

CoVid-19 Industry Updates (104)

Honda and General Motors are producing nearly 12,000 gallons of hand sanitizer through their Fuel Cell System Manufacturing (FCSM) partnership. The hand sanitizer will be used by both companies at their facilities throughout the region and Honda is donating 3,750 bottles to health care facilities in Ohio and Michigan this week.

The hand sanitizer is being made at the Brownstown, Mich., facility where the FCSM team has been working on the development of fuel-cell fuel stacks for the next generation of hydrogen-powered cars. Using an apparatus designed to manufacture the electrodes used in the fuel cells, the team developed a process to re-purpose the equipment to produce a hand sanitizer that would allow employees and health care professionals to work more safely.

Honda will donate nearly 75 percent of its allocation of the hand sanitizer, packaging the product in easy-to-use nine-ounce bottles for health care facilities. On June 22, Honda made the first such donation of 1,250 bottles each to ProMedica Toledo Hospital in Toledo, Ohio, Memorial Health in Marysville, Ohio, and the DMC Children’s Hospital of Michigan in Detroit.

Cox Automotive President and CEO Sandy Schwartz recently discussed his strategic plan called “The Way Forward,” during the company’s recent Mid-Year review.

“These are just crazy times,” Schwartz said. “We’ve gone from selling 50 percent online at Manheim to 100 percent online.”

But that’s not bad news.

Schwartz said Manheim’s flagship auction – Manheim Pennsylvania – recently sold 8,000 vehicles in one week, all digitally.

Plotting “The Way Forward,’ involves three areas, Schwartz said.

No. 1 is accelerating digital adoption to meet dealer demand. That means, creating the touchless car buying experience consumers want, while nurturing long-lasting service relationships and freeing time and resources to better serve customers, he said.

“This isn’t a new tune, we’re just beating the drum more loudly and a lot more,” Schwartz said.

When Cox asked Schwartz to run Manheim about a dozen years ago, Manheim was only selling 5 to 8 percent of its cars in some digital form. It took over 10 years to get to 50 percent, but the pandemic has moved that figure to 100 percent in just the last couple of months, Schwartz said.

The company has numerous tools to accelerate digital adoption.

“We can’t go backwards,” he said.

The second part of “The Way Forward,” is a focus on real-time market insights to fuel and help Cox Automotive’s customers make the best market decisions at all times.

Schwartz said Cox, with tools across more than 20 brands, has “unmatched data and analytics” to help with both wholesale and retail products.

No. 3 is to “be human at your core,” Schwartz said. This has to do with make continued safety the top priority for employees and customers. It means to nurture relationships and deepening customer ties by giving back to the community. It also means choosing business partners that share the same values.

Schwartz said despite Cox’s focus on technology, it’s “still the human touch, it’s still the human direction, that drives our technology.

“Trust is vital and the human touch must be felt in everything Cox does, from eco-friendly sanitizers in cleaning vehicles to social justice issues in communities.”

The California Assembly voted down a bill that would have had a huge negative impact on the state’s auto finance industry.

AB 2501 – the COVID-19 Homeowner, Tenant and Consumer Relief Law of 2020 – was defeated by a 28-25 vote on June 15 and the Assembly adjourned its session without taking up a motion to reconsider the measure.

The bill, sponsored by Assembly Banking and Finance Committee chairwoman Monique Limón, would have prohibited creditors from repossessing vehicles until Jan. 1, 2023, and required them to provide loan forbearance for up to nine months for customers unable to make payments.

Repossessions would have been halted under AB 2501
Repossessions would have been halted under AB 2501

The Independent Automobile Dealers Association of California worked with the National Independent Automobile Dealers Association to oppose AB 2501, noting its passage would drastically reduce the ability of independent dealers and auto finance companies to extend credit to consumers – especially credit-challenged individuals.

“We couldn’t be happier with the actions of the Assembly,” IADAC executive director Larry Laskowski said. ”There really was no upside to the bill. The economic impact would have been enormous. 

“Thanks to the action of IADAC and NIADA and other groups, members of the Assembly were able to make the right choice and defeat this potentially disastrous bill.”

In a letter to Limón and members of the Assembly, NIADA pointed out auto lenders assume significant risk in extending credit, which is minimized only by their ability to repossess the collateral in the event of a default. Without that ability they would be far less likely to provide credit – and those most likely to be harmed by that would be the most vulnerable and financially disadvantaged consumers.

Dealerware, a connected car platform for automotive retailers, will launch a new Contactless Contracting feature June 24. All customers will receive the new feature via a software update to Dealerware's Mobile Contracts product.

With Contactless Contracting, dealerships can send loaner vehicle agreements to customers via text message or email. Customers can review the terms of the agreement and sign for the vehicle on their own device, reducing the need for dealership employees and customers to physically share space, share devices or use impractical workarounds to complete paperwork.

Dealereare's contactless contracting app with Mobile Contracts
Dealereare's contactless contracting app with Mobile Contracts

From the service bay to the sales floor, Contactless Contracting enables dealerships to adhere to social distancing guidelines in order to protect the health of both employees and customers. Retailers are empowered to deliver exceptional customer service experiences such as touchless pickup and delivery, and unaccompanied or at-home, extended test drives.

“Automotive retail is changing faster than ever before, and while our primary goal with Contactless Contracting is to address a need for safer, more comfortable customer interactions, we also wanted to equip our customers to meet new consumer expectations for more flexible sales and service experiences,” said Russell Lemmer, president of Dealerware.

The new Contactless Contracting functionality will be a feature within Dealerware's Mobile Contracts product.

Dealer and consumer sentiment showed volatility, lower levels of used inventory are being reported, but there are also opportunities for efficient new operational methods in the wake of the coronavirus. Those insights come from the Cox Automotive report, “COVID-19: Tracking U.S. Consumer and Automotive Dealer Sentiment.”

However, 33 percent of independents expect the market will be strong in three months and 78 percent are doing business beyond their physical location.

The report showed that while many consumers are returning to more daily activities, “many continue to delay automotive purchases and servicing.”

Twenty percent of consumers are comfortable returning to normal duties, while only 2 percent of consumers think things are back to normal.

Cox stated, “inventory shortfalls are starting to eat into the price discounts that dealers had previously been offering.”

As of mid-June, the report showed 41 percent of consumers are delaying car purchases for up to two months, while 43 percent are delaying purchases three to six months.

Factors in those delays include unemployment concerns, worries about recent civil unrest, potential for a second wave of coronavirus and general uncertainty in the market.
About 62 percent of independent dealers feel inventory levels are too low, while 34 percent feel levels are “just right.”

The survey showed 47 percent of independent dealers have lowered retail prices as a result of the coronavirus.

Black Book reported good news on the retail and wholesale fronts in its June 16 COVID-19 Market Report.

“Fueled by continued stimulus payments, the success of the Federal Paycheck Protection Program, and unsatisfied demand from April and May, last week continued a story of rebounding wholesale prices, with volume-weighted overall car and truck segments both showing gains for a third week in a row, gaining 0.62 percent overall,” the report stated. “As for specifics, the overall car segments increased by 0.88 percent (compared to 0.16 percent the prior week) and the overall trucks and SUV segments increased again this past week at 0.52 percent (compared to 0.08 percent the prior week).

The Nissan Sentra is popular with used car buyers this year
The Nissan Sentra continues to be popular with used car buyers in 2020

“Wholesale prices declined 1.5 percent in May – a substantial improvement compared to April when prices dropped by 5.9 percent. As a result, Black Book’s Seasonally Adjusted Retention Index had a very respectable comeback in May, only dropping by 0.7 percent (vs. a 6.9 percent drop in April). The decrease in April was driven almost exclusively by the collapse in consumer confidence, along with high levels of uncertainty about the financial markets due to the COVID-19 pandemic. Since the middle of May, we have observed the stabilization of prices, as shelter-in-place orders are being relaxed throughout the country.”

The report also stated auction sales volume is “finally returning to pre-COVID-19 levels, although most auctions are still operating in a digital only environment.” Black Book also showed an increase in rental units sold, compared to previous weeks.

Black Book expects “a large, incremental influx of used inventory to hit the marketplace over the next six months, coming from prolonged lease return delays, downsizing of rental fleets (including the expected sell-off of a large number of Hertz’s units), increased repossessions, and un-sold inventory from the March-May time period.”

AutoLeadStar, a complete marketing automation platform designed for dealers, unveiled their latest benchmark report on buyer trends titled, “A Post COVID-19 Era for Automotive: The Next Leap in Dealer Technology.”

The report explores four major trends that could bring about transformation similar to the disruption seen by digital companies like Cars.com and AutoTrader in the late ’90s. The trends detailed and explored in the report include: accelerated adoption of in-house dealer technology versus outsourced marketing; ascendance of AI-based tools to segment, convert, and close high-intent shoppers; the emergence of new buying personas and in-market shopper behaviors; and unprecedented technology-driven operational efficiency.

According to the Q2 2020 Cox Automotive Dealer Sentiment Index taken in late April and early May, U.S. auto dealers’ view of the current automotive market remains negative and is understandably far more negative than in the first quarter. 

With an index score of 20, the rating shows the devastating impact COVID-19 on the auto industry, and the decrease from Q1’s index score of 49 is statistically significant. Year over year, the current market index is down by 29 points, which is also statistically significant and remains below 50, indicating more dealers view conditions as weak rather than strong.

As the CADS Index has consistently demonstrated, the current market sentiment skews more positive for franchised dealers compared to independent dealers, who sell only used vehicles. The gap narrows this quarter, however, with both franchised and independent dealers markedly negative about current market conditions. Franchised dealers decreased from 55 in Q1 to 30 in Q2 while independents are even more negative at 17, down 23 points from Q1. In the survey, 54 percent of independent dealers stated that staying in business is their top priority with no other priorities even coming close.

Consistent with declining views of the market, used-vehicle sales also significantly decreased in Q2 compared to last quarter. The view from independent dealers represents a decline in used-vehicle sales perception from last quarter and year over year with the used vehicle index at 20 in Q2. The used-vehicle sales index is also significantly lower from Q1 to Q2 for franchised dealers, moving from 72 to 43. This is the first time that franchised dealers perceived used-vehicle sales as weak. The used-vehicle inventory index also declined compared to last quarter and year, coming in at 31, which means that both franchised and independent dealers consider used inventory to be declining.

During the COVID-19 pandemic, the Murphy Auto Group dealerships have provided sanitization service to first responders, distributing thousands of meals and masks, and eliminating medical debt in the CSRA.

Murphy Auto Group sourced GTECH Clean Complete Germ Protection as a sanitization option to kill 99.9 percent of bacteria and viruses, including coronavirus. Miracle Toyota in Haines City, Fla., invited the local police and fire departments to receive GTECH sanitization for their vehicles at no charge. Hundreds of cars were sanitized for the Haines City Fire Department, the Polk County Sheriff’s Department, and medical professionals from Advent Hospital. Miracle Toyota also provided free oil changes for first responders during the month of April.

Murphy Auto Group partnered with Feeding Tampa Bay and Golden Harvest Food Bank in the CSRA to donate and distribute 11,000 complete meals to CSRA and Polk County families in need. Murphy Auto Group also donated 10,000 masks to the community in Haines City and the CSRA via VA Hospitals, churches, and local charities. Additionally, the dealerships gave away four masks per family during weekends in May.

The auto group also paid off $1.5 million in medical debt for more than 500 families in the CSRA through a partnership with Rest in Peace Medical Debt, a nonprofit based in New York. Several local families in the CSRA will receive a letter from RIP Medical Debt notifying them that through the Murphy Auto Group donations, $1.5 million of medical debt will be wiped out.

May’s job report was much more positive than expectations, according to the U.S. Labor Department.

Employment increased by 2.5 million, and the unemployment rate dropped to 13.3 percent from 14.7 in April, the Conference Board reported.

U.S. Secretary of Labor Eugene Scalia cited the reopening of the economy coming earlier than expected as one reason for the bump.

“(The June 5) report shows much higher job creation and lower unemployment than expected, reflecting that the re-opening of the economy in May was earlier, and more robust, than projected,” Scalia stated. “Millions of Americans are still out of work, and the Department remains focused on bringing Americans safely back to work and helping states deliver unemployment benefits to those who need them. However, it appears the worst of the coronavirus’s impact on the nation’s job markets is behind us.”

The Conference Board, a nonprofit think tank, reported the unemployment rate does not fully reflect the size of the labor market slack, as many workers experienced a significant cut in weekly hours, and many of those who lost jobs have left the labor market altogether.

The increase in employment was across most industries, with the most notable exception being the government. The number of jobs in government dropped by 585,000 in May after a 963,000 drop in April. The decline in tax revenue in state and local governments is forcing them to shed workers.

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