CoVid-19 Industry Updates

CoVid-19 Industry Updates (169)

Black Book released its Used Vehicle Retention Index for April (152.4), an increase of 11.2 points (or 8.0%) from February (141.2). The Index currently stands 43% above where it was the same time last year, during the initial economic shutdown due to COVID-19.

“Wholesale prices continued their ascent each week in April, although the rate of increase declined slightly at the end of the month,” said Alex Yurchenko, SVP, Data Science and Analytics.

“Demand for used and new vehicles remained strong but available inventory continued to decline. This elevated demand and low inventory coupled with low incentives levels on new vehicles helped the retention index to increase for the fourth month in the row. This month, all segments showed increases, with Compact Car and Minivans having the largest gains.”

The Chicago Auto Show has received approval from state and city officials to host a special edition of the show July 15-19 at McCormick Place. The Chicago Auto Show will be one of McCormick Place’s first live, in-person events since the COVID-19 pandemic shutdown.

The special show will move to the West Building of the McCormick Place complex and expand outdoors to take advantage of July weather. With the show’s move, attendees will now experience more outdoor test drive opportunities, test tracks and technology demonstrations, which will take place along Indiana Avenue and surrounding city streets. 

2020 Jeep Willys display at the Chicago Auto Show

Auto show fans will be able to enjoy favorites like the Camp Jeep and Ram Truck indoor test tracks as well as Subaru’s popular pet adoption event – all of which will be executed in a safe manner. Ford has also embraced the show’s outdoor space availability with experiences featuring the new Bronco, Bronco Sport and all-electric Mustang Mach-E SUV.

“We’ve been working with McCormick Place officials for months on an opening plan, and very early on they saw that our show may provide a pathway to re-opening the facility,” said Chicago Auto Show General Manager Dave Sloan. “We stand committed to providing a safe environment for all involved and will carefully adhere to the health and safety protocols and guidelines set forth by city and state officials.”

Tickets for the 2021 Chicago Auto Show will be sold exclusively online. Attendees will be able to select their preferred attendance date and time utilizing timed entrance windows designed to carefully control crowd capacity throughout each event day. Show organizers will also intentionally regulate the number of attendees throughout the day to control the number of people on the show floor at any given time.

Attendees will also have the opportunity to pre-register for onsite activations including indoor and outdoor test track and ride-and-drive events. This will allow attendees to schedule participation in various show attractions ahead of time, diminishing lines and reducing congestion within exhibits.

April U.S. auto sales, when announced next week, are expected to reveal a very hot new-vehicle market, according to Cox Automotive.

The April sales pace is expected to finish near 16.5 million, which is down from last month's robust 17.7 million level but still a healthy pace for the industry. Sales in March were especially strong due in part to some February sales being delayed as a result of bad weather and the resulting power outages. The extra boost that benefitted March is not likely to be seen in April though.

Charlie Chesbrough, senior economist, Cox Automotive.

"The robust sales pace is the story for the industry right now, as strong retail demand continues, even though a downtick from March is expected," said Charlie Chesbrough, senior economist, Cox Automotive. "There is little reason to expect buyer interest to wane anytime soon given recent economic growth rate expectations and improvements to consumer sentiment. But inventory is a huge problem in the vehicle market – a lingering result of the COVID-19 shock last year." The computer chip shortage also remains a problem.

Sales volume is expected to finish near 1.36 million, up nearly 640,000 units, a near 90% increase from last April's historic low result. Given the shock to the market last spring, a better comparison to measure the strength of the market is calendar year 2019, the last year the industry saw a robust 17.0 million market. Versus April 2019, vehicle sales are expected to increase more than 30,000 units, or 2.3%, which suggests automobile sales are normalizing. There is the same number of selling days this month as last month (26) and last April; however, there is one more than in April 2019.

The average value for all used vehicles traded in during the month of March hit an all-time high, climbing to $17,080, compared to $14,160 a year ago. Edmunds analysts say that demand is soaring for used vehicles as chipset shortages continue to severely constrain the supply of new vehicles in the market. New vehicle inventory on sale at dealerships nationwide was down by 36% in March 2021 compared to a year ago.

Jessica Caldwell Edmunds' executive director of insights

According to Edmunds data, trucks retain the greatest value and command the highest trade-in prices of all consumer vehicles in the market right now. Edmunds analysts looked at all 2018 model year vehicles traded in during March and determined their respective retained values by comparing the average trade-in price of each model against its average original MSRP. Ford F-250 Super Duty, GMC Sierra 2500 Heavy Duty and F-350 Super Duty all tied for the No. 1 spot on the list, retaining 80% of their value on average. The complete Top 20 list, together with the full list of vehicles with the greatest retained value broken out by segment, can be found below.

“The chipset shortage is wreaking havoc on new vehicle production, but we're also seeing surprisingly healthy car shopper demand, which has likely grown stronger in light of vaccines rolling out quicker than anticipated,” said Jessica Caldwell, Edmunds' executive director of insights. “These two factors combined are disrupting the market in a way we haven't ever really seen before.”

Edmunds analysts say that consumers who might have typically been new-car shoppers are increasingly turning to the used market in search of more alternatives and better value. Traffic to the Edmunds website's used vehicle inventory pages jumped approximately 300% in March compared to a year ago.

Nevertheless, March sales were at near record levels for new cars.

“It seems impossible, with the pandemic still raging in many parts of the country, that new vehicle sales could be at the highest March level in more than two decades, but here we are,” said Caldwell. “Until automakers can start cranking out new vehicles again, we're going to see increased demand and higher trade-in values for used vehicles as well.”

Used-vehicle inventory tumbled through March to lows not seen since last summer, according to a Cox Automotive analysis of vAuto Available Inventory data.

The total supply of unsold used vehicles totaled 2.34 million vehicles at the end of March, down from 2.59 million vehicles at the end of February, which was lower than January, Cox reported.

March stock compares with a supply of 2.86 million vehicles in the same year-ago period. Used-vehicle supply was 18% below March a year ago and 16% below the end of March 2019.

Cox data showed used-vehicle days’ supply throughout March kept dropping, plummeting to 33, down from 48 in January and February. By the end of the month, the days’ supply was down to levels seen during the inventory dry months of June and July 2020. March 2021 days’ supply was 33% below March 2020 and 20% below the same period in 2019.

AVERAGE USED-VEHICLE LISTING PRICE

The days’ supply of used vehicles had remained relatively stable since last October, but strong spring sales, thanks to tax refunds and stimulus checks, depleted the supply, according to Cox Automotive. Used-vehicle sales were brisk during March, running 22% ahead of the same period in 2020 and even 5% higher than the comparable period of 2019. The Cox Automotive days’ supply is based on the daily sales rate for the most recent 30-day period.

Franchised dealers had 1.33 million used vehicles in inventory for a 31 days’ supply. Independent dealers had 1.01 million vehicles in inventory for a 34 days’ supply.

The average listing price continued to be high, closing the month at $21,343. That was nearly 13% higher than the same week a year ago. The pace of rising prices is starting to slow slightly. For franchised dealers, the average listing price was $23,270. For independents, it was $18,802.

Used vehicles with a listing price of under $10,000 were in the lowest supply at 23 days. Vehicles in the $10,000 to $25,000 range had at or slightly below average inventories. Vehicles priced above $25,000 had a bit better supply, according to Cox.

ADESA Canada will hold new daily sales hosted on the company’s proprietary Simulcast+ technology. The sales offer dealers across Canada exclusive access to first-run, off-lease inventory from top-tier automotive consignors not available on any other platform.

The new Simulcast+ sales take place daily, Monday through Friday at 10:30 a.m. EDT and feature more than 60 first-run in an open auction, off-lease vehicles from some of Canada’s top consignors. With daily events, the sales provide dealers with additional convenient options to simultaneously source, bid and buy the highest quality inventory from any computer or mobile device.

Simulcast+ is ADESA’s proprietary marketplace technology that simulates the competitive live auction environment in an entirely digitized, highly automated, live streaming format.

The Greater Milwaukee International Car & Truck Show will take place at a new location, Wisconsin State Fair Park, from May 5-9. Rescheduled due to the COVID-19 pandemic, this year’s later dates and new venue will allow for both expansive indoor exhibits as well as outdoor displays. The show will feature enhanced health and safety precautionary measures to protect attendees, vendors, employees and the surrounding community throughout the duration of the event.

“Since 1907, the Automobile Dealers Association of Mega Milwaukee has successfully hosted an auto show and we are grateful to be able to make it happen this year as well,” said Automobile Dealers of Mega Milwaukee President Jim Tolkan. “We are working closely with the professional team at Wisconsin State Fair Park and the participating manufacturers, in conjunction with health officials to create a safe show experience during this unprecedented time as a result of the COVID-19 pandemic.”

Wisconsin State Fair Expo Center and masses of outdoor space will transform into a car enthusiast’s paradise featuring hundreds of the latest cars, trucks, crossovers, SUVs and alternative fuel option vehicles, as well as exotics and classics. Attendees are invited to check out all the latest vehicles in this non-selling environment, talk to product specialists, inspect engines and experience the latest automotive technology. This year’s auto show will also feature a Classic Car Show, Ford Bronco Test Drive, Subaru Pet Adoptions and more.

Auto show organizers and Wisconsin State Fair Park staff are working closely to revise traditional experiences and show elements, to prioritize the health and safety of attendees, exhibitors and employees. The event was originally set to take place in February at the Wisconsin Center.

The National Association of Manufacturers released a new study detailing the potential short- and long-term damage to the American economy under tax proposals to increase the corporate tax rate.

The study calculated the effects of increasing the corporate tax rate to 28%, increasing the top marginal tax rate, repealing the 20% pass-through deduction, eliminating certain expensing provisions and more. The negative consequences would include the following:

 

  • One million jobs lost in the first two years;
  • By 2023, GDP would be down by $117 billion, by $190 billion in 2026 and by $119 billion in 2031;
  • Ordinary capital, or investments in equipment and structures, would be $80 billion less in 2023 and $83 billion and $66 billion less in 2026 and 2031, respectively.

 

“Manufacturers want to help President Biden achieve his goal of creating jobs in America and strengthening the supply chain so that our country does not face critical shortages, especially during times of national crises,” said NAM President and CEO Jay Timmons. “Manufacturers can, and should, lead the economic recovery in the wake of the pandemic. But this study tells us quantitatively what manufacturers from coast to coast will tell you qualitatively: increasing the tax burden on companies in America means fewer American jobs.”

According to the car shopping experts at Edmunds, new vehicle inventory on sale at dealerships nationwide is down by 36 percent in March 2021 compared to a year ago, and prices are rising for both new and used vehicles as a result. Edmunds analysts forecast that the average transaction price (ATP) for new vehicles will climb to $40,563 in March compared to $38,601 a year ago; the ATP for used vehicles is expected to hit $22,663 compared to $20,273 last year.

Full-size trucks have been disproportionately affected by shortages

“The chipset shortage has snowballed into a bigger crisis for the automotive industry,” said Jessica Caldwell, Edmunds’ executive director of insights. “Major auto manufacturing plants are implementing temporary closures, and we’re seeing the industry being hit hard on both sides: Retail customers are being offered fewer choices and paying higher prices, while fleet customers are likely seeing their orders delayed as auto manufacturers shift their focus to serving consumers.”

Edmunds analysts note that full-size trucks and large SUVs are among the vehicle categories most disproportionately affected by these shortages. According to Edmunds data, full-size truck inventory was down by 60 percent in March compared to a year ago; the average transaction price for new full-size trucks is expected to climb to $54,763 compared to $51,164 a year ago, while the average transaction price for used full-size trucks is expected to climb to $34,445 compared to $28,156 a year ago. Large SUV inventory decreased 56 percent in March compared to last year; the average transaction price for new large SUVs is forecasted to climb to $67,542 compared to $62,620 in March 2020, and the average transaction price for used large SUVs is expected to climb to $35,035 compared to $31,232 a year ago.

The car shopping experts at Edmunds forecast that 3,818,503 new cars and trucks will be sold in the U.S. in the first quarter of 2021. This is an 8.6 percent decrease in sales from the fourth quarter of last year but an 8.9 percent increase in sales from Q1 of 2020.

“First-quarter sales are starting off on a strong note. The fact that we’re surpassing last year’s numbers when the pandemic didn’t even hit the industry until the last two weeks of March 2020 is no small feat,”

Jessica Caldwell, Edmunds’ executive director of insights

said Jessica Caldwell, Edmunds’ executive director of insights. “Seeing sales continue at such a strong rate despite all of the challenges presented by COVID-19 is an ongoing testament to the strength of the automotive industry and the confidence of the American consumer.”

Edmunds experts note that limited inventory created by pandemic-related production issues and chipset shortages continue to present challenges for the industry. According to Edmunds days-to-turn (DTT) data, vehicles are selling at a much faster pace because inventory is in such short supply: In March 2021, 17 percent of all new vehicles sold within five days of arriving on a dealer lot, compared to 14 percent last year. Edmunds analysts note that older new vehicle inventory is harder to come by as well: Edmunds data reveals that just one in five new vehicles sits on the lot for more than 100 days before selling, compared to nearly one in three last year.

“Some consumers seem to be catching on to the microchip shortage and are responding by making more aggressive purchasing decisions,” said Caldwell.

Despite the ongoing challenge of inventory shortages, Edmunds notes that a rise in the average transaction prices (ATP) in the first quarter is a positive trend in terms of profitability for automakers and dealers. Edmunds analysts anticipate that the ATP for new vehicles will climb to $40,320 in Q1, the highest Edmunds has on record for any quarter.