CoVid-19 Industry Updates

CoVid-19 Industry Updates (169)

Toyota Financial Services announced it is offering payment relief options to its customers affected by Hurricanes Laura and Isaias, as well as those impacted by the wildfires in California and the derecho which struck the Midwest earlier this month. This broad outreach includes any Toyota Financial Services (TFS) or Lexus Financial Services (LFS) customer in the designated disaster areas. 

A releases by TFS stated the company “cares about the safety and well-being of its customers and wants to help those impacted by these natural disasters. Impacted lease and finance customers residing in the affected areas may be eligible to take advantage of several payment relief options, some of which include: extensions and lease deferred payments; redirecting billing statements; and arranging phone or online payments. Customers who would like to discuss their account options are encouraged to contact TFS or LFS:

American automakers FCA US LLC, Ford Motor Company and General Motors issued a new report, the American Automakers 2020 State of the U.S. Automotive Industry, illustrating how vital these three American companies are to the U.S. economy, by driving growth in both manufacturing and job creation.

As policymakers consider additional measures to support the U.S. economic recovery from the impact of the COVID-19 pandemic, the data in this report shows why American Automakers are critical to this effort.

“American Automakers FCA US, Ford, and General Motors are pivotal in driving growth in the U.S. manufacturing sector and will be essential to the recovery of America’s economy in the months ahead,” said Governor Matt Blunt, president of AAPC, the trade association representing the three American automakers. “The 2020 State of the U.S. Automotive Industry report highlights the many crucial contributions American Automakers make to our nation’s economy. These unique contributions are especially important as policymakers consider steps to recover from the negative economic impact of the coronavirus on the U.S. economy.”

The Detroit 3 produced 5.8 million vehicles in 2018, representing 75 percent of their U.S. sales and exported nearly 1 million American-made vehicles last year, serving more than 100 foreign markets. The trio of automakers invested more than $34 billion in U.S. assembly, engine and transmission plants, R&D labs, headquarters, and other facilities (2013-2018). The Detroit 3 accounted for 238,000 U.S. workers at 260 assembly plants, manufacturing facilities, research labs, distribution centers, and other facilities, located in 31 states. They also spent approximately $20 billion in R&D in 2018.

August has been another step forward in the market’s recovery, although the pace of sales improvement now appears to be slowing, according to a forecast this week by Cox Automotive.

“While the market continues to slowly improve, there are a number of factors preventing more robust gains,” stated Charlie Chesbrough, senior economist at Cox Automotive.

Charlie Chesbrough
Charlie Chesbrough

“Limited inventory for some brands, as well as the ongoing high unemployment and low confidence from the pandemic, continue to keep sales from rebounding more quickly. There’s been a noticeable pull-back in incentives as well. These problems will likely persist, at least in the near term.”

Available inventory continues to plague much of the market and was the key story in August. Some brands were wrestling with significant shortages. Toyota, Lexus, and BMW all had less than 40 days of available inventory in the latter part of the month, far below the current industry average of 60.

“Obviously, you can’t sell what you don’t have,” added Chesbrough. “The lack of inventory likely kept some potential buyers out of the market.” Low inventory means less choice when it comes to vehicle color or trim package. It also means higher prices. Recent research from Cox Automotive notes nearly 20 percent of dealers have raised retail prices since the start of the pandemic. A similar percent of consumers admit they are putting the vehicle purchase on hold, waiting for a better deal.

New vehicle sales are forecast to finish at 1.30 million units for August, down nearly 20 percent compared to August 2019. When compared to last month, sales are expected to rise nearly 90,000, an increase of 7 percent. The SAAR in August 2020 is forecast at 14.9 million, far below last year’s 17.1 million level, but an improvement from last month’s 14.5 million pace.

While all major segments are expected to see increased sales compared to last month, SUVs and pickup trucks will continue to outperform.

 

Manheim has added six more sites to its list of in-lane bidding (Digital Block) locations. This brings the total number of Manheim in-lane bidding sites to 43.

“As we continue with our reopening plans, we’re hearing positive feedback from dealers about in-lane bidding at our pilot sites,” said Manheim’s division vice president Alan Lang. “After ongoing safety reviews, we will add six additional sites beginning Aug. 24, bringing the total to 43 locations… We continue to be intentional with our decision to expand the program, as health and safety remain at the center of everything we do. Should the data continue to support a safe environment for team members and clients, we anticipate adding more locations.” 

The six sites include Manheim Riverside, Manheim Southern California, Manheim San Diego, Manheim California, Manheim San Francisco and Manheim Tucson.

Manheim’s Lot Vision vehicle tracking system is now in place at 19 Manheim sites. Lot Vision was deployed at Manheim Tucson and Manheim New Jersey earlier this month.

Cars.com shared new data revealing more than a third of Americans are currently working from home and commuting less, which puts a greater emphasis on their personal vehicle. Sixty-six percent of workers are saving valuable time by not commuting, leaving subway cars, bus seats and train platforms largely empty as they continue to ditch the office.

"Workers are saving up to an hour or more a day by not commuting and finding significant value in this newfound gift of time. And when they do finally return to the office, it won't be via mass transit. Personal vehicles will dominate the work commute as distrust in public transport and ride-sharing continues,” said Matt Schmitz, assistant managing editor for Cars.com.

According to the new Cars.com study, 62 percent of workers swap public transportation for their car. In terms of COVID-19,  43 percent of Americans lack faith in fellow passengers to abide by health and safety protocols, while 57 percent at least moderately trust other passengers.

Twenty-one percent have purchased a car in the last six months, with 57 percent saying it was due to the pandemic.
Majorities of bus riders and subway/commuter rail riders are riding less frequently.

Protective Asset Protection, a provider of F&I programs, services and dealer owned warranty company programs, announced an update to its retrospective (Retro) programs that will help local dealerships meet the needs of their communities and employees during COVID-19. 

Protective is reducing the production requirements for its Retro programs. Beginning with the second quarter interest payment, the production requirements in all Retro programs will be reduced 25 percent. In addition, the year-end production requirement will also be reduced. This reduction will be applied across the remainder of the year and all levels, impacting each level of potential payout. All other Retro agreement requirements and conditions remain unchanged, and this change does not impact any other dealer participation programs.

Under the structure of a Retro program, payments to dealerships are retrospective commissions paid by Protective directly to a dealership. Underwriting profits are calculated and paid out to dealers on an earned basis, and these can be paid either through investment income or commissions and distributed in advance with a future offset and payback liability. Dealers should note that the dealer’s business corporation entity will most likely result in less income tax on Retros received than previous to the 2017 Tax Cuts and Jobs Act.

 “Dealers are working harder than ever to serve their communities and remain open for new and used vehicle sales as well as the service and repair of these vehicles,” said Rick Kurtz, senior vice president of distribution. “In addition to equipping dealers with the best F&I programs possible, we want to do everything we can to help dealers and their employees during this unprecedented time of operating a business.”

 

Consumer sentiment remains steady and they have positive views of pick-up and delivery services, according to Cox Automotive.

In Cox’s regular update,  “COVID-19: Tracking Consumer Sentiment,” the level of concern among those surveyed was at 68 percent, a slight decrease from 70 percent in mid- to late July.

The survey showed that 78 percent of consumers report they are wearing a face mask consistently in public.

In terms of shoppers, the study showed 15 percent of consumers are in-market to purchase a vehicle within six months. That has dipped from 17 percent in May to mid-June.

However, purchase delays are at their lowest point since late May, Cox reported.

At the start of the shelter-in-place orders in March and April, 34 percent of consumers reported they were delaying their purchase or lease. In the first week of August, that percentage had dropped to 26 percent.

Factors affecting purchase delays include uncertain financial stability; ongoing COVID-19 cases; fewer miles traveled; civil unrest and general uncertainty in the market.

Cost concerns were the top reasons for delay from Boomers, Gen X and Gen Z buyers.

For Millennials, the main concern was social distancing.

Car repairs put off during lockdown are on the rise
Car repairs put off during lockdown are on the rise again

Cox reported that fewer consumers are delaying service/repairs on their vehicles, with the percentage dropping to 21 percent, from a high of 36 percent in March and April during the height of the shelter-in-place orders.

The rise of service pick-up and delivery in the wake of coronavirus have been well-received according to the Cox study.

Satisfaction with delivery and pick-up service is at 85 percent. The study also showed 23 percent of vehicle owners  have used pick-up and delivery since COVID-19 hit.

One of the big hits to consumers during this pandemic has been employment disruptions.

According to the Cox study, 28 percent of those surveyed have had reduced work hours, while 18 percent suffered temporary shutdowns, 17 percent were laid off, 13 percent saw pau cuts and 13 percent reported being furloughed.

However, the number of people experiencing those disruptions have dropped to 53 percent in early August, compared to 62 percent in April.

Cox’s study showed that 58 percent of younger shoppers have decreased their budgets and begun looking to spend less.

But across all generational groups, consumers have adjusted their vehicle price range down. The study showed 64 percent of Generation Z consumers lowered their price range, while 75 percent of Boomers have done the same.

 

 

Fintech and automated loss mitigation provider Constant has announced the launch of AutoCare, an innovative module on its cloud-native SaaS platform designed to fend off auto loan delinquency and prevent involuntary repossessions. With auto loans emerging as one of the hardest-hit categories of credit amid the coronavirus pandemic, the ability to offer loan modifications, typically applied to higher dollar debt such as mortgage loans, is a game-changer for the auto loan industry: it can mean the difference between margin retention and partial or total loss for lenders. AutoCare includes a fully automated voluntary repossession feature for borrowers not able to retain their vehicle.

AutoCare is one of the first to offer automated loan modifications to the consumer. “Historically, it has not been cost-effective to offer mortgage-style hardship relief for small dollar loans,” said Carissa Robb, president and COO at Constant. “The timeline to collect and record a total loss is shorter for auto loans, as compared to real estate secured loans. As relief options tighten, delinquency worsens and charge offs accelerate, few relief options are available to restructure and return borrowers to performing. Until now.”

Robb added, “Offering mortgage-style relief options on auto loans can help reduce delinquency roll rates, charge-offs, and bankruptcy. Where appropriate, offering non-retention options like an automated repossession tool that allows borrowers to voluntarily surrender their vehicle if a workout option is not appropriate, protects asset value.”

J.D. Power reported sales of used vehicles at franchise dealers were 3 percent above the pre-virus forecast for the week ending Aug. 2.

Used retail prices continued to rise, increasing 0.4 ppts week-over-week in the week ending August 2. Prices are now 5.1 percent higher than the index baseline level from March 1.

J.D. Power also reported wholesale auction sales were 98,000 units in the same week, which were 2 percent lower than the pre-virus forecast.

Wholesale auction prices improved for the 15th straight week through Aug. 2. Overall, prices have grown 34 percent over the past 15 weeks.

However, the rate of price growth has slowed over the past three weeks, which indicates a slowing market, according to J.D. Power.

New-car front-end vehicle grosses decreased $41 week-over-week to $973 for the week ending Aug. 2, but $689 higher than the same week last year.

Retail sales unchanged from the prior week, with new-car prices averaging $35,677, the second highest weekly result ever. The number is $22 shy of the record set April 5.

Incentive spending per unit for the week ending Aug. 2 was $4,221, virtually flat from the prior week.

Cox Automotive this week announced the elimination of 1,600 North American positions, as the effect of the COVID-19 pandemic continues to hurt businesses.

Chintan Talati, senior director for public relations, released a statement to Used Car News on Aug. 5.

“As Cox Automotive continues to evolve its business priorities and organizational structure in response to COVID-19, we’ve made the difficult decision to eliminate 1,600 North American positions,” the statement read. “While we regret the impact these moves have on our employees and their families, we’re working to create a Cox Automotive that’s prepared to meet changing client needs and lead the industry well into the future.”

 The 1,600 positions were across the United States and Canada and represent a mix of corporate and field positions, Talati stated.

In the United States, approximately 1,500 positions were impacted, with roughly 1,100 representing Manheim. Of this Manheim total, 45 percent represent part-time workers.

Of the Cox Automotive positions, 87 percent were furloughed in May. 

In Canada, nearly 130 positions were impacted, all of which were previous temporarily layoffs.