CoVid-19 Industry Updates

CoVid-19 Industry Updates (169)

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.

President Donald Trump signed bipartisan legislation that will provide $320 billion in additional funding for the Paycheck Protection Program (PPP).

The bill also appropriates $60 billion more for the Small Business Administration’s (SBA) Disaster Loan Program.

In a press release June 3, the National Independent Automobile Dealers Association praised the legislation before it went to Trump.

NIADA CEO Steve Jordan
NIADA CEO Steve Jordan

“This bill provides much-needed flexibility to NIADA members and small businesses across the nation as they reopen and rehire staff,” said Steve Jordan, NIADA’s  CEO. “Economic recovery from a crisis like COVID-19 takes time, and this gives independent dealers the time they need to get their operations back up to full speed.” 

NIADA stated the legislation addresses concerns with the Small Business Administration’s forgivable PPP loans, which require businesses to use the money within eight weeks of receiving it to be eligible for full forgiveness. In addition to extending the time in which the loan funds must be used to qualify for full forgiveness from eight weeks to 24 weeks – through Dec. 31 – it would also reduce the percentage of PPP funds required to be used for payroll from 75 percent to 60 percent. 

Other provisions include eliminating the restriction limiting loan terms to two years, allowing businesses that receive PPP loans to also defer payroll taxes, and extending the deadline to rehire employees from June 30 to Dec. 31 to account for the effect of federally enhanced unemployment benefits. 

 

The International Automotive Remarketers Alliance will hold a free webinar on June 5 called “Adjusting to the New Normal,” the third in a series of webinars from IARA.

The webinar, scheduled for 12 p.m. to 1 p.m. EDT, will feature consignors from OEM’s, banks, commercial fleets, remarketing companies and finance companies discuss the current remarketing landscape. They will discuss how to find ways to maximize return on your inventories despite market changes and discover how your remarketing strategy compares, competes, or enhances current market dynamics.

The webinar will also address the effect on consignors in the remarketing space and how buyers are sourcing cars.

For information, go to the IARA’s website www.iara.biz.

According to a forecast released by Cox Automotive, the annual vehicle sales pace is expected to finish near 11.4 million, up from last month’s historically low 8.6 million pace but still far below May 2019’s robust 17.4 million level, after incorporating seasonal adjustments.

New light-vehicle sales volume in May is expected to finish near 1,050,000 units, down 33 percent compared to last May but up 49 percent from last month.

According to Charlie Chesbrough, senior economist at Cox Automotive: “Recent trends suggest daily sales are showing significant gains over March and April’s collapse. Data reveals the market hit a bottom around the first of April, and since then has been making a slow but steady recovery. The opening of dealerships, and whole states, over the last few weeks is greatly contributing to the upward sales trend. The key question for the market going forward is whether these modest but steady sales gains will continue into June or does the sales recovery stagnate.”

As the industry drives into the summer selling season, a full sales recovery faces multiple headwinds. Cox reports the crisis is unique because the industry is facing a negative demand shock and a negative supply shock simultaneously. Vehicle factories have been mostly closed since late March and are only beginning to restart. That means new-vehicle inventory is at the lowest volume in more than a year. Low inventory means less choice for consumers, particularly with popular vehicles like pickup trucks and SUVs, according to Cox.

Although most small business owners are eager to reopen once their cities and states fully lift restrictions, some entrepreneurs worry about the lingering effects of the pandemic, according to LendingTree’s latest survey of small business owners.

Just 11 percent of respondents said they have no anxiety about reopening. Nearly half of small business owners worry they cannot afford to resume normal operations following mandated closures, LendingTree reported. Approximately 46 percent of small business owners cite funding as the primary obstacle to reopening, and that once open, increased health and safety measures could further stifle sales.

Independent dealers are open across the country
Independent dealers are open across the U.S and have implemented Social Distancing protocols

The biggest concern for 39 percent of small business owners is that they will not generate enough sales to make opening worthwhile. And 30 percent are nervous they would have to shut down again if there is another spike in coronavirus infections. A smaller group is worried about complying with ongoing social distancing and health safety guidelines, as 8 percent said that was their main concern, while 5 percent are most troubled about employees not wanting to return to work.

On the bright side, 52 percent of survey respondents expect all of their employees to return to work when the business reopens. Nearly half — 48 percent — plan to bring back the same number of people at the same number of hours. And only 23 percent of business owners expect to employ fewer people for fewer hours when they reopen.

 

Manheim announced that “increased sales activity” and “early signs of economic recovery” have in part led it to recall 300 workers just weeks after furloughing 9,000 U.S. employees.

In a May 27 release, Manheim President Grace Huang said a boost in reconditioning requests led to the return of the 300 workers.

Manheim President Grace Huang
Manheim President Grace Huang

“As business conditions continue to improve, we plan to recall even more furloughed employees,” Huang stated.

She reported that with lots at full capacity, two-thirds of locations are participating with expanded viewing days and times. Manheim also has wireless tracking technology at 13 locations, with plans to double that total for year’s end, Huang reported.

Huang said Manheim is accelerating its investments in condition reports and imaging, as it is still limited to an all-digital format. The company promises key enhancements in the coming months, while continuing to comply with CDC guidelines.

Manheim continues to waive simulcast fees for buyers and sellers and waive the Manheim express sell fee for self-listed vehicles. The company also offers daily MMR retention values to help with valuations. It’s also waiving fees for vehicles sold without a title or title absent, as well as other assistance.