Automotive analysts acknowledged the grim status of the industry while speculating about a potential auto stimulus package and how the industry will get through the crisis caused by COVID-19.

A  recent webinar hosted by the Automotive Press Association and the Society of Automotive Analysts brought together Cox Automotive’s Michelle Krebs, LMC Automotive’s Jeff Schuster and IHS Market’s Stephanie Brinley for the wide-ranging discussion.

On a global basis, the short-term news was not good.

Around the world in March, auto markets dropped from 70 to 85 percent in countries like France Spain, Italy and China, according to Schuster.

“Our base case forecast is we’re seeing about a 15-percent decline for the year globally,” he said.

That would mean a drop in the worldwide light-vehicle market to 73 million from last year’s 90 million.

Schuster expects automakers to essentially be shut down in April across North America.

“We’ve got about 140,000 vehicles expected to be produced, roughly a 90 percent decrease from what is normally produced in April,” he said. “About 100,000 of those will be in Mexico.”

He said the pull-back in demand is expected in the 14- to 15 percent range and likely to get weaker.

“It remains an extremely fluid situation,” Schuster said.

Brinley, principal analyst at IHS Market, said what makes  this situation different from 2008-2009 is that there is both a “supply-side and demand-side shock” in this environment.

“We’ll still have to wait and see how consumers respond coming out of it,” she said. “This is certainly unprecedented. I can’t remember a time that we’ve actually shut down auto manufacturing like this before.”

While the government’s CARES economic relief package won’t stop the coronavirus, it may help in repelling the “big old bad ‘depression’ word,” Brinley said.

There was a debate about what, if any, auto stimulus should look like.

Krebs said Cox expects that an auto stimulus plan will be part of a future package.

Schuster added he’d be “shocked” if there wasn’t some type of government incentive program to help boost auto sales.

Krebs said Cox is bullish on EVs and hybrids, believing that a package would involve some variation of a ‘Cash for Clunkers,’ the 2009 program that incentivized the scrapping of older cars to sell newer, more environmentally friendly cars

Brinley questioned whether a ‘Cash for Clunkers’ stimulus would be the best move. She said this is a unique situation in which consumers are not being allowed to go outside or they’re being encouraged to stay inside.

‘Cash for Clunkers,’ the 2009 program
‘Cash for Clunkers,’ the 2009 program

“So, their reason for not buying now is much different than it was during the recessionary time period,” Brinley said.

She said an incentive may drive someone to make a purchase – if that person were already inclined to buy a vehicle. But she’s not sure that would drive a purchase otherwise.

“And even when you look at ‘Cash for Clunkers,’ all it did was (boost) pull-ahead sales,” Brinley said. “I would question whether or not that’s the very best use of funds.”

She said automaker incentives like 0-percent financing or other relief would be more effective in getting people back to showrooms. Brinley said making customers feel comfortable that they can continue to make payments is more important than a one-time check.

Cox predicts the recovery will be “very uneven” for different brands and segments.

Segments that do worse will likely be compacts and subcompacts, Krebs said, since those already attract budget-constrained buyers.

High-end performance cars and luxury cars are discretionary purchases which track with the stock market, Krebs said.

“We see those slower to come back,” she said.

Vehicle segments likely to do best are trucks, SUVs and crossovers.

Krebs said Cox has spent lot of time looking at shopping habits in the crisis.

“What we have been doing is monitoring on a daily basis shopping on our websites like Kelley Blue Book and Autotrader,” Krebs said. “We watch used vehicle activity at our Manheim auto auctions, although those have gone totally digital.

“As we looked at our credit application data, by the end of March, sales had fallen 64 percent for new cars and 50 percent for used. Of course, this comes at the worst time. March is one of the biggest months for sales, especially for used car sales. Typically, when tax refunds come in, people will use those to buy used cars.”

Tax season came to a “screeching halt” on March 10, Krebs said. She believes people are now holding on to their tax money for other essentials like rent or food.

Krebs said Cox is also having open office hours with clients, be it dealerships, lenders, rental car companies, etc., a couple of days a week.

“That is really eye-opening and, in some cases, heart-breaking,” she said. “I had some who were laid off or just closed their dealerships last week. That was tough.

“We think that April may will be the lowest sales rate in the history of data collection.”

The National Automobile Dealers Association announced that president and CEO Peter Welch will be retiring at the end of 2020.

Welch, 67, was appointed by the NADA Board of Directors in January 2013 to head the organization. Under Welch’s stewardship, NADA achieved a series of legislative and regulatory victories in a number of areas, including auto finance, tax reform, vehicle safety and international trade issues. Welch also led NADA through the sale of its used-vehicle valuation guidebook and its retirement planning business, oversaw an organization-wide rebranding initiative, led the planning of NADA’s year-long centennial celebration in 2017, and orchestrated the organization’s move to a new state-of-the-art office facility in 2018.

“I’ve had the distinct privilege of serving associations comprised of franchised new-car and truck dealers for 30 years, and it’s time for me to get ready for my proverbial ride into the sunset,” Welch said.

His retirement announcement triggers NADA’s succession plan, which includes the appointment of a NADA Director-led search committee. NADA has also selected international search firm Spencer Stuart to oversee the transition process. Spencer Stuart oversaw NADA’s CEO selection process in 2012.

 

APCO Holding LLC, a provider and administrator of automotive F&I products, will continue to provide COVID-19 assistance by joining the F&I Providers Relief Fund for F&I Managers as a founding partner.

With the auto industry facing unprecedented losses, dealers are confronting slow business and serious challenges. For some, that means temporarily closing their doors or making the difficult decision to lay off staff, enact furloughs, or make pay cuts. Founded in April, the F&I Providers Relief Fund has brought more than 40 providers together and raised over $500,000 to provide grants to F&I professionals who are confronting financial setbacks as a result of this crisis. Contributing members include a variety of F&I administrators, underwriters, roadside companies, technology platforms, and others who are involved with dealers and their employees on a day-to-day basis.

“As we continue to see the fallout from this pandemic, it is essential to come together and collaborate on what we can do as an industry,” says Fin O’Neill, Chairman & CEO of APCO Holdings. “If our responses are going to be effective and sustainable, they have to be built from a wide range of experiences. The F&I Providers Relief Fund has brought us together with one goal in mind—to help the people we do business with every day who are now impacted by this crisis. It’s an honor and a privilege to be a part of this effort.”

 

John Lee, president of APCO’s EasyCare and GWC Warranty, holds a seat on the seven-member Relief Fund board of directors tasked with raising awareness about the need within the industry and reviewing applications to award financial assistance grants.

Porsche Finder is the name of the German automaker’s new pre-owned and Certified Pre-Owned vehicle search platform.

With the launch of the new platform, Porsche Cars North America (PCNA) is streamlining and enhancing the customer’s ability to connect from home with one of the 192 U.S. Porsche dealerships and quickly find precisely the vehicle they’re looking for.

The new platform includes optimized search filters for model and generation, vehicle equipment and packages, pricing options, dealer inventory search without zip code, in addition to an expanded selection of interior and exterior vehicle colors (including cabriolet roof colors). Porsche Finder was developed in cooperation between PCNA and Porsche Digital.

 

Sales of certified pre-owned (CPO) vehicles decreased 46 percent year over year in April, according to Cox Automotive.

CPO sales were on a record-setting pace for the year before COVID-19 and ended down 20 percent month over month compared to March. For April, only 127,068 CPO units were sold, Cox Automotive reported.

The 46 percent drop in CPO volume was larger than both the estimated 34 percent drop in used-vehicle retail volume and the 41 percent drop in new-vehicle sales. Cox analysts said this suggests consumers in market during the COVID-19 pandemic are likely looking for low prices and value and steered away from CPO. While CPO are excellent used vehicles, with full warranties and benefitting from factory-backed inspections, they are often priced higher than a traditional used vehicle. At the same time, new-vehicle retail sales in April benefitted from high retail incentives and 0 percent financing deals, improving the value proposition. CPO units, stuck in the middle, suffered, Cox reported.

This year, CPO sales are down 18.7 percent versus 2019, with 739,838 CPO units sold through April.

Cox stated Toyota, Honda and Chevy continue to be the biggest players in the CPO market, collectively representing a third of all CPO sales. Those three plus Ford and Nissan account for 45 percent of CPO sales so far in 2020.

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