Empty delaer lot

Vehicle Demand in a Time of Disruption

Revisiting the statistics to project second-quarter sales targets.

Economy woes are on the minds of every business right now, and sales projections are likely to be disrupted. If you are trying to make sense of what the second quarter may look like at your dealership, we dug into a few sources to pull together some quick stats on the average demand for vehicles in the U.S. to help you make some mathematical assumptions. Regardless of what the economy does, there are leases that will get traded in, and cars will get totaled and require replacement.

Leases

J.D. Power studies indicate that over 1.8 million vehicle leases will expire between March and July 2020. This, of course, means that 1.8 million consumers will need to visit their local dealership to either extend their lease, buyback that leased vehicle or return their vehicle and choose a new vehicle.

Truck and SUV Sales

Even though new vehicle sales are in a downward trend, in 2019, over 46,800 light-duty vehicles were sold each day. That 1.7 Million sales in a year sold across 18,000 dealerships in the U.S.

Collision Replacements

Does your dealership offer “bird dog” payments to Body shop owners and estimators? You should. According to a recent report from CCC (a collision repair management system), each day, roughly 34,400 vehicles are totaled and head to salvage yards. These vehicles are leaving the U.S. fleet and need to be replaced by new or used vehicles sitting on dealership lots.

As cars and trucks continue to hit the nation’s fleet with full ADAS capability, the cost to repair is pushing more and more vehicles to totaled that could physically be repaired but is not economically feasible. If a car is hit hard enough in the front and the airbags blow, they are getting totaled now. In the past, these “trainwrecks” were often repaired, but not anymore because of the cost for ADAS parts and post-repair scanning.

Last-Mile Fleet And Heavy Truck 

Supply chain and transportation are an area for growth given the rise of Amazon and nearly same-day deliveries replacing the need for brick and mortar stores. And now, there is a demand for medical supplies, food, and personal consumer products as people can’t leave their houses. 

 Last-mile fleet businesses continue to rise, and sprinter vans high roof delivery trucks are more vital than ever. With an increase in demand, commercial fleet operators may decide that now is the right time to add a new vehicle to help meet this demand. Amazon continues to add last-mile depots in cities to reduce shipping times, and incentives exist for entrepreneurs to start their own transportation and logistics companies. This will be an attractive option for some of the thousands of Americans who may be laid off as a result of the virus.

All is not lost for dealerships in 2020. The new car sales have been in decline, and the shutdowns at factories may help the right size supply and demand. But auction sales are increasing and pre-virus, the demand was steadily outpacing the supply. Certainly, there will be fewer buyers in the days ahead, but focus on the areas of growth as outlined above and adjust your sales strategies accordingly.

Electric connectors

Banking On An Electric Vehicle Future? You May Need To Pump The Brakes

So much uncertainty has been thrown at the world this past month. This sudden left turn naturally leads each industry to take a look and try and see what is on the horizon so that we can prepare. Some industries impact the world more than others, and changes there send ripple effects to the rest of society.

The auto industry is one of those giant industries that everyone from politicians to economists keeps an eye on. Prior to this sudden left turn, we were looking like we may soon become an all-electric car reality. But the EV market is especially vulnerable in this upheaval because major investments still need to be made in the technology, the supply chain, and the infrastructure to support it. Forward progress is easy to put on hold when you are forced to make cuts.

Analysts agree that this crisis is very likely to cause carmakers to revisit their manufacturing strategies, which could be especially bad news for electric vehicles.

Dependence on China for Batteries

The EV market’s newness and its dependence on global sourcing for batteries are two hurdles to seeing the EV to fruition, and electric vehicles have already been tough to sell in most mainstream markets.

Last fall, Ford unveiled the Mustang-inspired Mach-E electric crossover, which was well received by the public. Elon Musk’s Cybertruck led to immediate pre-orders, and the EV market has been growing slowly, thanks in large part to enthusiasts, early adopters, the Tesla, the Chevy Volt and the Toyota Prius. But EV’s only account for 2.2 percent of new vehicle sales in 2019.

Oil Price Drops Kill The Economic Argument for EV’s

Falling oil prices, combined with economic fallout, could keep those who are leaning towards purchasing a more expensive EV purchasing internal combustion vehicles for a lot longer. EV leader Tesla alone has seen its stock value cut by more than half in the past month, due to a mix of demand fears and dependence on to Chinese suppliers who are dealing blows due to mandatory shutdowns.

Price May Be The Dealbreaker

The biggest deal killer for EV’s in terms of demand will be the higher than average price tag. When gas is cheap, it undermines the cost of ownership advantage that comes with owning a more expensive vehicle that costs nothing at the pump. This is also true for Hybrids, even with the federal tax credit. At the current national average gas price of $2.25 gallon, it would take 80 years to recover the $8,000 premium from energy savings alone in an EV.

Oil prices could rise once the pandemic is over, but for now, this is reality. Under these conditions, a recession could force lots of consumers to burn through savings and shift any automotive spending to used cars or even hybrids rather than to the more expensive EVs.

Government mandate Fuel efficiency Regulations are a wild card for EV sales. Stricter emissions regulations in the European Union and China might help sales of EVs over there, the fairly modest support for electrics in the US may not be enough to overcome the challenges EV’s face from higher costs and low gas prices.

Some industry experts still believe in the long-term future of electric vehicles. The premium price electric vehicles demand won’t always continue to be expensive, and costs of EVs’ relatively immature technology will likely fall as global production increases.

One thing that may rise up out of this pandemic is an increased demand for autonomous vehicles. If that demand drives production decisions, then the EV is a natural fit for a vehicle with no steering wheel or gas pedal.

So if your dealership was betting large on the future of the Electric vehicle, this pandemic might pump the brakes for a few years. That is not to say the demand will be erased entirely, but you should plan on selling gas-powered cars in your business plans at least in the next five years.

Used cars on dealer lot

News from NADA Is Good News For Used Car Dealers

The National Automobile Dealers Association (NADA) at the 2020 NADA conference in Las Vegas issued an analysis of U.S. auto sales and the economy, which implied good news for the used car dealer.

“All in all, the year ended strong with 17.1 million units,” said NADA chief economist Patrick Manzi. “In December 2019, we saw a continuation of many of the trends we have seen throughout the year.”

December 2019 trends include OEM incentive programs to boost year-end sales with increased incentive spending, a continued shift to crossovers and pickups, and an increase in consumers choosing used vehicles or leased vehicles in light of affordability concerns.

Both of these points are good news for used car dealers. Leasing increases mean the pool of marketable used cars will remain in good supply. It also means more opportunity for used car purchasers who just turned in their lease.

Affordability issues with new cars are also good news for used car dealers for obvious reasons, especially if there is an opportunity to sell a visually similar but model year or two older versions of the new vehicle a purchaser is considering.

Trucks continue to drive sales

In 2019, light trucks continued to drain market share from the car segment. As of December 2019, light trucks represented 72.1 percent of all new light-vehicle sales. Compared to 2018 sales, this is an increase of nearly three percent. By the end of 2020, NADA expects the light truck segment to be larger than 75 percent when compared to an anticipated 25 percent of sales going to new car sales.

Used as an alternative to expensive new car purchases

“As affordability remains a challenge, more consumers chose used vehicles in 2019,” added Manzi. “New cars are getting too expensive for many consumers. Even consumers with great credit or the ability to buy new are instead choosing a used vehicle.”

Quality used car inventories, coupled with these affordability hurdles, and the used vehicle market will continue to pull new vehicle customers away from the new-vehicle market.

It is not all good news however

In 2020, NADA anticipates the used-vehicle sales of 39.5 million units, a similar in volume to what was seen in 2019. Even though you may see more used car buyers, the number of units sold is expected to remain flat.

It is worse for new car sales

Going into 2020, NADA anticipates new-vehicle sales of 16.8 million units – a 1 to 2 percent decrease from 2019.

“Consumers are feeling confident in the economy. Interest rates are low. Unemployment is low,” said Manzi. “In the U.S. economy, things look really good, and I’m confident we will have another solid year in 2020.”

Plan for profit now 

With these predictions in hand, the time is now to plot out the profit for the year, especially as we begin to wrap up the first quarter. How will your used car dealership increase profitability this year with a flat units-sold count? One way is to make more by selling the right mix of vehicles. Certainly, the mix of more trucks and SUVs will help drive more profit.

But making more money per unit is crucial, especially with reconditioning costs. Get a handle on your reconditioning expenditures by adopting software designed to help you plug the holes that are costing you money. Shaving recon time is a sure-fire method for increased profit. Contact your AMT rep today to learn more about AMT’s Suite of products designed to help growth-minded dealerships like yours.

8 Trends Your Dealership Should Pay Attention To In 2019

Dealership Software and Operations

  • Sedans Losing Popularity
  • Electric Vehicles Gaining Popularity
  • Self-Driving Vehicles Become More Common
  • Artificial Intelligence Integrations
  • Subscription Plans
  • Electric Systems Will Improve Drastically
  • Used Vehicles Remain Popular
  • Used Car Reconditioning Industry Will Grow and Evolve

2018 has been a volatile year for the auto industry. It started off with a lot of uncertainty, but as everything has begun to fall in place, we now have a clearer picture of where it’s all heading. There’s been a growth in the economy; however, new vehicle sales have gone down. The tariffs that were created to help American companies, unfortunately, had a negative impact on automobile manufacturers both internationally and here in the states.

New vehicle dealerships made money, but the profit margin dropped a little. Beyond that, new cars are struggling while used vehicle sales are going up. Now, more than ever, the reconditioning industry has become increasingly important for both consumers and dealerships. With all of that in mind, let’s look at the most important trends to look out for going into 2019.

 

Sedans Are Losing Popularity

Ford and Chevrolet are expected to drastically reduce their sedan production come 2019. This trend first became known when Ford announced they would discontinue all of their cars outside of the Mustang and Focus Active, and will continue producing their trucks and SUVs. With two of the biggest vehicle manufacturers changing focus, you should expect others to follow in their footsteps. For many, it’s expected that SUVs and Trucks will be the most popular vehicles by 2020.

 

Electric Vehicles Will Only Continue To Increase In Popularity

With companies, such as Tesla, prioritizing all-electric vehicles, it should be no surprise electric has become as popular as it has. No matter where you look, you’ll see traditional manufacturers following suit. There’s the BMW i3, Volkswagen e-Golf, Hyundai Ioniq EV, Chevrolet Bolt EV, and more. Beyond that, hybrids remain a popular transition vehicle from gas to electric.

No matter what, electric vehicles will grow exponentially in popularity. In the US alone, you may have already seen an increase in charging stations. With companies shifting their focus to hybrids and all-electric, it’s important to know how much they’ll impact the industry.

 

Self-Driving Vehicles Will Slowly Become More Common

It’s safe to say we are still a couple years from having fully autonomous vehicles on a mass scale. However, with all of the sensors in vehicles today, it’s easy to see where the market is heading. We already have proximity sensors, parking cameras, built-in navigation, and other self-adjusting features being implemented into our vehicles.

Beyond that, companies such as Toyota and Ford have already begun investing in self-driving vehicles. This trend was further bolstered when Congress signed a bill in support of self-driving technology. It shouldn’t surprise anyone to hear that self-driving vehicles are being looked into by companies, such as Uber, for commercial use as well.

 

We’ll see AI Implemented Into Vehicles

Whether it happens in 2019 or not is up in the air, but it’s hard to deny that the use of AI has been steadily increasing. Whether it’s our smartphones, tablets, or computers, there’s an AI to help. There’s Siri, Cortana, and Google Assistant, and manufacturers like BMW have already partnered up with Google.

 

Subscription Plans Are Looking Like They May Be The Next Big Thing

Companies like Porsche, Cadillac, and Lincoln already have subscription plans in place. If you’ve been in the auto industry for long enough, you know that the big changes tend to happen with luxury vehicles first, and then trickle down over the years to standard vehicles. Beyond that, we simply live in a time where subscriptions are the big thing. Whether it’s Amazon, Netflix, Spotify, or even gym memberships, subscriptions are the way of the future (for now).

Subscriptions for the car market benefit consumers. It provides them with the opportunity to upgrade or acquire a new car much more easily than they currently can in our buy-or-lease market. However, subscriptions are also great for automakers because consumers will feel obligated to stay within brands.

 

Electric Systems In Vehicles Will Improve Drastically

This is something you may have heard about a couple of years ago, but it’s now looking increasingly likely to happen soon. In the near future, 12-volt electrical systems will be phased out, and eventually replaced, by 48-volt systems. This is because we live in a digital age where we have computers in our pockets, navigation and sensors in our vehicles– all things that require an increasingly larger amount of power.

 

Used Vehicles Will Continue To Grow In Popularity

The used car market is a billion dollar industry already. But if the last year has shown us anything, it’s that it is slowly taking over vehicles sales. In the US, alone, the average vehicle out on the road is 11.5 years old. This means more and more consumers are keeping and maintaining their cars for much longer. Beyond that, as a result of the tariffs and the vehicle price increases, used car dealerships have become the preferred option for many people.

 

The Growing Used Car Industry Will Evolve Reconditioning Processes

With vehicles becoming increasingly sophisticated and consumers driving cars for much longer, the reconditioning process will have to evolve. Right now, some of the most successful shops have already anticipated the change and have adjusted accordingly. They’ve stopped relying on paper and inefficient methods. You’ll see shops getting the latest paint booths, the fastest paint dryers, and workflow management software to track jobs and tackle constraints.

In fact, with the sophisticated technology in cars, you’ll need better equipment, better-educated technicians, and faster ways to organize, track, and adjust your lean processes. Everything will need to be done quicker, and you’ll need to embrace technology in this digital age.

Management software can track where vehicles are, how long each step takes, who’s working on them, what’s wrong with the vehicles, what work has been done, and more, all on mobile and back-office devices. It’s designed to make the reconditioning process more efficient so you and your technicians can upload documents, take photos, and apply updates for everyone to see in real-time, at the click of a button.

 

AutoMobile Technologies Can Help

AMT offers software solutions designed to make your reconditioning business more efficient, provide you with better visibility, and give you peace of mind knowing that your back-office is always up-to-date.

ReconMonitor is a state of the art workflow automation software for auto recon, dealerships, and auto marketing companies. ReconMonitor dealership software decreases reconditioning cycle time and increases your control and profitability.

ReconPro is the industry’s most versatile and powerful software solution purpose-built for auto recon professionals. With essential tools for performing PDR estimates, hail and insurance matrixes, parts management, paint code lookups, integrations with DMS, body shop crash systems and accounting systems, too. ReconPro manages the details of running your business so you can focus on growing your business. 

With your dealership managing recon workflows in ReconMonitor, and your vendors and technicians using ReconPro, you have a complete digital ecosystem for end-to-end visibility and efficiency in your reconditioning operation.

Auto Analysts’ Crystal Ball Says Prepare Now for a Surge in Used Car Demand

How prepared was your dealership for 2017’s roller-coaster ride of new and used car sales?

If you are like many dealerships, you weren’t prepared for the unusual hurricane-induced car buying demand spike in the Fall that usually happens after tax refund time in the Spring.

crystal ballIt’s a dealership’s worst nightmare to be caught during a spike in sales demand at a time of low inventory, and then be forced to sit back and watch as potential customers head over to your competition.

Then, as you scramble to purchase inventory and get it frontline ready, you can almost watch the revenue slip past your balance sheet. Will you get the cars cycled out before the demand is gone?

Oh, to have a reliable crystal ball during auction time!

Actually, if you know where to look, there already is one. Auto Industry forecasters are expecting lower price volatility than 2017’s record highs and unusual fall spike. These same prognosticators also predict higher volumes of used vehicle sales in 2018.

The crystal balls reveal that a more desirable mix of late-model vehicles entering the marketplace and higher take-home pay as the new federal tax law is implemented, will heat up the used car market, so you might want to prepare yourselves now and reap the rewards when the buyers start coming.

From almost the minute the new tax law was passed, large corporations began announcing bonuses and pay raises for American households. Cox Automotive Chief Economist, Jonathan Smoke, revised his forecast of 2018 total used-vehicle sales to nearly $40 million.

At a recent conference call with investment analysts and reporters, Cox stated that they estimate 85% of US households will see an income increase as a result of the new tax laws. Cox also anticipates a 2 to 4 percent decline in 2018 U.S. new light-vehicle sales to fewer than 17 million units.

By now, all the Harvey and Irma hurricane victims have replaced their cars, so that spike in new and used car sales as replacement vehicles ended in December of 2017.

Still, experts believe that the U.S. economy will continue its strong demand for new and used vehicles in 2018 due to a low unemployment rate, strong financial markets and consumer confidence, and incentive offers from automakers.

 

Where will the used inventory come from?

It has been predicted that 2018 will be a slowdown in the increasing numbers of late-model vehicles entering the used market, with 2018 lease returns growing only 8.1 percent to 292,000 units.

And most of the growth is in pickups and SUVs, which are more in demand, so grounding dealers will retain more off-lease vehicles themselves.

Expect to see lower rental car-fleet vehicle returns, fewer coupes and hatchbacks, will fall this year, But there will be an increase in pickups, SUV’s and crossovers.

How to stay ahead of the demand.

Following the economic downturn started in 2008, car buyers’ desires for new vehicles leaned heavier towards cars than trucks. This caused a mismatch in the used market as consumers started leaning back towards trucks and SUV’s during the upswing.  But in 2018, half of off-lease vehicles are expected to be light trucks.

Heed the warnings.

Retailers who sell late-model SUVs and crossovers will benefit from declining used-vehicle prices this year, that could squeeze dealerships’ volumes and margins on new light trucks

Cut your frontline cycle times.

Now is the time to focus on the operations and look for ways to eliminate bottlenecks and unnecessary snarls.

Efficiencies save profits

The focus on fast and efficient reconditioning becomes even more important to maintaining margins on new car inventories as used car demand puts pressure on new car pricing. A small investment in a recon software such as ReconMonitor can mean the difference between profit and loss during a squeeze like the one being predicted now.

As a used car dealer, the decision to pursue CPO designation for select vehicles can be advantageous, making initial inspections even more crucial. Again, any investment in automation can pay for itself. When used car demand is high, each day lost in the recon stage is money wasted. Consider streamlining the intake phase with an investment in inspection software such as InspectionNotes from Automobile Technologies. Why waste time entering and transcribing vehicle details and management of recon needs on paper, when a single mobile recon app can eliminate hours of work?

 

2018 may not be as bumpy a ride as last year, but it’s sure to have surprises of its own. Staying attentive to the market is as close as we’ll get to that crystal ball, and maintaining an efficient operation will keep your dealership rolling smoothly.


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