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3 major car market trends I'm watching đ
Your January auto market update is here
Hey, everyone. Exciting announcement: I just launched the Car Dealership Guy Industry Job Board! I built this job board so that employers in the auto industry could take advantage of my network and I could help great people find great jobs. Itâs really a win-win.
Vendors, lenders, dealers, auto tech entrepreneursâanyone in the industry can use this tool. And the best part? Employers can post up to 50 roles for free.
Check it out and post your jobs (or find your next one) right here.
âCDG
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Todayâs Biggest News
3 Major Car Market Trends Iâm Following
I donât have a crystal ball, but I do have a hunch: There are a handful of market realities already emerging, three weeks into 2024, that I think will dominate the industry conversation in the months to come.
As we head into some major industry events (NADA Convention, here we come) and get closer to tax refund season in the spring (when seasonal trends will really start emerging), Iâm tracking these three auto market trends â
1. Itâs all in the segment.
Cox noted âweaker-than-normal buying demand for this time of year,â given dipping average daily sales conversion rates so far this month. But when you dig in deeper to individual segments, things look a little more nuanced â
Full-size pickups are âperhaps the most flooded major segment, relative to sales,â according to S&P Global. The segment is a major profit source for Detroit, but increasing inventory has resulted in deep discounts.
Via S&P
Meanwhile: Compact SUVs have the most inventoryâŚbut also healthy registrations of about 200,000 per monthâputting the segment right at the ideal ratio of two months' supply. Goes to show you how data requires analysis.
Via Cox
2. Used could be cooling off.
The stat that jumped out to me: Cox expects that wholesale prices on its Manheim Used Vehicle Value Index (which tracks prices of used vehicles sold at its US wholesale auctions) will end 2024 only 0.5% higher than 2023. The normalization trend continues, even through this continued systemic shortage of used cars.
Via Cox
Important context: The Manheim Index fell 7% in 2023 and almost 15% in 2022 as the used car market evened out following a period of inflated prices and limited inventory during the pandemic.
What that means for buyers: Stability isnât a bad thing, especially for determining book values that serve as the foundation for lending. And wholesale used vehicle prices decreased 1% from December in the first 15 days of this month. But used car prices are still higher than they were pre-pandemic.
Why haven't used car prices crashed?
It comes down to supply on dealer lots:
2019 --> 3M used vehicles available
2023 --> 2.4M used vehicles availableYou have 20% fewer used cars on dealer lots + New car prices are still near all-time highs.
The result? Used car prices are⌠twitter.com/i/web/status/1âŚ
â Car Dealership Guy (@GuyDealership)
7:27 PM ⢠Jan 23, 2024
And what does it mean for dealers? Those lower prices have to hit someoneâno such thing as a free lunch and all. Several dealers mentioned that volume was solid but gross margins were down when I polled the CDG audience recently.
âFor the economy and the auto market, weâre in for just 1% to 2% growth, but growth beats a recession,â Jonathan Smoke, Cox Automotive chief economist, said on a call recently.
âAs we enter into 2024, new supply is back to spring 2020 levels, which favors consumers and leads to lower prices.â
All in, dealers have noted that used demand is still decently strong to kick off this year. But as automakers 1) revive new vehicle supply (relative to volume, inventories are up 30% these days, per S&P) and 2) further incentivize new vehicle salesâŚwe could be witnessing the end of the sellersâ market.
3. The macro makes the micro.
You know who doesnât buy cars? People who arenât confident they can pay for them (usuallyâŚ). So macroeconomic trends like consumer confidence matter.
Right now: Retail sales turned up stronger than expected for December. Consumersâ POV on car buying conditions has improved to the best level since July 2021. Inflation concerns continue to fall.
Translation? Buyers seem buoyed by generally strong economic conditionsâand the fact that the University of Michiganâs consumer sentiment index notched its biggest monthly advance since 2005 this month is proof.
Thatâs what Iâm thinking about right now, as I consider the car marketâs near- and long-term future. What are you paying attention to? Hit reply and tell me more.
This Weekâs Episodes of the CDG Podcast
Want to know the secret weapon to dealership efficiency? David Domm, cofounder and CEO of Carmatic, told me just what he thinks it isâplus whether his car sales tech business poses a risk to anyoneâs job at a traditional dealershipâin this episode.
The future of dealerships will require tech solutions. But which tech helps and which tech hurts? And how can US dealerships learn from what their international counterparts are doing? Brian MacDonald, CEO of CDK Global, shares his POV on all the above and more in this episode.
Listen to the episodes here, and subscribe to the CDG Podcast on Apple, Spotify, or wherever else you get your podcasts. And thank you to Cars Commerce, CDK Global, and Valvoline for making this content possible.
Together with Cars Commerce
You know your storeâs reputation is essential to the health of your businessâbut do you know how to diagnose it?
With so many reviews to read through, it's not easy to identify which specific aspects of your experience are resonating well (and not so well) with your customers.
Dealers: Check out your Cars Commerce Experience Report. đđ
This free report measures and tracks customer sentiment for each aspect of your experienceâfrom lead follow-up to financingâand helps you benchmark those perceptions against your local market and OEM averages.
Improve your experience. Build your reputation. Promote what makes you different. It all starts with using data to diagnose where you are today.
In Other News
Itâs curtains for Vroom. The company, which went public in 2020, is shutting down its online used car marketplace and laying off about 800 employees, or 90% of its workforce. Vroom plans to sell off its remaining used vehicle inventory to wholesalers. From now on, Vroom will focus on its auto financing and AI-powered analytics business units.
What happened? âDespite significant efforts to do so, we ultimately were unable to raise the necessary capital in the current market,â Vroom CEO Tom Shortt said in a statement. Vroom ran out of liquidity after the market lost its appetite for online vehicle shoppingâwhich has waned in the post-pandemic years. Worth noting: Vroomâs biggest competitor, Carvana, has managed to keep humming along pretty wellâŚbut Carvana shares are down almost 90% from an August 2021 high.
The Backlot
The FTC is postponing the effective date of the CARS Rule while a legal challenge against the rule is pending. You can read more about my POV on the CARS Rule from a few weeks back here.
Ford (in a joint venture with Lincoln dealers) is launching a new ecommerce platform for dealer solutions called The Shopâitâs sort of like a directory or App Store for dealers.
The EPA has sent its proposal to finalize major emissions cuts for new cars and trucks through 2032 to the White House for review.
GM unveiled a redesigned 2025 Chevy Equinox.
This was an interesting look at what went wrong with autonomous trucking company TuSimple, which just voluntarily delisted shares from the Nasdaq.
Thanks for reading. Hard to believe Vroom was worth $5+ billion and running a Super Bowl ad just two years ago. Things change fast. What auto tech companies do you see going the distance, even when the competition bites the dust? Hit reply and tell me who youâd bet on.
âCar Dealership Guy
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