Car buyers visiting more dealerships, Ford's solid May sales, Toyota in hot water

Hey everyone. Tomorrow, the CDG podcast goes Canadian with guest Jimmy Houle, CEO of Groupe Lallier Automobile in Quebec. Stay tuned to learn what it takes to be a top Honda dealer in Canada and where Jimmy finds his inspiration in business.

— CDG

1. The car buying process hit a ‘plateau of pleasantness’ last month – survey

Top line: For the second month in a row, the CDK Global research team concluded that 87% of car buyers surveyed said that the purchase process of their new car was easy.

By the numbers: While more car shoppers needed to visit multiple dealerships in May (70%) compared to April (64%), a higher percentage (79% vs 70%) found the car they wanted easily this May compared to a year ago.

But despite improvements in inventory, compared to April, fewer May buyers (50%, down from 53%) found the car they wanted. Yet, they adapted by choosing vehicles in transit (24%, up from 22%) or finding a different in-stock option (11%, up from 9%).

By the numbers:

• Car shoppers in May also said most stages of the buying process were easier last month. Reaching a final price (68%), agreeing on a trade-in value (59%), and applying for credit (68%) all maintained their positive trend.

• The only step that dipped slightly was finalizing financing or leasing, going from 69% success in April to 68% in May.

Why it matters: Giving consumers the option to do some of the car buying steps online seems like a clear benefit for the shoppers that CDK surveyed. Now that Inventory levels are returning to somewhat normal levels, and the summer season is here with attractive retail incentives, anything dealers can do to enhance a smooth ride for the consumer purchase is vital.

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2. Ford’s sales spike in May backed by hybrid, EV strategies

Driving the news: Ford’s U.S. sales rose 11% overall in May year-over-year, primarily driven by strong hybrid, EV, and SUV sales. At the same time, many refreshed models hit dealer lots, like the F-150 and Ranger trucks.

By the numbers: Ford sold 190,014 vehicles last month. Hybrid sales roared 64.5%, while EV sales also increased 64.7% year-over-year. Traditional gas-powered vehicle sales saw a modest rise of 5.6%.

Between the lines: Inventory levels are up across most brands (with a few exceptions), which has led to increased incentives to move more vehicles faster. But, high prices and interest rates continue to challenge affordability.

Why it matters: The significant increase in hybrid and EV sales reflects Ford's striking change in strategic tone announced earlier this year. Sales of hybrid vehicles saw meaningful growth, including the Maverick compact truck, which increased 96% to 13,616 units. Sales of EVs were led by the Mustang Mach-E (4,255) and F-150 Lightning (3,260).

Zoom in:

• Maverick hybrid sales shot up 81%, while the Transit commercial van saw a 96% increase.

• Bronco sales rose 18%, though F-Series truck sales dipped 1.6%.

• SUV sales increased by 7.4%, with the Explorer up 15%, Expedition up 16%, and Escape up 20%.

The key point: Ford's focus on hybrids over EVs is a calculated move, aiming to stay profitable while also meeting federal regulators’ emission requirements, and it seems to be paying off. The company plans to offer hybrid options across its North American lineup by 2030.

What's next? Ford's CEO, Jim Farley, stressed the long-term role of hybrids and the importance of balancing the brand’s product offerings. The automaker is committed to scaling EV production while capitalizing on the growing demand for hybrids.

What they're saying: "We should stop talking about [hybrid powertrains] as transitional technology," said Ford CEO Jim Farley.

"Many of our hybrids in the U.S. are now more profitable than their non-hybrid equivalent," he added.

In today's automotive landscape, car buyers invest more time than ever in researching, considering, and comparing options. But for dealers, the challenge lies in pinpointing the audience ready to make a purchase.

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3. Safety test scandal rocks Toyota

Big picture: Japan's auto industry is in turmoil after a widening safety test scandal ensnared Toyota, the world's largest automaker.

What's happening:

• Toyota admitted to using incorrect or manipulated data in safety certification tests for multiple car models.

• The scandal has snowballed, with Honda, Mazda, Suzuki, and Yamaha also acknowledging irregularities in their testing procedures.

• Transport ministry officials raided Toyota's headquarters on Tuesday, escalating the situation.

Why it matters: Toyota suspended production of three car models (Corolla Fielder, Corolla Axio, Yaris Cross) manufactured in Japan. While the automaker insists that affected vehicles on the road are safe to drive, the scandal raises questions about quality control and could damage Toyota’s reputation, which is known for its reliability and methodical practices.

Key quote: “The investigation is still ongoing, but it identified that seven models, including those that have already ended production since 2014,” Chairman Akio Toyoda said in a statement.

“As the person responsible for the Toyota Group, I would like to extend my sincere apologies to our customers, car enthusiasts, and all stakeholders for this issue, following Hino, Daihatsu, and Toyota Industries Corporation. I am truly sorry. We neglected the certification process and mass produced our cars without first taking the proper precautionary steps, he added.

Flashback: The scandal's roots lie in late December 2023, when Japan’s transport ministry launched an investigation into certification practices after irregularities at Toyota's Daihatsu unit. The improper testing affected 64 models. 

What's next: The full extent of the misconduct and its impacts remain unclear, but it could include recalls, fines, and a significant blow to consumer trust for the automaker.

Of note: This does not affect vehicles in the U.S.

Bottom line: This scandal has thrown a wrench into the Japanese auto industry's image and raised concerns about consumer safety. The coming weeks will be crucial in determining the full scope of the problem and its long-term impact. Is this just a blip for Toyota, or is something more troubling lurking beneath?

• Some early Tesla bulls are giving up on the stock.

• The political battle around EV investments is growing, says Michigan Gov. Gretchen Whitmer.

• U.S. Sen. Joe Manchin encourages industry to sue Treasury over EV tax credits.

• Toyota to recall 100,000 vehicles over risk of stalled engines.

• While new electric vehicle sales are slowing, used sales are ramping up.

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Thanks for reading everyone.

— CDG