Hybrid cars are winning, used EVs unlock affordability, Carvana's impressive Q2

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Each week, I curate the top 5 automotive industry headlines based on the topics CDG readers engaged with the most on social media. Let’s get started.

1. Hybrid cars are having a banner year

Hybrids are quickly becoming the go-to for many drivers making the switch from gas-powered cars.

Driving the news: After many automakers admitted to overreaching on their EV plans, hybrid vehicles offer a middle ground.

• Hybrid car sales doubled in Q1 compared to last year.

• Owners are also sticking with the hybrid love, with loyalty rates at a seven-quarter high.

• Over the past three years, hybrids have steadily outpaced EVs, and now claim 11% market share – a record high.

Why it matters: Facing the unpredictable shift to EVs, automakers have hit the gas on hybrids. Blending top-tier fuel efficiency with powerful performance, hybrids appeal to more drivers and avoid the pitfalls of costly EV overproduction. And it’s paying off big time.

Know who’s not having a banner year? Hertz. The rental company’s gamble on 100,000 Teslas keeps coming back to bite.

2. EV depreciation burn intensifies for Hertz

Hertz reported a Q2 loss of $1.44 per share and $2.35 billion in revenue for the quarter – weaker than analysts expected.

• The rental giant said that vehicle depreciation costs increased to $706 million, driven by plummeting used EV values.

• Per-unit depreciation improved to $600 a month, but still more than three times higher than a year ago.

Why the steep decline in values? Tesla’s aggressive price cuts are pulling the whole segment down.

Zooming in: Used EV values are plummeting faster than the market, dropping 16.6% year-over-year in June, compared to just 9.5% for non-EVs. This steep loss in residual value is taking a heavy toll on fleet operators who were early EV adopters like Hertz.

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But…one company’s pain is a car buyer’s gain. Thanks to depreciation, used EVs are some of the cheapest cars on the market today.

3. Used car market opens door to broader EV adoption

What’s happening: Some of the first folks to jump on the EV bandwagon are now swapping their old rides for newer models with better tech and longer ranges. This has led to a big increase in used EVs hitting the market—up 27% from last year.

Why it matters: A robust used EV market is key for broader adoption. Most years, Americans buy more than twice as many cars used as new.

Digging deeper: According to a July report from Cars Commerce, used EV demand is up 54.8% year-over-year.

• From June 2023 to June 2024, used EV listing prices have dropped 13.8%, landing at $36,764 on average.

Expect to see more dealers confidently wade deeper into the used EV segment, especially as overall used car supply tightens.

4. Used car supply under pressure

This year, the car market is settling into a groove, with used cars taking center stage in the drama of prices and supply.

By the numbers: Used car prices dropped by 6.9% in June and 5.6% for the first half of the year. But even with those price drops, supply is still pretty tight, down 10% from last year. As consumers adjust to new market realities, the demand for affordable used vehicles is surging, putting pressure on an already strained supply.

But wholesale auctions look a little bit different right now…

POV: Just yesterday, I heard from one of the industry’s top wholesalers that used car prices are actually creeping back up at auction.

Why? Could be that dealers are rushing to restock their inventories after “taking their foot off the gas” during the CDK outages. It’ll be interesting to see if this trickles down to the retail market in 30-60 days.

Big picture: Until new car prices come down and incentives return in a meaningful way, used cars will continue to offer what new ones can’t: affordable transportation.

No one knows this better than Carvana.

5. What bankruptcy? Carvana defies downbeat car market with earnings jump

Carvana reported a big increase in second-quarter profit driven by an unexpectedly solid sales performance.

By the numbers: Carvana saw big gains across most metrics, including sales, revenue, and net income.

• Sold 101,440 retail units in Q2, a jump of 33% year-over-year and 10% quarter-over-quarter.

• Revenue soared 15% over 2023, hitting $3.41 billion.

• Retail gross profit per unit was $7,049, an increase of $529.

Of note: Carvana does not calculate gross profit the way most dealerships do. Since the company is also a bank, logistics company, and vehicle auction, they take all gross (retail and wholesale) and then divide it by the number of retail units they sell.

Why it matters: Carvana’s comeback has surprised a lot of industry experts. Just over a year ago, it was on the brink of bankruptcy. Now, it's not only back on its feet but also posting impressive earnings and dodging the usual used car market headaches.

That’s a wrap for now – make sure you’re following along on X, LinkedIn, and IG for more real-time updates.

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—CDG

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