Car Dealers Can Keep Rolling After Supply Crunch

First Up 07/22/21

Dealers Make An Impact: Catching Up with AFIT-PAC Chairman Howard Hakes

In the latest installment from Dealers Make An Impact, Howard Hakes, President of Hitchcock Automotive Resources, sits down with AIADA President & CEO Cody Lusk to discuss his role as Chairman of AFIT-PAC, why free trade is critical for the auto industry, and the importance of dealer involvement. Watch the video here. 


Car Dealers Can Keep Rolling After Supply Crunch

Despite fears of car supply availability, auto dealers aren’t running into any speed bumps just yet, reports The Wall Street Journal. Both Lithia Motors LAD and AutoNation reported record revenue and profits last quarter. Lithia Motors said on Wednesday morning that its second quarter sales surged 118% compared with a year earlier; AutoNation’s sales jumped 54% in the same period. New vehicle shipments seem to be catching up: They were down just 6% last quarter compared with 2019 levels, AutoNation noted on its earnings call on Monday. Demand still far outpaces supply, however. At AutoNation, there were just 14 days’ worth of inventory available for new vehicles; Lithia had 23 days’ worth. Dealers typically have 50 days or more worth of new car inventory on hand. That mismatch between supply and demand comes with all kinds of perks for the dealers: Not only are they commanding higher prices, but they have also been paying less interest on floor-plan loans, which are typically used to finance floor inventory. Read more here (Source: The Wall Street Journal). 

A Small Victory: Used-Car Prices Slip From Dizzy Heights

For months, anyone who wandered onto a dealer lot to look for a used car could be forgiven for doing a double take — and then wandering right off the lot. Prices had rocketed more than 40% from their levels just before the viral pandemic struck, to an average of nearly $25,000. The supply of vehicles had shrunk. And any hope of negotiating on price? Good luck with that. But now, a sliver of hope has emerged. The seemingly endless streak of skyrocketing used-vehicle prices appears to be coming to a close, reports the AP. Not that anyone should expect bargains. Though average wholesale prices that dealers pay are gradually dropping, they’ll likely remain near record levels. So will the retail prices for consumers. Supply remains tight. And while demand has eased a bit, a steady flow of buyers could keep prices unusually high for a couple of years more. Read more here (Source: The AP).

Hyundai Motor Q2 Net Profit Soars, Expects Chip Shortage to Ease

South Korea's Hyundai Motor Co turned in its best quarterly profit in about six years on Thursday, helped by solid demand for its high-margin sport-utility vehicles (SUVs) and its premium Genesis cars, reports Reuters. Hyundai, which together with affiliate Kia Corp is among the world's 10 biggest automakers by sales, reported net profit of 1.8 trillion won ($1.57 billion) for April-June versus 227 billion won in the same period a year earlier. That compared with an average analyst forecast of 1.6 trillion won compiled by Refinitiv SmartEstimate. "Sales of SUV models and Genesis luxury brand models drove the momentum in sales volume, and declining incentives helped lift revenue and profitability in the second quarter as the ongoing recovery from the global COVID-19 pandemic spurred automotive demand," Hyundai said in a statement. Read more here (Source: Reuters). 

GM Forced to Halt Most Large Pickup Truck Production Due to Chip Shortage

General Motors will halt most U.S. and Mexican production of its profitable full-size pickup trucks next week due to the ongoing global shortage of semiconductor chips, reports CNBC. The Detroit automaker confirmed the production cuts Wednesday for plants in Michigan, Indiana, and Mexico that produce the Chevrolet Silverado and GMC Sierra pickups. GM has avoided halting production of its large pickups this year due to the parts shortage through aggressive supply chain tactics as well as building some vehicles without the needed chips to be completed later. It also has cut some features that require chips such as wireless phone chargers. “The global semiconductor shortage remains complex and very fluid, but GM’s global purchasing and supply chain, engineering and manufacturing teams continue to find creative solutions and make strides working with the supply base to minimize the impact to our highest-demand and capacity-constrained vehicles, including full-size trucks and SUVs for our customers,” the company said in an emailed statement. Read more here (Source: CNBC). 

Around the Web

The World's Road Fuel Demand to Peak Years Earlier Than Expected [Bloomberg]

Daimler Turns Profit in Q2 Despite Semiconductor Problems [The Detroit Bureau]

Tavares Says Chip Shortage Will Easily Drag Inot 2022 [Automotive News]

Utility Vehicles Power VW, Audi to Strong First  Half [WardsAuto]