As New-Car Demand Returns, Leasing Levels Refuse to Rally
Automotive News reports that leasing, which comprises nearly one-third of new-vehicle sales, dropped in April to the lowest levels since 2015 as the coronavirus pandemic collapsed the top two leasing markets in the country and automakers saturated the market with loan incentives. Rising customer demand prompted automakers to pull back on many of those programs, but leasing levels remain well below normal. Leasing levels fell to 24 percent in April, Experian said, down from 30 percent in April 2019. The last time the levels were below 25 percent was in the fourth quarter 2014. As leasing levels dropped, shares of 0 percent-interest, 84-month loans as part of total auto originations rose sharply in March, peaking at 22 percent in the week of March 29, J.D. Power said. Steeply incentivized auto loans have been steadily falling each week since, comprising only 12 percent of originations in the first week of June. Read more here.
Ford Giving Salaried Employees Option to Stay Home Until 2021
Ford is giving its salaried employees who are working from home the option to do so until 2021, reports The Detroit Bureau. The hallways at the Glass House, Ford Motor Co.’s Dearborn, Michigan headquarters, and scores of other buildings are likely going to be quieter for the next several months as the automaker gave salaried personnel working from home already the option to stay there until 2021. The automaker has about 30,000 employees who are currently working from home due to the coronavirus pandemic. The company – and general public – is grappling with how much exposure to people is too much, but with so much already being done remotely, it made it simpler to give employees the choice to return to their offices or work from home. Depending upon the environment, the offer to work from home could even be extended beyond New Year’s Eve. Read more here.
Tesla Registrations Plunge in California, Data Tracker Says
Registrations of newly purchased Tesla Inc. vehicles plunged in the critical California market over the past two months, according to new data, underlining the challenge Chief Executive Elon Musk faces to keep investor enthusiasm that has helped propel the company’s share price. According to The Wall Street Journal, the data from research firm Dominion Enterprises shows registrations fell by a combined 37% in April and May, offering the first window into how the U.S. quarantining measures to slow the spread of the coronavirus affected domestic demand for the Silicon Valley auto maker. It initially seemed more immune to problems than rivals when it posted a surprise first-quarter profit. Tesla shares have soared since late April and set a new high last week, fueled in part by encouraging sales data from China, where the auto maker delivered a record 11,095 locally made Model 3 compact cars last month, according to China Passenger Car Association. Tesla only began shipping cars from the Shanghai plant late last year. Read more here.
The Car Industry's $1.1 Trillion Debt Problem
The acute phase of the coronavirus crisis has passed for automakers. The chronic phase may be just beginning, reports The Wall Street Journal. No automaker has gone bust in this recession. None seems likely to either, given the ready availability of cash. The combination of ample central-bank liquidity and a functioning financial system have forestalled the kind of existential drama that rocked the industry in 2009. But this is only good news up to a point. More cash now means more debt later—debt that manufacturers can ill afford, given the mounting cost of new technologies. As of June 16, car manufacturers and their suppliers had raised $21.7 billion in extra long-term debt as a result of the Covid shutdowns, according to calculations by consulting firm AlixPartners. That further increases the total industry debt load to at least $1.1 trillion or 3.4 times earnings before interest, taxes, depreciation and amortization. At the end of last year the leverage multiple stood at 3.0 times. Read more here.
COVID-19 Moves Pickup and Delivery Into Mainstream Brands
Thanks to COVID-19, the era of pickup and delivery is here, reports Automotive News. Before the pandemic, a growing number of stores selling mainstream brands were slowly rolling out pickup and delivery options for their service customers. But now it's pedal to the metal as pickup and delivery of customers' vehicles has emerged as one of the most effective ways fixed ops directors can keep their service bays busy while reducing the risk of exposing service advisers, techs and cashiers to the virus. An added bonus: Pickup and delivery means fewer customers hanging out in lounges waiting for their vehicles to be fixed, further helping stores remain virus-free. "It's a fabulous loyalty tool. I don't know any customer who is not interested in convenience," says fixed ops consultant Jim Roche, most recently a vice president at Cox Automotive. Read more here.
Around the Web
A Sports Car That You Can Wear Into a Bar [NY Times]
Review: 2020 Acura NSX, the Most Underappreciated Car in Its Class [The Detroit News]
10 Fun Used Cars with a Stick Shift You Can Buy for Less Than $10K [Gear Patrol]
2021 Honda Pilot Gets New Special Edition Trim, Standard Nine-Speed Automatic [Autoblog]
