Tag Archives: Cox Automotive

Start of an EV Price War?

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By Gary S. Vasilash

Last month Tesla did something that OEMs almost never do. (And in its history, Tesla has done lots of things that traditional OEMs almost never do, so at least in this regard it is being consistent.)

It cut the price of its vehicles in China, Germany, and the U.S.

These weren’t slight, either. In the U.S., for example, the Model Y Performance was cut by 19% and the Long Range version by 20%.

There were all manner of assessments as to why this happened. Some suggested that Elon Musk’s Twitter distraction was causing the company to lose sales. Others were pointing out that there is increased competition from some of the traditional OEMs. (Who, to be frank, are bigger on rhetoric about their electric scale today and tomorrow than they are in putting EVs in customer’s driveways.)

Tesla has some 2/3 of the U.S. EV market.

Mustang Mach-E: When does a popular vehicle–and it is popular–get a price reduction? (Image: Ford)

Consider: while the Ford F Series seems like a force of nature when it comes to sales, in 2022 there were 653,957 of those trucks sold—and GM sold 764,771 Silverados and Sierras combined, so it isn’t like either of the primary players have anything near 2/3. Yet a company that wasn’t taken all that seriously 10 years ago now dominates a category.

Shortly after Tesla made its announced cuts, the folks at Ford joined in on reducing the prices of its 2023 Mustang Mach-E models. The reductions ranged from $600 on the Select eAWD Standard Range model to $5,900 for the GT Extended Range.

Ford clearly wants to move metal. What’s curious, though, is that in 2022 it sold 39,458 Mach-Es, which is a 45.4% increase over the number it sold in 2021. It’s not like things were lagging. (Ford execs may have noticed that in July of last year GM cut the prices of the Bolt EV and Bolt EUV by $5,900 and $6,300, respectively, and those vehicles ended the year at 38,120 deliveries, not only close to that Mach-E number, but a 53.5% increase over 2021–greater than the Mach-E rise. Although it is hard to imagine the vehicles being cross-shopped..)

Everyone knows that EVs are more expensive than vehicles with internal combustion engines for a wide array of reasons. And while the overall percentage of EVs sold in the U.S. is still small—5.8%–it is growing, not declining.

So why were the cuts to prices made and will other OEMs follow suit?

Those are the primary questions raised and discussed on this edition of “Autoline After Hours.” Charlie Chesbrough, Cox Automotive Senior Economist, and Joe White, Reuters Global Automotive Correspondent, join “Autoline’s” John McElroy and me to talk about those topics and more.

And you can see the show here.

About Those (Absent) Auto Ads

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By Gary S. Vasilash

Some 41% less was spent by automakers on national TV advertising in July 2022 compared with July 2021 according to iSpot.tv information cited by MediaPost.

The MediaPost article points out, “Without the Olympics, NBA Finals and Stanley Cup (which all took place during at least part of July last year), TV ad spending was down for automakers. . . .”

Fair point, because ads for OEMs during sporting events are absolutely ubiquitous.

However, there is another factor that probably plays a bigger role I the absence of ads:

The lack of product to sell.

According to Cox Automotive, the U.S. auto industry’s days’ supply of vehicles is in the mid-30s, a fraction what is ordinarily the norm.

Honda had just 21 days’ supply on dealer lots.

The point is, it makes very little sense to advertise products that people can’t buy.

Sure, there is something to be said to maintain brand awareness, but if there are ads that are extolling all of the wonderful features of a vehicle that is unicorn-like in its available existence, then the potential consumer is going to be highly annoyed (especially when that person tries to be sold something completely inappropriate by a dealer: guess who certainly won’t go back to that store and who is likely not to shop that brand?).

So sporting notwithstanding, the issue of sparsely available vehicles on dealer lots is a massive roadblock to commerce.

Buying Electric Pickups

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People buy a lot of trucks. According to NADA, in 2021 U.S. light truck sales (admittedly not all vehicles with cargo boxes on the back, as SUVs make it into this space) accounted for 77.6% of all light-duty vehicles moved off of dealer lots.

With the transition toward electrification, OEMs have undoubtedly taken this into account. So whether it is a traditional OEM like Ford and the now-in-volume-production F-150 Lightning or a startup like Rivian and its R1T, electric pickups are rolling out and there are more to come.

Cox Automotive has done some interesting research on potential purchasers of electric pickups.

Looking at those who currently own gas-powered trucks, they found that when it comes to what they are likely to buy next, 50% said they’d stick with gas-powered trucks. 37% said electrified (hybrids or full battery electric). And 14% will consider both.

What’s good news for the OEMs is that only 36% of buyers under age 35 would consider just gas-power, so the future looks better because the OEMs are putting a big bet on the future. 53% of those older than 35 say they’ll be sticking with gasoline. The first group will be buying more vehicles than the latter.

One finding puts the why-buy into perspective for pickups.

While some might imagine that the trucks are mainly for vocational use, turns out that only 12% of those who are considering an electrified for truck say they are doing so because they need it for work.

And 45% say they need it for their hobbies/interests.

What You Need to Know If Vehicle Shopping

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First the good news, according to Michelle Krebs, executive analyst for Cox Automotive:

“The surge in new car prices appears to have peaked.”

That is the new vehicle average transaction price fell 1.8% in January compared to December.

Now it is “just” $46,404.

But while not exactly an entire shoe dropping, Krebs adds:

“Yet, while we expect vehicle supply to improve, it will continue to be tight particularly through the first half of the year. Because of this, we expect prices to remain high for the foreseeable future, but car shoppers can rest assured we don’t anticipate any more record highs.”

Not records. Just high.

Here’s another thing that probably won’t make you feel much better.

Cox calculates that car shoppers for non-lux vehicles are paying, on average, more than $900 above sticker. A year ago those customers were paying $1,600 or more below sticker.

For those in the lux segment it is a similar story, just higher numbers. As in paying $1,300 above sticker when last year the prices out the door were $2,400 under MSRP.

One way of looking at this is that for non-lux cars customers are paying a $2,500 penalty for waiting (the swing from minus $1,600 to plus $900) and the lux buyers $3,700.

With inflation and rising interest rates, however, it may be a good idea to shop earlier rather than later lest those factors add to the sticker.

Remember: MSRP is “suggested” price, not what you’re going to sign off on.

Something to Think About Regarding Vehicle Prices

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By Gary S. Vasilash

Here are some interesting observations from Charlie Chesbrough, senior economist and senior director of Industry Insights at Cox Automotive.

Chesbrough, during a presentation at the Federal Reserve of Chicago’s 28th Annual Automotive Insights Symposium, pointed out that new vehicle inventory at the end of 2021 was 63% below what it was in 2020.

Not a whole lot of inventory on those dealers’ lots.

He said the day supply of vehicles is about 35 days, and that when vehicles show up on dealer lots they get bought up just as quickly as they are dropped off.

What’s more, the average price of a vehicle is MSRP plus something.

In other words, that sticker is a suggestion. The price goes up from there.

What’s more, people are paying more than ever—average transactions at $47,077, according to Kelley Blue Book—and dealers and OEMs are racking up the rewards.

“This is a tight supply situation and I don’t know that the industry is in much of a hurry to change it.”

Why would they?

Not A December to Remember: At Least If You’re Shopping

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By Gary S. Vasilash

Cox Automotive reports that there are two things going on in the new vehicle market right now that certainly aren’t particularly beneficial if you’re looking for something new to put in your driveway.

On the one hand, average transaction prices (ATPs) are continuing to climb. In November the ATP was $46,329, a record, and while the December number has yet to be calculated, Cox notes, “A new record in December would not be surprising.”

Then on the other hand, there are incentive programs, which are continuing to disappear.

Cox points out that in 2019 new-vehicle incentive programs reached an all-time high. This year, incentive programs have decreased month after month such that in the fourth quarter it was at the lowest point in five years.

Of course, all of this matters only if vehicles can be found.

Charlie Chesbrough, senior economist at Cox, says, “While sales in the first half of 2021 were relatively strong, the industry ran out of vehicles, and sales stalled in the second half.

“Total sales in the second-half of 2021 were the slowest in a decade. Demand is healthy, but supply and production disruptions kept the industry in check. You can’t sell what you don’t have.”

Nor can you buy what you can’t get.

So if you can, you might want to wait until next year.

Chesbrough: “Heading into 2022, we believe the supply situation will improve but it will take time to restock the shelves at dealerships.  We expect modest gains in new-vehicle sales in the first quarter, and by the second half of the year a much more robust market should emerge.”

This, of course, is dependent on things like the semiconductor issue to be solved, to say nothing of improvement in the logistics situation (i.e., shipping and trucking).

But the numbers for 2021 are improved over ’20, so. . . .

They’re Probably Not Throwing in the Mats

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Challenges and opportunities in the dealer model and other contentious issues

By Gary S. Vasilash

Research from Cox Automotive, which is a source that dealers find exceedingly useful in their efforts to conduct their business, found that there is an increasing interest among customers to do more of their transactions digitally.

As in 80% of consumers would like to do part of the buying transaction on line. (Who doesn’t do research on the vehicles they’re interested in on line; who doesn’t want to get some of the “paperwork” related to the transaction done in the comfort of their own home rather than under the fluorescent lights of a dealership?)

And 25% of customers would like to have the whole thing done and dusted on line.

What’s more, KPMG conducted a global survey among executives in the auto industry—OEMs, suppliers, dealers, financial services providers, etc.—and they found (again, realize this is a global survey and the Cox Automotive survey in U.S. only):

  • 78% think the majority of purchases will be on line by 2030
  • 34% think that from 60 to 79% of the vehicles delivered will be direct to the consumer by 2030
  • 84% think vehicle subscriptions will be competitive to buying and leasing by 2030 and only 22% dealers are the best channel for subscriptions (OEMs are the biggest choice, 45%)

There is some concern that due to the reduced inventories that are a result of supply chain issues dealers—not all, but some, some that get attention—are increasing prices well above the sticker price.

If consumers were thinking there might be an alternative before this occurred, then those who were subjected to or simply heard about this behavior might be thinking harder about new approaches to getting vehicles (e.g., the Tesla approach).

This is one of the topics that is discussed on this edition of “Autoline After Hours” with “Autoline’s” John McElroy, Cars.com editor-in-chief Jennifer Newman, the Wall Street Journal’s vehicle expert Dan Neil, and me.

Other topics include whether Apple is going to get into the vehicle business (Neil and Newman both think that it is a when not an if), and whether electric vehicles are going to be the end of muscle cars as we know them.

And there’s much more in one of the more animated shows in some time.

Which you can see right here.

Cox Finds EV Interest Not Yet Sparking

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Sure, there are lots of people who want to buy Teslas, but one brand does not a solid segment make

Cox Automotive took a look at what real people think about their likelihood when it comes to the possibility or potential of their buying an EV the next time they’re in the market for a new vehicle and it seems that they are more likely to buy an ICE-powered pickup truck or SUV.

That is:

  • 38% are considering an EV within the next 12 months. Let’s face it, all of us consider lots of things. But when it comes to actually signing the documents. . . .
  • 21% say they are >50% confident their next vehicle will be an EV. There are a couple of ways of looking at this. Is the 21% a subset of the 38%. Or are these confident people, people who are likely to buy a new vehicle. . .oh, sometime.
  • 3% are 100% confident their next vehicle will be an EV. It so happens that 3% is the share of market that EVs will have this year.

Here’s something that’s not surprising:

If an EV is available for $5,000 less than a comparable gasoline vehicle, 71% will consider the EV.

Price is the second-highest barrier to buying, at 51% citing EVs and being too expensive.

The others are:

  • 57% think there’s not enough charging stations in their local vicinity
  • 42% are worried the battery won’t hold a charge
  • 41% are concerned with the cost of potential battery replacement (shouldn’t that be 42%, or is it that 1% who are worried about the lack of a sustained charge will just live with it?)
  • 37% still have range anxiety—although the positive news for EV purveyors is that two years ago 47% cited low range as a concern

Here’s something that ought to be of concern of the marketers at Nissan (LEAF) and Chevy (Bolt EV): 63% of those surveyed don’t know that Nissan offers an EV and 69% are unaware that Chevy has one in the showroom.

Oddly enough, 21% are aware of and considering a Toyota EV. Which leads one to wonder whether this is in anticipation of the bZ4X coming next year or that there are actually people who are aware of the fact that although the Mirai is powered by a fuel cell, it actually is an EV, just not a BEV (battery electric vehicle).

Thinking About Buying a New Vehicle? Think Hard

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. . .because (a) you’re going to be spending more than you might think and (b) you may be buying something that you aren’t necessarily considering

By Gary S. Vasilash

If you’re thinking about buying a new car, ute or truck—and “new” may mean “new to you,” as in “used”—then you ought to hear what Charlie Chesbrough, senor economist and senior director of industry insights for Cox Automotive has to say about the current market conditions.

As Cox Automotive encompasses a variety of businesses that know more than a little something about, as they say, the conditions on the ground—as in Kelley Blue Book and Manheim Actions—Chesbrough’s observations and understanding are grounded in what’s really happening, not some theoretically calculations.

The fundamental thing is this: Although it might seem that COVID is behind us, that everything, with a few hitches here and there, is getting back to normal, that is far from being the case with regard to the availability of some things. Things like motor vehicles.

This is because COVID helped cause a semiconductor chip shortage. In part this came from everyone working or playing from home, which led to a sudden demand for PCs and PlayStations, both of which use silicon.

Because the auto companies faced shutdowns of their factories last year, they canceled their orders with the semiconductor providers, who then readily found anxious customers who were making things like PCs and PlayStations.

So the vehicle manufacturers had to go to the end of the line.

It is also worth noting that some of the chips that go into vehicles don’t have the types of margins that chips that go into other products do, so the semiconductor manufacturers realized that they’d do well by just serving the non-automotive customers fulsomely while providing the auto manufacturers—who are famously thrifty when it comes to paying suppliers—with a reduced number of chips.

This has led to two things, Chesbrough notes:

  1. Overall reduced number of available vehicles
  2. Overall increases in the prices being charged for vehicles—new and used

While the first part of the year seemed to be improving when it came to the availability of vehicles (relatively speaking—2020 was a horrible year for sales and 2021 was an improvement on that), things have gone south since then.

Chesbrough suggests that things won’t get back to what may be considered “normal” until sometime next year (if at all).

At present, OEMs are concentrating on putting chips in vehicles that are high-ticket items, which is good for returns, but which put many consumers in a bind (unless they are high-end buyers).

There are some companies, like Ford, which are recommending that people order vehicles, something common in Europe but not a practice that is at the basis of the auto market as it has developed in the U.S., which is all about moving the metal.

Chesbrough talks to Keith Naughton of Bloomberg, Joe White of Reuters and me on the show.

In addition to which, Naughton, White and I talk about Ford’s massive investments in electric vehicle/battery manufacturing capacity in Kentucky and Tennessee—and how Michigan didn’t even make a proposal for the investments, as well as about GM’s Investor Day presentations, which were clearly designed to make Wall Street look at GM more as a “tech company” with a wide range of product in the pipeline and technology and capacity that will make money sooner rather than later.

And you can see it all

.

Surprising Trends in Auto Retail

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You spend a lot. And you may be willing to forego the dealer “experience”

By Gary S. Vasilash

According to the most-recent Cox Automotive/Moody’s Analytics Vehicle Affordability Index, the number of median weeks of income to buy a new vehicle is 37.

37 weeks to buy a new vehicle.

That’s the greatest number of weeks since they started measuring it back in 2012.

The firms found a trifecta of things contributing to this situation:

  • Vehicle prices increased
  • OEMs and dealers are putting less cash on the hood
  • Median incomes fell

It would have been worse, apparently. Financing rates decreased, so if that didn’t happen, there would have been higher monthly payments.

Gulp.

In May, the most recent month with figures, the average transaction price that people were paying for a new vehicle was $41,263 according to Kelley Blue Book.

Now admittedly that doesn’t mean that everyone pays that much. It wraps in figures for OEMs from Mitsubishi to Mercedes, from Chevy to Porsche. Cars, trucks, SUVs.

But still, a lot of money.

A lot of weeks to earn that money.

All that said, J.D. Power has announced that predicated on its analysis of the usage of OEM websites, 49% of vehicle shoppers are willing to purchase a new vehicle online.

This is an increase of 11% from 18 months ago—about the time that the effects of the pandemic kicked in in the U.S. market.

So what’s behind this:

  • Is it that people are more comfortable shopping for things online, as many of them have done during the past 18 months for everything from groceries to appliances?
  • Are more people simply questioning the visit to a dealer as being a necessity?
  • Is this a case where people go to a dealership, take the test drive, and then go home and search for a better deal?

Whatever the case, it is clear that there is a shift in how vehicles are going to be bought. And it is also clear that there is a shift in what people are willing to pay for vehicles.

Consider this: If you bought a new vehicle the first week of January this year, you wouldn’t pay it off until the week of September 10.