Are We Level?, Wholesale Stability, Sixt Shifts Gears

Paul J Daly: 0:34

Good morning. It is Monday, December 11. I'm as happy as I could possibly be after such a crazy terrible Eagles loss. But being friends and talking about the car industry, it's just what I mean.

‍Kyle Mountsier: 0:48

I was wondering, I just how you were gonna get there. As happy as I possibly could be is the is the clarify that I have to Okay, one thing I'm pologize I have to bring it up. I've been waiting for this all morning. So I'm running this morning. And I look over and on CNN, CNN never run sports news. But apparently this morning, they run the news. And it said, Dallas bullies Philly in sweeping victory.

Paul J Daly: 1:24

That feels about right. That feels about right. Well, Kyle never like usually, you know how you have your games and you have your little crew that you text during your games. And so I got I got my go twos right Mark David Evans at Vayner and Jason Monahan and Nathan Southwick, our producer, you got our little go round, and you're never anywhere to be found. And last night, you're like, what is Philly doing? Even you?

Kyle Mountsier: 1:47

Well, you so I also have Jalen hertz on my fantasy team. And I was like, What is this?

Paul J Daly: 1:52

I know it's a sad day. But you know what, actually, that's what it's like when you have community I came in, I actually saw my shirt that I'm wearing love people more than love car shirt in the camera reflection. And we started the show. And I'm like, Alright, I already feel a little bit better, because that's what he does, right? So we have so much awesome community coming up actually, the year end extravaganza two Thursdays from now, December 21. We're running our third annual year and extravaganza where we just have a whole list of people that are going to be on the show. And if you've never seen it, it's where we kind of like wrap up the year we look back, we hear from a bunch of people some well wishes, I'm looking ahead to 2024 Surprises fun. There's nothing else in this industry, or I don't know if any industry like this. So we've had fun last few years. We hope you join us. Best way to do that. Go to LinkedIn, right search hit searches. So if you don't follow us on LinkedIn, just follow us on LinkedIn. There's a lot of fun stuff going on just a note

Kyle Mountsier: 2:49

the if you've never attended and asoto LinkedIn live event like not Yeah, we have our morning show. And there's a lot of amazing people like we see Adrian in the morning and we see a whole crew but like the full events where we go where we go all in and bring a lot of people the comments section is one of the most fun things that you could possibly be it really

Paul J Daly: 3:09

is it lights right up. So when you go to a soda on LinkedIn, click on the little Events button. It'll be the first thing you see there. Make sure you attend and join share it. The more the merrier. We also have a webinar, our Quick Shot webinars, so to edge coming up Wednesday, right today's live with the 13th is Wednesday with our friends at upstart we're going to talk about transforming car buying the power of connected auto retailing we're gonna hear a lot of insights and a very fast paced webinar the fastest webinar you've ever been on unless you've been on one of our other ones 20 to 30 minutes it'll be over before you know it and you'll be like hey, wait, I want a little bit more. Just the best way to leave a webinar.

Kyle Mountsier: 3:46

Speaking of being over before you know it segue Oh, thank you.

Paul J Daly: 3:54

Thank you. I was like either you have something else there we go for US auto sales in November rose by about 9% with significant gains for brands like Honda Volvo, Toyota. This is in the middle of a lot of people like building your inventory backup. However, analysts are cautioning about the markets future, noting the potential impacts of interest rates we know declined a fleet sales and car share being at near record lows. So here's probably this may be my quote of the week starting on Monday. Andrew Guillen, Senior VP of Toyota North America says we're going to run a 15.5 star this year, which is pretty freakin healthy. I had to double check that pretty freaky. I love this news. Yeah. But going to 24 There's no question we're going to have to be more aggressive with our incentive spending to work on that affordability issue. That's Toyota talking about increased incentives and 2024 as the affordability conversation is going on, right? Looking at incentives, looking at market conditions, consumer preferences and here's how On the rundown quick before we get some commentary your over year growth has been quite staggering actually. Honda 33% up Volvo up 26% Toyota North America up 17% Hyundai up 11 Kia up three, they actually held up pretty good last year. And Ford was the only reporting automaker whose sales actually declined in November, by almost half a percentage point

Kyle Mountsier: 5:23

wonder why. Here's here's here's the most interesting part about this besides the VP, the Senior VP of Toyota saying it's going to be pretty free, it is pretty freakin healthy. That's that's notable. The bigger notable thing is what a manufacturer is going to have to do in 2024, when it comes to affordability, because there's going to be the necessity to both drive incentive on a PRs but also incentives in cash, right? I'm hearing so much on people dealing with getting people out of inequitable trade situations, and so big one, because they're going to have to deal with that they're going to have to figure out how to incentivize their way into dealing with negative equity, not interest rates, because affordability is affected by interest rates, but also just the simple affordability of can I buy it based on my current equity situation? They're gonna have to deal with that if they want to continue to see new cars sales price. Well,

Paul J Daly: 6:22

that's a big one. That's a big one. Oh, Brian Ortega. Thank you for giving me some consolation in the comments. It's okay. I know. I know. I. During the game last night, I did see a Hyundai comm commercial, actually saw a lot of Hyundai commercials. They ran a ton last night now that I'm thinking about but one of the big offers was 0% for 60 months, with no payments with no payments for three months.

Kyle Mountsier: 6:46

So 0% for 60. I mean, that's, that's the equivalent of a few grand incentive. That's

Paul J Daly: 6:52

right. You could I think you could get that or 2500 Cash, oh, but the percent financing, they probably want

Kyle Mountsier: 6:58

you to take the 2500 cash, probably three to$4,000 incentive depending on the type of vehicle but I feel

Paul J Daly: 7:05

like I haven't heard an offer like that in like, a long time, especially when it's like hey, like get the 0%. And your first payment would be in like April. Thank you. Yeah, it's a big deal. Figure out how to afford it then. It'll come around credit all the Christmas credit card bills and be gone. And then it'll be we'll be good to go. We'll be good to go. Speaking of being good to go, segue. So after a wild 2023, there may be hope for smoother sailing in 2024, including the some analysts as the industry adjust to post strike market conditions. We're really talking about the wholesale market here. Manheim used vehicle index reports at 2.1 month over month and a 5.8% year over year decline in wholesale values, suggesting that actually, it's a good sign, right, we're getting closer to stability. That's actually

Kyle Mountsier: 7:59

a good thing we want to see as an industry, we want to see wholesale and retail values declining just slightly because that's what's that's what drives like depreciation at the right curve. This is actually a positive move. Yep, significant

Paul J Daly: 8:15

price drops observed in various categories, including compact cars down 11.3% luxury vehicles now 6.3%, as the margin market adjust to this post UAW strike, like we kind of know where everything lays now, Black Books us vehicle retention index also shows a decline, reflecting a correction phase in the US market. So there you go. So we got a quote here from from Alex. Oh, boy, you're Chinko chief data scientist, science officer of black book says with the UAW strike behind us in new sales going strong, the US market went into a correction, we had four weeks of declines, exceeding 1%. So again, declines equals good news for us. Yeah,

Kyle Mountsier: 8:55

which you can't that we can sustain that rate of decline for an extended period of time. But this type of market correction actually helps with affordability it helps bring greater divide between new and used vehicles reset the market so that so that used car purchasers just have an easier access to that. I think, you know, it's kind of interesting because like, you're always going to see this decline near the end of the year. I'm always interested in on what january february, march does with tax time and whether or not we have enough use vehicles in the market to sustain the steady decline or we're going to see if there's not enough use vehicles in the market because the new car vehicle transactions aren't high enough. We could see another increase in use car so it's something to watch and I always be watching that inventory on a 14 day turn right now it's still extremely important to not go in 3060 day cycles without inspecting the inventory because it is quick quickly change Doing that quickly. Like when you're looking at a 1% decline over a week that dramatically changes how retail and wholesale happens both in lane and on and on a

Paul J Daly: 10:10

lot. It not Well, I mean, like you think of these two stories and the reason we're talking about this stuff more is, you hear a lot of like Henny Penny, the sky's falling from some people and then you see other people saying, no, no, no, we're fine. Actually, let's just put back on our rational brains that we you know, had to have the crazy brain on for the last 36 months. Right now we're thinking normally again, and if we're thinking normally like new car prices coming down, used car prices stay like it's all started or wholesale prices stabilizing. It's actually build stability right. Stability is us, be ours. Yes, stability,

Unknown: 10:45

but I can the opposite of stability, the opposite of stability. Opposite day.

Kyle Mountsier: 10:54

A major German rental car company SIXT is saying goodbye to its Tesla fleet fleet, citing high repair costs and plunging residual values while shifting focus to more sustainable and cost effective options. They essentially announced that they are planning to phase out their entire Tesla EV fleet impacted by Tesla's price cuts, which results in great depreciation. They also stated that they are seeing a lot higher costs on things like repairs and ongoing maintenance because of what they're dealing with with tires or body damage or anything like that. hurts right now is cautiously stepped, stepping back from EVs altogether, sixes are actually not just stepping away from EVs. Totally, they're only stepping away from Tesla's they're actually still aiming for a 90% electric vehicle capacity by the end of the decade by 2030. Their goal? purchase more from BYD they Oh, here we go. And it already to 100,000 BYD electric cars, so they got a new play in town. They

Paul J Daly: 12:03

do and I mean, I wonder how the parts and repair thing is going to play out. But I think there's a lot more confidence going in that the BYD first of all pricing is going to be more stable pricing. I mean that Yeah, I mean, what do you think of stable and Elon Musk in the same sentence? Right? Well, we know we know obviously, he's not in there just swinging the axe actually, Tesla moves in a very measured way through their pricing corrections we've learned however, it makes a lot of sense. The German market European market, leaning into EVs, more and then accelerated rate anyway. And so to see like, hey,

Kyle Mountsier: 12:36

the me stipulate with BYD like absolutely why he is winning that market. And so if they're primarily a German rental car company, the market is more prepared to rent that type of vehicle. Absolutely.

Paul J Daly: 12:49

Without a doubt. And so it'll be interesting to see if this shift like when BYD if and when they come into the US market like what that does here, but like I mean, Tesla's fighting on all fronts right now on all friends. Well, look, I know you are fighting on all fronts. We here at asoto are fighting on all fronts to do a few things. To love people more than we love cars, and to build a sustainable business that makes a lot of money. Right? Those two go together. Have an awesome Monday.