Vote 2020 graphic
Everything you need to know about and expect during
the most important election of our lifetimes

Demand For Used Cars Right Now Is Through The Roof

Illustration for article titled Demand For Used Cars Right Now Is Through The Roof
Photo: Getty Images
The Morning ShiftAll your daily car news in one convenient place. Isn't your time more important?

People really want used cars right now, Jaguar’s parent company is in bad shape, and there’s more evidence the fix was probably in for Carlos Ghosn. All that and more in The Morning Shift for June 15, 2020.

Advertisement

1st Gear: It’s A Seller’s Market If You’re Trying To Unload A Used Car

At the height of the pandemic used car prices were in the cellar, as everyone stopped spending and steeled themselves for a prolonged period of economic doom. But now that shelter-in-place orders are lifting and people are saying that the economy may get going again sooner rather than later, pent-up demand is driving used car sales.

Advertisement

Meanwhile, inventory for new cars is not great. Manufacturers shut down for two months, meaning that people who might have ordinarily bought new are looking at buying used out of convenience, too.

From Automotive News:

Dealers throughout the U.S. have seen wholesale prices come roaring back in May and June. Prices tumbled by double digits in April as retail activity fell off dramatically amid store closures and stay-at-home orders. Now that dealerships are reopening — but not many vehicles are being returned to auction — the market has overcorrected.

Wholesale prices rose 16 percent over seven weeks, according to J.D. Power, which said that for the week ending June 7, wholesale values were 4 percent above the pre-virus forecast.

And yet a lot of people see the current situation as a very temporary one. Especially because the federal aid that is in large part propping up the economy won’t be there in August unless lawmakers agree to an extension, which seems unlikely.

Hundreds of thousands of excess vehicles are expected to continue coming back to the wholesale market from beleaguered rental companies, as well as by way of deferred leases and repossessions. In May, J.D. Power estimated there were an additional 865,000 deferred used-vehicle returns that would come back to the wholesale side over the next several months.

With the excess vehicles coming back, unemployment still high and federal stimulus set to expire at the end of July, Black Book sees a “negative perfect storm” brewing for wholesale values, said Alex Yurchenko, Black Book’s senior vice president of data science.

Prices may be at a high point now, but Black Book expects a decline soon, falling to 15 percent below pre-COVID-19.

[...]

[Nasir Uddin, vice president of pre-owned vehicle operations at Prime Automotive in Massachusetts], said he plans to hire two full-time used-vehicle buyers whose sole task will be to monitor various online auctions for used vehicles.

More immediately, he’s focused on smart appraisals and dealing with lean inventory. “We’re kind of focused on running with a tight days’ supply and focused more on turn rather than going out and paying too much,” he said. “Because we know the bubble is going to burst, eventually.”

Advertisement

Every day I think about a recent letter I got in the mail from my local dealer explaining how desperate they are to buy my Fit.

2nd Gear: Tata Motors Isn’t Doing Great

Tata owns Jaguar Land Rover, which is where it gets most of its revenue. The problem is that revenue from Jaguar Land Rover has dried up in the face of the pandemic, like a lot of other automakers.

Advertisement

From Reuters:

The pandemic has been a major blow to Tata Motors which had made progress on its turnaround plan to improve JLR sales in key markets. The company in January warned the virus outbreak could impact profits at the JLR unit.

Tata Motors’ consolidated net loss was 98.94 billion rupees ($1.30 billion) for the fourth quarter ended March 31, compared with a profit of 11.17 billion rupees a year earlier.

JLR retail unit sales slumped nearly 31% during the quarter, and Tata Motors said outlook for the unit remains uncertain.

Advertisement

A loss of over a billion dollars in a fiscal year that only accounts for some of the pandemic is a bad sign indeed.

3rd Gear: Automakers Are Still Adjusting And Getting Leaner

Much like the used car market, there is a lot of demand for new cars for now. Over the next year or so, though, it sure seems like the bubble’s gonna burst.

Advertisement

Here’s Automotive News on how automakers are reacting:

The shutdowns wiped out about 2.8 million vehicles in scheduled North American light-vehicle production in the first half of the year, according to LMC Automotive. Full-year 2020 output likely will fall by 3.4 million vehicles, or 21 percent, compared with 2019, LMC said.

GM has not provided a timeline for deliveries to dealers, but some have said they expect to get their first post-shutdown shipments in the next couple of weeks.

“You just need to make every pickup truck you can right now, especially if you’re GM because they were shorthanded going into COVID because of the strike” by the UAW in the fall, said David Whiston, senior equity analyst for Morningstar.

“Longer term, what remains to be seen is, what’s the fate of something like just-in-time and inventory management and supply chain management?” he said.

After automakers fill dealers’ orders and satisfy pent-up demand, sales likely will level out until unemployment improves, Whiston said. “The big overarching question is, what does everything look like nine to 12 months from now, assuming no second COVID outbreak?”

Advertisement

Forecasters are saying that new car sales will be somewhere in the range of 12-13 million for 2020, which is way off the pre-coronavirus estimate of just under 17 million.

Also included in the story is a stat I don’t think I’ve ever seen before.

For all automakers operating in the U.S., there were more than 605,000 configurations built in 2019, excluding vehicle color, according to J.D. Power. Thus, each unique configuration accounted for an average of only 22 retail sales.

Advertisement

4th Gear: Sure Seems Like Carlos Ghosn Was Set Up

Bloomberg got ahold of some emails that show that the campaign to bring him down was long in the making.

A chain of email correspondence dating back to February 2018, corroborated by people who asked not to be identified discussing sensitive information, paints a picture of a methodical campaign to remove a powerful executive. The information comes to light as another former Nissan executive and the company itself face a looming trial in Tokyo, and as Japan seeks the extradition of Ghosn, 66, who fled to Lebanon in a daring escape last year.

Alarmed by Ghosn’s pledge in early 2018 to make the alliance between the companies irreversible, senior managers at the Japanese automaker discussed their concern at how the chairman of both Nissan and Renault was taking steps toward further convergence, according to people familiar with discussions at the time.

Advertisement

The arrest didn’t come out of nowhere, in other words.

Days before Ghosn’s arrest, [Hari Nada, who ran Nissan’s chief executive’s office and later struck a cooperation agreement with prosecutors to testify against Ghosn] sought to broaden the allegations against Ghosn, telling [then-CEO Hiroto Saikawa] that Nissan should push for more serious breach-of-trust charges, according to correspondence at the time and people familiar with the discussions. There was concern that the initial allegations of underreporting compensation would be harder to explain to the public, the people said.

The effort should be “supported by media campaign for insurance of destroying CG reputation hard enough,” Nada wrote, using Ghosn’s initials, as he had done several times in internal communications stretching back years.

Advertisement

I recommend reading the whole story in full.

5th Gear: Volkswagen Thinks It Might Ultimately Come Out All Right

Reuters got its hands on an internal newsletter, in which the company’s chief financial officer predicts a terrible second quarter. But possibly not a terrible year.

The coronavirus pandemic had caused results to deteriorate in the second quarter, the multi-brand carmaking group said.

“Nonetheless there is hope for the second half of the year. The aim is at year end, to have a positive operating result before special items,” Witter told the newsletter.

A Volkswagen spokesman confirmed the remarks made by Witter, which were first reported in Wirtschaftswoche.

Advertisement

Reverse: Fire

I was just in Astoria Park a weekend ago reading the plaque there about this.

Advertisement

Neutral: How Are You?

My new jam is Diablo III. What a game! You’re telling me it came out in 2012? Well, that was right in the middle of a self-imposed 10-year gaming hiatus, broken only a couple years ago, after someone sent us a Nintendo Switch. Turns out a gamer’s heart never dies.

News Editor at Jalopnik. 2008 Honda Fit Sport.

Share This Story

Get our newsletter

DISCUSSION

bkilburn
ArtistAtLarge

Just wait a few more months.

The U.S. economy is in free fall but awareness, and the pain, have yet to catch up.

Oh, and the pandemic is nowhere near over. See my first sentence. (I hope I’m wrong. I really do, but America has a stupid that can’t be fixed, so I doubt I am)