On a bi-weekly basis, CAR welcomes our audience to decompress with our President and CEO, Carla Bailo, as she covers and shares her thoughts on the latest Hot Topics happening in the automotive industry. While the biweekly newsletter primarily covers four topics, this feature story previews two of the topics covered on April 15, 2022. If you would like access to the full newsletter for better insights into critical industry issues you and your organization are facing, sign up for our mailing list here.

HOT TOPICS 4/11/2022 – 4/15/2022

Q1 Auto Sales

• U.S. auto sales fall in Q1 as chip shortage slows factories
• EV auto sales shine in first quarter of 2022
• S. auto sales slide in Q1; Toyota outsells GM
• STELLANTIS: Q1 volume drops 14%; Jeep dips 2%
• Ford sales drop 17% from 2021: Which models took the biggest hits

Carla’s thoughts:

We are seeing problems converge in the sales volume reports. First, there are still too few vehicles available for purchase on dealer lots. Most companies are talking about a 30ish day supply where optimal is 60ish. This inventory problem is combined with inflation and wages that aren’t keeping up with inflation. The average American household has seen grocery expenses increase by $250-$300/month. The rise in living costs may negate being able to afford a new car.

This issue is further compounded by rising interest rates, long-term loans, and loan defaults. Consumer auto loan debt is now at its highest level in 10 years. Loan defaults are increasing. On the other hand, car prices are at the highest they’ve ever been, which puts a new vehicle (or a used vehicle) out of reach for the average American household.

I strongly recommend dealers consider the long-term loyalty impacts of the new “non-negotiable” stance and the consumer being totally upside down in a loan situation. This situation doesn’t bode well for long-term sustainability. Just because you can ask over an invoice doesn’t mean you should.

Next, let’s offer some “vehicle usership” options at a reasonable price. Affordability is a concern that can’t be ignored, but mobility provides ladders of opportunity to jobs, health care, and education. If you want your economic engine to grow as a society, you must have mobility for all!

New EVs and Investments

• GM and Honda expanding their partnership to develop ‘millions’ of affordable EVs in 2027
• Honda Lays Out Its Plans to Join the EV Race
• Jeep says its new electric Wrangler concept goes 0-60 mph in 2 seconds, matching Tesla’s $136,000 car
• EV maker Lucid debuts its latest Tesla rival, a high-performance luxury sedan with a 446-mile range
• Lexus unveils new pictures of its first all-electric car and it has a yoke steering wheel
• ‘It’s time’: Ford teases official F-150 Lightning launch date

Carla’s thoughts:

Investments keep being announced by all automakers for the EV surge, and this won’t change UNLESS vehicle sales continue to plummet and profits are impacted. A decrease in sales and profits may slow the spending on EVs and CAVs. Fortunately, the automakers all have healthy balance sheets these days and some of the healthiest free cash flow and bank credit lines in recent history. Their financial position bodes well for continued investment in our electrified future.

Combined with NHTSA’s latest CAFE regulation, the electrification push will continue to grow. This growth includes more than just EVs. Hybrids, fuel cells, and plug-ins are all part of the solution. Automakers need not put all their eggs in one basket, but consider consumer demand and be very cognizant of this.

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