I received a message from a Reader/Listener who is in the Automotive Retail industry. His information is shocking!
What I received, verbatim:
The sales side (or variable operations) in the Retail Automotive sector is car-shing. Service (fixed ops) isn't fairing much better. I'm very glad I sold my store a few yrs ago.
I consult for several OEMs, and they are beginning to panic. At several, ROS, or Return on Sales (a closely watched metric) is down by 70% (+,-), over the last 45 days. They thought it was a blip at first, when ROS was down 25% and it just kept going. I will not name specific OEMs and risk violating my NDA.
Return on Sales is a primary indicator of a company's health. Some OEMs are now cutting production which is still no where near pre-Covid levels.
We are about to see massive incentives (rebates) at many OEMs. Once these start, used car values will plummet even further (because new become much less costly) Days to turn on used cars is skyrocketing (drawdown of 18.2% in October which was the largest drawdown ever. This will put some dealers out of business as they will find themselves millions of dollars in the hole on their used car inventory. Only the ones with large reinsurance reserves or with significant cash on hand will survive.
One of my points is; if you are in the market for a car, truck, CUV, SUV wait until about February. Prices will be 25% (or more) lower than they are now. Notice all the dealerships near you are jam packed with inventory again.
I was at a conference last week where JD Power & Associates showed some data on a huge crash in Electric Vehicles (EVs). The message was all the customers willing to own one bought one. No one else wants one. BTW, the mileage range on all of them is grossly overstated.
Sorry this is wordy, but it is just another indicator that we are again on the cliff of a major economic calamity. Act accordingly...
