Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday.
CarMax CEO Fears Buyers Are Locked Out Of Used Cars Entirely: ‘You Have To Go Back To Affordability’
We’ve written a lot about the changes in used car prices and the slow easing of the inventory crunch, but it’s still a challenging time for used car buyers. It’s also, increasingly, a difficult time for used car sellers. CarMax is, by volume, America’s largest used car dealer and they’ve seen their stock drop by over 50% this year. Part of the challenge in the used car market was Carvana, which was likely driving up wholesale prices of used cars by buying from consumers at artificially high prices. With inventory super low due to a variety of factors (cars being destroyed in storms, production/supply chain issues reducing the number of cars being sold to rental fleets, et cetera), prices kept increasing. Add in that rising interest rates and it’s suddenly not a great time for anyone. CarMax dropped its third-quarter earnings report right before Christmas, conveniently, and it showed lingering issues: CEO Bill Nash had more to say on a conference call, as recorded by Automotive News: Total retail used vehicle unit sales declined 20.8% to 180,050 and comparable store used unit sales declined 22.4% from the prior year’s third quarter. It’s worth noting that CarMax made $31.9 billion in FY2022, helped by an increase in profits caused by limited demand. The concern about affordability doesn’t seem to stem from a desire to assist buyers in a tough market as much as a realization that their business is a never-ending balance of inputs and outputs.
Tesla Is Reducing Output From Its Shanghai Plant: Report
The exclusive of the morning belongs to the reporters at Reuters, who seem to be recovering from the holidays faster than I am. They’ve got access to internal documents that show Tesla will continue to run a lower production schedule at the company’s Shanghai plant: Why? Sinking demand and rising COVID certainly don’t help. This has been a problem for the entire Chinese auto industry. Rising competition from domestic producers like BYD ain’t helping, either. Tesla will run production for 17 days in January between Jan. 3 to Jan. 19 and will stop electric vehicle output from Jan. 20 to Jan. 31 for an extended break for Chinese New Year, according to the plan seen by Reuters.
Nio Also Feels The Pinch
Tesla isn’t the only automaker sensing a little trouble in big China, with Chinese EV-maker NIO adjusting its fourth-quarter expectations. I like the way NIO puts it in their release: “NIO Inc. Prudently Adjusts Fourth Quarter 2022 Delivery Outlook.” I’m gonna steal that. “Matt Hardigree Prudently Adjusts Afternoon Leftover Ham Intake Outlook.” Here’s the company’s take: Aim for the moon and land on the top bunk, or whatever.
CES Is Gonna Be EVS Because Of All The EVs, Amirite?
It sounds like David and PG are going to be at CES to see all the big reveals of, primarily (if not exclusively), electric cars and trucks. Also scooters! (Ed. note: They may have flying cars there, too. I’ll see if I can get David to pilot one until they send the Nevada Air National Guard after him. -PG) The folks at Automotive News have a breakdown of the big movers and shakers: Honestly, the electric Ram 1500 alone is worth the price of admission.
The Flush
How long do you think it’ll take before used car prices come down to their historical averages?
West Virginia Senator Joe Manchin Is In A Fight With Hyundai Over EV Tax Credits Ford Raises The Ford F-150 Lighting Base Price Again Elon Musk Sells $3.6 Billion In Tesla Stock The Volvo XC40 and Escape are the only two SUVs that did well on new IIHS test Lucid Gets A $915 Million Boost From The Saudis McLaren’s V6 Artura Already Recalled For Fire-Causing Loose Nuts
Got a hot tip? Send it to us here. Or check out the stories on our homepage. Photos: Google Finance, Carmax, Stellantis, Nio I think the thought went that the used car market is about 5 years behind, supply chain issues started only 3 years ago, but there are no cheap cars now, so in a couple years things are really gonna pucker up as there were less new cars produced, and that will last at least the 3 years or more we’re seeing for automakers to really ramp up again, so well over 5 years. CarMax, call me. I’ll do the job for half the pay. All of this can’t be pinned on a single factor either, it’s a cocktail of them. Manufacturers have no desire to make cheap cars, so almost all of them are moving away from them. Then of course we have a small supply and sky high demand. And we also have manufacturers that literally specialize in predatory lending…like Nissan and the American companies. If you go to Ford or Chevy’s website and spec out a build their default financing is 72 months, which is insane. More expensive new cars means more expensive used cars, and as regular people are priced out buying new slowly but surely the demand for used cars goes up, which combined with low inventory for the foreseeable future means high prices are here to stay. Unfortunately these are the economic consequences of living in a country where literally everything is designed to funnel wealth upward. Similar things are happening with housing as we speak. People of normal and even above average economic means are no longer going to be able to afford to own anything, and these manufacturers, developers, etc couldn’t care less because their pockets get stuffed by these consequences, which then go on to line the war chests of politicians on both sides of the aisle. I sure hope that this slow decent into forcing the middle and lower class to rent all of their necessities stops, but I’m not exactly optimistic because this is exactly what the American economy is designed to do. All of this will come crashing down eventually and it won’t be the billionaires who are left holding the bill…. These days, a seven year loan isn’t at all unreasonable for the value returned by buying new instead of used. Even an eight year loan would be a reasonable proposition for buying most domestic and Japanese vehicles. The problem rests solely with the size of the loan and the interest rates. My personal opinion is that $1500 will be the new floor for legal, functioning transportation here in SW Va. I’m talking an old, but working car without ac: your basic poverty shitbox. And this won’t come down much anytime soon due to the pandemic, then supply-chain problems, then gas-crunch prompting back-yard pull-out & rehabs. As I’ve never paid more than $3k for a car, I have no informed opinion on what most people consider the used car market I often wonder what the “$500 beater” will start looking like as we move forward. Those are a thing, and will not cease to exist. Just has me thinking…. is it cheaper and less hassle to start new and start depreciating? Or, is it cheaper and easier to buy at $500 and start adding the value you want and care about. Personally, I’m hoping that things get closer to reasonable in the next couple of years, since I’d like to get a phev daily, but I’m not holding my breath. Gazes at fleet of 5 cars and 2 tractors. “No we don’t” The ideal situation for CarMax is worse for us: we all end up accepting high prices and pretending it was always this way. We’ll accept lower trade-in values because things are “going back to affordability,” and they’ll make a lot of money.
