The Automotive Advisor Team

Economic Update: Source

General Motors has temporarily laid off most of the approximately 2,000 unionized workers at its Fairfax assembly plant in Kansas as a result of the ongoing UAW strikes.

It looks like the rhetoric is not softening and both sides are dug in for a fight. With the OEMs forcing more expense onto the unions with actions like laying off additional workers, the UAW President is ready to go all in on the strike and shut down more production facilities. The impact on new and used car supply and price will be substantial if this continues. With the Biden administration just now sending the labor secretary to Michigan, the question is what if anything can they do to stop the impending loss of production and revenue for the OEMs?


New Day Supply: Source: Cox Automotive Data

New Car activity has been increasing over the last couple of weeks most likely due to the union strike and a decrease and price, seen below, that increases affordability. That has had a direct impact on the supply of new cars sitting around 60 days when the 2019 level was around 80 days. We’re still 20 days short of pre-pandemic levels in the new car market with the UAW strike in our backyard. 



Used Day Supply: Source: Cox Automotive Data

 Used car sales have been on the rise for the last few weeks and that has had a direct impact on supply. We’re sitting around 40 days now down from almost 50 days just a few weeks back. The price of used cars has stayed steady and softened since early June but we may see a shift in that soon. Showing just below is the day supply both in years by segment but also gives us a cautionary view of the shrinking five years and newer used inventory over the next 2 1/2 years.



Wholesale Market Trends: Source: Cox Automotive Data

Looking at the wholesale market indexes below we see the trend of stabilization and possible valuation increases that will be accelerated by an extended UAW strike. The index on the left is Manheim’s MMR measuring pandemic inventory supply and valuation of that supply. On the right is Black Book’s 2 to 6-year-old inventory index that measures pre- and post-pandemic inventory. They don’t tell conflicting stories they tell deeper stories. Below is each segment’s performance data that can help you be surgical in your acquisition approach based on what your inventory  management systems recommends for you.



Buy / Sell Market Trends:

The MMR index is in the blue compared to the retail market index (vAuto) in the yellow. They have separated most of this year of a sizeable amount which indicates a positive margin. We are starting to pinch a little bit as the softening of the sales price comes closer to the stabilization and slight increase of the wholesale price. Looking below that you can see just a few quarters back the cost of buying a car was more expensive than the cost of selling a car represented by the blue line crossing on top of the orange line. 




Talking to a well-known operator just the other day his comment was, “This is going to be a tough market to put together.” He’s not wrong but knowing him and many of our clients,  they’re prepared with the right data, insights, and partners to win in this market as others pull back. Markets like these are very manageable and volume and profit can still be made but it takes a different approach than it does in other markets. In our opinion the larger the margin gap the more competitive the market is and the harder it is to sell. As these gaps start to squeeze the market becomes less competitive as others pull back, it creates a market share opportunity for those who are prepared and set up to win.


Happy selling.