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Showing posts from June, 2017

The Perfect Storm 2 - Autonomics

By Daniel Ruiz Blinders Off, LLC
To better understand why the automotive industry is in the middle of a perfect storm, first go back and consider the also perfect set of events that led to a robust recovery and a record setting 2016 sales year.
Our Last Recession In 2009, the automotive industry faced a great challenge. New light vehicle sales dropped to 10.4 million, GM and Chrysler went through bankruptcy reorganizations, retail dealers closed and many folks lost their jobs. The US  government felt the need to act in order to support the very vital automotive industry (3% of GDP & 10% of manufacturing). The Fed also stepped in to help stimulate the overall economy by reducing interest rates.
Consumer Purchasing Power For the purpose of this piece, the central focus will be placed on the purchasing power of the consumer. With no bottom in sight for falling new vehicle sales, our government attempted to stimulate demand by approving the 3 billion dollar Cash for Clunkers program begin…

A Train Wreck Of Inventory

By Daniel Ruiz

On May 10, 2017, there were 145,763 new 2016 vehicles unsold. Today, 2016 new car inventory stands at 112,310. At the current rate of sale, we will not sell through the new 2016 inventory till the last week of August.
Why this matters Dealers always focus on selling their oldest vehicles first. This is because the majority of dealers floor plan their inventory. As a vehicle gets older, the interest expense grows larger. Because of this, the oldest inventory always gets the prime real estate at a retail dealer location for maximum visibility. Newer arrivals are usually staged in lower customer traffic areas and not discounted as much in efforts to sell the oldest vehicles first. This method of inventory control works great as long as supply doesn't overwhelm demand.

More Supply Than Demand Is Our Current Reality
Here's a visual representation of this in action. On the way to a local park, I passed a dirt lot previously used as farm land now filled with cars.  I looked…