Bottom-Up Automotive Analysis

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 ...

The Perfect Storm By Daniel Ruiz Blinders Off, LLC Please start with the following video to better understand my analysis: Auto Market Projections The following topics all have their part in fueling the storm to come: 1) Trade Cycles and How They Affect New Vehicle Sales Velocity Used car values determine in large the velocity of new car sales. Most new car transactions involve a trade. The level of equity in the trade oftentimes determines whether a new vehicle transaction will be successful or not. Inclining used car values lead to faster trade cycles while declining used car values lead to slower trade cycles. Dismal new car sales volume during our last recession created a shortage of used cars. This created a large supply and demand imbalance that made used car values soar from 2009 till 2014 as seen on this chart. This time period was extremely favorable for new car sales because consumers found themselves in an equitable position on their ...