COUNTERING THE COST-OF-LIVING CRISIS

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic.

Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024. Monetary policy should stay the course to restore price stability, and fiscal policy should aim to alleviate the cost-of-living pressures while maintaining a sufficiently tight stance aligned with monetary policy. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.

This article was originally published by International Monetary Fund https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world-economic-outlook-october-2022.

U.S. vehicle inventories at highest point since June 2021

Slowing sales helped inventory levels recover further to 1.32 million vehicles in September, a significant jump over where they were a year earlier but still historically low, according to Cox Automotive and the Automotive News Research & Data Center.

Cox said the figure — the highest since June 2021 — represented a 42-day supply, based on its practice of using the selling rate from the last 30 days.

It was nearly a half million vehicles higher than where inventory stood at the same point last year and about 90,000 higher than where it stood a month earlier.

But inventory remained more than 2 million vehicles down from the same month in 2019, before the pandemic.

Mass-market and luxury brand inventories collectively rose from the previous month, Cox said. Within individual segments, stocks of compact and midsize cars remained tight, along with minivans and electrified vehicles, while selections were best among full-size pickups and high-end luxury cars.

Among automakers still reporting monthly sales and inventory figures, five saw their days’ supply increase, with Ford Motor Co.’s climbing the most. Volvo’s figure stayed flat, and Toyota Motor North America declined slightly, according to the Automotive News Research & Data Center.

This article was originally published by Automotive News. https://www.autonews.com/manufacturing/us-vehicle-inventories-highest-point-june-2021

Toyota CEO Akio Toyoda talks about why he isn’t all-in on EVs

CEO Akio Toyoda last week simply stated what he would like his legacy to be: “I love cars.”

Just how the 66-year-old racer, car enthusiast and company scion will be remembered regarding his approach to all-electric vehicles compared to gas-powered performance cars, like the Supra, or hybrids, like the once-groundbreaking Prius, will play out in the years to come.

Toyota, the world’s largest automaker, plans to invest $70 billion in electrified vehicles over the next nine years. Half of that will be for all-electric battery ones. While it’s a substantial investment in EVs, it’s smaller than some competitors’ plans, and not as much as some would like given Toyota’s global footprint.

Despite criticism from some investors and environmental groups, Toyoda this past week doubled down on his strategy to continue investing in a range of electrified vehicles as opposed to competitors such as Volkswagen and General Motors, which have said they are going all-in on all-electric vehicles.

The plans could arguably cement Toyoda’s “I love cars” legacy or tarnish it, depending on how quickly drivers adopt electric vehicles.

“For me, playing to win also means doing things differently. Doing things that others may question, but that we believe will put us in the winner’s circle the longest,” he said Wednesday during Toyota’s annual dealer meeting in Las Vegas, which, by the way, was called “Playing to Win.”

Toyoda, who described Toyota as a large department store, said the company’s goal “remains the same, pleasing the widest possible range of customers with the widest possible range of powertrains.” Those powertrains will include hybrids and plug-in hybrids like the Prius, hydrogen fuel cell vehicles like the Mirai and 15 all-electric battery models by 2025.

Aside from the EV plans, Toyoda discussed several other aspects of the company’s business last week during the dealer meeting and a small roundtable with U.S. media.

EV regulations and materials

Toyoda reiterated that he does not believe all-electric vehicles will be adopted as quickly as policy regulators and competitors think, due to a variety of reasons. He cited lack of infrastructure, pricing and how customers’ choices vary region to region as examples of possible roadblocks.

He believes it will be “difficult” to fulfill recent regulations that call for banning traditional vehicles with internal combustion engines by 2035, like California and New York have said they will adopt.

“Just like the fully autonomous cars that we are all supposed to be driving by now, EVs are just going to take longer to become mainstream than media would like us to believe,” Toyoda said in a recording of the remarks to dealers shown to reporters. “In the meantime, you have many options for customers.”

Toyoda also believes there will be “tremendous shortages” of lithium and battery grade nickel in the next five to 10 years, leading to production and supply chain problems.

Carbon neutrality

Toyota’s goal is carbon neutrality by 2050, and not just through all-electric vehicles. Some have questioned the environmental impact of EVs when factoring in raw material mining and overall vehicle production.

Since the Prius launched in 1997, Toyota says it has sold more than 20 million electrified vehicles worldwide. The company says those sales have avoided 160 million tons of CO2 emissions, which is the equivalent to the impact of 5.5 million all-electric battery vehicles.

“Toyota can produce eight 40-mile plug-in hybrids for every one 320-mile battery electric vehicle and save up to eight times the carbon emitted into the atmosphere,” according to prepared remarks for Toyoda provided to media.

Toyota’s hesitancy to launch all-electric vehicles has been criticized by environmental groups such as the Sierra Club and Greenpeace, which ranked the Japanese automaker at the bottom of its auto-industry decarbonization rankings the past two years.

Standing pat with dealers

Toyota has no plans to overhaul its franchised dealership network as it invests in electrified vehicles, like some competitors have announced.

“I know you are anxious about the future. I know you are worried about how this business will change. While I can’t predict the future, I can promise you this: You, me, us, this business, this franchised model is not going anywhere. It’s staying just as it is,” he told dealers to resounding applause.

The franchised dealer model has been under pressure after Tesla and newer EV startups began selling directly to consumers than rather through traditional dealers.

GM has offered buyouts to Buick and Cadillac dealers that don’t want to invest in EVs, while Ford last month announced dealers that want to sell EVs must become certified under one of two programs — with investments of $500,000 or $1.2 million. 

‘Happy dance’

As part of lighthearted and comedic comments to dealers, Toyoda said he danced when the automaker outsold GM last year for the first time ever in the U.S.

Despite Toyota executives saying the accomplishment wasn’t sustainable — GM led through the first half of this year — Toyoda still felt it was cause for celebration.

“At Toyota, we like to keep our head down and not talk about our success,” Toyoda said before reenacting the dance on stage. “But when I heard you became No. 1 in the U.S. last year, I actually did a little happy dance in my office.”

Article originally posted to CNBC https://www.cnbc.com/2022/10/02/toyota-ceo-akio-toyoda-electric-vehicles-happy-dance.html.

October Newsletter

Fall has arrived and October typically brings us ghouls, goblins, and ghosts. This year our industry is dealing with more tricks and treats than normal…

A few of the “Tricks” dealers are facing:

There are still a few “Treats” to be found:

  • Dealers for the most part are still experiencing record, or near-record profits on the vehicles they are selling.
  • The American consumer is proving resilient despite key metrics signaling reason for concern.
  • Fixed Ops continue to be a bright spot in most dealerships, with many stores and dealer groups posting record results.
  • The NADA Mid-Year analysis shows a healthy and vibrant dealer body that continues to feed a significant portion of our overall economy.

Additionally, ADS has a few “Treats” for our dealers to take advantage of:

  • We are hosting an AFIP Certification Course October 4th and 5th in Strongsville, OH. Be sure to check out the information below and register early to secure your seat.
  • This year, ADS is a proud sponsor of Live2Lead in conjunction with one of our favorite charities, Changing Lives Foundation. This is a tremendous opportunity to take leadership lessons from some of the most recognizable names in leadership, coaching, and mentoring. Be sure to check out the information below and reach out to your ADS representative to secure either heavily discounted, or free admission.

Here’s to another great month for everyone!

View the full newsletter https://mailchi.mp/advdealer.com/october-newsletter.

CarMax says inflation taking toll on car demand

Used-car retailer CarMax Inc said on Thursday that an uncertain economic environment was starting to take a toll on vehicle demand, sending ripples through the auto sector, which has largely dodged a significant hit from inflation this year.

CarMax shares tumbled 22% to $66.63 to hit a more than two-year low, after the company reported second-quarter results below analysts’ estimates and underscored the impact of inflation and rising interest rates on car sales.

“Obviously, consumers are having to make decisions … I just think they are prioritizing their spend a little differently,” Chief Executive Officer William Nash told analysts, adding that softness in used-car sales continued in September.

Strong demand for personal transport amid inventory shortages has allowed automakers and retailers to pass on higher costs to customers, largely protecting profitability this year.

But analysts have been warning that the industry will soon feel the pinch of rising interest rates and weakening consumer confidence as inventory shortages send car prices to record highs.

Auto research firm Cox Automotive, which tracks U.S. vehicle market trends, cut its forecast for new and used vehicle sales on Wednesday, citing worsening consumer sentiment, while Moody’s changed its outlook for the global Automotive industry to “negative” from “stable” earlier in the day.

The outlook change is driven by a weakening macroeconomic environment and concerns over affordability, Moody’s analysts wrote in a note.

CarMax’s dour comments and disappointing results heaped more pain on the auto sector, which has been reeling from a broader market selloff.

Shares of General Motors Co and Ford Motor Co were down about 5% in morning trade, while those of auto dealers AutoNation Inc, Lithia & Driveway and Group 1 Automotive fell between 7% and 10%.

(Reporting by Priyamvada C in Bengaluru and additional reporting by Joseph White in Detroit; Editing by Anil D’Silva)

This article was originally shared by Yahoo Finance. https://finance.yahoo.com/news/carmax-results-fall-short-inflation-132024060.html

FTC vs. Dealers: New Rules, New Costs

The FTC has been increasingly focused on dealership sales practices, likely emphasized by the record profits many dealers are realizing in the current economic environment. The agency’s most recent efforts have centered around protecting consumers against undisclosed fees and charges, embodied in a proposed rule promulgated under the Dodd-Frank act.

The rule is meant to drive truth and transparency in the car-buying process and end hidden add-on charges when consumers are shopping for a vehicle.

While on their face these requirements seem like basic standards of doing good business, requirements around implementation and proof of compliance may lead to significant changes in the sales process.

Disclosures and Consent

The proposed rule directly addresses add-on products (meaning any product or service sold to the consumer, which was not installed by the manufacturer, including F&I products) in several ways.

  • Before selling an add-on product, the dealer must disclose the offering price of the vehicle without the product and have the customer decline the purchase in writing, including the time, date, and customer’s signature.
  • If the sale is being financed, the dealer must go through the same process again, disclosing the cash price of the vehicle and the separate finance charges excluding the add-on product.
  • To sell an add-on product, the dealer must obtain the customer’s express informed consent in a written and oral disclosure.
  • Finally, the dealer cannot sell an add-on product that would have no benefit to the consumer, such as a GAP contract where the consumer’s loan does not qualify for coverage.

The rule is very specific about how disclosures must be made, how written consent is obtained, and how long the dealer must retain records of compliance (24 months). A dealer that cannot prove the required disclosures were made and consents were obtained faces stiff repercussions.

The Cost of Compliance

These requirements would compel dealers to maintain several new categories of documents beyond what is typically required today. In practice, a dealer attempting to strictly comply with the rule will likely need to implement a robust software solution into the sales process to track and preserve proof of compliance that would be required.

Sourcing and implementing a solution for compliance may require a large investment for dealers, particularly having legal counsel vet the technology, subscribing to the service, issuing handheld devices to dealership staff, and paying for data storage for years.

Dealers should begin doing their diligence on these issues now in order to be ahead of the game in the likely event that the rule is enacted later in the year.

Andrew Seger is the chief legal officer for Portfolio, a leading provider of reinsurance and F&I programs and products.

This article was originally published on Auto Dealer Today. https://www.autodealertodaymagazine.com/368972/ftc-vs-dealers-new-rules-new-costs

Dealership Participation/Reinsurance Lunch and Learn

We had a packed house at our Dealership Participation/Reinsurance Lunch and Learn at Firestone Country Club.

We had the pleasure of hosting dealers from around the country to learn from Greg Petrowski and his associate Jeremy Elsberry of GPW and Associates.

They offered insights on a variety of different structures, up-to-date tax information, and a forecast on the future of the F&I space.

September Newsletter

September starts off with a long weekend to recognize many of the individuals who built this great country… The Laborers! The holiday is rooted in the late nineteenth century, when labor activists pushed for a federal holiday to recognize the many contributions workers have made to America’s strength, prosperity, and well-being. Without the efforts of the millions of American laborers, we certainly wouldn’t be the country we are today. Although the jobs being performed may look different today, it is still the labor force that keeps this country moving forward. 

To learn more about the history of Labor Day click here.

ADS has some great events planned and some exciting news… 

https://mailchi.mp/advdealer.com/september-newsletter

ADS and GCADA Partnership

The Greater Cleveland Auto Dealers Association and Advanced Dealer Solutions are teaming up to offer dealers F&I Training and Development

In the month of August, The GCADA announced ADS as the Preferred Provider for F&I Training and Development and awarded them the coveted GCADA approved badge!

Words from GCADA

‘We look forward to providing our members with a comprehensive resource for F&I training and development.’

Words from ADS

‘At ADS we are proud to offer dealers an unbiased approach to their F&I decision-making process.’ – stated Ryan Nelson, EVP of ADS ‘There are so many options for dealers today it sometimes becomes difficult to discern what is best for their specific and unique business. ADS enjoys the opportunity to present dealers with a variety of options which are all catered around exceeding the dealer’s goals and objectives.’ Nelson added.

‘We were impressed with the amount of due diligence the GCADA performed on our team, sales process, training platform, and the relationships we have with our dealers.’ – says Bob Mancuso President of ADS ‘To be awarded the Preferred Provided status for F&I Training & Development validates what we have been doing for our dealers over the last eight years.’ Mancuso went on to say.

About GCADA

The Greater Cleveland Automobile Dealers’ Association (GCADA), represents over 265 new motor vehicle dealerships in a 21-county region of Northern Ohio, including franchised new car and truck, motorcycle, and recreational vehicle (RV) dealers.  GCADA provides products, programs, and services to its members and produces the Cleveland Auto Show.

About ADS

Advanced Dealer Solutions is a premier dealer development agency specializing in F&I training and development, product structure, and reinsurance management.

Women In Leadership

Gina Cocking is the CEO of Colonnade Advisors and represents the 2% of women who are CEOs at financial institutions. She brings 20+ years of experience in investment banking and executive leadership to the table including experience as a CFO in multiple companies.

When Gina was recently interviewed by Ryan Nelson of the Advanced Principles Podcast, Ryan asked Gina what advice she might have for other women looking to enter the competitive and male-dominated industries like automotive, technology, and investment banking.

Gina (23:00)

“I think 15 years from now, 20 years from now, the guys better watch out. Women are going to college at a higher rate than men. Something like 60 to 65 percent of the incoming college class is female.” 

The pandemic was extremely challenging to the women’s leadership movement. With schools closed and much of the infrastructure for working women disrupted, many families had to make tough decisions and compromises. Homeschooling became the norm, and many women had to shift their schedules.

So what is Gina’s top advice for women that want to make it to the top echelon of the career ladder?

Gina: (28:00):

Marry well. And I don’t mean marry wealthy.

Find a partner who supports you, who gets that your career is just as important as his career. 

Throughout your lives together, know that you’re going to have to make trade-offs. There are some things that are not going to be fun, but you do them together.

If your partner supports you, you can get through it. It’s important that your partner does not feel like their career path is more important. That is the number one key to success.  

About the podcast episode featuring Gina Cocking

Advanced Dealer Solutions is a premier F&I development agency specializing in the automotive, RV, and powersports industries. Advanced Dealer Solutions works to maximize the purchasing experience as well as increase F&I sales and profits as well as increase service sales and retention.

Advanced Dealer Solutions has assembled one of the most sought-after F&I training platforms in the industry. We have a passion for increasing dealer profits by providing industry-leading technology and implementing an F&I selling system that is guaranteed to elevate performance. Advanced Dealer Solutions is driven to provide dealers with products and solutions that result in increased production, profitability, customer retention, and most importantly, customer satisfaction.

Advanced Principles Podcast was created to be an outlet for like-minded individuals to share in the broader conversations on leadership, retail market updates, and incredible success stories.

Colonnade Advisors has deep experience in the automotive dealership services industry. Please see the pre-event interview series here for more information about Colonnade in the industry, M&A drivers, and more.

Colonnade Securities is a leading investment banking firm that has completed over $9 billion in M&A transactions for clients in the business and financial services industries.

View the full interview here, Episode 34 With Gina Cocking.