It’s being reported that GM, Ford and FCA will be suspending production today.
Honda and BMW appear to be doing the same in the US.
This is not good for hackers as fewer cars generally means fewer deals. But it is also a sign that many cars are sitting on the lots with interest compounding for car dealers.
The dealers are NOT paying any interest on their floor plan right now, only the manufacturers.
It would be in all of the manufacturers interest to keep the factories closed and not discount any of their product and see what the true demand is. When it’s time to reopen the factories, they are in a better bargaining position to negotiate labor and capacity.
2018 was the historic peak at 17.44M new cars sold, 2019 was down to 17.05M. With Q1-2020 the worst Q1 ever ever ever (despite three HUUUUGE interventions by the Fed which all back-fired) this year is shot. We might be looking at 12-14M SAAR. For the companies who have union labor: staying closed for longer while enduring slow sales gives them more leverage to renegotiate.
I’m not saying this is the most likely scenario, but I would invite everyone who continues to think about car sales like a lemonade stand up on the balcony: you’re still playing small-ball. If GM has access to nearly unlimited free capital, where the only trade off short-run executive pay cuts, why not sit idle for months and months if you can and see how quickly you deplete the inventory on hand and heavily negotiate away every body you possibly can? With the economy stalled, you have no incentive to ramp production and build cars you aren’t sure will sell.
The rental car companies that survive aren’t buying new cars in 2020, they will drive their entire fart fleets into the ground for a year until they find bottom.Manufacturers can’t count on fleet sales.
Don’t focus on what’s in your dixie cup when a pestilence just eradicated all the lemons.
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Where did you get this from?
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Force Majeure clause?
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Keep an eye out for floor-plan relief. And obviously if that dealer uses the captive for their fp.
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Every manufacturer does not have floor plan relief, that’s a wild generic statement
It can’t possibly cover all of them. Not every manufacturer has an ownership relationship with their captive. Many manufacturers are global companies. Most, not every dealer floorplans with the captive. But more than enough.
You are not going to hear in 30 days that Nisan of Sheboigan closed after 60 days with no sales because they couldn’t pay the interest on their aging Versas.
If you don’t agree and you think the carrying cost of your dream car (at FP rate * dealer cost per month after the grace period) is why it will be a sweet deal in May, how much do you think that will effectively be off the price of the car?
It doesn’t matter how many cars are on the lot, the car you want isn’t 10% more off each month it sits there. The dealer doesn’t pay anything for it until they sell it. They’d rather lose a fraction of a % than be certain they’re losing 30% because it’s labor day and things are mostly normal and cloth versas are moving slow.
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Nobody said 10% per month discount until it sells. That’s a straw man.
What we are saying is that nothing is selling right now. Cars or houses. So there are going to be some great deals this summer. Feel free to disagree but history is on our side. See 2008. With record unemployment this is going to be 10x worse and manufacturers have to clear their inventories. They are not going to shut down for 6 months and lose market share.
Correct, a dealership is not going to lose a few thousand to compensate for a fractional amount of interest per day. Dealers are sill holding 2019s, virus or no virus, because floor planning is heavily subvented.
My intent was to question and correct your statement that all dealers are getting floor plan relief.
