2021 Automotive market thread

[max225]

I know this is somewhat similar to what we could consider car chat. But I wanted to create a stream of consciousness around 2021 and 2021 specific issues/things that we think/will wont happen in our near future for 2022 and on.

Figured I'd leave my take here on what I consider to be one of the if not THE MOST DISRUPTIVE (gasp I used the word I hate) year in Auto motive history.
In somewhat modern history I think there have only been 3 years that rival 2021:
1976 with the cross over to the new efficiency rules
2008 with the crazy "$5 gas" and the huge desire for everyone to dump gas guzzlers and SUVs that ?
2009 with the absolutely abysmal no one is buying anything 7M a year in new vehicle sales, 6 months old 60k cadillacs trading for 25k and people being HAPPY to get it.

Now fast forward to 2021... I think the following forces are completely reshaping the ENTIRE car industry.

1. The Advent of Carvana + Vroom + Shift etc, running on NEGATIVE MARGINS (yes I checked their financials, they lose money on every vehicle. They are buying up swaths of vehicles at ABOVE market prices (just like Zillow did with homes before going under). And they are artificially inflating USED values and driving incremental demand to NEW cars (more on that later).
2. The "Return to work" yes some of us are "Permanently remote" but as most are starting to realize there is SOME desire and demand from all over the various employment areas that work is to be done in person, or some sort of hybrid format, requiring personal transportation.
3. The complete avoidance of public transit, everyone is scared of everyone and public transit is seen as a cess pool that it is.
4. The Timbuk2 fuckers who now need to drive 20 min to get milk. A lot of people moved from city centers to places in BFE, and it requires at least one vehicle to get around because places in the middle of no where simply aren't set up for lyft/uber etc.
5. Technological revolution of EVs compared to ICE. EVs are at a critical inflection point where they are now proving that in most use cases (other than cost) they may actually be a better way of personal transportation for most. Now this is a controversial point, because it can be specific to a region+it may actually depress car sales in the long run due to cost/complexity/shortages of materials.
6. "Supply chain shortages". Frankly what we're seeing is not exactly a shortage but more of a spike in demand thanks to everyone being at home, and flush with cash. Willing to spend it on everything and anything.

The above 6 factors have driven incredible short term demand to New and USED cars. Although I will state that the USED factors are primarily increasing further than new due to point 1 as well. Once you lay out all these factors, one things becomes quite clear. NONE OF THEM ARE PERMANENT. This situation will very likely not persist much longer as, OEMs who are in the business to make as many cars as they can, are producing in record numbers as we speak. The return to work is slowly starting to be a "new normal". Cash is quickly running out as the costs of everything are skyrocketing. This will put a HUGE damper into DEMAND, while SUPPLY is being PUMPED UP.

I am personally thinking that there will be an enormous correction in particular in the Big SUV/Truck segment at some point in mid 22 to mid 23. Where USED values will drop by 30-40% from their current values which are at or above MSRP for 0-2 years old. I am also thinking that one of these Carvana/Vroom/Shift businesses will go bankrupt within the next 12-36 months further flooding the market with vehicles.

I think the multiple reasons due to which everyone is DYING to get a car at the moment. Will reverse in our very near future.

What say yeee.. ?

Crazy rant off.

[MexicanYarisTK]

Thought I add something on here which when I have just gotten my real plates from my dealership. The sales breh I worked with for the Accord told me I bought the car in the right time cause the market has just gotten worse with mark-ups.

[max225]

Thought I add something on here which when I have just gotten my real plates from my dealership. The sales breh I worked with for the Accord told me I bought the car in the right time cause the market has just gotten worse with mark-ups.

Yep mark ups are peaking from sep to nov.

[ChrisoftheNorth]

This is a blip. People are assuming some grand shift in the way the industry does business, and I just don't think that's going to be the case. This is a classic case of demand > supply in a short to medium term and nothing else. OEMs will resume record production volume as soon as they can (they probably already are right now) and normal deal discounting and whatnot will follow within 6-9mos. They claim they're going to try more build to order and inventory discipline, but lets not forget that OEMs make money when a vehicle ships to the dealer, NOT when it's sold to the customer. As such, they have no incentive to change the way they do business when it comes to inventory management, especially if dealers are clamoring for the inventory. And as long as customers still want to be able to walk into the dealer and leave with a vehicle within an hour, dealers are going to want that inventory.

There's been a lot of talk about online vehicle ordering and sales, but the success of Carvana, Vroom, etc show that people still need instant gratification (or close to it) and waiting 3-6mos for a "custom" order just isn't sustainable, not if other OEMs have plenty of instant inventory to sell. I actually like the Toyota model of selling upstream into the existing dealer pipeline, so at least the customer is waiting closer to a month, not multiple months. That practice may continue, but Toyota has always done this to an extent with some of the best inventory discipline in the industry.

I think Carvana is going under after all of this. Carvana over Vroom at least because of countless anecdotes like mine where Carvana is offering multiple $K over Vroom for cars with no rhyme or reason. They must be targeting growth and being #1 in inventory volume or something because it just makes zero sense. Vroom is closer to what actual dealers are offering, and thus perhaps a bit more disciplined and sustainable, but even that is .

Between losing money on each vehicle sale and ridiculous investments in real estate to build the "vending machines", there just zero sustainable business practice with Carvana. Zillow is a great example of what happens when you let an algorithm buy big things unchecked, and while growth keeps the stock price up and capital flowing, it will crash just as hard once new vehicle inventory freely flows into the market and used vehicle demand plummets. Only idiots are buying used right now, and once there's new alternatives, Carvana is toast with monumental losses and no growth on the horizon.

We'll look back on these last few months in a few years and remark "remember when we could effortlessly sell a vehicle to Carvana (RIP) for $10k over new? That was crazy!"

[max225]

This is a blip. People are assuming some grand shift in the way the industry does business, and I just don't think that's going to be the case. This is a classic case of demand > supply in a short to medium term and nothing else. OEMs will resume record production volume as soon as they can (they probably already are right now) and normal deal discounting and whatnot will follow within 6-9mos. They claim they're going to try more build to order and inventory discipline, but lets not forget that OEMs make money when a vehicle ships to the dealer, NOT when it's sold to the customer. As such, they have no incentive to change the way they do business when it comes to inventory management, especially if dealers are clamoring for the inventory. And as long as customers still want to be able to walk into the dealer and leave with a vehicle within an hour, dealers are going to want that inventory.

There's been a lot of talk about online vehicle ordering and sales, but the success of Carvana, Vroom, etc show that people still need instant gratification (or close to it) and waiting 3-6mos for a "custom" order just isn't sustainable, not if other OEMs have plenty of instant inventory to sell. I actually like the Toyota model of selling upstream into the existing dealer pipeline, so at least the customer is waiting closer to a month, not multiple months. That practice may continue, but Toyota has always done this to an extent with some of the best inventory discipline in the industry.

I think Carvana is going under after all of this. Carvana over Vroom at least because of countless anecdotes like mine where Carvana is offering multiple $K over Vroom for cars with no rhyme or reason. They must be targeting growth and being #1 in inventory volume or something because it just makes zero sense. Vroom is closer to what actual dealers are offering, and thus perhaps a bit more disciplined and sustainable, but even that is .

Between losing money on each vehicle sale and ridiculous investments in real estate to build the "vending machines", there just zero sustainable business practice with Carvana. Zillow is a great example of what happens when you let an algorithm buy big things unchecked, and while growth keeps the stock price up and capital flowing, it will crash just as hard once new vehicle inventory freely flows into the market and used vehicle demand plummets. Only idiots are buying used right now, and once there's new alternatives, Carvana is toast with monumental losses and no growth on the horizon.

We'll look back on these last few months in a few years and remark "remember when we could effortlessly sell a vehicle to Carvana (RIP) for $10k over new? That was crazy!"

The main wrench that could be thrown into this scenario is some sort of global supply chain collapse that will only allow OEMs to build about 1/2 vehicles or less. Due to a plethora of factors such as raw material shortages, staff shortages due to virus etc etc and rapid inflation...

We sort of have elements of that present now but perhaps at a greater scale. Presumably this will improve however. It is however a possibility. I think all of that can/will be solved through "inflation" though.

[ChrisoftheNorth]

This is a blip. People are assuming some grand shift in the way the industry does business, and I just don't think that's going to be the case. This is a classic case of demand > supply in a short to medium term and nothing else. OEMs will resume record production volume as soon as they can (they probably already are right now) and normal deal discounting and whatnot will follow within 6-9mos. They claim they're going to try more build to order and inventory discipline, but lets not forget that OEMs make money when a vehicle ships to the dealer, NOT when it's sold to the customer. As such, they have no incentive to change the way they do business when it comes to inventory management, especially if dealers are clamoring for the inventory. And as long as customers still want to be able to walk into the dealer and leave with a vehicle within an hour, dealers are going to want that inventory.

There's been a lot of talk about online vehicle ordering and sales, but the success of Carvana, Vroom, etc show that people still need instant gratification (or close to it) and waiting 3-6mos for a "custom" order just isn't sustainable, not if other OEMs have plenty of instant inventory to sell. I actually like the Toyota model of selling upstream into the existing dealer pipeline, so at least the customer is waiting closer to a month, not multiple months. That practice may continue, but Toyota has always done this to an extent with some of the best inventory discipline in the industry.

I think Carvana is going under after all of this. Carvana over Vroom at least because of countless anecdotes like mine where Carvana is offering multiple $K over Vroom for cars with no rhyme or reason. They must be targeting growth and being #1 in inventory volume or something because it just makes zero sense. Vroom is closer to what actual dealers are offering, and thus perhaps a bit more disciplined and sustainable, but even that is .

Between losing money on each vehicle sale and ridiculous investments in real estate to build the "vending machines", there just zero sustainable business practice with Carvana. Zillow is a great example of what happens when you let an algorithm buy big things unchecked, and while growth keeps the stock price up and capital flowing, it will crash just as hard once new vehicle inventory freely flows into the market and used vehicle demand plummets. Only idiots are buying used right now, and once there's new alternatives, Carvana is toast with monumental losses and no growth on the horizon.

We'll look back on these last few months in a few years and remark "remember when we could effortlessly sell a vehicle to Carvana (RIP) for $10k over new? That was crazy!"

The main wrench that could be thrown into this scenario is some sort of global supply chain collapse that will only allow OEMs to build about 1/2 vehicles or less. Due to a plethora of factors such as raw material shortages, staff shortages due to virus etc etc and rapid inflation...

We sort of have elements of that present now but perhaps at a greater scale. Presumably this will improve however. It is however a possibility. I think all of that can/will be solved through "inflation" though.

Yea, good point. Global supply chain issues will impact all sorts of vehicle components and could limit production output. Not to mention, shipping issues domestically.

The 4R with my name on it was delayed a week in shipping, has no firm idea when it'll come. That's an interesting problem where there aren't enough port workers, truck drivers, etc to keep the supply chain moving efficiently. My truck is just chilling at the port (maybe still on the boat) behind who knows how many other vehicles and boats...plus it has to have accessories installed on it that could make it sit even longer. A lot of elements at play, but rampant inflation should start to depress demand for products a bit and hopefully free up some capacity in the supply chain.

[wap]

Just read this morning that the Heep Cherokee factory in Belvedere, Illinois is laying off 400 employees, after going down to 1 shift/day, due to continuing supply chain issues, including the unobtanium chips, and way lower sales. I guess the pending/beginning turnaround isn't equal across the whole industry.

[max225]

The main wrench that could be thrown into this scenario is some sort of global supply chain collapse that will only allow OEMs to build about 1/2 vehicles or less. Due to a plethora of factors such as raw material shortages, staff shortages due to virus etc etc and rapid inflation...

We sort of have elements of that present now but perhaps at a greater scale. Presumably this will improve however. It is however a possibility. I think all of that can/will be solved through "inflation" though.

Yea, good point. Global supply chain issues will impact all sorts of vehicle components and could limit production output. Not to mention, shipping issues domestically.

The 4R with my name on it was delayed a week in shipping, has no firm idea when it'll come. That's an interesting problem where there aren't enough port workers, truck drivers, etc to keep the supply chain moving efficiently. My truck is just chilling at the port (maybe still on the boat) behind who knows how many other vehicles and boats...plus it has to have accessories installed on it that could make it sit even longer. A lot of elements at play, but rampant inflation should start to depress demand for products a bit and hopefully free up some capacity in the supply chain.

The latest data is already showing a huge dip in demand. The YoY number is UP 2% or so, but adjusted for inflation we're actually DOWN in physical spend.

The port issues are caused by a HUGE influx of SHIT (+30%) that no one needs and only some that we do. We normally see spikes of -5% + 5%... so that's why we're having issues.

That will clear up... as mentioned DEMAND is DOWN and supply is WAYYY up. The supply is obviously not in the stores yet... but imagine once it hits.... we will be flush with crap with no one willing to spend the new higher prices. It'll be quite a reversal from the current MO IMO.

[D Griff]

Yep, I pretty much agree with all of this. The 'chip shortage' certainly isn't over, as I can attest to from my own ings at work, but things seem to be headed in the right direction. he more 'normal' things get, the more the market will settle. I have to assume many will want out of all of the shit they've knee jerk purchased in the past 1.5 years and as the used market starts to flood with this stuff, prices will drop. Used cars will also start sitting on dealer lots once the new cars are there as a viable alternative.

The only caveat to all of this, IMO, is the Vroomvana shit. Like, if they somehow continue to 'succeed' while losing money and don't flop, they will continue to fuck the market. Everyone will choose to sell to them because they offer huge money for the cars, this in turn means won't get used inventory. In that world, Vroomvana can kind of set the used market pricing at whatever they decide to.

These tech companies having access to seemingly unlimited capital sort of fucks the free market for everyone else.

[ChrisoftheNorth]

Just read this morning that the Heep Cherokee factory in Belvedere, Illinois is laying off 400 employees, after going down to 1 shift/day, due to continuing supply chain issues, including the unobtanium chips, and way lower sales. I guess the pending/beginning turnaround isn't equal across the whole industry.

That Cherokee blows.

[ChrisoftheNorth]

Yea, good point. Global supply chain issues will impact all sorts of vehicle components and could limit production output. Not to mention, shipping issues domestically.

The 4R with my name on it was delayed a week in shipping, has no firm idea when it'll come. That's an interesting problem where there aren't enough port workers, truck drivers, etc to keep the supply chain moving efficiently. My truck is just chilling at the port (maybe still on the boat) behind who knows how many other vehicles and boats...plus it has to have accessories installed on it that could make it sit even longer. A lot of elements at play, but rampant inflation should start to depress demand for products a bit and hopefully free up some capacity in the supply chain.

The latest data is already showing a huge dip in demand. The YoY number is UP 2% or so, but adjusted for inflation we're actually DOWN in physical spend.

The port issues are caused by a HUGE influx of SHIT (+30%) that no one needs and only some that we do. We normally see spikes of -5% + 5%... so that's why we're having issues.

That will clear up... as mentioned DEMAND is DOWN and supply is WAYYY up. The supply is obviously not in the stores yet... but imagine once it hits.... we will be flush with crap with no one willing to spend the new higher prices. It'll be quite a reversal from the current MO IMO.

Yea, I'm think 22Q1 we're going to be seeing nearly the opposite of now. Plenty of supply for many products that are short right now, probably even sales/deals starting.

[ChrisoftheNorth]

Yep, I pretty much agree with all of this. The 'chip shortage' certainly isn't over, as I can attest to from my own ings at work, but things seem to be headed in the right direction. he more 'normal' things get, the more the market will settle. I have to assume many will want out of all of the shit they've knee jerk purchased in the past 1.5 years and as the used market starts to flood with this stuff, prices will drop. Used cars will also start sitting on dealer lots once the new cars are there as a viable alternative.

The only caveat to all of this, IMO, is the Vroomvana shit. Like, if they somehow continue to 'succeed' while losing money and don't flop, they will continue to fuck the market. Everyone will choose to sell to them because they offer huge money for the cars, this in turn means won't get used inventory. In that world, Vroomvana can kind of set the used market pricing at whatever they decide to.

These tech companies having access to seemingly unlimited capital sort of fucks the free market for everyone else.

Luxury big purchases that people are leveraged on like Boats, RVs, and fun cars are going to be nearing firesale next fall as people realize they don't really NEED them and can't "afford the payment" anymore.

I have no idea why Vroomvana will continue to be successful. Once people can easily buy new cars for cheaper, they're going to. Carvana in particular looks really prime to be holding a huge bag of negative equity on used cars when new cars hit. I imagine they're hoping that new inventory will trickle in and give them time to correct their inventory cost, but my $35k Cucktrek offer indicates otherwise. That's just

[wap]

Just read this morning that the Heep Cherokee factory in Belvedere, Illinois is laying off 400 employees, after going down to 1 shift/day, due to continuing supply chain issues, including the unobtanium chips, and way lower sales. I guess the pending/beginning turnaround isn't equal across the whole industry.

That Cherokee blows.

Maybe, but that's not why they're laying off 400 workers.

[ChrisoftheNorth]

That Cherokee blows.

Maybe, but that's not why they're laying off 400 workers.

It is, kind of. They just have a convenient excuse to use instead.

[D Griff]

That Cherokee blows.

Maybe, but that's not why they're laying off 400 workers.

I beg to differ...

They have X amount of chip allocations, they are going to put them towards where they can make the most money. That hideous POS Cherokee has been around and AFAIK exactly the same for like... 8+ years? Seems like they have put energy into bigger SUVs, V8 Beep Beeps, etc. and just sort of let it run its course, now they have a tasteful way of slowly putting it out to pasture that will give them less negative press.

[wap]

Maybe, but that's not why they're laying off 400 workers.

It is, kind of. They just have a convenient excuse to use instead.

Dunno.
Other than a banner year in 2018, sales seemed pretty consistent through 2019, Even early 2020 wasn't THAT bad until covid hit big in March, but by summer things looked like they started to rebound a bit until they fill off a cliff this spring. Seems like a supply chain scenario to me, more than just that the consumer suddenly decided that it "blows". But I know you're the industry insider expert so I'll defer to your judgement here.

Year Sold
2013 25,786
2014 178,409
2015 220,260
2016 201,420
2017 169,882
2018 239,437
2019 191,397
2020 135,854
2021 78,749

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2020 10,938 14,160 8,577 4,187 9,305 9,770 14,370 12,773 13,838 12,798 10,512 14,626
2021 12,135 12,135 13,652 9,872 9,492 9,872 3,912 3,767 3,912 0 0 0

[wap]

Maybe, but that's not why they're laying off 400 workers.

I beg to differ...

They have X amount of chip allocations, they are going to put them towards where they can make the most money. That hideous POS Cherokee has been around and AFAIK exactly the same for like... 8+ years? Seems like they have put energy into bigger SUVs, V8 Beep Beeps, etc. and just sort of let it run its course, now they have a tasteful way of slowly putting it out to pasture that will give them less negative press.

Well, I have no dog in this fight, I'm just citing what the article said so I'll defer you you guys.

[D Griff]

I beg to differ...

They have X amount of chip allocations, they are going to put them towards where they can make the most money. That hideous POS Cherokee has been around and AFAIK exactly the same for like... 8+ years? Seems like they have put energy into bigger SUVs, V8 Beep Beeps, etc. and just sort of let it run its course, now they have a tasteful way of slowly putting it out to pasture that will give them less negative press.

Well, I have no dog in this fight, I'm just citing what the article said so I'll defer you you guys.

I mean, really I will defer to Chris as he has the most inside knowledge. Just seems like they are at least somewhat related.

I do have some real disdain for the Cherokee

[wap]

Well, I have no dog in this fight, I'm just citing what the article said so I'll defer you you guys.

I mean, really I will defer to Chris as he has the most inside knowledge. Just seems like they are at least somewhat related.

I do have some real disdain for the Cherokee

As did I a couple posts up.

the distain? After they fixed the weird headlight situ it seemed inoffensive enough. I mean, I'd never buy one, but a coworker here has one he really likes, and my neighbor has 2, his and hers, had 'em for years, and they seem pretty trouble-free and they really seem to like them.

[D Griff]

I mean, really I will defer to Chris as he has the most inside knowledge. Just seems like they are at least somewhat related.

I do have some real disdain for the Cherokee

As did I a couple posts up.

the distain? After they fixed the weird headlight situ it seemed inoffensive enough. I mean, I'd never buy one, but a coworker here has one he really likes, and my neighbor has 2, his and hers, had 'em for years, and they seem pretty trouble-free and they really seem to like them.

I just find their ugly. A buddy of mine has one and he is somewhat of a car guy (also owns a C3 'vette, clearly just has tastes) and every time I've ridden in it, it's just kinda I'm sure they're perfectly adequate vehicles.

[wap]

As did I a couple posts up.

the distain? After they fixed the weird headlight situ it seemed inoffensive enough. I mean, I'd never buy one, but a coworker here has one he really likes, and my neighbor has 2, his and hers, had 'em for years, and they seem pretty trouble-free and they really seem to like them.

(also owns a C3 'vette, clearly just has tastes)

at

[D Griff]

(also owns a C3 'vette, clearly just has tastes)

at

That thing is really bad... worst car I've ever driven. It looks cool and is in immaculate shape, but my god, it's horrendous.

[wap]

at

That thing is really bad... worst car I've ever driven. It looks cool and is in immaculate shape, but my god, it's horrendous.

Yeah, they were quite shitty. The C4 was yuuge improvement.

[Tar]

I believe that used car valuations dropping 20-30% in February, maybe more. I'm offered 27 grand for a yr old R with 95k miles on it, and have had offers of 20k from my VW dealership last year when the car was 4 yrs old and had 75k miles.

Toyota cares more for it's suppliers and adds better systems, and their business practices kept them from losing much production. Plants in Canada lost a total of three weeks IIRC. They probably also prioritize Ravs over other products, so maybe that plays a part in their uptime, but I was told that they added some supplier countermeasures after the Fukushima incident, so they were naturally better positioned for shocks like these.

[ChrisoftheNorth]

I mean, really I will defer to Chris as he has the most inside knowledge. Just seems like they are at least somewhat related.

I do have some real disdain for the Cherokee

As did I a couple posts up.

the distain? After they fixed the weird headlight situ it seemed inoffensive enough. I mean, I'd never buy one, but a coworker here has one he really likes, and my neighbor has 2, his and hers, had 'em for years, and they seem pretty trouble-free and they really seem to like them.

First, the launch of the thing was a disaster back in 2013. It had a then new 9-speed auto transmission, and the programming wasn't fully baked before production, and they had them stacked up like cordwood outside of the Toledo plant (before it moved to Belevedere) waiting for transmission updates. It took YEARS for them to get the programming just acceptable, and add that to the weird design and it got off to a bad start.

But the worst part to me is it's an embarrassment to the Jeep badge. I drove a number of them a few years ago, and was even tasked with trying to figure out what was wrong with it and why it didn't sell. To move the volume and keep the plant running, the corp was spending a fortune in incentives which made it one of the cheapest vehicles of its size in its segment. That's how the sales numbers looked so decent. But pull incentive spend info and the Cherokee has always been at or near the top of its segment (this isn't a publicly available stat, so production is often taken out of context).

Why is it so terrible?

It's really just a Fiat something from Europe with an ugly exterior. The interior is a TON of MEH, and it feels more like a car than an SUV. Jeep is an SUV brand, it's all it's ever been, and all it should ever be. The Uconnect screen has to handle a lot of interior functionality including turning on/off the heated seats...and the screen is small due to corp so it's not at all easy to use, especially when driving. It still drives weird with the 9-speed, which for some reason they were never really able to nail down the tuning right.

Add to all that, it's in the most crowded segment in the industry. RAV4, CR-V, Forester, etc, there's zero reason for someone to buy a Cherokee over those other than price. Which makes it a horrible business case that's been a thorn in FCA and now Stellanus's side since it launched. As griff said, chips are in short supply and are being prioritized by vehicle and profitability, so Wranglers, Gladiators, and more importantly the new Grand Cherokee and Wagoneer need the chips more than a money loser like the Cherokee. And chips are a convenient excuse to kill off something bad without admitting that it was bad.