When auto dealers were surveyed two years ago, they said “limited inventory” was slowing their business. That makes sense. The pandemic led to shortages, particularly in semiconductors, which slowed sales. In 2024, that’s far less of an issue, and instead both dealers and consumers are looking ahead to November.
That’s right! Politics affect auto sales. Specifically, a majority of consumers and dealers believe the election will affect car purchasing decisions and, in particular, that the next president will influence interest rates one way or another (which is odd, because technically the president can’t!).
The other big news yesterday was that Volkswagen acquired a large stake in Rivian. How did the stock market react? Rivian is up aaaand… Volkswagen is down. Less big/still big news: CDK Global says systems may not be fully up and running until June 30th aaaand… now come the lawsuits.
Oh, Cruise has a new boss from a pretty interesting place.
Let’s unload.
82% of traders believe the US presidential election will affect interest rates
I was delighted to be invited to Cox Automotive’s half-year presentation. The focus is on the overall economy, the auto trade, consumer sentiment and how all of these factors fit together to form an annual forecast.
Despite all this, sales are recovering from their lows (when SAAR hit 12.3 million in September 2021) and we are working our way back to a SAAR of 16.0 million in June.
What is holding us back in the second half of the year?
Cox Automotive surveyed dealers and interest rates top the list: 59% of dealers believe they are hindering their business, followed by the economy at 57% and market conditions at 41%. Obviously, interest rates were far less of a concern a few years ago when they were practically zero.
The economy is almost always a topic, as are market conditions, and rising interest rates can be a problem. But the “political climate” is an interesting topic. More than a third of dealers said it was a problem. Do people think Joe Biden or Donald Trump will be better for auto sales?
Not quite. This has to do with interest rates and uncertainty and is spread across all parties.
“Consumers seem to believe that the next U.S. election will impact the economy, interest rates and even inflation. Given this uncertainty, many have adopted a wait-and-see attitude,” said Vanessa Ton, senior manager of research and market intelligence at Cox Automotive.
Looking more closely at the numbers, nearly 66% of consumers and 82% of traders believe the U.S. presidential election will affect interest rates “in some way.”
I mean…maybe? Technically, the Federal Reserve Bank and the Fed Chairman are independent and cannot (or will not) do anything just because the President of the United States asks them to. This independence is an essential part of how the Fed works.
So on its own, this is a bit odd. If you dig deeper, you see that a president can do many things to influence the economy. How did the inflation happen? Many things had to happen, but federal spending in response to the COVID pandemic played a role. Of course, interest rates are just a larger part of the bigger economic picture (and not the only thing the Fed does to keep the economy under control) and: I wait for the election before buying cars because I expect a rate cut is a strange attitude.
It’s a strange election. Stranger than normal, depending on what you mean by “normal.” And frankly, a second term for President Trump could try to influence prices. From Bloomberg:
Neither Trump nor his campaign have officially commented on the matter, although the Republican candidate has said he will not reappoint Fed Chairman Jerome Powell, whose dismissal he had considered in 2018. Some of Trump’s unofficial advisers have floated ideas about possible changes at the Fed that would give him more power over the central bank.
That has convinced many people that Trump would take action on the issue in his second term. Forty-four percent of respondents to a Bloomberg reader survey in late May said they expected Trump to weaken the Fed’s independence or limit its power. In contrast, only 5 percent said President Joe Biden, if re-elected, would go beyond comments on monetary policy or calls for lower interest rates.
Maybe this illogical decision is logical in some ways. Maybe a President Trump will somehow take over the Fed and force it to cut interest rates (or raise them, who knows).
Or maybe everyone is so exhausted from the election campaign and fed up with the world that they are waiting to see what happens next, and there is an assumption – wrong or not – that after November everything will be back to some sort of normal.
Volkswagen Group invests $5 billion in Rivian
Without the support of the Saudi government or other players, it seemed inevitable that Rivian would partner with a major automaker. I’m not sure I thought it would end up being the Volkswagen Group, but that’s exactly what happened.
From Rivian:
The partnership is designed to accelerate software development for Rivian and the Volkswagen Group. It is expected to enable both companies to combine their complementary strengths and reduce cost per vehicle by increasing scale and accelerating innovation globally. Rivian’s proven market-specific hardware design and integrated technology platform will serve as the foundation for future SDV development in the joint venture and will be applied to both companies’ vehicles. Rivian plans to contribute its expertise in electrical architecture and is expected to license existing intellectual property rights to the joint venture.
Both companies plan to launch vehicles in the second half of the decade that benefit from the technology developed within the joint venture. In the short term, the joint venture will enable the Volkswagen Group to use Rivian’s existing electric architecture and software platform. The goal of the partnership is to accelerate the Volkswagen Group’s SDV plans and move to a pure zone architecture. Both companies will continue to operate their respective vehicle businesses separately.
Rivian needs money. The company is losing too much money and needs to expand. Volkswagen’s software division Cariad is a disaster, and Rivian’s software works. Everyone wins, and eventually the two companies can build cheaper cars. How does this fit with VW’s Rivian competitor Scout? Quite simply, Scout will use Rivian software, according to ^ “Reuters”.
Since the news was announced, Rivian’s share price has risen sharply and Volkswagen’s has fallen slightly.
Here come the CDK lawsuits
CDK Global, the largest provider of all software used to run car dealerships, fell victim to a ransomware attack and is currently trying to get its systems back up and running after reportedly making a payment to the hackers.
The company’s response seemed pretty poor and it’s possible that the company won’t get traders fully back up and running until June 30th, which is a big problem because that’s the end of the month.
What does CEO Brian MacDonald say about this? Automotive News:
“Our senior leadership team is in daily contact with our dealer group customers in small groups, via email and phone. In addition, our sales and customer success teams are meeting one-on-one with dealers in their territories to provide them with alternative ways to support their sales and service efforts in the meantime,” said MacDonald.
However, this does not seem to be stopping the lawsuits, as two separate lawsuits have been filed by individuals seeking class action status:
The June 24 lawsuits filed by former car dealership employee Eugene Buraga and the June 22 lawsuit filed by vehicle lessee Yuriy Loginov, both in the Northern District of Illinois, are each class action lawsuits.
(…)
Both men criticized CDK for allegedly failing to properly notify them and other members of the group about the problem. Loginov’s lawsuit states that this meant he and other members of the group “lost the opportunity to take appropriate early steps to protect their private information and to take other necessary steps to mitigate the harm caused by the data breach.”
Who wants another year of credit monitoring!?!
Meet the new cruise chief
Founder and interim CEO Kyle Vogt resigned from GM’s robotaxi company Cruise after one of his taxis dragged a pedestrian. An interim CEO has since been installed.
Now there’s a new boss, Marc Whitten, who was a founding engineer at Microsoft’s Xbox. You may know Whitten as the guy who wrote the community letters and who has been with Xbox for three generations of the platform.
“In a few years, transportation will be far safer and more accessible than it is today, creating much greater value for individuals and communities around the world. It’s a once-in-a-lifetime opportunity to be part of that transformation,” said Marc Whitten of his decision to join Cruise. “The team at Cruise has developed world-class technology and I look forward to working with them to bring this important mission to life.”
It will be nice to have someone at Cruise who is known for not being afraid to speak to the community.
What I hear when writing TMD
If you’re not watching season three of Shoresy, I don’t know what you’re doing. Go pull on your balls.
The big question
Without revealing your political views: Are you holding off on purchases until after the election? Why?
