Two years when car dealers were surveyed they said that “limited inventory” was holding back their business. That makes sense. The pandemic led to shortages, specifically in semiconductors, that slowed down sales. In 2024 that’s way less of an issue and, instead, both dealers and consumers are looking to November.
That’s right! Politics are impacting car sales. Specifically, a majority of consumers and dealers think the election will influence car buying decisions and, specifically, that the next president will impact interest rates one way or another (which is weird because, technically, the president can’t do that!).
The other big news yesterday was that Volkswagen took a huge stake in Rivian. How did the stock market respond? Rivian is up aaaaaaand… Volkswagen is down. In less big/still big news, CDK Global is saying systems might not be up fully before June 30th aaaaand… here come the lawsuits.
Oh, Cruise got a new boss from a kinda interesting place.
Let’s Dump.
82% Of Dealers Think The U.S. Presidential Election Will Impact Rates
I was delighted to be invited to Cox Automotive’s mid-year presentation, which is focused on the larger economy, dealerships, consumer sentiment, and how all of those fit together to make a forecast for the year.
In spite of everything, sales are recovering from their lows (when SAAR hit 12.3 million in September 2021) and we’re working our way back to a SAAR of 16.0 million in June.
What’s holding us back in the second half of the year?
Cox Automotive surveyed dealers and interest rates are up at the top with 59% of dealers thinking it’s an issue holding back their business, followed by the economy at 57%, and market conditions at 41%. Obviously, interest rates were way less of a concern a few years ago when they were basically zero.
The economy is pretty much always an issue, as are market conditions, and interest rates can be an issue when they go up. But “political climate” is an interesting one. More than one-third of dealers said it was an issue. Do people think that Joe Biden or Donald Trump will be better for car sales?
Not quite. This goes back to interest rates and uncertainty and it’s spread across parties.
“Consumers seem to believe the next U.S. election will impact the economy, interest rates and even inflation. With this level of uncertainty swirling about, many have adopted a wait-and-see mentality,” said Vanessa Ton, senior manager, Research and Market Intelligence, Cox Automotive
Drilling down into the numbers, nearly 66% of consumers and 82% of dealers think the U.S. presidential election will impact interest rates “in some way.”
I mean… maybe? Technically, the Federal Reserve Bank and Fed Chairperson are independent and can’t (or won’t) do something just because the President of the United States asks them. This independence is a key part of how the Fed functions.
So, in a vacuum, this is a bit strange. Getting a level deeper, there are many things a president can do to impact the economy. How did we get inflation? A lot of things had to happen, but federal spending in response to the COVID pandemic played a role. Of course, rates are just one larger part of the overall economic picture (and not the only thing the Fed does to help control the economy) and: I’m waiting for the election before buying cars because I expect a rate reduction is a weird take.
It’s a strange election. Stranger than normal, depending on what your definition of “normal” is. And, honestly, a 2nd term President Trump might try to impact rates. From Bloomberg:
Neither Trump nor his campaign has taken an official stand on that, although the Republican candidate has said he wouldn’t reappoint Fed Chair Jerome Powell, whom he had discussed firing in 2018. Some informal Trump advisers have floated ideas about possible changes to the Fed that would give him more power over the central bank.
That’s convinced many people that Trump would take action on the subject in a second term—44% of respondents in a survey of Bloomberg readers in late May said they expected him to weaken the Fed’s independence or limit its power. By contrast, only 5% said that President Joe Biden would go beyond comments on monetary policy or calls for lower interest rates if reelected.
Maybe this illogical decision is, in a way, logical. Maybe a President Trump will take over the Fed somehow and force them to lower rates (or raise, who really knows).
Or maybe everyone is so weary from campaigning and so tired of the world they’re waiting to see what happens next and there’s an assumption, whether incorrect or not, that things will be a version of normal after November.
Volkswagen Group Puts $5 Billion Into Rivian
Without the backing of the Saudi government or some other play, it seemed sort of inevitable that Rivian might partner with a major automaker. I’m not sure I’d have guessed that automaker would end up being the Volkswagen Group, but that’s what happened.
The partnership is anticipated to accelerate the development of software for Rivian and Volkswagen Group. It is expected to allow both companies to combine their complementary strengths and lower cost per vehicle by increasing scale and speeding up innovation globally. Rivian’s proven in-market zonal hardware design and integrated technology platform are expected to serve as the foundation for future SDV development in the JV that will be applied to both companies’ vehicles. Rivian plans to contribute its electrical architecture expertise and is expected to license existing intellectual property rights to the joint venture.
Both companies aim to launch vehicles benefiting from the technology created within the joint venture in the second half of the decade. In the short term, the joint venture is expected to enable Volkswagen Group to utilize Rivian’s existing electrical architecture and software platform. The partnership’s ambition is to accelerate Volkswagen Group’s SDV plans and transition to a pure zonal architecture. Each company will continue to separately operate their respective vehicle businesses.
Rivian needs cash. It’s losing too much money and it needs to expand. Volkswagen’s Cariad software arm is a disaster and Rivian’s software works. Everyone wins and, eventually, the two companies can make cheaper cars. How does this fit in with VW’s Rivian competitor Scout? Simple, Scout will run Rivian software according to Reuters.
Since announcing the news Rivian’s stock price is way up and Volkswagen’s stock is slightly down.
Here Come The CDK Lawsuits
CDK Global, the biggest provider of all the software that helps run dealerships, got hit with a ransomware attack and is in the process of trying to get its ish working again after reportedly paying the hackers.
The company’s response has seemed pretty bad and the company might not get dealers fully up again before June 30th, which is a big deal because it’s the end of the month.
What’s the CEO Brian MacDonald gotta say about it? From Automotive News:
“Our executive leadership team is engaged with dealer group customers during daily small group discussions, emails and phone calls; and our sales and customer success teams are conducting one-to-one outreach with dealers in their territories to provide alternative ways to support their sales and service efforts in the interim,” MacDonald said.
That doesn’t seem to be staving off the lawsuits as two different ones were filed by people seeking class-action status:
The lawsuits filed June 24 by former dealership employee Eugene Buraga and June 22 by vehicle lessee Yuriy Loginov, both in the U.S. Northern District of Illinois, each seek class-action status.
[…]
Both men criticized CDK for allegedly failing to properly notify them and other class members about the issue. Loginov’s lawsuit said this meant he and other class members lost “the earliest ability to take appropriate measures to protect their Private Information and take other necessary steps to mitigate the harm caused by the Data Breach.”
Who else is excited about getting yet another year of credit monitoring!?!
Meet The New Cruise Boss
Founder and sometimes CEO Kyle Vogt resigned from GM’s robotaxi company Cruise after one of its taxis dragged a pedestrian and there’s been an interim CEO in place.
Now there’s a new boss, Marc Whitten, who was a founding engineer at Microsoft’s Xbox. You might recognize Whitten, who was at Xbox through three generations of the platform, as the guy who wrote the community letters.
“In a few years, transportation will be fundamentally safer and more accessible than it is today, creating much more value for individuals and communities around the world. It is an opportunity of a lifetime to be part of this transformation,” said Marc Whitten on his decision to join Cruise. “The team at Cruise has built world-class technology, and I look forward to working with them to help bring this critical mission to life.”
It’ll be nice to have someone at Cruise who is famously not afraid to talk to to the community.
What I’m Listening To While Writing TMD
If you’re not watching the third season of “Shoresy” I don’t know what you’re doing. Give yer balls a tug.
The Big Question
Without letting on to your politics, are you holding back on making any purchases until after the election? Why?
I’m not buying because IDGAF what the Jones are up to and I feel no need to keep up. And because Pontiac no longer exists to serve my IDGAF needs.
If I were looking to buy a car I’d hesitate to buy an EV because of our stupidly high electricity rates.
I’m holding back on any big purchases because I am too broke to make said purchases.
Glad to see Steve-o’s EV CEO carreer is doing great!
It amazes me the number of people who are ignorant about how the Fed works. No matter who is in office, they cannot influence interest rates. The Fed sets interest rates based on inflation and the overall state of the economy. Additionally, the near-zero interest rates were an aberration caused by the pandemic – it has never happened before and it looks like it won’t happen again. People are going to be very disappointed when interest rates don’t change after the election is over. If you need a car, go get a car. Get the best deal at the best rates possible. I just saw a Nissan commercial where they are offering 2.9% rates on their cars. Cheers.
This really doesn’t fit with the discussion today but I just noticed that Honda has entered the insurance business. Saw this on their website this evening.
https://www.hondainsurancesolutions.com/s/
Generally speaking when it comes to politically relevant purchases I look to make said purchases before the election so that they would be grandfathered in worst case, however after an election where a person “friendly” to X product ends up getting elected prices usually drop, so if there is excess inventory you can usually snag it for a steal.
What is unfortunate is that the election is between someone who creates and causes chaos at all times on all things, where no one can count on any action, versus someone who is steady and contemplative on all things. It shouldn’t be a difficult decision at all.
Jokes on you man, hot dogs at Costco are still $1.50.
And of course a president has direct control over the price of hot dogs at Costco apparently?
Inflatable car lot guy would be a major improvement over either candidate in the US election.
i don’t think it’s “the election.” Last year we were promised lower interest rates in 2024 by ALL the experts. here we are and they are still to the moon.
“All the Experts” were market players who were counting on the Fed bringing rates back down as quickly as possible so that the money train on wall street wouldn’t slow down. They expected to be able to raise prices with abandon and that the Fed would just buy the story that it was cost-increase related instead of what it really was, which was price gouging and using the economy as an excuse. The Fed has always been cautious with that and is thankfully being patient enough and objective enough to see that and they’re waiting for prices to start contracting across more industries. Any disconnect in guidance you’re perceiving from the Fed is a result of the lack of price contraction (i.e. companies’ at fault), not the Fed changing their strategy or approach. This is the right thing.
Interest rates are not “to the moon”. Comparatively, they may seem like it for some who have come of age in the last 20 years and have known nothing but near-zero interest rates. Current rates are at or below historical interest rates over the past 100 years and are pretty on par with 90s and early 00s rates. This is also just fine and not anything to fret over. Don’t be surprised if rates contract over the next 24 months by about 1.5-2.5% and then stay there. Any lower and you risk the same overheating of lending markets again with too-cheap debt.
Don’t drink the Kool-Aid about the economy – it’s fine and this is all right. It kinda sucks if you’re carrying a variable rate note or if you’re trying to buy a house in this market, but otherwise, the wild increases in cost of living that occurred over the past 3 years should be tapering off and going the other direction back to a more reasonable level for most folks. Anyone saying otherwise is likely financially incentivized to cry wolf.
Back when inflation was just getting the party started, there was some considerable criticism of the Fed for supposedly waiting too long to raise rates. I think Mr Powell et all knew and know exactly what they’re doing. In the beginning, inflation numbers were distorted upward due to ludicrous price increases in cars and housing. Now, they’re distorted downward by less-ludicrous price decreases in cars, and the tiniest in housing.
About a year ago, I did the math to back the data from the auto auto, housing, and some other price-gougey sectors out of the inflation numbers, and suddenly inflation was pretty much rock solid at 4%, starting from the first stimulus package. I suspect it’s still there and The Fed knows it.
It is worth pointing out that all housing in this country is now so overvalued that the Fed really can’t raise rates to the point they used to without crashing the economy, and there’s no way to unwind that deal without crashing the economy.
Agreed on all of that and I think the Fed sees the same thing and wants true inflation to come down a bit more. I think the Fed is watching for commodities and groceries to tick downward materially and not just the big ticket items. They know that the second they start to pull interest rates downwards, companies believe they’ve reached the end and will stop considering price decreases and start counting on more rate drops. The wild swings in the stock market based on even the prediction of rate contraction indicates that wall street is going to go crazy again the second they make a move so there’s no rush on their part.They can stand pat for now, let the housing market stabilize under the new reality, let businesses adjust and unwind some of the price hysteria, and I think they might actually pull off a soft landing.
Another reason for baseline interest rates to be a little higher than before the pandemic (to say nothing of the chauffeur-driven grand phaetons with duplicates of Monopoly’s Mr. Moneybags tossing fistfuls into the streets, which unfortunately is what we needed during the pandemic) is to give some room to cut rates when the economy needs a quick stimulus to avoid or at least ameliorate recession. I can’t see negative interest rates being any kind of a good solution to any problem, even though they were instituted in the Eurozone mid-pandemic. .
This wouldn’t go over well with the GOP’s Wall Street and billionaire contingents, as they count on the integrity, stability and willingness to do unpopular but allegedly necessary things (see Paul Volcker and the interest rate-driven recessions of 1980 and 1981-82 that put large numbers of people out of work but help control inflation) of the central bank. The populist wing that’s gone all in on Trump – the JD Vances and Josh Hawleys who criticize the financial establishment as well – would be thrilled to have a Fed that’s under their control. Trump would side with whatever’s better for him, and as a developer he’s predisposed to prefer low interest rates even at the risk of inflation. And the history of his first term suggests that the national debt will continue to increase, taxes will be cut (disproportionately tilted towards the rich and large businesses) without meaningful spending offsets, and there will be no government investment or encouragement of private investment aimed at growing GDP at a rate faster than that of the national debt, which is the long-term way out of the trap.
Hey Hardigree, Are you ready?
…
Good, ’cause you’re goin’.
Also: Ford had a significant investment in Rivian which they had to write off. More’s the pity, because I think Ford would be a better partner than VAG.
I make purchasing a used EV this year a priority because I’m pretty sure if there is an administration change then the $4K tax credit will go away.
I wouldn’t say the outcome of the election has any play on it, but my wife could use a new car, but we are holding off as long as possible. Mostly because it seems while interest rates are nowhere near historical highs, many do forecast them to still come down a bit more. Also, there are good incentives coming back on dealership financing for certain trims and models. When the right opportunity comes along, we would pull the trigger, but we don’t expect to do so until 2025 at the earliest. Her current car is still doing great, nine years old and over 170k miles. It’s seen a lot of the lower 48.