CarMax provides a perspective on the used car market, Reuters provides an update on Tesla’s Chinese ambitions, NIO provides a prudent reevaluation of its 2022, and CES provides David a chance to go back to the Taco Bell Cantina on the Las Vegas Strip.
Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday.
CarMax CEO Fears Buyers Are Locked Out Of Used Cars Entirely: ‘You Have To Go Back To Affordability’
We’ve written a lot about the changes in used car prices and the slow easing of the inventory crunch, but it’s still a challenging time for used car buyers. It’s also, increasingly, a difficult time for used car sellers. CarMax is, by volume, America’s largest used car dealer and they’ve seen their stock drop by over 50% this year.
Part of the challenge in the used car market was Carvana, which was likely driving up wholesale prices of used cars by buying from consumers at artificially high prices. With inventory super low due to a variety of factors (cars being destroyed in storms, production/supply chain issues reducing the number of cars being sold to rental fleets, et cetera), prices kept increasing. Add in that rising interest rates and it’s suddenly not a great time for anyone.
CarMax dropped its third-quarter earnings report right before Christmas, conveniently, and it showed lingering issues:
Combined retail and wholesale used vehicle unit sales were 298,807, a decrease of 28% from the prior year’s third quarter. Online retail sales accounted for 12% of retail unit sales, compared with 9% in the third quarter of last year. Revenue from online transactions, including retail and wholesale unit sales, was $1.8 billion, or approximately 28% of net revenues, a decline from 30% of net revenues in last year’s third quarter.
Total retail used vehicle unit sales declined 20.8% to 180,050 and comparable store used unit sales declined 22.4% from the prior year’s third quarter.
CEO Bill Nash had more to say on a conference call, as recorded by Automotive News:
“You have to go back to vehicle affordability,” CarMax CEO Bill Nash said in a Thursday conference call. “It’s just keeping a lot of people on the sidelines right now.”
It’s worth noting that CarMax made $31.9 billion in FY2022, helped by an increase in profits caused by limited demand. The concern about affordability doesn’t seem to stem from a desire to assist buyers in a tough market as much as a realization that their business is a never-ending balance of inputs and outputs.
Tesla Is Reducing Output From Its Shanghai Plant: Report
The exclusive of the morning belongs to the reporters at Reuters, who seem to be recovering from the holidays faster than I am. They’ve got access to internal documents that show Tesla will continue to run a lower production schedule at the company’s Shanghai plant:
Tesla (TSLA.O) plans to run a reduced production schedule at its Shanghai plant in January, extending the reduced output it began this month into next year, according to an internal schedule reviewed by Reuters.
Tesla will run production for 17 days in January between Jan. 3 to Jan. 19 and will stop electric vehicle output from Jan. 20 to Jan. 31 for an extended break for Chinese New Year, according to the plan seen by Reuters.
Why? Sinking demand and rising COVID certainly don’t help. This has been a problem for the entire Chinese auto industry. Rising competition from domestic producers like BYD ain’t helping, either.
Nio Also Feels The Pinch
Tesla isn’t the only automaker sensing a little trouble in big China, with Chinese EV-maker NIO adjusting its fourth-quarter expectations. I like the way NIO puts it in their release: “NIO Inc. Prudently Adjusts Fourth Quarter 2022 Delivery Outlook.” I’m gonna steal that. “Matt Hardigree Prudently Adjusts Afternoon Leftover Ham Intake Outlook.”
Here’s the company’s take:
In December 2022, the Company has been facing challenges in deliveries and productions, together with certain supply chain constraints, caused by the outbreak of the Omicron coronavirus variant in major cities in China. While our teams have strived to maintain continuous operations on all fronts, we were not able to reach our full capacities, particularly when there have been disruptions on delivery and registration procedures involving users. The Company now expects to deliver 38,500 to 39,500 vehicles in the fourth quarter of 2022, adjusted from previously released outlook of 43,000 to 48,000 vehicles.
Aim for the moon and land on the top bunk, or whatever.
CES Is Gonna Be EVS Because Of All The EVs, Amirite?
It sounds like David and PG are going to be at CES to see all the big reveals of, primarily (if not exclusively), electric cars and trucks. Also scooters! (Ed. note: They may have flying cars there, too. I’ll see if I can get David to pilot one until they send the Nevada Air National Guard after him. -PG)
The folks at Automotive News have a breakdown of the big movers and shakers:
BMW will showcase its Neue Klasse next-generation platform, which it expects to build vehicles upon starting in 2025. Stellantis will highlight its Ram EV pickup, scheduled to launch in 2024. Both BMW CEO Oliver Zipse and Stellantis CEO Carlos Tavares are set to deliver keynote remarks.
Honestly, the electric Ram 1500 alone is worth the price of admission.
How long do you think it’ll take before used car prices come down to their historical averages?
Photos: Google Finance, Carmax, Stellantis, Nio