January 19, 2015
ON THE WEB: ’Vettes Hold Value
NADA Used Car Guide analysts detailed the one-year performance of all new, or heavily redesigned, mainstream car and truck models and the 2014 Corvette dominated other models by retaining 84.7 percent of its typically equipped manufacturer suggested retail price.
New Law Expands Salvage Buyers
A new law repeals the requirement for a state-issued bidding license for the purchase of salvage vehicles at salvage auctions in Ohio.
Honda Pays for Failing To Report Problems
Honda will pay two $35 million civil penalties, for a total of $70 million, for failing to report deaths, injuries, and certain warranty claims to the federal government.
Ally Announces Stock Sale by U.S Treasury
Ally Financial Inc. announced the U.S. Treasury has sold its remaining 54.9 million shares of the company’s stock.
Rush - Dated Material
www.usedcarnews.com
Lower Gas Prices Hurt Electric Cars By Ted Craig
DETROIT – The dramatic drop in gas prices benefits the residuals of some vehicles and hurts others. At a recent Cox Automotive event, Eric Ibarra, Kelley Blue Book’s director of residuals, said trucks currently have the highest 60-month residual values. Electric vehicles are at the other end of the spectrum. Used electric vehicles already prove a hard sale, since tax and other credits can make a new version cheaper. “It’s not organic demand,” said Alec Gutierrez, Kelley’s senior market analyst. It’s hard enough to move electric and other alternative fuel vehicles without the credits and other perks, such as the ability to drive in the high-occupancy vehicle lane. Doing it when gas is below $2.50 is especially challenging. Manufacturers have started offering large incentives on their alternative fuel vehicles to move them. That’s less possible in the used market. More off-lease alternative
vehicles have started coming back to the market this year, adding to the price pressure. The situation will only grow worse in the next few years as the off-lease volume doubles, Ibarra said. The question now is how long will gas prices stay this low and what effect will there be on consumer behavior when they start to rise. The answer seems “little effect,” unless prices skyrocket. Surveys on KBB.com showed fuel efficiency declining as a major concern early last year when gas prices were still closer to $4 than to $2. Vehicles today are much more fuel efficient than they were 10 years ago, said Karl Brauer, another senior analyst at Kelley. Consumers start to focus more on function than fuel at a certain point, he said. “Once you get to 30 miles per gallon, most consumers said, ‘Good enough,’” Brauer said. This higher fuel efficiency has come mostly through improvements to vehicles with gasoline engines.
Photo by Ted Craig OUTLOOK: Kelley Blue Book senior analyst Alec Gutierrez describes the current state of new-car incentives during a recent event.
Consumers trust these vehicles more and there is no need for a new infrastructure to provide fuel. The vehicle benefiting the most from the current environment is the compact crossover, Gutierrez said. Consumers are considering these vehicles along with midsize and compact
cars, the two best-selling segments. The market for these three segments is so competitive that it’s seeing higher incentives. Overall, incentives remain lower as a percentage of average transaction prices than they were before the recession, Gutierrez said.
Automotive Industry Hinges on Credit, Capacity, Competition By Ted Craig
DETROIT – The recovery of the auto industry in the past few years has been nearly miraclous. The question now is how much longer it can last. Ravi Shanker, lead auto analyst for Morgan Stanley, focused on three areas to watch in coming months during a talk at the Society of Automotive Analysts’ outlook conference. The biggest factor remains credit availability. “The banks run the auto industry,” Shanker said.
The second factor Shanker said to keep an eye on was capacity. The manufacturers today are matching production and demand. That could change in the near future, causing a return to the days of pushing inventory on dealers and moving them with incentives. The third factor is competition. Shanker said that could heat up in the next few years due to the weaker yen. This means the Japanese manufacturers make more of a profit on each vehicle they sell and then reinvest in their products. “In a way, the industry looks like it did in 2006,” Shanker said.
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