Numbers mean nothing unless they add up and intersect in ways that help a business gain insight, maximize performance, or improve operations.
Kevin Chartier, vice president of Manheim Consulting, showed how data can deliver such results that inform business decisions during his Aug. 18 presentation, “Strategic Insights That Drive Decision Making.” He spoke during the International Automotive Remarketers Alliance Summer Roundtable in Nashville.
Manheim, which now has 22,000 dealers on its DealerTrack platform, can look at comprehensive data across many industry sectors and transactors. Also, about two thirds of all consumers who buy a vehicle either touch Auto Trader or Kelley Blue Book along the way. Both brands are owned by Cox/Manheim.
Chartier offered a random mix of data-driven observations and trends about the state of the industry and market shifts.
No Crashes Ahead
The industry will not see a major crash in resale values in 2022, he said. Used vehicle price increases outpaced new vehicle prices in 2021, squeezing up the against new. One-year-old used vehicles saw an average 31% price increase, and three-year-olds, 35%. One- to two-year-old vehicles are impossible to find.
Drawing on data since 1995 that spanned four major correction events, Chartier defined a vehicle market crash as spurred by plunging demand, extreme oversupply of new and used vehicles, and aggressive incentives and discounting as dealers try to clear inventory into falling demand.
“We don’t have any of those conditions today,” he said. “It’s very unlikely we have a crash unless there’s some unforeseen economic calamity.”
Despite solid used demand being relatively flat since spring, the monthly sales rate (by month) next year will increase over this year, he said.
No Recovery Either
Since COVID struck in 2020, the automotive industry has produced eight million fewer vehicles in a market demanding 16.8 million vehicles, Chartier said. “The long-expected production recovery has stalled, and we are worse this time of year than we were at the start. We’re not remotely close to excessive new vehicle supplies.”
Auction inventories are running about a third or less of typical volume. The only place for inventory is on dealer retail lots which averages a 48 days’ vehicle supply. Most dealers maintain 45-60 days’ supply. That means no incentive discounting.
In 2021, used vehicle prices were up an average of 33%, and new vehicle prices, up 14%, he said. The market will see higher than normal new vehicle prices (+9%) but used car values are cooling slightly compared to last year (-5%). Look for a constrained long-term supply market at least through 2025, for new and used vehicles.
Redefining Vehicles Sales Markets
One of the great auto industry transformations underway is the blurring of lines between resale and wholesale markets, Chartier said. The Carvana-ADESA deal was “a major cannon shot in that direction, and they are not the only one doing it.” OEMs are getting into the act as well, and “if you don’t understand how the retail market works, you will be in trouble.”
That means vehicles can be shown the way consumers will see them at the time of appraisal. “If you’re going to play in this new world, you need to learn how to play in retail. You need to get smart and sophisticated like the dealers.”
Artificial intelligence image protection and high-definition imaging will automate damage detection, leaving no doubts among those best-in-class images that buyers will zoom in on, Chartier said.
“Right now, different condition report writers on different days will score differently. Digital imaging is consistent. Now you have inspectors reading images and feeding the information back in.”
He estimated about 75% of damages are being assessed through A.I., which will accelerate the accuracy of data, create more avenues for it, and generate new insights that empower business decision making.
In trying to make sense of so much data coming from every direction, Chartier reminded the audience, “Data in and of itself is not very interesting, unless it helps you do something useful.”