This year’s gathering of the “Voice of the Consignors” could never be mistaken for only representing one industry niche.
More industry voices, faces, and interests abounded as the 22-year professional remarketing group took stock of the current moment and readied attendees to track the primary drivers of change-progress-disruption.
Close to 300 consignors, auction executives, finance and technology specialists, and remarketing related businesspeople gathered for the 2023 International Automotive Remarketers Alliance Summer Roundtable. It was held Aug. 22-24 at the Westin Michigan Avenue Chicago conference center, just two blocks from the Lake Michigan shoreline.
As often happens with an active business group, there’s a lot going on. Here is a round-up of eight key sessions and events at the Roundtable:
Vehicle Markets Still Lurching Toward Normalcy
The first fact Dr. Alex Yurchenko, chief data science officer for Black Book, wanted the audience to know is, “We’re still on the roller coaster.”
Yurchenko and co-presenter Melinda Zabritski, senior director of Experian Automotive, led the session, “Market Insights from Black Book and Experian Automotive,” on Aug. 24.
Yurchenko shared the following market and economic data:
- New vehicle inventory is increasing unevenly but has doubled on dealer lots since last year. Supply still falls well below pre-pandemic levels. OEMs prefer this market more than dealers, but inventory is likely to increase.
- Buyer demand remains high, with more than 50 million units projected to be sold in retail and commercial channels in 2023.
- Despite higher interest rates, consumers are still buying vehicles. With more inventory, incentives are increasing, although far below pre-pandemic levels. Incentives are at about 4.5%, up from 2% last year.
- Used inventory is stable, ranging at pre-COVID levels. Two million units are available on dealer lots with no shortages as of today.
- Used vehicles are still not as affordable as pre-2020, as the largest share of used vehicles cost more than $25,000. Used vehicles are more expensive while becoming older with higher mileage. Lease returns are still down, pushing older inventory into higher prices ranges.
- Pre-owned vehicles will remain below pre-COVID highs for the foreseeable future. They’re returning to normal depreciation in the teen percentages compared to the peak 28% appreciation in 2021. But the rest of 2023 will see higher depreciation on wholesale vehicles with prices coming down but staying high compared to pre-COVID levels.
- Retail prices are not decreasing like wholesale. Retail is relatively stable.
- Average retention of three-year-old vehicles is 72% and forecast to decline to 58% by 2026.
- Higher used vehicle prices took many buyers out of the market and reduced demand. Prices are expected to decline, but not drop dramatically like wholesale prices. Retail prices are stickier. “With high prices and high interest rates, how can people afford these vehicles?” asked Yurchenko, posing a key market challenge ahead.
- Overall, expect prices to ease, but not to pre-pandemic levels since the next three years will bring a shortage of used inventory.
Zabritski rounded out the presentation with related market data and observations:
- The fleet sector is beginning to pick up market share, with 19.2% so far in 2023, up from percentages in the low teens.
- Financing hovers at a six-year low for loans and leases, with not all lenders seeing the same origination lows.
- Consumers are transacting with 20% cash coming into new car sales versus 15% on higher loans for new vehicles.
- 60% of all financing goes for a used vehicle.
- Leasing has picked up again, but in recent months remained low. The market is seeing more cash, at 22-23%.
- Last year, leasing was down 800,000 units, but 2023 shows better lease volume year over year.
- 1.8 million units are projected to come off lease in the next six months, September to February 2024. But next year, when the dip hits, subsequent periods will be lower, with 500,000 units the following year for a total of 1.3 million.
- The Tesla Model 3 now ranks as the first electric vehicle in the top 10 leased vehicles.
- Vehicle repossessions are coming back: Delinquencies were 1.21% of 966,000 loans in 2019 versus 1.39% now on 1.1 million loans. This will only go up. COVID caused more losses, charge-offs, and defaults in the sub-prime segment. While repo market models are not as predictive as they used to be, repos will come back despite a lack of repo agents.
RB Global Pursuing Tech-Digital Vision
In a keynote interview on Aug. 23, IARA executive director Mark Coleman questioned RB Global CEO Jim Kessler about the recent Ritchie Bros. acquisition of IAA, an associated rebranding, and market outlooks for the years ahead.
RB Global is focused on a global marketplace that connects consignors and buyers, said Kessler, whose career includes 16 years at Pep Boys starting in college. He later worked in the rideshare, private equity and vehicle collision sectors, leading to him developing the first national collision repair company in the U.S. worth $4 billion.
Kessler explained how the global pandemic led to major changes and more technology adoption at publicly traded RB Global, which runs an omnichannel marketplace. It provides insights, services, and transactions for buyers and sellers of commercial assets and vehicles worldwide. RB runs auction sites in 14 countries and a digital platform, serving customers in more than 170 countries. Its business sectors include automotive, commercial transportation, construction, government surplus, lifting and material handling, energy, mining, and agriculture.
Among its most notable brands are Ritchie Bros., a large worldwide auctioneer of commercial assets and vehicles offering online bidding, and IAA, a global digital marketplace connecting vehicle buyers and sellers.
“I started just as the U.S. locked down,” Kessler said. “I never got to experience a Ritchie Bros. live equipment auction. Ritchie Bros. had to transition into a digital environment while figuring out how to keep an environment of value for buyers and sellers.”
That meant switching the platform to wires, ACHs, and digital transactions while making sure buyers are comfortable when not being able to physically examine equipment.
“We had to get into 360-degree showings in industrial settings. No more inspectors. We bought a platform called Iron Planet to provide digital electronic bids and transactions.”
What the company found was clients and buyers still wanted to connect like they did at physical auctions. “They were sitting on phones in theaters because they wanted to connect. We turned that into more social events so they could connect and talk about the industry.”
Kessler also touched on future disruptors, especially artificial intelligence which will enable data scientists to use data and intelligence to predict supply and demand for the global marketplace, while offering better insights on how to manage it.
“We have to get back to whoever has the best and most data -- who will be the ones to succeed in the game,” Kessler said. Past data insights will no longer carry as much weight.
As an example, he cited enhanced digital images of vehicles and equipment at auctions that are 99% accurate and can provide more information in real time. That increases value at auction by more closely assessing net return on an asset.
Through an acquisition, RB Global now has data scientists constantly looking at transportation costs, and how to use information and apply data for better transactions, Kessler said. The goal is to get as many components into a predictive model as possible to produce accurate vehicle values.
With electric vehicles coming into remarketing, Kessler said safety will be a top priority at his company to prevent EV battery fires and keep work teams safe.
“As we think about the future, we will be focused on the value of EV batteries and whether they are worth more than the car. We’re taking that process very seriously.”
The battery will be a key component of figuring out the value of a used EV, which depends on the right data, he said.
In identifying what consignors and remarketers should be thinking about, he advised, “If partners are talking about the past, then you don’t have right the partners. You need partners who can take data and predict as best as possible. Supply chains are not yet where we want them to be. Who has the data and partners for the future that can give you insights easy to understand? It’s someone who can take all the data and summarize it in a useable easy format for each of your businesses.”
As to what keeps him up at night, Kessler mentioned the following:
- Enabling employees and teams who are engaged and passionate about doing work they love. In a company of 4,000 employees, it requires a culture built to accommodate them.
- Leadership also needs a vision that can shift with change and get employees out of their comfort zones. “People can get uncomfortable. You have to [encourage] everyone to commit to the vision, to stop the drama and emotions, and focus on consignors and buyers in the marketplace. You stay focused on what’s at hand. They don’t care who the CEO is, but about what we deliver.”
That means working on what makes RB Global special — a relationship with consignors and delivering on the company’s commitment, he said.
Electric Vehicle Safety: Avoiding Physical and Financial Flameouts
During a series of IARA committee roundtable meetings Aug. 23, the Industry Advancement Committee heard some sobering insights on electric vehicle battery fires from Jeff Haltrecht, executive at Call2Recycle, Inc., a Toronto-based non-profit that recycles all types of electronic batteries, including ones for EVs.
Haltrecht captivated the audience with warnings about EV battery fire risks and the detailed procedures needed to deter them at remarketing operations and facilities.
With EVs surging into the automotive market, industry education on battery storage, handling, and safety has still not caught up with demand and activity, he said. So far, there are no widely used case studies and resources based on real-life experience.
“The auto sector will transition to electric, but we’re not sure how far it will go,” Haltrecht said. “The reality is EVs are showing up at auction houses, dismantlers, and collision centers.”
Call2Recyle has led a project during the last six months to publish a 25-page guide that provides steps on how to safely handle and store EV batteries. Five automotive OEMs, including GM and Toyota, and 50 core vendors contributed knowledge to the guide.
Haltrecht relayed a few incidents where EV batteries damaged in accidents overheated, combusted, and burst into a long-burning fire that consumed nearby vehicles. Such fires can cause catastrophic losses for auctions, EV maintenance and repair facilities, dealerships, and vehicle collision centers.
In one example, an EV battery charging until damaged in left front fender-bender continued to send faulty signals to the EV battery in a car parked on a lot that caused it to overheat. Employees thought they had disabled the EV battery before closing for the day, but then discovered five crispy, ashen vehicle carcasses the next morning.
“Most of the time a thermal event will not happen, but expect it once over the lifetime of a business,” Haltrecht said. “It will happen to you.”
The good news is the eventual advent of solid-state batteries and improved battery technologies will lower the risk of EV battery fires, since lithium-ion batteries now commonly used in EVs are the most flammable in rare circumstances. But those are at least another five years away. Compared to gasoline tank fires on damaged vehicles, EV fires are far less common but burn faster, hotter (at 2,732 degrees Fahrenheit), and wider, needing a heavy and prolonged firefighting response.
Haltrecht said the first step is to set up processes for detecting off-gassing and overheating inside the battery, which does not become apparent at first. A battery can idly sit by as dangerous combustion brews inside.
Haltrecht displayed video clips from thermal imaging cameras at an EV battery burn laboratory showing how an EV battery could explode into a fire only 15 seconds after gases start to escape through cracks.
An emergency preparedness plan should include the following equipment and procedures:
- Look for dents, punctures, or cracks in the battery, indicating signs of an accident or rough driving. Rocks and curb scrapes can damage an EV battery positioned in the undercarriage, as can slashes from road accidents.
- Off-gassing is the most prevalent indicator of a “thermal incident” in an EV battery and can be detected through whisps of white or gray smoke escaping the chamber and a sweet bubble gum smell hinting of a fire within the battery compartment.
- An EV that drives through a flooded intersection or high puddles can lead to short circuit triggers resulting from water combining with electricity. Submersion in floods also can cause EV fires.
- A phenomenon known as arc flashing could easily fan an EV battery fire to other vehicles and/or burn up maintenance and repair buildings. An arc flash happens when electricity runs through the battery off-gases that generates a bursting, hissing, crackling penumbra spreading through the air. Those fiery emanations could ingnite any number of nearby objects.
- Damaged EVs coming into an auction or facility can cause fires up to 2.5 months after the initial incident.
- Auctions and remarketing operations need to train employees to contain fires and move vehicles to safer locations on a lot.
- A thermal imaging meter and four gas meters applied to a damaged EV brought into an operation can immediately detect if an EV battery poses fire risks.
- Employees inspecting and handing EV batteries should wear PPE jumpsuits and special fire-resistant gloves that can prevent electric shocks. They should only work in teams of two.
- Fire suppression systems sized based on the volume of cars and size of facility and lot.
- A fireman’s hook should be kept on hand to rescue a shocked worker from an electrocution source. Often, a person undergoing an electric shock stiffens from muscle contractions that prevent them from releasing their grip. The hook yanks the person away from the voltage source, so their muscles relax.
- Because EV battery fires often require hours of extinguishing, remarketing operations may consider re-grading or sloping the area of their lots where EVs are stored so any toxic water runoff from a firefighting flood can flow to an environmentally safe outlet.
- Damaged EVs should be parked in cement bays or “stalls with walls” to prevent flames from spreading to other nearby vehicles. Such EVs should at least be held in such bays for 14-30 days as a safety precaution.
- EV batteries should be transported in coffin-link fire-retardant containers built with steel and insulation. Each container costs about $60,000.
- If a fire breaks out, a vehicle “fire blanket” can delay a fire spread by 30-40 minutes. Workers should throw the blanket onto a fire which snuffs out enough oxygen to hold the flames underneath. That allows more time for first responders to arrive before serious damage can occur.
- Three ways to end a fire: Let it burn, spray with large volumes of water, or use heavy equipment to lift and place the vehicle into a dunk tank.
- Some insurance companies are reluctant to cover damaged EVs on commercial and business lots but may be more inclined to grant coverage if a remarketing operation has a complete fire safety and preparedness plan in place.
EV Acceleration: Separating Hype from Reality
Electric vehicle and automotive industry expert-consultant Steve Greenfield, CEO of Automotive Ventures, updated the state of the EV market and industry during a keynote session Aug. 24.
The EV market appears to have hit a plateau as 93% of the population are not buying them, due to a combination of high purchasing costs, range anxiety, and charger speed, reliability, and availability. A recent J.D. Power survey showed one out of five public chargers are not working on any given day in the U.S. Motorists drive an average of about 30 miles per day.
Like Haltrecht of Call2Recycle, Greenfield pointed out that lithium-ion EV batteries are more subject to fire risk than solid-state. As EV batteries advance, they will retain more energy and provide more range, he said.
Most OEMs will shift their new vehicle portfolios to EVs from ICE vehicles in the early 2030s, with 130 new EV models coming online in the next three years compared to 33 different models on the market in 2023. “You’ll see screaming deals for EVs in future years as OEMs are eager to sell,” he said.
For now, price drops from Tesla are causing huge losses for dealerships, many of which resist taking Tesla trades, and for OEMs that are not making any profit on their EV operations.
“Tesla has higher margins, and can afford to drop prices,” he said. “Ford may never drive profitability on their EV operations. They lose $4.5 billion per year on EVs — ICE vehicles and commercial vehicles bail them out.”
Greenfield added, “This will suck wind for a while. When will they drive profitability? Good freakin’ luck, dude.”
He described the core problem and challenge with this quote from a Wall Street Journal editorial: “Policy makers have adopted a view that EVs are the future but haven’t invented the economics to go with it.”
As a result, the automotive market will see an oversupply of EVs for a few years.
Meanwhile, China has locked up most of the minerals and ingredients to go into batteries, and processes most of them domestically. 66% of the world’s EV batteries are made in China.
Japan and other Asian countries are deliberate about owning raw ingredients, refining, building the batteries, keeping intellectual properties, and building EVs. If the U.S. goes all-electric, it will be in a vulnerable position if it doesn’t have the EV battery mining and processing on its soil. The lead time to open a lithium mine takes 10 years.
As a result of these global market dynamics and U.S. consumer behavior, “100% of GM sales being EVs is not going to happen,” Greenfield said. “Lithium prices are already very high and will go through the roof.”
He cited Toyota as a rational automaker that questions whether going all in on all electric is a viable long-term strategy. Toyota sees hybrid is a bridge technology to various forms of electric and other energy sources.
Greenfield further delineated other consequences and changes due to a more EV-centric automotive industry:
- Since EVs run on simpler drivetrains requiring fewer parts and maintenance visits, dealerships will sustain losses in their now-profitable service and parts departments. But for fleet owners and operators, that’s a plus. A typical EV has about one-third of the service work of an ICE vehicle.
- 40% of the cost of new EV is related to electronics, such as sensors, ADAS calibration, software updates, and microchips. That makes EV repairs costlier and longer.
- Nicks and dents can lead to catastrophic repair costs, prompting insurers to total and write off the vehicles, which then results in higher premium costs for EV owners. Replacing an EV battery on a Tesla can cost from $20,000 to $40,000.
- EV owners will increasingly be monitored via all the connected electronics in the vehicles. OEMs and EV providers can program the software of an EV to provide tiers of amenities, service, performance, and comfort, Greenfield explained. Want lumbar support with turbo-level driving? Buy the connected package.
- That likely will lead to more EV subscriptions, where an owner temporarily buys into the usage of an EV and adds a set of driving and experience options available through OEM-controlled electronic and software access that can regulate amenities, performance, and features that it toggles on and off based on driver preferences, Greenfield said. Such a scenario likely will anger those generations used to buying a vehicle that includes all amenities and features in one price, while digital-native younger generations will like the flexibility of ordering what they want from software-defined vehicles.
- It already costs $650 per year to subscribe to a Ford F-150 Lightning all-electric pickup truck.
- With EVs potentially more durable, drivers or subscribers could enter longer-term, lease-type subscriptions. The average car in the U.S. is already on the road of 12 years.
- EVs could lead to higher insurance cost more to repair and accidents are more likely to be total incidents. That could deter younger consumers from taking on more expensive EVs and opting for ICE vehicles.
- For remarketers, EVs pose a list of undefinable questions: How do you assess the value of EVs with various software options that can add or subtract features and performance? What about irrelevancy? How do you set resale values? What does it mean for MSRPs? Leasing terms? How do used EVs affect resale values for ICE vehicles?
- As cars collect more data, remarketers, dealerships, and related businesses will need to find more sophisticated ways to protect themselves from data privacy invasions and liabilities.
In sum, Greenfield advised remarketers to be more open-minded and child-like toward the changes that are coming. “This is is not time to dig in heels about what will and will not work.”
But he predicted ICE vehicles will be on American roads for years to come. “The U.S. government will not force consumers to do anything. We will not get to more than 50% EVs in our lifetime. I’ll be long dead, and we will still have ICE vehicles in America. It’ll take another 10-12 years before most vehicles are electric. We’ll see a good co-existence of EVs and ICE vehicles.”
GROWing Resources for Businesswomen
The Summer Roundtable kicked off Aug. 22 with a champagne welcome and launch of Global Remarketing Opportunities for Women (GROW), a new professional organization dedicated to creating a supportive business and networking environment for women in the remarketing sector.
The group held a reception where several leaders spoke of empowering women with the tools and resources for success. GROW will target women who work for auctions, consignors, wholesale buyers, and vendors.
The co-founders are: Shelly Frank, director of national accounts for DAA Rockies & DAA Southwest; Sheila Tedesco, remarketing manager of Lobel Financial; and Kelly Bianchi, president and co-founder of AuctionVCommerce LLC.
The Circle of Excellence Award Goes to a Win-Win Leader
The 2023 IARA Circle of Excellence Award recognzied Summer Roundtable emcee Joe Miller, the former executive vice president of client success for AutoIMS Remarketing Technology. Miller was cited for his active and supportive IARA and industry involvement and will be staying on in IARA roles as he pursues non-profit business mentoring and coaching opportunities.
In remarks introducing Miller, outgoing IARA Chairman and 2019-21 President Paul Seger cited his outstanding contributions to the betterment of the industry and society. “This year’s recipient really fits that description to a tee. He quickly distinguished himself in progressive sales and marketing roles. In 2009, he joined AutoIMS for the purposes of leading and redesigning one specific product. But shortly after, he was tapped to lead the entire support team and was promoted to vice president at AutoIMS, and in 2022, executive vice president of client success. In those successive roles, he made countless contributions that better many of us here in the room and helped make our remarketing industry more efficient. He has developed many strong relationships over the years, which tried win-win outcomes for everyone. Recently, he resigned from AutoIMS for the purposes of contributing to society, undergoing rigorous training and certification programs to coach others to make them more successful in business and life.”
In his acceptance, Miller thanked the IARA for the honor and recognition. “I feel like we're sitting on a pile of potential, including some actions you've taken, but you made it important that I do all the things I said I'm going to do. And so, it's an honor to contribute in any way I can, and with so many wonderful friends and relationships.”
IARA Leaders Outline IARA Plans, Vision
The now-former IARA President (2021-23), Jeff Bescher, in opening remarks Aug. 23 pointed to the new companies and technologies emerging in the remarketing industry, with new people and entities being created as some companies merge and change ownership.
He referenced the IARA’s transition to a new executive director, Mark Coleman, who will focus on improving communication among members, enhancing the alliance’s value proposition, and broadening the membership base.
Coleman followed up with IARA plans for the coming year:
- Expand social media engagement.
- Revamp the website to make sure content is no more than one or two clicks away, while working with committees to post placeholders on the website for critical content, such as buckets for A.I., consumer privacy, and tech innovations.
- Provide more value for members and lay the foundation for a bigger membership tent through such partnerships as with GROW.
- Work with emcee Joe Miller to develop a mentoring program for younger workers entering the industry to connect them with senior execs and boost their careers.
The next day, the IARA leadership held its biannual handing of the gavel as it formally installed new President Doug Turner, director of asset management at Byrider and outgoing first vice president, for the 2023-25 term.
In announcing Turner, Bescher said, “I will say it has been an honor being the president of the IARA for the past two years. My sincere thanks go out to the support and direction I was afforded from the committee chairs and co-chairs as we've changed how our organization and structure has been set up. And thanks to all the volunteers who unselfishly volunteer their time and make their areas what they are today. I would also say a special thanks goes out to my immediate predecessors and to Paul Seger, who started the current transition of the alliance to a much broader, value focused organization.
Bescher added the worked closely with Turner during the last few years and will offer a new perspective for the IARA because of his dealership focus.
After presenting Bescher with a gift on behalf of the alliance, Turner thanked past leaders, mentors, and volunteers for building a strong trade group. He outlined new changes and pursuits ahead:
A more detailed strategy for social media usage and outreach now that the IARA has a new vendor to organize its messaging.
He underscored the three key goals for IARA leaders:
- Driving better communication for members and the industry.
- Looking for ways to boost value in the IARA for members and industry groups that collaborate with the alliance.
- Lay the foundation for more membership growth and services.
IARA Sees Professional Programs Add Members
The IARA hit a record milestone of 33 new members so far this year, bringing its total to 232. A member counts as a company, not an indivdual, so the actual person headcount is much larger.
During the last year, the IARA has netted more graduates and users of its two leading professional development programs, the Certified Automotive Remarketer (CAR) education modules, and the Audit & Compliance Training program.
As of last week, the IARA has certified 373 U.S. and Canadian CAR graduates, with 22 lifetime certificate holders who have taken the continuously updated courses three times, reported Penny Wanna, the co-chair of the IARA Education & Compliance Committee and president of Auction Academy.
The four newest lifetime CAR graduates include: Kim Hunt, a client support specialist at Auto IMS Remarketing Technology; Andrew Smith, a remarketing representative at Westlake Financial; Laura Taylor, senior vice president of America’s Auto Auction; and Stephanie Gringas, business operations manager at Gauge Automotive.
Since the ACT program launched at last year’s Summer Roundtable, the compliance modules have been completed by 65 managers and 70 employees in the remarketing industry.
“ACT is intended to make sure companies can comply with consignor and bank requirements, and is a good tool for all employees,” said James Demetry, the IARA’s attorney and an attorney at Demetry, DeCarlo & Coffman, LLC in Chamblee, Georgia. “ACT gives an overview and high-level explanation on handling sensitive information,” thereby helping businesses avoid spam and scams.
Added Wanna, “This is good box to check on employee training. The work is done for you as part of IARA membership. It’s a resource. Take advantage of it.”