Auto Dealers Report 2021 Profits Will Break Previous Record

With so many articles discussing how poor automotive sales have been through 2021, one could be forgiven for thinking this was going to be a hard year for anybody owning a dealership. However, the reality of the matter is that it’s a seller’s market and those who can sell are making a killing off everyone else’s misery.

The National Automobile Dealers Association (NADA) has reported that the ongoing deficit of product has helped the average store rake in more money than they did in 2020, breaking the previous twelve-month profitability record. Today’s average dealership is reporting a net pretax profit of about $3.38 million through October for 2021. That’s more than twice what was tallied within the same timeframe last year and really goes to show how much money can be made when the customer’s needs are the only items being discounted.

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December Auto Sales Still Looking Weak

While the official figures haven’t dropped, just about every outlet tracking new vehicle sales is projecting a significant decline in volume for December 2021. Showrooms have been trending toward the minimalist aesthetic since 2019 with the pandemic kicking things into overdrive as supply bottlenecks nullified practically every manufacturer’s ability to produce anywhere near its normal pace.

Last December was bleak, with sales falling by around 5 percent for the month as the typical transaction price for automobiles set new records. The U.S. market only saw 1.54 million sales, the lowest volume witnessed since December of 2014. But 2021 volumes are shaping up to be decidedly worse. This month is on track to fall by anywhere from 23 to 30 percent with retail sales barely cresting 1 million units as transaction prices for both new and used vehicles surpass all previous metrics.

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Ford Has Officially Run Out of Maverick Pickups

Word on the street is that Ford’s new “compact” pickup has been such as smashing success that the automaker is fresh out of product — at least in hybrid guise.

While the 2.0-liter turbo offers substantially more power and towing capability, the default 2.5-liter Duratec four-cylinder gasoline engine with a hybrid electric motor still produces an agreeable 191 horsepower and 173 lb-ft of torque. Mated to Ford’s e-CVT gearbox, the Environmental Protection Agency suggest the pickup delivers 42 mpg around town and 33 mpg on the highway. Considering that the vehicle retails just below $20,000 (before you account for taxes and dealer fees), offers a conservatively sized truck bed, and seats five, it’s little wonder that Ford’s tapped out in an era where people are being forced to tighten their belts.

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Opinion: Why Dealers Have Earned Massive Markups

Earlier this week, someone sent me an addendum sticker from Mercedes-Benz of Selma, in Texas. The addendum added two line items to the sticker price. The first line item was VIN etching, at $199. That’s controversial enough, since some people have said that VIN etching is the scam of the decade – but those people haven’t seen the second item: A “Market Adjustment” charge for $125,000.

You read that right. One-hundred and twenty-five thousand U.S. American dollars – and that’s on top of the Mercedes-Benz G63 AMG’s already steep $178,000 asking price. But, frankly, it’s not the 70 percent markup that’s the most offensive thing here, It’s not even the $199 charge for the VIN etching.

Frankly, the worst part of this is that MB of Selma will very likely get their markup. And, when they do, they will deserve every single penny.

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UK Vehicle Registrations Fall Into Bottomless Pit

Despite manufacturers still managing to turn a profit, the automotive sector hasn’t been in the best of health these last few years. Growth appears to have plateaued in most Western nations, encouraging companies to cater this business toward other markets, supply chains have also been negatively impacted by the pandemic — with semiconductor shortages hindering production schedules on a scale we’ve not seen since the Great Recession.

It’s a bad situation and rumored to get worse if the warning cries of economists are to be believed. But there’s also mounting evidence to support their claims. The Society of Motor Manufacturers and Traders (SMMT) recently reported that vehicle registrations in the United Kingdom fell by roughly 35 percent in September vs the same timeframe in 2020. This is relevant because the month typically represents the second-busiest period for the country and numbers were already low due to production stops created by coronavirus lockdowns.

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Will Chip Shortage Dethrone GM's Sales Dominance?

Ninety years. That’s the amount of time that General Motors has led the sales charts in the U.S.

That may change this year, according to industry bible Automotive News, because of the ongoing microchip shortage.

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German Automakers Aren't Interested in Returning to Normal

With supply chain hiccups crippling the automotive industry’s ability to conduct business as normal, resulting in rolling production stalls and skyrocketing vehicle prices, manufacturers looked to be in serious trouble throughout the pandemic. But we learned that wasn’t to be the case by the summer. Automakers were posting “surprise profits” because people still needed cars. We also found out there’s been a growing appetite for expensive (see: highly profitable) models and the industry saved itself a bundle by not needing to pay for office space or line workers, as COVID restrictions kept everyone at home.

Having considered the above, most automakers are seriously considering how they can further leverage this new modality. German manufacturers have even said they’re not that interested in going back to the normal way of doing things — instead electing to intentionally limit volumes and focus on high-end models that will yield the greatest return on investment. But it’s not quite the curveball it seems, as some companies were already ditching the volume approach.

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Kia Embraces At-Home Test Drives

With various government and corporate entities pushing rolling restrictions to our everyday lives, the automotive sector has gotten extremely creative in how it does businesses over the last nineteen months. Everything is being digitized so business can be conducted remotely, including sales. But this creates an issue for shoppers who — and this is going to sound crazy — actually want to see and familiarize themselves with one of the largest purchasing decisions they’re likely to make this year before committing.

Luxury brands were already testing at-home test drives and subscription-based vehicle exchange programs by the start of 2020. But we’re now seeing more pedestrian brands trying similar strategies to reach customers from beyond the confines of the dealership. Kia even recently announced a pilot program to sync digital sales with at-home test drives. Called “Kia@Home,” the service allows shoppers to schedule a vehicle to be sent to their home for an hour-long assessment.

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Opinion: Subaru is Doing Everything Just About Right

Tim asked the other day if I might work up an opinion piece on the current state of Subaru. “Sure,” I said, and immediately felt salty. In mind were many criticisms on how the smallish automaker is doing things currently. After that initial salty reaction, I got to thinking about Subaru’s current offerings and recent trajectory more critically. And I realized they’re doing most everything just as they should.

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Dealership Markups Are Getting Insane

Car buyers and market observers are used to seeing large dealership markups on models that are tough to get — first editions of popular cars, usually, or models that are produced in small numbers, or both.

It’s no shock to see the Ford Bronco or Chevrolet Corvette marked up by thousands of dollars. Motor Trend reported markups of $30K on Broncos, for example. C8 Corvettes are also being marked up like crazy.

While annoying, it’s somewhat understandable, given how the franchise-dealer system works, as well as how basic capitalism and supply and demand work. You don’t have to like the phenomenon, but the logic behind its existence is sound.

Still, we draw the line at an almost $6K markup of a Mitsubishi Mirage.

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CarMax On Used-Car Buying Spree As Market Madness Continues

With used-car prices soaring, retailer CarMax has been busy swooping up used vehicles to flip for sale.

That could be a solid strategy since the chip shortage has left new-car dealers bereft of vehicles on the lot.

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Toyota Pulls Japanese Olympics Ads As Games Come Under Fire

The 2021 Summer Olympics, set to be held in Tokyo starting Friday, are proving to be quite unpopular, at least in Japan. And apparently, Toyota has taken notice and pulled the plug on its planned local advertising during the Games.

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It's Not Just Pricing, Auto Loans Are Also Getting Out of Hand

As you’re undoubtedly aware, now isn’t the best time to purchase a new vehicle. While you can currently sell your ride for more than it’s realistically worth, the economy is anything but stable as inflation and supply shortages gum up the works. A lack of semiconductor chips has caused the automotive industry to stutter endlessly throughout 2021, with the issue getting so bad that some manufacturers have been building unfinished vehicles just to give their employees something to do. Ford is even mulling over a strategy to ship those units directly to dealerships so they’ll have something on the lot — effectively making its retail network responsible for final assembly.

But the logistics nightmare is only part of the story. Automotive loans are also becoming untenable as terms stretch out endlessly. Cars continue getting more expensive and the average consumer is losing their buying power. The preferred solution is for financiers to extend agreements so customers can continue making the same monthly payments while accruing more on interest over the duration. While effective in the short term, and bound to make banks money as we’re all driven deeper into debt, one wonders how this plays out on a grander scale.

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Report: GM Not Bothered By Corvette Markups

Chevrolet’s C8 Corvette has been in demand.

So much so that some dealers are commanding markups up to $100K over MSRP.

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You Would Be Crazy to Buy a Used Car Right Now

I touched on it in the newsier post about used-car prices down below, but in normal times, scribes like us sometimes advise our family and friends who are car shopping to buy used, because a lightly used car can be in like-new condition and cost significantly less. And someone else has taken the initial huge depreciation hit.

These are not normal times.

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  • Oberkanone My grid hurts!Good luck with installing charger locations at leased locations with aging infrastructure. Perhaps USPS would have better start modernizing it's Post offices to meet future needs. Of course, USPS has no money for anything.
  • Dukeisduke If it's going to be a turbo 4-cylinder like the new Tacoma, I'll pass.BTW, I see lots of Tacomas on the road (mine is a 2013), but I haven't seen any 4th-gen trucks yet.
  • Oberkanone Expect 4Runner to combine best aspects of new Land Cruiser and new Tacoma and this is what I expect from 2025 4Runner.Toyota is REALLY on it's best game recently. Tacoma and Land Cruiser are examples of this.
  • ArialATOMV8 All I hope is that the 4Runner stays rugged and reliable.
  • Arthur Dailey Good. Whatever upsets the Chinese government is fine with me. And yes they are probably monitoring this thread/site.