CarMax Finds the Used Car Tipping Point After Dismal Quarter

Dan Smith

Image of Carmax dealer and parking lot

image: Justin Sullivan (Getty Images)

CarMax is doing its best to deal with the reluctant used car market. And success hasn't been as simple as one self-driving truck startup would like.Not only that, but more morning shift Thursday, December 22, 2022.

1st Gear: Not a good year for CarMax

There comes a point where people can no longer accept ever-increasing prices, and CarMax has apparently found that point in 2022. The used-car network underperformed against quarterly earnings targets, and the stock fell 14% Thursday morning.from bloomberg:

"Vehicle affordability issues will continue to impact third quarter sales as headwinds from broader inflationary pressures, rising interest rates and low consumer confidence continue," Carmack said in a statement. There are,” he said.

Used car prices skyrocketed during the pandemic as new car production stagnated due to supply problems. This year has seen a sharp decline as supply shortages have eased and buyers have resisted higher sticker prices.

Carvana has faced similar pressures, forcing the online car dealer to look for ways to restructure its debt amid concerns about its ability to pay. There are also growing concerns about spillovers to the broader auto market, which AutoNation Inc., the largest US new-car dealer chain, has warned.

CarMax CEO Bill Nash warned in September that consumers were shying away from big purchases amid challenges over affordability.The company's second-quarter profit Shortages weighed on peers' stocks as rising interest rates and low consumer confidence fueled further concerns.

This is evidenced by a 28% year-on-year decline in overall sales and a 46% decline in wholesale car gross margins. Net profit he plummeted by 86%. CarMax put the brakes on car buying last quarter. Reuters We are also taking steps to add and reduce marketing expenses. Temporary suspension of share buybacks.

Used car prices are dropping, but it doesn't give you a grand idea.wholesale price is Down about $3,000 on average from 2021 peakaccording to JD Power, at $25,000, still about $10,000 more than pre-pandemic.

Second gear: not a great year for Tesla

Tesla shares fell to $137.80 on Tuesday, their lowest since November 2020. It sounds like a big loss in isolation, but in context it's even worse.Courtesy of Bloomberg car news:

Given its volatility and CEO Elon Musk's fickle style, the stock was never for the faint of heart. Still, the scale of this year's crash is staggering. By Tuesday's closing, he had lost more than 60%, wiping out about $626 billion in shareholder value, at the pace of a record annual decline.

Two years after Tesla joined the S&P 500 Index, investors are faced with a new reality. Increasing competition from established automakers threatens Tesla's dominant market share. Analysts also see little pipeline to reignite the kind of ferocious demand for equities seen in 2020. Meanwhile, the stock is about 40% below the level it joined the benchmark.

"All talk of Tesla being a leader in everything it does is fading," said Jeffrey Osborne, an analyst at Cowen. “Tesla stocks tend to work best when they can create an enthusiastic narrative that something is coming.

It's a little strange to read "nothing coming" as a knock against Tesla, which has always been in this cycle of making big promises, underdelivering, or at least delivering very late. This brand has all, it's strange to hear that Tesla was ultimately criticized and evaluated in the same way as any normal company. That is, based on the product or lack thereof. But the company is still worth $440 billion, so it's probably okay.

Third gear: Volvo doesn't want people to hate

BMW and Mercedes-Benz have wasted no time charging owners subscription fees for features that don't really seem to constitute functionality.flat Honda The premise is drooling. Volvo doesn't want to be like that. take it out again bloomberg:

"If you charge for software updates, that must make a big difference to the consumer's bottom line," Volvo Chief Operating Officer Bjorn Anwoor said in an interview earlier this month. “We will not ask a person who bought a car for 1 million kronor ($96,500) to pay another 10 kronor to heat the seats.”


Anwall believes Volvo will generate little additional revenue from software until mid-2010. Volvo only charges extra when major upgrades such as autonomous driving modes become available. “You don't have to hold the wheel, which is a huge benefit for the user.”

The rest of the article is about the state of Volvo's software. philosophy of development, And the current supply chain situation. Volvo has become the software leader among automakers in recent years, so it's worth reading for these other reasons as well. But invented, perfected, It was built long before you got your car.

Gear 4: Speaking of supply chains

Reuters In this long story of limited offerings, there's a bright spot for where suppliers are today. Things look better than they used to be, but there is still a long way to go.

The situation has improved in recent months. For example, there is less backup of ships waiting to be unloaded at US ports. According to the latest monthly survey by the Institute for Supply Management, the percentage of respondents who say their suppliers deliver faster than the previous month is the highest since 2009, while the percentage of respondents who say they are slow is up from last year. It fell below past trend levels from a record high. Also, many items are now more readily available.

But supply chains remain far from normal.

"Lovingly, I whack-a-mole every week with suppliers who don't deliver," he said. [Calder Brothers Corp. vice president of operations Glen] Calder.

He's not alone in this new game. A recent survey of 179 of his companies by the Equipment Manufacturers Association said 98% were facing problems with continuous supply his chain. Even more ominously, nearly 60% say the problem continues to get worse, astonishingly given recent reports such as ISM data that supply flows more freely.

As always, how things are going depends a lot on who you ask.

Fifth gear: tough times for TuSimple

Self-driving truck startup TuSimple has a history of government scrutinywill lose a quarter of its workforce, the company said Thursday.courtesy Reuters car news:

TuSimple Holdings Inc. said Wednesday it will lay off 25% of its workforce, or about 350 employees, as the self-driving truck company seeks a way out of the economic turmoil that has raged throughout the year. .

The company said it expects to record a one-time claim of about $10 million to $11 million, most of which will be recorded in the fourth quarter.

The job cuts also follow the dramatic dismissal of CEO Xiaodi Hou in October. An investigation by the company's board of directors revealed that some employees spent paid time last year at Hydron Inc., a startup working primarily on self-driving trucks in China.

In August, TuSimple also underwent a "safety compliance investigation" from the Department of Transportation. One of its self-driving semis self-driving into a cement median.People inside the company have expressed concerns to management, especially about the lack of software review and oversight, and they clearly aren't listening.That It seems to be a pattern for self-driving startups,is not it.

Reverse: the best backmarker

What are you trying to say about Super Aguri, Honda's short-lived and half-hearted assault on the F1 B team tasked with driving around in last year's car.

Neutral: Merry Christmas from your favorite carolers

Credit: Fan of Sebastian Vettel via YouTube

Kimi is like a kid who forgot how to move in a Christmas pageant, but he still has a smile on his face.