David Is joined by Wyatt Carter of Richmond Auto Auction to discuss the pricing we’re seeing in the automobile industry.
About this segment of Blackbird TV
Guest: Wyatt Carter, General Manager, Richmond Auto Auction. To learn more about our guest, visit RichmondAA.com, or call 804-232-7355.
Recorded: May 25, 2021
Published: June 8, 2021
Segment transcript
A very exciting episode of Blackbird TV today. I have Wyatt Carter from the Richmond Auto Auction in Richmond, VA is our guest on Blackbird TV. Hello, Wyatt. Thanks David. I appreciate you taking the time out to talk to us today. I was recently doing an appraisal and I was absolutely dumbfounded at the increase in value and car prices are absolutely nuts and I thought I have to talk to an auto auctioneer about this. Wyatt, what’s going on out there? You know, really it’s a perfect storm of problems we have going on right now and then. I’m sure, everybody remembers back to their economics class and heard a little thing called supply and demand. We’re running into perfect storm of that right now, and really I know a lot of folks have probably heard about the chip shortage we have going on right there. And commodity problems or what have you, but that’s really just the tip of the iceberg of what’s going on in new car vehicle problems. Just over a year ago, everybody can remember the world was shut down. Manufacturing ceased, supply chains are now catching up with that problem. It’s hitting us all at the same time. The manufacturers have shortages of commodities, be it chips, be it weather, foam, plastics and all those supply chains are really coming to coming to a head right now. Then you throw chip shortage on top of it. Then you throw in an increased demand for people to go out and buy cars and so dealers are having to rely on used car inventory more than ever because they can’t get these new cars ’cause they’re just not being produced by the new car manufacturers nearly quick enough so they’re they’re having to really focus on the used car market pretty intensely because it’s their only option to sell. The federal government has put a lot of programs in place now that have put some money back into the pockets of individuals out there who are using it to go upgrade a car, buy a new car by you know, by another vehicle for maybe a child. And it’s really just kind of a perfect storm of happening all at the same time where there’s money available, shortage of new cars ultimately becoming a shortage of the used cars as a result of increased demand. So really in a brief nutshell, that’s kind of what’s going on. So you mentioned the chips and that’s what you read about in the newspaper and you see it on TV and they’re talking about the chips, the chips. You also mentioned a lot of other things, and I interview a lot of people in many different segments, and we’re finding that there are similar shortages and supply chain issues across many different verticals. It’s not just the chips that are hurting the car manufacturers and squeezing them right now, it’s other things is what you said correct? Absolutely. So the chips the chips are by far the most publicized when you hear about in the news the most, but really the shutdown has caught up with us. OK, so we we cease manufacturing for several months., at one point. The UAW went out… They stop manufacturing vehicles and then also not just the you know, the commodities that aren’t available to the manufacturers right now, but also a lot of their suppliers. Suppliers that make tops suppliers that make tires that make wheels that aren’t necessarily manufactured in house by the manufacturers are also contributing to just they can’t get enough so you’re hearing about manufacturing, shutting down for a couple of weeks, Ford’s doing it right now, all the time. So there you know they can’t get enough transmission, so they’re going to shut down because of a certain component made at the manufacturing plant in Mexico, they can’t get enough to assemble them here in the United States, so they shut down for a few weeks until they get enough to restart again or they can’t get enough hardtops for certain model so they’re having to shut down for a period of time. So hopefully all this catches up with one another at some point in the future, but we don’t know when that’s going to happen. And if you listen to the Fed, they say that this is very clearly a temporary constraint on the system, and it won’t be inflationary. What do you think about that statement? I think a constraint on the system and inflation or they may be tied somewhat, but, two different things. This problem that we have right now with supply demand increased values of cars in the shortage of new cars, that isn’t forever. That will correct itself, but it will take some time. Most experts I talk to say that this is going to last likely into 2022. Before you know new car vehicle levels, start normalizing and then you start to have pricing changes on used cars so that I feel this temporary. But it’s hard to ignore the amount of money that the federal government has pumped back into the economy, but that doesn’t have some effect on inflation, you know, I, I can’t remember the exact number of how many trillions of dollars were put back into the economy, but it’s hard to think that is not, you know, printing that money is not diluting the supply of what’s out there right now and will contribute to inflation at some point. I didn’t know there were that many zeros available. My son recently called me. He sold his car. He sold it for more than I bought it for four years ago. Is this uncommon right now? It is not. It is all too common of a story I hear, not just from individuals you know, but banks. They’ll run one vehicle one week, and then for some reason decide not to sell it, and it brings a ton more the next week ’cause the books are pushing these values up more and more. Every entity right now that’s tracking used car prices whether that be Manheim. Whether that be JD Power, whether that be NADA, Black Book… They’re all seeing record increases in the used car indexes, numbers that have never been seen before. And yes, I mean vehicles that were worth, you know, X two years ago are worth more than that now, in many cases, especially with desirable segment, like a truck and SUV. There’s huge demand for them because the simple fact that people that want to go out and buy a vehicle have to, in most cases resort to a used vehicle because the new vehicles are not out there, it’s just the way it is. You can boil it right down to very simple supply and demand to explain it, but it’s it’s really fascinating to look behind the curtain to see the other things that are happening that are causing these price increases. 2022 is when we come out of the tunnel. You heard it here. Wyatt Carter from the Richmond Auto auction, part of the Motley’s Auction Group, say “hi” to Mark, I appreciate your time. Appreciate it, David, thank you.