Cox Automotive Competitor Briefings

Part
01
of six
Part
01

Carfax Briefing

In the past 10 days, Carfax announced that its service shops have implemented creative safety/preventive strategies including "white-glove pick-up and drop-off options." Carfax's Public Relations Director said that the stay-at-home order has caused significant drops in retail sales of used cars, but there is nothing specific to the recent negative economic impact on the company. Also, Carfax has only made one statement in the past 10 days.

Statements

  • Carfax has not made any press statements/releases since February 26, 2020, and its blog focuses primarily on automotive advice and news. A search through the public domain for any statements from media resources and third-party sites did not provide any relevant information.
  • On April 28, 2020, Carfax announced on its Facebook and LinkedIn profiles that its service shops nationwide have "implemented creative strategies to help keep their employees and customers safe, such as white-glove pick-up, and drop-off options for those who need essential work done on their vehicles."

Economic Impact

  • In an interview with MotorWeek on April 28, 2020, Carfax's Public Relations Director Emilie Voss discussed the impact of COVID-19 on the used car industry and the expected changes in the future. She mostly provides information on the economic impact of the pandemic on the used car market (the market in which Carfax operates), with almost no mention of Carfax.
  • Voss said that pre-COVID-19 2020 was "shaping up to be a record year" for the entire used car industry. However, the stay-at-home order has caused significant drops in retail sales and dealers have been forced to close "the sales side of the business" in most states.
  • Voss also reported that they have been seeing some positive trends on the consumer side as customers are still looking to buy from their listings. She also said that they have seen "customer-dealer connections reach pre-COVID-19 levels" in the last few days.
  • Voss adds that while it may be difficult to predict how the pandemic will affect their business and the overall used car market, there might be an influx of newer used cars in the market in the coming four to six months as many vehicles come off lease, which would mean lower prices. However, prices of used vehicles aged less than three years may go up in the next two years since the pandemic has impacted manufacturers' ability to produce new vehicles.

Innovation

  • Carfax, Inc.'s Carfax for Police introduced virtual events on how Carfax's data can be of help the police. The first webinar was held on April 30, 2020, for the benefit of the New York police, and the second targeting Florida police is scheduled for May 5, 2020. These are the only signs of the company's current innovation based on a review of the company's website, communication portals, social media channels, and the public domain.
  • On April 28, 2020, Carfax posted on its social media accounts that its service shops have implemented creative safety/preventive strategies including "white-glove pick-up and drop-off options."
  • Additionally, Voss made some statements on how dealers are adopting to the current situation in an attempt to meet customer needs. In the first weeks of the stay-at-home period, they started offering online financing and shopping experience. Also, dealers are only accepting scheduled showroom visits, making home deliveries, and going to owners' homes to service vehicles.
Part
02
of six
Part
02

Cox Automotive Briefing

The CEO of Cox Automotive has stated that the company was following CDC guidelines to keep its employees, clients, and partners healthy. Cox Automotive is innovating by activating its Business Continuity Plan and launching new digital retailing tools. The company recently reported a drop in new light-vehicle sales by 53% YoY and 37% MoM in April 2020.

What the Company has Communicated

  • On May 1, the CEO's statement about the company's response to the COVID-19 crisis was updated. The response stated that the company was in close contact with the government and health officials for monitoring the situation. The company has requested its employees to follow CDC guidelines, avoid face-to-face meetings, limit travel, work remotely, and observe appropriate sanitation practices.
  • On April 30, NextGear Capital (subsidiary company) announced a relief package for its dealer network. The company deferred more than 160,000 payments in the first 30 days of April and announced to defer Curtailment and Extension payments for eligible Floorplan Advances till May 30, 2020.
  • On April 30, the company announced a discount of 25% on Autotrader listings fees for June 2020. Additionally, the company announced not to charge a fee for SnapLot 360 and digital contracting on Dealertrack uniFI till June and August, respectively.
  • On April 28, the company CEO was interviewed by Jim Fitzpatrick from CBT News; they discussed the company's actions to help dealers during the pandemic. The CEO said that the company is moving forward to achieve 100% of wholesale vehicle trading with its online portals.
  • On April 27, Cox Automotive Forecast reported that new light-vehicle sales were expected to drop by 53% YoY and 37% MoM in April 2020.

Signs of a Recent Negative Economic Impact on the Business

  • On May 1, the company released an industry update about the economic effects of COVID-19 on the US auto market. The article reported automotive sales dropped by 50% for April 2020.
  • On April 28, the company released a report about Ford's Q1 2020 US market performance. It stated that Ford Motors would lose $2 billion due to the COVID-19 with sales impact of 11% YoY. Additionally, the company reported that vehicle incentives accounted for 19% of vehicle sales compared to just 2.4% in February.

Signs of a Recent Negative Impact on the Company

  • On April 30, Dale Pollak, EVP at Cox Automotive, reported that dealers were concerned about the large difference between Manheim Market Report (MMR) values and real-time auction sales prices for their vehicles.
  • The rate decline for wholesale transaction prices was faster than MMR can calculate for actual cash selling prices. Hence, the valuation references led appraisers to value vehicles at a considerably higher rate than their true cash value.
  • The company has started publishing a daily index adjustment called MMR Retention. Manheim has been encouraging dealers to use the daily index reference with MMR itself to appraise vehicles and calculate the right prices.

Ways in Which the Company is Currently Innovating

  • On May 1, Dealer.com launched two digital retailing tools for dealers to communicate with their customers more efficiently. The company partnered with LivePerson to launch Video Chat and CoBrowse tools for its dealers.
Part
03
of six
Part
03

Carvana Briefing

Recent statements by Carvana and related analyst commentary indicate that the auto retailer will likely experience downbeat earnings for the first quarters of 2020 due to the coronavirus pandemic.

Company Statements — Last 30 Days

  • Over the past 30 days, Carvana has published two formal press releases, one of which revealed new details about the company's business.
  • Specifically, on April 8, Carvana announced that it will report its first-quarter 2020 financial earnings on Wednesday, May 6 following the close of financial markets.
  • While this press release contained the fairly standard details associated with corporate earnings announcements, the decision to report earnings in the evening indicates potential challenges for the businesses' recent sales and profitability.
  • In particular, Investopedia notes that companies often report earnings results after the close of stock markets when they are preparing to "bury" bad news, given that after-hours briefings typically garner lower investor attention and help "minimize scrutiny."
  • Since then, Carvana has shared several other statements related to is business on the company's various social media channels (e.g., Facebook, Twitter).
  • For example, on April 16, Carvana revealed that the company is actively "working with state and local governments" amid the COVID-19 outbreak, most likely in an effort to comply with restrictions while maintaining sales and operations functions.
  • In addition, during the past 30 days, the company published a variety of blog articles and social media posts highlighting Carvana's continued commitment as a business to ESG goals, including its charitable contributions to the community and interest in supporting the environment with eco-friendly vehicle offerings.
  • Meanwhile, other corporate statements reiterated Carvana's larger strategy to embrace social distancing during the pandemic, including a CNBC interview with Carvana CEO Ernie Garcia.

Signs of Recent Negative Economic Impact — Last 10 Days

  • On May 1, The Motley Fool highlighted how financial stocks are suffering due to the coronavirus, adding that used-car retailers such as Carvana are likely to experience financial challenges due to the fact that the pandemic has led to a buildup in used and off-lease vehicle supplies.
  • However, the investor trade also noted that Carvana may be well-positioned to weather this negative economic impact, given that the company has approximately 15 months of cash after recent financing options.
  • In parallel, separate articles published in Seeking Alpha on April 27 and April 28 discussed that Carvana and other auto retailers are struggling from a larger, "virus-fueled shutdown" across the industry and global economy.
  • In particular, both articles asserted that Carvana's stock is overpriced given the current "economic situation," and its negative impact on both consumer demand for cars as well as car prices.

Company Innovation — Last 10 Days

  • Most notably, an April 7 article published in Barron's highlighted Carvana's recent innovations in its business model and processes, including the company's current expansion of vending machines to eight locations and ever-improving ability to approve financing and car trades in a few minutes.
  • Additionally, the April 27 article found in Seeking Alpha briefly noted that the company is "making significant progress" in evolving its pricing strategy to better capture gross margin from every vehicle sale.
Part
04
of six
Part
04

Car AutoNation Briefing

Car AutoNation is promoting themselves as a high value for low cost option in consumer automotive sales and service. Their communications also message their financial stability, in that they returned $80 million dollars in government relief. They also appear to be the only national chain offering vehicle sanitization to the public.

Car Nation's Communication

PPP (Paycheck Protection Program)

  • AutoNation Executive Vice President Marc Cannon said that the company’s board voted Thursday to return the funds even though the company had acquired them under the rules created by Congress and intended to use the money only to pay employees.

Financial Enticement

Sanitizing

  • Car AutoNation is offering a car sanitation service for privately owned vehicles. Cleaning is done with PrecisionCare powered by Clorox® Total 360®.
  • For $29.95, the service is advertised as killing 99.9% of bacteria in as little as 5 seconds. Also, eliminates odors caused by bacteria, and inhibits the growth of mold and mildew.

Negative Economic Impact

Innovation

Sanitizing

  • In response to COVID-19, Car AutoNation appears to be the only national car dealership that offers sanitizing services for personal vehicles, regardless of their purchase origin.

Reputation

  • Only one third of the car sales organizations use and market their reputation on Reputation.com. Reputation.com takes customer reviews and other indicators to create a measurement that provides a Reputation Score, and AutoNation has one of the highest in the industry.
  • Their reputation Score includes a total of nine metrics including volume, frequency, and reach that make up the full customer review picture.
  • Reviews are submitted by location/dealership and sent to the stores, where the corporate leadership team works to continually improve the customer experience.
  • Reputation Scores are authentic. They are based on customer reviews and calculated independently by Reputation.com.

Part
05
of six
Part
05

Car Gurus Briefing

During the period of April 24th to May 3rd, CarGurus has released statements or posted articles on its Customer Sentiment Surveys, discounted rates for dealers, and the positive signs it has seen indicating that consumers still want to purchase cars. While the company has had to lay off some staff members and has seen a decrease in its share price, it remains focused on promoting contactless services throughout its dealerships.

Press Releases

  • In a post on its Dealer Resource Center on April 27, 2020, CarGurus reminded dealers that waning consumer confidence would delay purchases, but it wouldn't stop them. As such, it encouraged dealers to modify the way they interact with customers. Two of the suggestions were virtual appointments and at-home test drives. The company also noted that increased inquiries from potential customers.
  • On April 28, 2020, CarGurus issued a press release regarding the results of its Customer Sentiment Survey. The survey found that consumers who were interested in buying a car online increased from 32% before the COVID-19 pandemic to 61% after. It was also projected that 39% of persons who used ride sharing services prior to COVID-19 would not return to doing so when things returned to normal.
  • A day later, the company released information about its discounted rates for its dealers. The 20% discount would apply for the month of June, and is part of CarGurus' initiatives for cost relief to its subscribing dealerships. The discount is meant to encourage dealers to maintain contact with potential customers.
  • On May 1st, CarGurus released its Canada-specific Customer Sentiment Survey. When compared to the US-based survey, a similar percentage of persons were interested in buying cars online. When it came to ride-sharing services, however, 51% of Canadians had no intention of using them when the pandemic has passed.
  • On the same day, CarGurus published a post to its Dealer Resource Center noting that there were already signs of a positive turnaround for the business. The company mentioned increasing site traffic and stated it was possibly due to consumers' tendencies to research cars for at least a month before committing to a purchase.

Negative Impact

  • Changes in consumer behavior have had a significant economic impact on CarGurus because it had to close its showrooms. As such, the company suspended its 2020 outlook.
  • It has also been reported that the company has needed to lay off 13% of its staff complement since the COVID-19 pandemic.
  • Additionally, while the company's share price has improved from where it was a month ago, it's still 36% less than it was last quarter.

Current Innovations

  • Along with continuing dealership discounts in the US and UK, CarGurus has provided contactless solutions for its dealers to implement. This will allow dealerships to maintain relationships with their potential customers whole remaining distant.
  • The company has also provided its dealerships with the resources they need to highlight their COVID-19 related services. This includes updating their websites, taking advantage of social media, and chatting with customers 24/7.

Research Strategy

When it came to CarGurus' new innovations, the company seems to be building on its previous contactless services instead of developing anything new. This may be because it's proving to be a helpful and successful strategy for dealing with potential customers. Based on what has been published within the stipulated time period, the company has been focused on helping its dealerships maintain the technological tools necessary to work with their customers during the pandemic.

Part
06
of six
Part
06

Car Buyer Behavior Changes 4/24 - 5/3

Several automotive industry consumer behavior shifts were noted during the past 10 days (April 24-May 3, 2020). These include a positive change in weekly auto purchase momentum during April, increased demand for 0% financing, higher value car purchases, economic and financial concerns deferring auto purchases, and usage of contactless used car buying processes. Top car buying search topics and queries in the 7 days ending May 3, 2020, were related to buying new and used automobiles and researching and securing financing and insurance.

Upward Trend in Car Buying Throughout April Despite Overall Sales Declines

  • On April 30, 2020, Edmunds forecasted a 52.5% drop in April 2020 US auto sales compared to 2019.
  • According to Edmunds, April 2020 monthly car sales will be the lowest-volume month since 1990.
  • Despite these year-over-year declines, sales appear to have increased steadily throughout the month of April.
  • Tyson Jominy, Vice President, Data and Analytics at J.D. Power, said auto sales decreased each weekend throughout the month of March, but have increased approximately 5% each week throughout April.
  • Hyundai reported a 39% sales decline in April 2020, compared to April 2019, but an increase of 6% in car sales compared to March 2020.
  • Drivers of the reversing consumer auto purchasing trend include discounts offered by automakers, lower financing rates, and some states loosening COVID-related dealership opening restrictions.

Increasing Zero Percent Financing Deals

  • Zero percent financing deals accounted for 25.8% of all financed automobile purchased in April 2020, compared to 4.7% in March and 3.6% in February.
  • This is the highest percentage of monthly zero percentage-financed sales since Edmunds began tracking this metric in 2004.
  • The prevalence of zero percent financing dropped the overall average new car purchase interest rate by 25%, to 4.3%, in April.
  • General Motors is currently offering qualified buyers zero percent financing for 84 months. Fiat-Chrysler is also currently offering prospective buyers zero percent financing, with an 84-month loan term.

Buyers Financing Higher-Value Car Purchases

  • While car buying is down overall in April, those who are buying are spending more on each purchase, reflected in growth in the amount financed and decline in down payments.
  • According to Edmunds, the average amount financed for new cars grew to $37,561 in April 2020 (a record high), while the average down payment declined by 31%, from March to April, to $2,159, a record low.
  • Longer loan terms associated with recent car financing incentives may be driving this trend to toward higher-value purchases.
  • Car buyers are taking on higher levels of financing on both new and used cars.

Economic Concerns and Financial Constraints Delaying Car Purchasing

  • According to an IBM survey of 25,000 US adults in April 2020 (published May 1, 2020), 25% say that a lack of confidence in the economic outlook (both United States and Global) will impact their decision to purchase a car.
  • One-third of respondents in the IBM survey said their personal finances would impact their decision to purchase a car once COVID-19 restrictions are lifted.
  • Twenty-five percent of US adults report they will delay car purchasing by 6 months or more, with many consumers saying aggressive financing deals will not encourage them to move their purchase decision earlier.

Contactless Used Car Buying

  • Online shopping and purchasing used cars is a recent trend observed among car buyers.
  • Online used car sales systems, supported by technology platforms, provide benefits including a convenient process for buying and selling, non-negotiable pricing, and fast approval on trade-ins and financing.
  • Carvana, who offers this contactless approach to used car buying (without any traditional dealerships), recently moved to #4, from #8, in used car dealer rankings.
  • In April 2020, Carvana CEO and Chairman, Ernest Garcia noted Carvana's sales have not declined as much as other dealerships as a result of COVID-19, attributed to their contactless delivery system implemented during COVID-19, as well as deferred payment options.
  • On May 1, Carmax announced contactless curbside pickup for new and used cars, with recommendations to complete most of the process online prior to the pickup, including pre-approval for financing and receiving a trade in estimate.
  • May 2020 used car reviews focus on the simplicity of the Carvana contactless used car buying system, including, "Everything about car buying through them was convenient. Browsing the cars was easy, and they delivered it to my door...." and "The process was very easy, customer service was exceptional and they kept in constant contact with me throughout. The vehicle was exactly as described and the photos were completely accurate...."
  • An April 30, 2020, article by AARP notes that online, contactless, car buying and shopping has shifted from an 'intriguing" means of car shopping to something that has become 'explosively important' to buyers in recent weeks.

Top Search Queries/Topics Related To Automobile Purchases

  • Top car buying search topics and queries in the 7 days ending May 3, 2020, focus on searches related to buying new and used automobiles, and queries about researching and securing financing and insurance.
  • Top past 7 day search topics related to automobile purchases (car buying) include 'Car-Transportation mode', 'Used car', 'Car dealership', 'Credit', and 'Loan'. The appearance of credit and loans as a top search topic may be related to recent financing incentives being offered by car dealerships.
  • Top past 7 day search queries include variations on those related to used car buying, new car buying, when buying a car, car loans and car insurance. Specific top queries are 'buying used car', 'buying a used car', 'when buying car', buying new car', 'buying a new car', 'buy a car', 'cars', 'car loan', and 'car insurance'.

Buying a Used Car

  • This search query is related to automobile purchases as it yields results related to the process of buying a used car (such as this US News guide to used car buying), local dealerships, and 'cautions and watch-outs' associated with buying a used car.

Buying a New Car

  • This search query is related to automobile purchases as it yields results related to the process of buying a new car (such as this Kelley Blue Book article) and 'cautions' associated with buying a new car.

When Buying Car

  • This search query is related to automobile purchase as it yields results related to the process of buying, with the top search result an article by Edmunds advising about the steps associated with buying a car.

Car Loan

  • This search query is related to automobile purchasing as it yields results related to car loan financing offers and interest rates, such as provided by Nerdwallet, which highlights alternative auto loan financing offers.

Car Insurance

  • This search query is related to automobile purchasing as it yields alternative car insurance company insurance offers and auto insurance provider links, such as this link to Geico auto insurance website.

Research Strategy

To identify ways consumer behavior is shifting in the automotive industry within the past 10 days (between April 24, 2020, and May 3, 2020), we first leveraged news sources, articles by industry experts, surveys, and automotive industry thought leadership surrounding recent consumer behavior shifts that were published within this time frame. A recent behavior shift was considered a one that appeared to be changing as of this time period or was continuing to shift during this time frame. We did use some recent sources outside of this time frame, mainly to provide context around the recent behavior shift. A shift in behavior was identified based on automobile purchasing data trends, industry expert insights around shifting behaviors in the industry and recent survey results highlighting how behavior has recently changed and will potentially change going forward (as a result of COVID-19). We identified top searches and topics via Google Trends, associated with 'car buying' (as a surrogate for 'automobile purchases'), as 'car buying' yielded more robust information. We also looked past 7-day search topic/query trends, as past 10 day search topics/queries was unavailable via Google Trends.





Sources
Sources

From Part 02
From Part 06