With outstanding earnings reports in the first quarter for many car dealers, what can the industry expect in Q2? Today on CBT News, Kevin Tynan, Senior Automotive Analyst for Bloomberg Intelligence, joins the show to review results from Q1 and share his perspective on the electric vehicle market.
Tynan begins the conversation by reflecting on first quarter reports compared to the same time last year. So far in 2021, automakers haven’t had to incentivize inventory as much as previous years because production is moving at a slower pace due to the chip shortage. With supply low and demand high, car dealers have had incredible margins that could continue for the rest of the year.
With supply at a lower level, car dealers have been able to differentiate their inventory from other dealerships. In the past, retailers in local markets would compete for the same customer because they would both have the exact vehicle the customer was looking for. Tynan says that car dealers can now be more firm on their margins because they don’t have to fear losing the customer to the store down the street.
Tynan then dives into his take on the rise of electric vehicles. He says that one of the issues surrounding the talk of EVs is the focus on building demand instead of supply. Tynan says that automakers are going to be less inclined to build EVs if they can’t make money on them.
Until EVs begin to pick up speed in the market, Automakers will be more inclined to build, market, and sell their most popular product, which is currently the pickup truck. According to Tynan, pickups accounted for 78% of auto sales in the month of March. For this reason, automakers are slowly rolling out new EV models over the next decade in hopes of building the profitability needed to grow EV production and sales efforts.
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