During last week’s 2021 Auto Finance Summit, industry executives shared updates on return-to-office plans, future changes to the auto market, continued fallout from the inventory shortage and compliance concerns.
With the anticipated rise in electric vehicle adoption, for one, the industry could experience a shift from car ownership to usership in the next decade. Short-term usership models, such as vehicle subscriptions, are already on the rise and pose a way for consumers to try electric vehicles before committing to the shift.
Meanwhile, inventory constraints are impacting multiple areas of the auto finance industry. Rental car companies holding on to their fleet supply will hinder used-car inventory in the next three to four years, further inflating prices.
Diversity and inclusion were also pressing topics during the summit. This year’s Women in Auto Finance keynote speaker, Chief Information Officer at Exeter Finance Michele Rodgers, highlighted the need for the industry to do more to recruit and retain women in leadership roles.
In this episode of the Weekly Wrap, Deputy Editor Amanda Harris and Associate Editor Whitney McDonald discuss key takeaways from the 2021 Auto Finance Summit, and what’s in store for the upcoming week.
Editor’s note: This transcript has been generated by software and is being presented as is. Some transcription errors may remain.
Hello everyone and welcome to the roadmap from auto finance news since 1996, the nation’s leading newsletter on automotive lending and leasing. It is Monday, November 1. I’m Amanda Harris. And joining me today is Whitney McDonald. This is our weekly wrap on what happened and auto finance news last week. So as always, I want to thank our Auto Finance News advertisers Dealertrack, CEDAR CX, defi solutions, Verisk, and Westlake Financial for their continuing support. First in manufacturing news from this morning, supply chain issues continue to linger in October. Further lengthening supplier delivery times as a record long raw materials lead times combined with shortages of critical materials are making it very challenging for manufacturers to keep up with demand in nearly every sector. And this according to Bloomberg. And of course, we know this obviously impacts the auto industry as well. So turning to some general Automotive News, during the auto finance summit that we held last week, several auto lenders announced their return to Office plans, following pandemic closures and moving employees to work from home. So Wells Fargo for one plans to bring employees back starting in January, while US Bank will continue a hybrid model for the foreseeable future and provide a certain end date to that. So right now they’re going to continue their hybrid model. GM Financial also will bring at least some employees back to offices on November 15, in about two weeks, and then Nissan Motor Acceptance Company, they did start bringing people back in September, on a very partial basis. But they do have a hybrid model. And they said that that will be in place through the next couple of years, so into 2023, possibly 2024. And they have not yet seen a full scale return of employees. So they only had about 50 coming back in a really big facility. So very minimal, and very certain roles coming back in which you’ve kind of seen throughout throughout the industry. Even as people come in, they’re usually certain roles, or they’re coming back part time, few days in the office few days at home for the hybrid model. And some are still fully work from home for the next little bit. So that’s where that stands. So speaking of the auto finance Summit, we did have a fantastic week, last week of networking, and Industry Insights, I’m not going to be in Vegas, but I know that it went really well. And of course, when he and I were tackling our coverage from where we are. And we really enjoyed some of the sessions. So some of the big takeaways, just to kind of recap, included a deeper look at the continued impacts of the inventory shortage, changes to come as electric vehicles become more popular, diversity inclusion initiatives and of course, compliance concerns and changes. All were highlighted in various sessions over the three day events. One topic I thought was really interesting that came up and stood out to me was this potential change to come in ownership trends. So they did talk a little bit about this possible shift from, you know, owning a car, being the current mentality, you want a car, you’re gonna own that car, you’re gonna buy it for your loan or lease, it’s gonna be in your driveway, use it as you want. It’s your car. I think that’s kind of in the norm. You know, for a long time, especially in places where I live, I live in Sacramento, there’s not like a lot of buses and trams and things like that, or I’m at a car ownership is still very much the norm. But we do know that new transportation types and ownership kind of models are coming online. So there’s this potential shift being talked about from ownership to usership in the next decade. So looking at cars as a standpoint of a transportation mode from point A to point B versus owning a car. So it could be things like vehicle subscriptions, you know, that’s a short term option, you subscribe to a vehicle, you may only need a vehicle full time for a couple months, they subscribe to one when they when a couple months are over, get the vehicle back. That’s one thing that we’ve kind of seen pop up in the industry. We know next car is one of the big suppliers of vehicle subscriptions, but there are others out there as well. And this will kind of heighten a little bit too when electric vehicles become more of a norm because a lot of what people are trying to do is you know, get consumers to buy in, you know to the electric and hybrid cars And one way that you can do this is by trying it out with a subscription. So we know that there’s been a couple of subscriptions for EVs over the years, most recently Hyundai Motor America, they are doing a pilot subscription service specifically for the Kona, Evie. In New Jersey, and the thought process ears if it works well, they will expand that into other markets. But you know, it’s a way for people to try and Evie people are still it’s new, you know, so people aren’t, haven’t fully adopted across industry is still looked at kind of a luxury item item, luxury type market. So it’s not yet widespread for people to even really want to adopt those subscriptions could come online. And as more people sign up for those kinds of usership type options or rethink how they think about vehicles, it could be a potential shift away from car ownership. We’re not talking like next year. But it could be down the road, especially within the next decade. And again, EVs and other types of new vehicles will drive that some. So I thought that was interesting. And then another thing that kind of stood out to us, we did here, you know, course inventory was kind of an underlying discussion topic throughout almost the entire summit. We know that’s on the minds, everyone. But we heard some different perspectives to that, that show that this is impacting more than maybe, you know, the immediate things that come to mind like dealership for planning things that we’ve already talked about. So at the end, you kind of cover some sessions that talked about supply a little bit. So what stood out to you there? Yeah,Whitney McDonald 06:40
so I’m Friday at the summit, I was following our Risk and Compliance track. And we had one panel that was discussing upcoming residual values into next year and of course beyond. But yeah, those used car residual values are up there 4% higher than they were pre pandemic. And again, it’s just because it’s leaning on that manufacturing shortages, low production. And of course, the chips shortage is continuing and lowliest penetration. But one unique factor that they brought up was that rental companies are holding on to their fleets right now. So usually rental car fleets are a pretty good indication as to what’s coming to the used market. But those cars are not circulating back into the market right now. And rental car fleets are holding tight to those cars. And even in a lot of cases competing with dealers at auctions right now. So not only are they not contributing to the US market, but they’re even kind of taking from the US market just because those manufacturers aren’t providing new cars right now. So this is kind of gonna cause a used car shortage over the next couple of years for all used cars, but more specifically for used cars kind of in that three year old range. So newer used cars are going to be pretty hard to come by. And again, we’re just going to be waiting for manufacturing to ramp up for this to hopefully correct itself. But it’s looking to be 2023 at the earliest. That was kind of one of the projections that one of our panelists made. But again, it’s kind of a guessing game that we heard all throughout the summit. When when is production going to normalize? I think the best answer is we don’t know yet. But I think everybody hopes for sooner rather than later. But we’re going to be watching the US market just as much as we are watching the new market for inventory shortages.Amanda Harris 08:36
That was a really interesting point too, just to get another thing that’s exasperating the problem, right. I know. One thing I wanted to touch on, too, that came up during the summit was diversity. Inclusion, obviously has been, you know, a big thing on the minds of every single company in every single sector right now, especially in last couple years. Auto Finance is not an exception to that at all. So we were very blessed to have Michele Rodgers, who is our Chief Information Officer at Exeter finance as our keynote speaker at the woman and auto finance luncheon during the summit, she was fantastic, very knowledgeable, and gave some really, really good messages. So just to highlight some of the things that she talked about. Obviously, she is a woman who is in a leadership position at an auto finance company. So she’s kind of experience having to work her way up. She knows the gaps that still exist in the leadership pipeline. And she was very adamant about the fact that you know, there’s still much more work to be done to improve diversity, especially in the leadership roles and especially for you know, women, people of color, just getting those, you know, roles filled and increasing diversity, especially those like top level leadership positions. That’s where some of the biggest As gaps still exist so she, you know, quoting her she said even with overall gains are still plenty of work to be done to create true equity for women in the workplace, which I thought was a really good point to make. And she talks a lot about, you know, the fact that, you know, Nina, like, not only open the space for, you know, the, for those type of people in those leadership positions, but also just making sure that as a leader, you’re having, you know, a clear vision, you’re creating a safe space for your team members to buy into that vision that your team members know and understand what their contributions are, personally, they see the value that they bring to the company, I mean, all that also plays into, of course, retaining recruiting people into those leadership positions. And, you know, there, the company also Exeter has diversity inclusion program focuses on being stronger together, that was kind of her her main message like we’re stronger together, and that leaders need to show up, listen and learn from the hard conversations they’re having with their employees. So they need to not only talk with their employees, but they also need to, you know, listen and learn and put those things into place in order for it to actually make a difference. So I thought that message is really strong. We’ve got the course the full post up if, if y’all want to hear what else she had to say, but it was really strong live in auto finance luncheon. I didn’t get to be there in person here, but I did get to hear it from my computer. And it was really fantastic. So I just wanted to highlight some of the things that were talked about. And then for this week, we will be highlighting some more news coming out of that events. You know, we got a lot of last week, but there’s still so much that was that was highlighted and talked about. So really excited to highlight some more of that this week. I know we have some capital market information coming out today. And they will be looking through our sessions too and highlighting some more news bits that came out. So make sure to check out auto finance news.net. To see more of our coverage from the events. And you can check out last week, we did cover earnings as well. So more third quarter earnings went up Ford Credit, GM Financial, for example, and a few others. So you can check out the website to see you know how those companies did, and get an update on third quarter earnings so far. But that will wrap us up for this week. So as always, we want to hear from you. Thank you so much for joining us on another episode of the roadmap. And please rate the podcast on whichever platform you use to listen. And please follow us on Twitter and LinkedIn. And of course we’ll see you online again at auto financings.net. And here next time.