• Blinders Off Research

Consider The Unexpected

What follows is specific to autos, the only industry that I'm fully qualified to speak on. What's the most counterintuitive resolution to the challenges presented by the Coronavirus? That's a question that we should both be able to answer and take very seriously in my professional opinion.

Here's what we know so far - many people have been asked to work from home, large gatherings have been canceled, and several school districts across the country have shut down. However, these folks have not been laid off, and their paychecks are still flowing. In response to CDC recommendations, auto dealers have also put forth a significant effort to make their businesses safe while informing their clients and community. Moreover, dealers have not closed. While some analysts may be in a state of panic, we should take the time to consider a possible positive outcome. We currently have a significant amount of employed consumers with more available time-off (Ask yourself why significantly more vehicles are sold on the weekend vs. weekdays.) We are also in tax season, a historically strong period for auto sales.

Again, what's the most counterintuitive resolution to this situation? There are two important variables to consider. Will dealerships remain open? And, will the paychecks continue to flow uninterrupted? If the answer to both of those questions is yes, I think we're fixing to learn something about the U.S. consumer.

I am currently watching retail inventory (new and used) and used vehicle values very closely. If there's a drop in demand, inventory will spike, and a drop in used-vehicle values will follow.

Right now, the opposite is happening. As long as fear continues to cloud this reality, I will continue to view the current environment as concerning but opportune.

If dealerships close and paychecks stop flowing, all bets are off.