The Volkswagen Car “Buy Back” Just Pulled out Havoc On The U.S. Car Market
When it comes to the US manufacturing sector which as a result of the oil sector collapse recently entered a recession, for years it was the US auto industry which was introduced as a shining example of how “things can go right” and how US manufacturing workers have benefited when year after year domestic auto production rose and recently hit a record high annualized production rate.
But while recently there has been a rather steep decline in fresh car sales (as a result of soaring inventories and shrinking credit) the real canary in the coalmine when it comes to consumer end request for cars emerged in latest months when used-car prices began to leak lower leisurely at very first, and then very prompt. In fact, as we showcased recently, used-car-prices are plunging at a tempo comparable to 2008, as a result of what is a record glut of used cars sitting on dealer lots, incapable to find a willing buyer.
It all culminated with a latest RBC research report in which it asked if this is “the card that brings the entire house down” because, it added, “the reason for concern is lower used vehicle prices have a potential spillover effect to many other industry factors. If we think about volume, price, mix, credit – all have been amazingly positive and supportive of the recovery. All are also no doubt related, but that’s what makes it a bit scary.”
Swift forward to today when Volkswagen took a massive $Eighteen.28 billion charge related to the emissions-cheating scandal, forcing it to slash its two thousand fifteen dividends and post a deep loss. The largest German company announced earlier today a net loss of €1.58 billion for 2015, compared with a net profit of €10.85 billion a year earlier. The company posted an operating loss of €4.1 billion for the year.
For the current year, Volkswagen said group revenue would fall as much as 5% partly because of the emissions issue, however overall deliveries should be around the level of 2015. It expects a “sharp decline” in passenger car revenue, the company said, which is to be expected for a company that has gargled through years of goodwill with one foolish emissions-rigging scandal.
But much more significant than VOW’s financial results, was that as part of the company’s settlement in the U.S., it agreed to suggest U.S. owners of almost 500,000 vehicles a blend of car buybacks, repairs and compensation.
Specifically, Volkswagen has pledged to give drivers of about 480,000 2-liter diesel vehicles the option of selling the cars back to Volkswagen, or having them modified to meet emissions standards, the judge said. Those with a lease can cancel it and come back the vehicle to Volkswagen. Consumers also will get “substantial compensation” on top of that, according to Judge Charles Breyer, overseeing the lawsuit against the German car-maker, who has pressured Volkswagen since February to produce a fix for the cars. He made it clear last month that if no solution was suggested by this week, he would consider a request by the plaintiffs to set a summer trial the WSJ reported.
Unnecessary to say, given the option of a hassle-free buyback leading to cash in mitt, or waste weeks in some dealership, everyone will pick the former.
Which takes us back to the original point: the near record glut of used cars.
Because the instantaneous result of Volkswagen’s settlement to placate buyers following its emissions-testing scandal, could send a shock wave across the US auto industry.
As Market Talk correctly notes, suggesting hundreds of thousands of buyers a chance to sell back their old VW or end their lease early (in lieu of fixing the car) will almost certainly flood the used-car market that is already on tempo to hit record inventory levels in 2016.
Once the German auto maker fixes the emissions problems on those cars, it will put them back into circulation, and the the availability of repaired models will add even further pricing pressure on used-car prices “that are sagging amid a glut of gently-used vehicles being turned in after leases or as trade-ins for fresh car purchases.”
Volkswagen may be just the peak of the iceberg.
Following Wednesday’s emissions rigging scandal at Japan’s automaker Mitsubishi – because if Volkswagen was manhandling its emission standards tests, everyone else was too – the Japanese Transport Minister Keiichi Ishii said on Friday he desired Mitsubishi Motors Corp to react “with integrity” after revelations that it cheated on test to measure fuel economy, including by possibly buying back the cars in question, Kyodo news reported.
In other words, even more buybacks, even more fixes and even more used cars about to thrust the record used-car glut to never before seen levels. How long until car dealers, stick with hundreds of thousands of used cars, are compelled to begin dumping.
RBC may have been premature with its observation of the “card that brings the entire house down”, but what happens when there is all of a sudden a entire lot of cards?
The Volkswagen Car – Buy Back – Just Whipped out Havoc On The U
The Volkswagen Car “Buy Back” Just Released Havoc On The U.S. Car Market
When it comes to the US manufacturing sector which as a result of the oil sector collapse recently entered a recession, for years it was the US auto industry which was introduced as a shining example of how “things can go right” and how US manufacturing workers have benefited when year after year domestic auto production rose and recently hit a record high annualized production rate.
But while recently there has been a rather steep decline in fresh car sales (as a result of soaring inventories and shrinking credit) the real canary in the coalmine when it comes to consumer end request for cars emerged in latest months when used-car prices began to leak lower leisurely at very first, and then very quick. In fact, as we displayed recently, used-car-prices are plunging at a rhythm comparable to 2008, as a result of what is a record glut of used cars sitting on dealer lots, incapable to find a willing buyer.
It all culminated with a latest RBC research report in which it asked if this is “the card that brings the entire house down” because, it added, “the reason for concern is lower used vehicle prices have a potential spillover effect to many other industry factors. If we think about volume, price, mix, credit – all have been exceptionally positive and supportive of the recovery. All are also no doubt related, but that’s what makes it a bit scary.”
Prompt forward to today when Volkswagen took a massive $Eighteen.28 billion charge related to the emissions-cheating scandal, forcing it to slash its two thousand fifteen dividends and post a deep loss. The largest German company announced earlier today a net loss of €1.58 billion for 2015, compared with a net profit of €10.85 billion a year earlier. The company posted an operating loss of €4.1 billion for the year.
For the current year, Volkswagen said group revenue would fall as much as 5% partly because of the emissions issue, tho’ overall deliveries should be around the level of 2015. It expects a “sharp decline” in passenger car revenue, the company said, which is to be expected for a company that has deep-throated through years of goodwill with one bimbo emissions-rigging scandal.
But much more significant than VOW’s financial results, was that as part of the company’s settlement in the U.S., it agreed to suggest U.S. owners of almost 500,000 vehicles a blend of car buybacks, repairs and compensation.
Specifically, Volkswagen has pledged to give drivers of about 480,000 2-liter diesel vehicles the option of selling the cars back to Volkswagen, or having them modified to meet emissions standards, the judge said. Those with a lease can cancel it and comeback the vehicle to Volkswagen. Consumers also will get “substantial compensation” on top of that, according to Judge Charles Breyer, overseeing the lawsuit against the German car-maker, who has pressured Volkswagen since February to produce a fix for the cars. He made it clear last month that if no solution was suggested by this week, he would consider a request by the plaintiffs to set a summer trial the WSJ reported.
Unnecessary to say, given the option of a hassle-free buyback leading to cash in palm, or waste weeks in some dealership, everyone will pick the former.
Which takes us back to the original point: the near record glut of used cars.
Because the instant result of Volkswagen’s settlement to placate buyers following its emissions-testing scandal, could send a shock wave across the US auto industry.
As Market Talk correctly notes, suggesting hundreds of thousands of buyers a chance to sell back their old VW or end their lease early (in lieu of fixing the car) will almost certainly flood the used-car market that is already on tempo to hit record inventory levels in 2016.
Once the German auto maker fixes the emissions problems on those cars, it will put them back into circulation, and the the availability of repaired models will add even further pricing pressure on used-car prices “that are sagging amid a glut of gently-used vehicles being turned in after leases or as trade-ins for fresh car purchases.”
Volkswagen may be just the peak of the iceberg.
Following Wednesday’s emissions rigging scandal at Japan’s automaker Mitsubishi – because if Volkswagen was manhandling its emission standards tests, everyone else was too – the Japanese Transport Minister Keiichi Ishii said on Friday he desired Mitsubishi Motors Corp to react “with integrity” after revelations that it cheated on test to measure fuel economy, including by possibly buying back the cars in question, Kyodo news reported.
In other words, even more buybacks, even more fixes and even more used cars about to thrust the record used-car glut to never before seen levels. How long until car dealers, stick with hundreds of thousands of used cars, are coerced to commence dumping.
RBC may have been premature with its observation of the “card that brings the entire house down”, but what happens when there is abruptly a entire lot of cards?
The Volkswagen Car – Buy Back – Just Let out Havoc On The U
The Volkswagen Car “Buy Back” Just Whipped out Havoc On The U.S. Car Market
When it comes to the US manufacturing sector which as a result of the oil sector collapse recently entered a recession, for years it was the US auto industry which was introduced as a shining example of how “things can go right” and how US manufacturing workers have benefited when year after year domestic auto production rose and recently hit a record high annualized production rate.
But while recently there has been a rather steep decline in fresh car sales (as a result of soaring inventories and shrinking credit) the real canary in the coalmine when it comes to consumer end request for cars emerged in latest months when used-car prices began to leak lower leisurely at very first, and then very quick. In fact, as we displayed recently, used-car-prices are plunging at a tempo comparable to 2008, as a result of what is a record glut of used cars sitting on dealer lots, incapable to find a willing buyer.
It all culminated with a latest RBC research report in which it asked if this is “the card that brings the entire house down” because, it added, “the reason for concern is lower used vehicle prices have a potential spillover effect to many other industry factors. If we think about volume, price, mix, credit – all have been amazingly positive and supportive of the recovery. All are also no doubt related, but that’s what makes it a bit scary.”
Rapid forward to today when Volkswagen took a massive $Legal.28 billion charge related to the emissions-cheating scandal, forcing it to slash its two thousand fifteen dividends and post a deep loss. The largest German company announced earlier today a net loss of €1.58 billion for 2015, compared with a net profit of €10.85 billion a year earlier. The company posted an operating loss of €4.1 billion for the year.
For the current year, Volkswagen said group revenue would fall as much as 5% partly because of the emissions issue, however overall deliveries should be around the level of 2015. It expects a “sharp decline” in passenger car revenue, the company said, which is to be expected for a company that has deep-throated through years of goodwill with one bimbo emissions-rigging scandal.
But much more significant than VOW’s financial results, was that as part of the company’s settlement in the U.S., it agreed to suggest U.S. owners of almost 500,000 vehicles a blend of car buybacks, repairs and compensation.
Specifically, Volkswagen has pledged to give drivers of about 480,000 2-liter diesel vehicles the option of selling the cars back to Volkswagen, or having them modified to meet emissions standards, the judge said. Those with a lease can cancel it and come back the vehicle to Volkswagen. Consumers also will get “substantial compensation” on top of that, according to Judge Charles Breyer, overseeing the lawsuit against the German car-maker, who has pressured Volkswagen since February to produce a fix for the cars. He made it clear last month that if no solution was suggested by this week, he would consider a request by the plaintiffs to set a summer trial the WSJ reported.
Unnecessary to say, given the option of a hassle-free buyback leading to cash in palm, or waste weeks in some dealership, everyone will pick the former.
Which takes us back to the original point: the near record glut of used cars.
Because the instant result of Volkswagen’s settlement to placate buyers following its emissions-testing scandal, could send a shock wave across the US auto industry.
As Market Talk correctly notes, suggesting hundreds of thousands of buyers a chance to sell back their old VW or end their lease early (in lieu of fixing the car) will almost certainly flood the used-car market that is already on rhythm to hit record inventory levels in 2016.
Once the German auto maker fixes the emissions problems on those cars, it will put them back into circulation, and the the availability of repaired models will add even further pricing pressure on used-car prices “that are sagging amid a glut of gently-used vehicles being turned in after leases or as trade-ins for fresh car purchases.”
Volkswagen may be just the peak of the iceberg.
Following Wednesday’s emissions rigging scandal at Japan’s automaker Mitsubishi – because if Volkswagen was manhandling its emission standards tests, everyone else was too – the Japanese Transport Minister Keiichi Ishii said on Friday he wished Mitsubishi Motors Corp to react “with integrity” after revelations that it cheated on test to measure fuel economy, including by possibly buying back the cars in question, Kyodo news reported.
In other words, even more buybacks, even more fixes and even more used cars about to thrust the record used-car glut to never before seen levels. How long until car dealers, stick with hundreds of thousands of used cars, are coerced to embark dumping.
RBC may have been premature with its observation of the “card that brings the entire house down”, but what happens when there is abruptly a entire lot of cards?
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