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‘We are impressed by the resiliency of the American consumer:’ Analyst on October auto sales

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Yahoo Finance's Alexis Christoforous and Rebecca Lindland, Rebeccadrives.com founder, discuss auto sales amid the coronavirus pandemic.

Video Transcript

ALEXIS CHRISTOFOROUS: Despite the pandemic, auto sales have been pretty strong in recent months. In fact, Toyota just had its best sales ever for the month of October. Here to talk about the outlook and the election's impact on the industry is Rebecca Lindland, she's an auto analyst and founder of Rebeccadrives.com. Good to see you, Rebecca. First off, in terms of these numbers for October, we've got millions of people out of work, millions of people earning less. Who is buying these cars and what are they buying?

REBECCA LINDLAND: Well, thanks so much for having me on, Alexis, because it really is an interesting story of what's going on in October. And we're actually seeing this is a pretty widespread pattern in the industry. We are continually surprised and impressed by the resiliency of the American consumer. Who is buying these vehicles really tends to be wealthier consumers, which is true no matter what's going on in the country, but we're also seeing increased sales of pickup trucks, which is fantastic news for the manufacturers, because they do tend to make more money on-- more profits on pickup trucks.

It's really a statement of consumers saying, if you're going to stick me at home for however long, I'm going to do some at home projects. And so we're seeing a lot of you know do it yourselfers saying I need to get a pickup truck so I can haul my stuff back and forth and improve my home.

ALEXIS CHRISTOFOROUS: You know, at the height of the pandemic, of course, the auto manufacturers weren't producing any cars, and there was this-- you know, there was demand, but the supply wasn't there. Has that started to change and are things normalizing now?

REBECCA LINDLAND: So we still have pretty tight inventory. If you are in the new car market, if you see it on the lot, that's the one that you should buy, because if you try and order something, it could be months before you get it. So I would definitely encourage a consumer-- you get a better deal, anyway, if the vehicle is there on the lot. I wouldn't plan on ordering-- I think it may take a while.

ALEXIS CHRISTOFOROUS: What about new vehicles like the Ford Bronco are going to be out next year? I mean, are they-- are we going to have to wait even longer for those cars to hit dealerships?

REBECCA LINDLAND: No, I think that production schedules are pretty on track for new products coming out. I think that we've got the supply chain in pretty good shape. There's a lot of pent up demand, though, which is why we're seeing some strong numbers in October, not only from Toyota, but also from Subaru. They just reported, as well. Hyundai had a very good month. So we're continuing to see-- the area we're not seeing demand in, though, is fleets. Things like rental car fleets. Nobody's really holidaying, you know, going on vacation anymore. So we're continuing to see declines in fleet sales of like, 45, 50%-- it's a lot. But we do see that reslilient consumer coming into showrooms.

ALEXIS CHRISTOFOROUS: But I guess that does make sense-- we're seeing those strong retail sales, but those fleet sales taking a hit. I want to turn to the election for a moment, because we know that the Biden-Harris ticket has said time and time again they're going to raise taxes if they come into office. What would that mean for the auto industry, for consumers' ability to buy new cars, and also, for the automakers selling them? Might they pass those higher taxes along to us in the form of higher prices?

REBECCA LINDLAND: Well, we could definitely see a negative impact on auto sales. And I say that because even if they confine it to over 400,000-- people making a report $400,000 a year, when you break that down, if that's a family of four or five people, that 400,000, after taxes is what they're living on, that goes really quickly. And people are going to start constraining their spending if more money is coming out of their paycheck at the top.

So while these people may not be living paycheck to paycheck, you know, as you say, they're also-- the people that are living paycheck to paycheck tend not to be in the auto-- new car industry, anyway. So we're really kind of heading into the people that buy luxury vehicles. The consumer that maybe is a small business owner that will be constrained by higher taxes and by higher company taxes, we could then see prices increase, as well. So it's not going to be-- even if they just confine it to 400,000 and above, it's going to unfortunately have a trickle down effect to the rest of the economy.

ALEXIS CHRISTOFOROUS: What does this election mean for the electric vehicle market? Not just Tesla and Fisker, but also for the traditional Fords and GM, who we know are also in the EV market? Because you have President Trump, his approach vastly different from Joe Biden. He would support the fossil fuel industry. He already said he would be putting out fewer charging stations. And some are saying that could actually be friendlier for American wallets. On the other hand, though, you have Biden, who is standing ready to hand out more subsidies for electric vehicle carmakers.

REBECCA LINDLAND: This is a really complicated picture, because there's actually very, very good product coming out, very good new electric vehicles coming out with ranges of 200 to 300 miles per charge. And so then-- you may actually need less charging stations as we increase the capacity of these batteries. We're also seeing more affordable products coming out. I just drove the Hyundai Ioniq-- you can get in that vehicle for the high 20s. So we're seeing very competitive electric vehicles.

We're also seeing changes in demographics, where younger consumers, I call them generation app-- they're going to be in the marketplace in the next five to 10 years. They actually will expect their vehicle to be environmentally friendly and to be electric. What that environmentally friendly means in terms of how we get that electricity is a whole other discussion that we certainly need to have. But I think that that market, we're starting to see demographics, we're starting to see great product. So I think that we continue to see growth in electric vehicles really, regardless of what the government does.

ALEXIS CHRISTOFOROUS: Tesla's Elon Musk tweeted recently that we might finally get a look at that cyber-- the Cybertruck that they keep touting. And he said we might see it in a month or so-- sort of noncommittal there. What are you hearing? What do you expect?

REBECCA LINDLAND: Tesla's always exciting. You know, they're-- they're sort of-- it's always the temperament of a teenager. You never really quite know what's going to come out of Tesla. So I do think that they're facing a lot of competition, though, from GM and the GMC Hummer EV, which is a much more viable truck that we've already gotten really good stabs at it-- and I actually got a really good look at-- at it in person, as well.

So even the Cybertruck comes out-- you know, I'm a fan of Elon Musk in that we need somebody like him to push the traditional auto industry. So I love that he's in our space. And I think it's exciting what he brings out. But we also have some, shall we say, more practical vehicles that are available from mainstream manufacturers, as well.

ALEXIS CHRISTOFOROUS: You know, Tesla is one of our trending tickers here on the Yahoo Finance site today. And I was trying to figure out what was bringing the stock higher. I like your analogy to it being like a teenager-- a teenager. But there was news that just was going to get some new battery cells from Panasonic that will allow it to charge faster. Could that be giving the stocks some momentum?

REBECCA LINDLAND: It could be. And anything that increases the convenience of an electric vehicle's ownership experience is a positive, because consumers gravitate towards products that make their life easier, not harder. The one concern I do have with Tesla, though, in terms of their production manufacturing-- you know, we're seeing decline-- we're seeing more competition in Europe for Tesla. And so their market share is declining.

They're also supplying China with products and they're supplying Europe with products that are made in China. That kind of leaves their Fremont, California plant potentially with underproduction-- some less demand, really, for their products. So we could see some real significant shift in where Tesla produces their product and what that means for their-- their production facilities and their allocation. So that's something that I would definitely watch as an investor.

ALEXIS CHRISTOFOROUS: All right, we're going to leave it there. Rebecca Lindland of Rebeccadrives.com. Good to see you.

REBECCA LINDLAND: Likewise, Alexis. Thank you.