CATA News

The automotive sector was hit the hardest by supply chain disruptions during the Covid-19 pandemic, according to a survey that covered six broad industries.

The survey was conducted by the Economist Intelligence Unit and sponsored by Citi. It surveyed 175 supply chain managers — more than 70% of which were based in Asia — in February and March this year, and its findings were released Aug. 25.

In addition to auto, the respondents came from five other industries:

 

• Footwear and apparel;

• Food and beverage;

• Manufacturing;

• IT, tech and electronics;

• Healthcare, pharmaceuticals and biotechnology.

 

About 51.7% of respondents from the auto sector said disruptions to supply chains were "very significant" — the highest proportion across the six industries.

The footwear and apparel industry came in second with 43.3% respondents reporting "very significant" disruptions. Meanwhile, only 6.7% from the IT, tech and electronics sector indicated the same.

Over the past year, the movement of goods was disrupted as the global spread of Covid forced many countries to shut borders, close workplaces or limit exports.

The spread of the more transmissible delta variant again heightened such worries, as major Asian manufacturing hubs such as China and Vietnam in recent weeks locked down parts of their countries to curb a rise in Covid cases.

The auto industry was particularly affected by a shortage of semiconductors, which caused several carmakers to cut production at some of their plants. The chip shortage was caused by a surge in demand for personal computers and other consumer electronics as many people were kept at home during Covid lockdowns.

 

New locations

The pandemic has led some businesses to rethink their supply chains for the longer term, with about a third of respondents conducting a complete overhaul, the survey found.

One in five supply chain managers surveyed have invested or are looking to invest in the Philippines and India in the next 12 months as part of their strategy.

"Cheap labor costs and young populations in both those countries are important factors in this choice," said the report outlining the survey findings.

The report noted that the Philippine government is keen to attract manufacturing investments in sectors including electronics, automotive, aerospace, health and IT. 

India, meanwhile, was a preferred location for many supply chain managers in the auto sector, according to the report.

 

Douglas A. Rockenbach, a lifelong resident of Grayslake and owner of a namesake Chevrolet dealership in that town for more than 50 years, died Aug. 4. He was 96.

Mr. Rockenbach graduated in 1943 from Warren Township High School in Gurnee and was drafted by the Army, seeing World War II action in North Africa, Italy, France, Belgium and Germany.

He was active in community organizations, including as chairman and a board member of the Lake County Easter Seal Society and as commander of Grayslake American Legion Post 659. He owned Rockenbach Chevrolet, founded in 1925.

Industry achievements include a nomination for the Time Magazine Quality Dealer of the Year; four-time General Motors Dealer of the year; chairman of the Illinois Automobile Dealers Association; and president of the Chicago and Northwest Indiana Chevy Dealers Advertising Association. One highlight of Mr. Rockenbach’s time as president of the ad association was signing Michael Jordan to his first contract as a spokesman for the Chevy dealers. He was in studio during Jordan’s first commercial shoot.

Survivors include a son, Gregg; a daughter, Gail; one granddaughter and three great-grandsons. His wife, Bonnie, and another son, Gary, preceded him in death. Memorial donations appreciated to the Grayslake Historical Society or to A Cure in Sight, an organization that supports the ocular melanoma community. 

 

Pamela A. Grace, 69, who had been the CATA’s receptionist and meeting rooms coordinator since 2001, died July 11. Illness forced her retirement in early June.

In her role, Mrs. Grace also served as the receptionist in the Exhibitors Office during Chicago Auto Shows.

She and Jeffrey Grace, her husband for 44 years, were avid racquetball players for many years, and they forged many friendships in the sport. She also served on the board of directors of the Illinois State Racquetball Association.

Other survivors include sons Dion, Anzel and Jeffrey II; a daughter, Nichole; and eight grandchildren.

 

Twelve area dealerships are winners of J.D. Power’s 2021 Dealer of Excellence award, for providing exceptional customer service: Arlington Heights Ford, Audi Westmont, Fair Oaks Ford (Naperville), Gerald Subaru of North Aurora, Bill Jacobs BMW (Naperville), Bill Jacobs Volkswagen (Naperville), Laurel BMW of Westmont, Loeber Motors Mercedes-Benz (Lincolnwood), Mercedes-Benz of Naperville, Napleton’s Valley Hyundai (Aurora), Phillips Chevrolet of Frankfort, and Porsche Exchange (Highland Park).

 

A claimed 70 percent of electric car buyers said they would miss the smell of gasoline when switching to a plug-in vehicle. That is according to Ford, which to promote its new Mach-E GT has created a fragrance intended to smell like petroleum.

 

Yes, that statement is correct and no, today is not the first of April. Ford goes on to say the smell of gasoline ranked as a more popular scent than wine and cheese, and was almost identical to the aroma of used books, according to its own research.

Named Mach-Eau, Ford said the fragrance is "designed to please the nose of any wearer; a high-end fragrance that fuses smoky accords, aspects of rubber and even an ‘animal’ element to give a nod to the Mustang heritage."

 

Ford worked with U.K.-based Olfaction to create the fragrance. Olfaction said the starting point for the fragrance was "the chemicals that are emitted from car interiors, engines and petrol." 

The company added: "This included benzaldehyde, which is an almond-like scent given off by car interiors, and para-cresol which is key in creating the rubbery scent of tires. These were blended with ingredients like blue ginger, lavender, geranium and sandalwood that added metallic, smoky and further rubbery accents, as well as an overdose of Timut pepper, utilizing the petrol-like top note."

The point of all this is to promote Ford’s new Mustang Mach-E GT, the high-performance flagship of the company’s EV range.

 

Today’s car buyers are different than before. Consequently, dealers should handle them in new ways, according to automotive consultant Merlin Stevenson.

"The auto industry is one of the most disrupted in the world, across the whole chain," said Stevenson, vice president of automotive for GP Strategies. "Retail is the most affected part."

Accordingly, many sales staffs are shifting their approaches from consulting to curating customer experiences.

"It’s less about selling," Stevenson said recently at an online CXAUTO2021 conference presentation entitled "People as a Key to Automotive Retail Transformation."

"When handling empowered customers," Stevenson said, "it comes down to (customer) experience and convenience."

Fifty-five percent of modern customers have done their online homework and arrive at the dealership fully informed about their vehicle of interest, he said. With such people, salespeople "need to do deep listening."

The main reason 70% of car shoppers visit a dealership is for a test drive, Stevenson said. "Don’t just make the test drive a spin around the block. Let them experience the vehicle." 

He breaks down today’s customers into four categories: dealer-trusting traditionalists who usually are older; hybrid customers who shop and research both digitally and in-person; online savvy modernists; and online-focused information seekers.

Because empowered customers’ online shopping and researching extends to vehicle pricing, "wiggle room is reduced" when it comes to price negotiation, Stevenson said.

Dealership service departments should strive to provide positive experiences, too, but for service customers, "every service visit is considered an inconvenience," he said.

Then there’s the new and varied dealership workforce, he said, noting dealerships now cover four generations of employees: Baby Boomers and Generations X, Y and Z.

"It is a big challenge managing all of them," Stevenson said. "They range from experienced salespeople to digital natives. The challenge is managing an organization that enables all employees to reach their potential and contribute to the team."

In the digital age, frontline salespeople need traditional skills but also virtual-selling and social-media skills, he said. Moreover, dealerships should use data in decision-making. "Properly used data brings us closer to customers."

 

The average cost of new-vehicle ownership is approaching $10,000 a year amid a shortage of cars and trucks that has driven up prices, according to a new study.

The rising cost of vehicles stems from multiple factors, including a global semiconductor chip shortage that has limited car production and led to price hikes.

The average annual cost for owning a new vehicle is now $9,666, or $805.50 a month, according to the 2021 Your Driving Cost study released by AAA.

The study, conducted from May 2020 to May 2021, reviewed costs for the five top-selling vehicles in nine categories. The vehicles were then assessed across six categories of expenses: fuel, maintenance/repair/tire costs, insurance, license/registration/taxes, depreciation, and finance charges.

The vehicles studied by AAA had an average price tag of $32,903, which is $1,502 or 4.78% higher than last year. That suggests that the average cost of owning a new vehicle is even higher, since the average price of new vehicles recently topped $40,000, according to car-research site Edmunds.

Depreciation, a measure of how quickly a car loses value, makes up 40% of all ownership expenses, the report said. Cars typically decline in value over time, though used-car values have temporarily increased in some cases due to the new-car shortage.

Fuel is the second-highest cost of owning a vehicle at 17% of the total, while maintenance represents 15%, insurance 14%, taxes 7% and finance 7%.

"We like to talk often about other aspects like cost of fuel or insurance," said Greg Brannon, AAA’s director of automotive engineering and industry relations. "But whenever you look at what the important costs are for all costs, depreciation is really the major factor."

Fuel on average costs 10.72 cents a mile, while maintenance and repairs cost 9.55 cents. 

While maintenance costs vary depending on the vehicle, this year’s most expensive are those in the half-ton pickup trucks category. 

This year’s list includes two new categories that have never been included in the 71 years AAA has done this study: subcompact SUVs and midsize pickups. 

With how strained vehicle inventory has been, Brannon said it is important to do research before buying or simply hold off until prices aren’t as high. With a little research, consumers can save thousands of dollars per year.

Brannon said that consumers who are ready to pull the trigger on a new car should buy a gently used car instead because new cars lose a tremendous amount of value in the first year of ownership.

By finding a used vehicle that is 2-3 years old with lower mileage, consumers will pay less, and "that’s because somebody else already paid" off part of the depreciation, Brannon said.

"While we all like that new car smell, which is actually plastic leaching into the car, the truth is that new cars depreciate at a quicker rate than used cars," he said.

 

CarGurus is an automotive marketplace website that consumers typically use to buy vehicles from dealers. But In a sign of the times that used-car inventories are in such short supply at dealerships, CarGurus has debuted a digital platform that allows consumers to sell cars to participating dealers who need to replenish their dwindling supplies of pre-owned vehicles.

Named CarGurus Instant Max Cash Offer, it instantly presents consumers the highest offer available from thousands of participating dealerships. 

"We think we can meet an unmet need," said Lisa Iannucci, CarGurus vice president of commercialization.

 

Here is how it works:

 

Interested consumers visit the no-haggle "Sell My Car" page on CarGurus.com and enter their vehicle’s information. They quickly receive offers and, upon opting to proceed, the vehicle is picked up and paid for following an on-the-spot inspection to verify its condition matches what the seller said on a questionnaire section of the web page.

Questions include asking for the 17-character vehicle identification number, mileage, license plate number, whether the vehicle has been in an accident and if it is damaged in any way.

"We’ve tried to strike a balance with the questions," Iannucci said. "We want to make it lightweight for the consumer, but also detailed enough for the dealers."    

A picked-up vehicle gets taken to local dealers who will have the option to buy it for the CarOffer matrix price or take a pass.

People who pick up and deliver the vehicles work for a third-party firm. "It’s an auto-specific partner with employees trained to inspect cars," Iannucci said. "We want people who know what they are doing."

Instant Max Cash Offer rolls out first in Florida, Massachusetts and Texas because those states have a large representation of auto consumers and CarGurus dealer clients, Iannucci said.

Sam Zales, the company’s president and chief operating officer, said, "We are headed towards a digital world where shoppers and dealers are both buying and selling vehicles online, and CarGurus is in a prime position to help both do so with the technology-first approach that we are known for in the industry."

The digital platform for the new program comes from CarOffer, a company CarGurus acquired in January. The platform originally had been a way to conduct dealer-to-dealer wholesale vehicle sales and trades. Said Iannucci: "We’re taking it up a notch. This is a game-changer for dealers and the CarGurus audience."

Because of the inventory dearth, today’s used-vehicle prices are relatively high. That may tempt many car owners to sell their vehicle. But won’t they then have to turn around and buy a replacement vehicle that also is pricy?

Not necessarily, Iannucci said. "Maybe it’s an extra vehicle, or maybe they are moving. There are various situations."

She cites two factors that point to potential success. First, car consumers are rapidly becoming more interested in online auto transactions versus in-person deals. Second, dealerships are hungry to find new and efficient ways to acquire vehicles amid the current industry shortages.  

"Inventory acquisition is a major priority at our dealership," one principal said, "and we often look for ways beyond auctions or trade-ins to purchase vehicles, and that includes searching for consumers who may not immediately come to us to buy a car."

 

WASHINGTON — President Biden this month made dual moves to reduce greenhouse gas emissions, imposing tougher fuel-efficiency standards on automakers and challenging them to drastically ramp up sales of electric vehicles by 2030.

Biden signed an executive order on Aug. 5 that sets a target for electric vehicles, hydrogen-fuel cell and plug-in hybrid vehicles to make up 50% of U.S. sales by 2030 — a voluntary goal that auto makers said would entail federal support for vehicle charging stations and consumer tax incentives.

Separately, the U.S. Environmental Protection Agency proposed new rules that would require automakers to achieve a fleet-wide average fuel-efficiency equivalent of 52 mpg by the 2026 model year, using an industry measure that takes into account both fuel efficiency and emissions reductions.

The current requirement for that model year is 43.3 mpg under rules set in 2020 by the Trump administration.

Automakers would be allowed some increased flexibility to use credits they banked in past years by surpassing their goals to comply with the rules, the agency said. Auto executives said the targets were largely in line with their expectations.

 

Polling of consumers in the Chicago marketplace showed many positive takeaways from the first Chicago Auto Show ever held in July, Michigan-based Foresight Research found.

Conductors surveyed 500 random households in the Chicago market between July 20 and Aug. 4, plus extras to ensure that 200 respondents personally attended the show. The show continued to have a high awareness in the area, with just 10% of local households that did not attend citing a lack of awareness of the July show.

The summer dates allowed for an expansion of the show outdoors, significantly increasing test drive opportunities. The average visit (show dwell time) was 6 hours 5 minutes — almost 90 minutes longer than in 2020 and the longest dwell time ever measured by Foresight. Analysts attributed that to the show’s outdoor street festival and the abundant number of ride-and-drives offered by manufacturers. Forty-five percent of visitors reported taking a ride indoors or outdoors.

Automakers, researchers found, "were hyper-focused on communicating their current and upcoming offerings in hybrid and battery electric vehicles, and the survey shows these efforts were not in vain." Show visitors were already 50%-100% more familiar with hybrids and electric vehicles than the local general population, and 76% of attendees said their likelihood to buy such vehicles increased as a result of their attendance.

Another notable achievement of the show was the high and increased number of its visitors actively cross-shopping, as measured by adding and subtracting brands from consideration lists: 58% of show attendees added one or more brands to their shopping list (up from 43% in 2020, and 41% subtracted brands from their lists (22% last year).

Other highlights:

• Show visitors continued to be younger, more often automotive influencers, and more ethnically diverse that the Chicago market’s overall population.

• Visitors continued to be disproportionately luxury brand-owning households.

• Visitors who are in-market to buy a new car or truck (12-month intenders) were almost double the intention rate of the local population.