The ongoing semiconductor microchip shortage has been a major disruptor to the automotive industry, diminishing inventory levels and leaving dealerships with little to no new cars to sell. On the flip side, those in the used car business have been able to turn record profits due to the consequential increase in value of second-hand rides. One such company is Carvana, which recently saw its shares increase by more than $0.25 each.
The uptick in value is the result of $3.3 billion in earnings for Q2 2021, which, according to Barron’s, beat the consensus call for $2.5 billion. The report goes on to say that the number of vehicles sold by Carvana is up nearly 100 percent while the year-over-year revenue has increased by nearly 200 percent and the gross profit is up almost 270 percent. The company told shareholders that its average gross profit per unit is up from $2,727 tp $5,120 per unit compared to Q2 2020.
The growth is indeed quite drastic, and according to Carvana CEO Ernie Garcia the trend will last as long as there’s a shortage in semiconductor microchips.
One can simply take a look at GM’s very own product offerings to see the mechanism at play here. Take, for instance, the Chevrolet Camaro which is seeing second-hand examples of the sports coupe selling for over $36,000 in June — up more than 40 percent compared to June 2020. While part of the increase is the result of consumers combating boredom brought on by the pandemic, an even more substantial factor is a decrease in the availability of new options.
The GM Lansing Delta Township plant where the Camaro is built has experienced recurring shutdowns due to the semiconductor shortage, making the vehicle hard to come by at dealerships. This likely has more prospective Chevy Camaro buyers shopping second-hand, in turn driving up used prices for the two-door. The GM Lansing Grand River plant is expected to come back online on August 9th, and 2022 Camaro models are set to enter production on August 17th.
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Comments
I track weekly auction rates, we are past peak used car prices, and the last 2 weeks used car prices have gone the other way. Still much higher than a year ago, but we passed the peak.
How do you do this? Just curious.
There are several online databases which track auction results, and also dealer transaction prices. You can can definitely see a peak formed about a month ago, and since prices have started to soften slightly. I also have a couple larger dealers I stay in contact with for confirmation of what they are seeing. It is always possible to be an anomaly in the statistics, but it looks solidly like the market has peaked.
Yes everything is still through the roof. Cars, lumber, food, fuel……………..
Lumber has dropped a lot recently. It is back to where the truck hauling the lumber is worth more than the load.
Some lumber prices have come down. I bought a few treated 4x4x10 the other day and they were about $15 each. When I priced them much earlier in the year they were close to $40. I will say this; shop around. I needed some 2inch galvanized pipe 10 foot long for a dock build and the price at Lowe’s was $89 and the same pipe at Menards was $44. Same pipe. The only thing I can figure is that Menards must of bought low and Lowes bought during the height of the pandemic.
Definitely shop around. If you buy from low volume stores or obscure products there can be much different pricing. Our local mom and pop hardware store had some great deals on plywood a few months back (because it have been purchased a year earlier and in their inventory) but word got out to contractors and they came is and scooped it all up.
A side note GM and Ram is cleaning up on base model pickup prices as a sub $40k F150 would be a white 3.3 truck which the same price on a Chevy will get you a 4wd ext or crew 2.7 or a Hemi Classic or Big Horn for the same price.