Everyone’s pandemic car loans could eat them up in debt

GMC vehicles are displayed at the Sterling McCall Buick GMC dealership on February 02, 2022 in Houston, Texas.  Record sales prices pushed General Motors' profits up 56% to $10 billion last year.  Due to a global shortage of computer chips, high demand and scarcity of vehicles has driven up prices, helping General Motors boost its bottom line by 56% last year.

In 2020, everyone took one look at the auto market – with dramatically low supply and dramatically high demand – and still took out a loan for a new car. It’s been…good so far, but it could come back to haunt us. All this and more in The morning shift for March 23, 2022.

1st gear: what happens when car prices fall?

the The Financial Times published a funny story on car loans taken out during the pandemic, noting that everyone decided to buy a personal automobile at the same time for whatever reason. (We were all getting Covid.)

It’s been relatively stable so far because, well, people are still buying cars voraciously and automakers are still struggling to get vehicles out there. We are still riding the wave, so to speak.

But what happens must happen, as the FT points out:

Americans have been buying cars a lot during the pandemic. Auto loans in the United States hit a record $734 billion in 2021, according to data from the Federal Reserve Bank of New York. Total debt outstanding in the sector rose by $84 billion to $1.46 billion, outpacing the observed increase in student and credit card debt combined. Federal Reserve Chairman Jay Powell this week argued for more aggressive monetary tightening, suggesting rising credit risks.

[…]

The high interest payments on these debts filled the coffers of auto lenders. Soaring used car prices have also made it easier for banks to recover their capital in the event of default. Used car values ​​are not far from decade highs in the United States, according to Manheim data.

However, rising interest rates, sharply rising gasoline prices and a possible easing of the car shortage threaten to put a damper on the auto loan boom. Already, shares of Ally Financial and Capital One have lagged the broader US financial Russell 1000 index since last summer.

When used car prices weaken, lenders who have made large loans may take a different view of collateral. Since July, auto defaults have risen again, according to the S&P/Experian Auto Default Index. It’s early days, but shareholders will want to buckle up. As a

I like the Financial Times because it doesn’t present this as a problem for consumers, for ordinary people. Ordinary people don’t read the FT. This article is for wealthy people who are financially invested in this issue.

2nd gear: Corvette production slowed due to parts shortage

Speaking of automakers still struggling to make cars, even their most prestigious vehicles: workers assembling the new C8 Corvette have been idle for a week due to parts supply issues, as Automotive News reports:

General Motors cut the first and second shifts at Corvette plant in Bowling Green, Ky., for the temporary parts restraint, spokesman Trevor Thompkins said Automotive News.

“Our supply chain, manufacturing and engineering teams are working closely with suppliers to mitigate additional production impacts,” he said.

[…]

GM declined to say which component was in short supply, but spokesman Dan Flores confirmed the downtime was not due to a shortage of semiconductor chips. No other GM plant is taking parts-related downtime this week, he said.

3rd Gear: Former GM boss moves to ExxonMobil

The warm relationship between the auto industry and the oil industry continues to this day, with former CEO and director of Cruise Dan Amman joining ExxonMobil. He says he’ll be there to help with the decarbonization, even if it’s a bit like entrusting a fox with guarding the chicken coop. From Automotive News:

Dan Ammann, the former General Motors president who suddenly left his post as CEO of Cruise in December, was named president of ExxonMobil Low Carbon Solutions.

[…]

He said in a LinkedIn position On Tuesday, he will lead the construction of new businesses at ExxonMobil focused on decarbonizing the industrial economy.

“We will significantly move the needle to net zero in the hardest to decarbonize industries, in an economically viable way and with urgency,” he wrote. “To do this, we will draw on the deep resources and expertise that exist within ExxonMobil today, as well as the best outside ideas and an initial $15 billion commitment the company has made. to develop this activity and reduce emissions.” Inasmuch as

4th Gear: “Right To Charge” is my new favorite EV phrase

I love this strange moment in the history of the electric car, in which there are increasing promotions for electric vehicles but an uneven charging infrastructure. In some places there are too many chargers, like in Japan. The United Kingdom faces the opposite problem, because Bloomberg reports:

A successful transition to the electric car is only possible with major infrastructure improvements that give drivers “the right to charge”, an industry body has warned.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said the industry was “up to the challenge” of phasing out new petrol and diesel cars, but its efforts must go hand in hand huge investments in public chargers.

[…]

Last year’s ratio of around 16 EVs for each public standard charger is likely to worsen to around 32 EVs per charger this year, with significant regional variation, Hawes said.

He warned: “Things are getting worse because of this pace of market transition for electric vehicle sales.

“We need the infrastructure to catch up.”

I love the expression Right To Charge. You have to fight! For your right! To engulf electrons at 150kWh!

5th Gear: You Have Two Months to Get $2.9 Billion in New Transportation Funding

The Department of Transportation under Pete Buttigieg is doling out another $2.9 billion and you have two months to get your hands on that sweet, sweet funding, like Reuters reports:

The White House will announce on Wednesday a $2.9 billion funding opportunity earmarked by the Department of Transportation for major infrastructure projects this year, as part of a $1 trillion bill approved by Congress in 2021. .

[…]

The grant funding provides “a unique opportunity to repair our outdated infrastructure and invest in major projects for the future of our economy,” Buttigieg said. Applications must be submitted by May 23.

The figure includes $1 billion for projects of national or regional significance that are too large or complex for traditional funding programs, which Buttigieg described as the “cathedrals of our infrastructure.”

We will build cathedrals to our wheeled gods, honor and cherish them.

Back: I can’t believe it was a year ago

On March 23, 2021, the Ever Given got stuck in the Suez Canal. In my heart, he is still there.

Neutral: How are you?

I think I could finally take advantage of this warmer weather to paint a bike for the first time. It will go horribly wrong, I’m sure.

About Galen A. Williams

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