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Entries in Canada (47)

Thursday
Jan192017

Sideswpided

At times you have an epiphany moment, and the other day it appeared on our radar that not only can you get disrupted from a myriad directions. Yes...everyone is constantly talking about disruption, business models changing, revenue sources altering.

In most instances you will get an initial signal of disruption on the horizon, then its up to you to adjust and recalibrate your actions and/or business model. Remaining stagnant is not an option.

But you can also get sideswiped and perhaps in a totally unexpected fashion, with varying negative results.

Canada is in the ideal position of being sideswiped in the near future by economic forces, or just a tweet. Yes...you want to reflect on this for at least a moment.

Auto Business:

We make auto parts and components, as well as assemble vehicles in Canada. Been doing it for decades, its always worked, although there have been pressures to perhaps make components, assemble vehicles elsewhere for less money.

We have had record auto sales for the past few years.

What happens when you start applying additional fees on the components and assembled vehicles? What decisions will be made? What will be the impact? Who wins and who loses?

The old Auto Pact was simple if Canada shipped $1.00 to the US it had to import $1.00 from the US, and July was the month to balance the books. Today NAFTA is a free for all with stuff coming from all over the place.

Perhaps nothing will change...but there is a cloud...the auto business just got sideswiped.

Lets not forget that the Canadian dollar at 75 cents is still not cheap enough.

Economy:

How often are you still hearing "The Great Recession" which in reality never happened in Canada. We experienced a slowdown but certainly not a major upheavel. In the meantime many Canadian companies made money and conveniently sat on the money. The premise was the great recession, uncertainty, and whatever other flavor of the day. In the meantime lets leave the money in the bank, lets sit on it.

Lets drop the interest rates to stimulate the economy, lets piss away the value of the Canadian dollar to encourage exports, and with time something will come our way.

As we roll into a time of "I'm going to get my shit together and I really don't give a fuck about anyone else". Do you think that Canada is getting sideswiped?

Citizen Main Street:

CMS is the only bright spot. Cheap money, low Canadian dollar, solid Canadian banks, a ton of money available. "Lets buy real estate, lets buy vehicles, lets take care of ourselves while keeping the economy rolling".

Who is going to buy all these houses at "ridiculous" prices, who is going to buy a record number of vehicles. Who else...CMS.

It worked so well that it scared the piss out of a ton of folks, and construction developed into the biggest Canadian industry. Not oil, not manufacturing, construction powered by CMS.

Will CMS get sideswiped? NO  Can CMS be more mindful with money? YES

 

 

Wednesday
Jan182017

Middle of January 2017

Yes its mid week and a few days past mid month.

We start the year, we want to get a "feel" for what is going on around us, we take a look at our plans, direction, and really take it all in to improve the understanding.

What caught our attention...in no particular order.

Eyeballs:

Unreal how everyone is scrambling for eyeballs to monetize whatever they are doing. Obvious some are even bolder than the bold.

Autonomous Vehicles:

Although its all moving in the direction of AV's we are not there yet, its progressing, a ton of folks are learning, and technology is being calibrated. Is there an upside for Canada?

People:

If you are in the auto business, you are in the people business...its that simple. Been like that for decades. Even with all the technology, all the empowerment...still in the people business.

Politics:

Its a great arena for a bunch of folks to try and get more eyeballs for their platform. In 2017 disruption is a huge eyeball attractor (is there such a word). Lets leave it at that.

Glass Palaces:

The retail auto landscape in Canada in reaching "peak glass palace" (which is often the price of entry) you have to wonder what's up next...the glassier palace on top of the glass palace?

Finance Terms:

"You can finance them for longer because they last longer". In 2017 the naivete of the statement is mind boggling, and completely detached from the reality in Canada.

Peak Technology:

Ask yourself "Are we reaching or have we reached peak technology in the auto business in Canada?" At some point its all pedestrian technology that anyone can access.

Motorcycles:

Boomers powered a generation of V Twin cruisers. Now the industry is still seeking a footing with younger generations. Is it a sport bike, is it a cruiser? One thing is certain it has to be less money. Victory shut down, MV Agusta is still challenged.

Utilities:

They are versatile, more profitable for manufacturers, and fashionable (life style vehicles). Are dealers making money with utilities?

Pick Ups:

The old school full size body on frame car, reincarnated as a pick up, and add a transfer case for good measure. By now we all know that an F150 is aluminum.

Real Estate:

Will keep on inching up especially in the GTA. The next few months will be revealing.

Interest Rates:

That they inch up by 25 points, manufacturers will continue to subsidise lower rates. Its not a big deal.

Used Vehicle Values:

We have been fortunate in Canada to move a ton of used iron to the US in the past. Will it continue? Probably but at lower prices. Values will come down in 2017.

Auto Shows:

Its not the reveals (eye candy), its the attendance by CMS (Citizen Main Street) that makes the difference, and moves iron.

Millennials - Gen Y:

Are increasingly becoming a factor in the Canadian auto business.

Disruption:

Ongoing in 2017, its a time when a "tweet" can quickly get folks do a 180.

Individual in the Back of the Room:

Might as well coin another one IBOR (individual in the back of the room), the person that observes the pedestrian knowledge and behavior to gain an advantage. You want to be an IBOR in 2017.

Time:

The equaliser, its the same for everyone, a precious resource that is constantly accelerating with increasing velocity. Successful individuals start their day early...very early.

We suggest that you make your own list of some of the stuff that has caught your attention so far this month.

 

 

Thursday
Jan122017

Mobility Business

Lets clarify a point or will it be a few points.

Today there are a lot of folks talking about mobility which is immediately interpreted as some sort of "self driving" or "autonomous" conveyance. Its also become an interesting catchword for a lot of folks.

When you reflect on it for a moment..."An auto dealer is in the people business to provide mobility".

You want or need a vehicle to go from A to B, and all vehicles today will get you from A to B.

Its that simple...

At Strada when we refer to mobility we prefer to think of it as the initial shift from ownership to having mobility on a monthly payment basis.

For decades in Canada we were ingrained in owning the mobility conveyance (car), there was a sense of pride in having ownership of the car.

Fast forward to today and the inexorable rise in consumer credit which is primarily driven by auto loans. It begs the question "Who owns a mobility conveyance?" Not many...

As you read the various virtues, and benefits of autonomous vehicles, from less accidents to car sharing, to vehicles returning home after a short commute...we could keep on going. In Canada we are already a few steps closer towards the model of AV's where less and less folks truly own a vehicle or are seeking an equity position in a vehicle.

Its costing me "So much per month" to have a conveyance that provides mobility.

Obvious that a lot of folks will still own their "toys" be it a car, a truck, motorcycle, hot rod. But the conveyance that is relegated to commuting, going from A to B, doing the errands. That one is on a "So much per month" basis.

Canada is steadily progressing in the "So much per month for mobility" since the past few years. Its the reason that we are seeing record sales.

 

 

Tuesday
Jan102017

Canadian Sales - 2016

Our review of Canadian Sales for 2016.

 

 

Friday
Jan062017

Vroom Room

Good Morning,

Its Friday, its the Vroom Room, the first of 2017. Enjoy the cappuccino and biscotti, join the conversation, and please tell your friend.

Hopefully you took a few days off, and this past week was your immersion into the 2017 reality. Its Canada's 150 Anniversary this year. We know Canada has been around for dramatically more than 150 years, but Canada the country will be 150 this year.

Probably not thinking about it, the Camaro is 50 years old this year...click. Reflect on this for a moment especially if you owned a 67 Camaro at one time or another, and perhaps if you still own a Camaro now.

Call it what you want, carbon tax, cap and trade, the reality is that CMS (Citizen Main Street) is paying more for gas in Ontario and a few other provinces. Is it a good thing? Time will tell, but its a great start to the year...or is it?

Agreed...its a busy month, CES going on now, NAIAS next week, the various auctions in Scottsdale, the Rolex 24 at Daytona, the World Economic Forum in Davos. Did we forget the inauguration of a new President in the US.

Canadian Sales

Although December was slightly behind last year, its been a record year, on top of a record year. It sort of leaves you for words...WoW. Yes...CMS (Citizen Main Street) is on a serious mobility streak in Canada.

Will it continue this year (2017) good question? What do you think.

Our usual old race cars a Visual Treat from Sebring...enjoy.

 

Tuesday
Jan032017

Expect The Unexpected

Do we have advice for 2017? Simple..."Expect the unexpected"

If you think its going to happen it might not, and if you think its not going to happen it just might develop; so expect the unexpected.

As we always say, be your own editor, and connect your own dots.

Does it mean that everything will turn into a surprise? No...a lot of plans, goals, will develop as expected, but anticipate disruptions from directions that perhaps you did not consider.

Canadian Sales:

Do we expect Canadian Sales to set another record in 2017?

Utility Vehicles:

We all expect utility vehicles to continue their upward trend in replacing sedans.

Mobile:

We expect a continued shift towards "mobile".

Housing:

Do we expect construction of new homes, and real estate to continue as a force in the Canadian economy?

We could keep on going, but you surely grasp our thought vector...

 

Thursday
Dec222016

The Truck Thing

To be clear by truck we mean pick ups and the various sizes of utility vehicles.

This year we have seen the "truck thing" gain increased momentum in Canada, while some well entrenched models in the utility segment have been disrupted.

Yes...gas is reasonably inexpensive, although on a upward trajectory.

The sedan segment is taking a pounding from the truck utility segment. Everybody wants some sort of a truck/utility and it seems that nobody wants a car.

By now we know that pick ups are popular in many areas of Canada, except dense urban areas. Even in those areas the mid size pick ups are making some inroads.

The various sizes, and segments of utility vehicles are making serious inroads into the car segment. Especially the compact utilities which are quite versatile compared to sedans. The driver sits higher, in numerous instances its AWD, with a reasonable cargo area. Its a useful vehicle...offering a strong value proposition.

Will the truck thing continue in 2017? What do you think?

 

 

Tuesday
Dec202016

Do it Better

Its that time of year. We are busy, time has accelerated all year long. We have seen disruption in a bunch of areas. A bunch of folks got caught flat footed and then some.

Its also the time of year when we might just ask "Could I/We have done it better?". Not to be a Monday morning quarter back (analyst) but simply to learn from our experiences, and decisions.

You look at the auto business in Canada, record year, never have so many new vehicles been sold in Canada. Especially with a challenging market in Alberta. Truly impressivle...absolutely. We have to be doing a few right things...absolutely.

Ask yourself "Can you do it better?"

You can surely come up with a few points where you could have done it better...what do you think?

 

 

Thursday
Dec152016

Its a Car not a House!

Do you remember when the auto business was melting down in North America in 2008/2009, agreed it almost looks like ancient history today.

Back then an inexorable shift from leasing which had a 50% penetration in Canada to finance terms (usually longer) was initiated by all the manufacturers with a few exceptions. The thought vector was simple "let's shift the residual risk to the consumer" taking it off the books of the manufacturer controlled captive finance companies.

We all know the auto business works best on a 36 month cycle. With time the auto business in Canada embarked on a voyage of rolling over deficiencies (on trade ins) and pulling ahead from an 84 month term to a 36 month cycle.

Looking at data from JD Power Market Metrics YTD November.

..................Lease.......Finance.......Over 72 Months

2012............21%.........61%.................58%

2013............19%.........62%..................62%

2014............23%.........59%..................67%

2015,,,,,,,,,,,,26%.........57%..................74%

2016............26%.........57%..................72%

If you conclude that CMS (Citizen Main Street) who had a strong affinity for leasing a vehicle is now caught up in a circle of rolling over deficiencies...we agree with you.

Manufacturers and financial service providers are caught up in having mechanisms to "roll over" deficiencies. While prices, and incentives are inexorably increasing.

Reflect on this...CMS who usually agrees to a 5 year mortgage term on a 25 year amortization period, is on at least a 6 or 7 year term for a vehicle.

Needless to tell you that the average monthly finance payment has escalated from approximately $530 per month in 2012 to approximately $575 per month in 2016.

Terms get longer while monthly payments creep higher.

The overview of Creeping Auto Loans in Canada.

The remark from the individual in the back of the room "How long can we keep this up?"

A different view...

Click on image to enlarge

 

Wednesday
Dec142016

Inventory Levels

If you are in the auto business, or just a casual observer you are aware of inventory levels at dealers by the number of vehicles that are displayed (parked) on the premises.

Way back in the day, before technology, inventory levels were more of a gut feel, with simple ratios (up to a point). In addition to the mantra "You cannot sell from an empty shelf". Usually there was more than less inventory on the ground, be it new vehicles as well as used. 

One strategic vector for new inventory was to have specific models, or specific options that provided a competitive advantage. Those were the days of Bespoke Vehicles from the factory.

New vehicles are assembled in a "just in time" process where most if not all components are just in time, and sequenced to the assembly line. These vehicles that are assembled just in time, get stored on various dealer facilities for months prior to being sold. Reflect on this for a moment...

When components were stacked at assembly plants, and vehicles were stacked on dealer's lots it sort of all made sense.

At one time...the revenue generated by finance contracts from the captive finance company, would often cover the floor planning of the new vehicle inventory. Reflect on this too for a moment.

in 2016 with a ton of technology at the factory, at the dealer, and empowering the consumer, inventories of new and used vehicles remain stagnant, with modest improvements, if any from the good old days (gut-simple ratios).

Looking at "Days to Turn" in Canada from JD Power Market Metrics for YTD November.

Days to Turn

....................New............Used

2012..............69...............61

2013..............65...............60

2014..............62...............59

2015..............70...............60

2016..............73...............61

From the customer's perspective its irrelevant how many vehicles are on the ground at any time, and for how long. For the dealer its an expense. When new vehicle inventories surge its an additional expense.

You have to wonder with record sales, an ample supply of all sorts of technology, why the new vehicle inventory is so high in Canada this year.

What do you think?