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Entries in Auto Business (5)


Canadian Consumer Debt

How often do we hear that CMS (Citizen Main Street) is swimming in debt. By now its a Canadian thing that every month CMS is swimming in a bigger pool of debt.

We will spare you the figures, and graphs. Its usually one sound bite accompanying another sound bite until you start connecting your own dots.

Here is the deal....

Consumer debt is through the roof again, excluding mortgages (consumer credit) it increased again.

Mortgages and the housing market lets not even go there...huge clouds all over the place.

Delinquency is almost at an all time low, seems like CMS still has money to make payments.

Yes...we know Alberta has been hit hard and delinquency is a little higher.

Its the eastern provinces that are increasing the level of consumer credit.

We could keep on going, but hopefully these sound bites are familiar to you too.

If mortgages are excluded, and credit card debt is under control with balances increasingly paid off on a monthly basis. You have to wonder "What's left?"

The second biggest purchase by CMS after a house is a car. Its a record year in Canada...never before have so many vehicles (trucks) been sold, especially in the eastern provinces (Ontario/Quebec).

What is driving up consumer credit (debt) in Canada? Simple automotive financing and leasing.

Will this trend continue in 2017?

Will CMS continue with "mobility for a monthly payment" in 2017?

Will manufacturers continue to enable "rolling over deficiencies" in 2017?

Will software continue the shift to a longer term to uphold a constant monthly payment in 2017?

What will happen if "somebody" steps in and disrupts the "roll over" and "pull ahead" guidelines?





More on Passion

This excerpt is from Seth Godin...

When someone handed you a calculator for the first time, it meant that long division was never going to be required of you ever again. A huge savings in time, a decrease in the cognitive load of decision making.

Now what?

You can use that surplus to play video games and hang out.

Or you can use that surplus to go learn how to do something that can't be done by someone merely because she has a calculator.

Either way, your career as a long-divisionator was over.

Entire professions and industries are disrupted by the free work and shortcuts that are produced by the connection economy, by access to information, by robots. Significant parts of your job are almost certainly among them.

Now that we can get what you used to do really quickly and cheaply from someone else, you can either insist that you still get to do that for us at the same fee you used to charge, or you can move up the ladder and do something we can't do without you.


You perhaps remember the advent of the electronic calculator...and if you do let's leave it at that.

Think of the auto retail business....

Think of how many "long divisions" in the retail business have been supplanted by technology...

Think of the passion being diverted to other activities...

If you replace the electronic calculator by computers, the passion being diverted increases dramatically.

How much surplus created by technology could be directed towards passion?





Is The Auto Business Myopic In Canada?

In the early days of the Internet the entire auto industry was myopic towards the Internet, and later towards social media. There are countless cases where the business comes up short.

If you have been around, involved with, or participated in the auto business for a while, you have the luxury of looking back, and looking ahead.

We were doing that the other day, and it hit us that in the 21st century some folks that are truly enlightened, prescient, and always very discreet. While others are myopic, with a glancing pedestrian knowledge, usually if not always making a ton of noise.

Everyone has a better mouse trap than the other guy. Everybody is trying to monetize something or other, or grab some piece of the action.

There is the "guild" for this, the association for that, the convention for something else, the event for another thing...and it goes on. Let's not forget the 20 of this, the 10 best of that, the top 5 of the other thing, and the nominated winner of something else.

Being part of a "guild", while attending these various events of like minded folks is great for networking, disseminating pedestrian knowledge, and inflating egos.

While the really smart "dude" observes from the back of the room acknowledges the myopic behavior, while crafting his strategy.

Agreed...public relations, photo ops, guilds, associations, events, networking, are an intrinsic part of any business, and create the right optics from a social, community perspective. In the auto business the PR budgets are well consumed for a myriad of activities that capture a nano second of attention.

In 2016 if you need to go to an industry event to discover a new product, new software, new concept, bolster your ego...where are you the rest of the time?

There is so much of this low level stuff going on, its has a tendency of sucking in individuals. While propagating "street knowledge" in an auto business environment where you have to be brilliant to make a difference, and stand out.

"Did you really do that (a brilliant move/strategy)?"....reply "Yes"...."How did you do that?"....reply "A bit of this, and that it worked out". Obvious no one will provide a step by step answer....certainly not to a room full of like minded folks (competitors).

Consider this simple graph from JD Power...for March 2016 in Canada.

The myopic / pedestrian comment would be "The spring market is around the corner and you can't sell new vehicles from an empty shelf."

The smart dude in the back of the room, discreetly starts to connect a few dots, seeking an advantage.

If you are an astute observer and conclude that manufacturers have applied the "sledge hammer" approach to move iron, you might be correct.

If you are a dealer and look outside, you visually see the increase in day supply, the increase in longer term loans, the additional challenge to close deals, while intimately feeling the pressure to move iron.

If you are a customer you see serious deals being offered in the immediate horizon.

Do you think that the smart / prescient individual in the back of the room will give you a step by step guide as to what he will do to move iron during the second quarter?



What's Up with Leasing

We always mention that you should be your own editor and edit out stuff that is...lets just say misinformed.

Last week we published our "white paper" Creeping Auto Loans, and mentioned that manufacturers that did not abandon leasing in Canada were in a dramatically better competitive position.

Reading in industry publications various comments and remarks from folks that should know better, you have to wonder if these folks are in the auto business in Canada...lets leave it at that.


A decade ago leasing had  50% penetration in Canada, CMS (Citizen Main Street) was leasing mobility, eschewing ownership. 

CMS was directed by manufacturers from mobility to ownership with increasingly longer finance terms.

While some manufacturers got out of leasing, others kept on leasing. They are in a better position today, aided by strong CPO programs.

What is the deal?

Leasing will not save the day of long loan terms and negative equity in 2016. Thinking otherwise is being naive, and totally detached from the current reality. 

Rolling over negative equity in a lease is perhaps possible, but the monthly payments would skyrocket, at a time when most deals are closed on a similar or lower monthly payment. Reflect on this for a moment.

Which begs the question "Why do industry experts mix long term loans, negative equity, and leasing in the same conversation.

Reality Check 1

Manufacturers that never abandoned leasing can easily function within the 36 month cycle, while attracting and conquering customers that are in a lesser negative equity position to their product. These manufacturers that never abondoned leasing in Canada have also introduced numerous new models in the "Premium Economy" segment.

Suffice it to say that they are eating a few lunches.

Reality Check 2

Manufacturers that abandoned leasing for finance, and are now fully embroiled in longer term finance, and negative equity have no choice but to continue doing the same, rolling over deficiencies, and pulling ahead finance deals. 

There is a choice...perhaps they will introduce a 72+ month lease to roll over deficiencies? Same as stretching the finance terms a few years ago.

Reality Check 3

When manufacturers abandoned leasing in Canada, they opened the door for Canadian financial institutions to become more active in the auto segment. Auto sales have exploded with the increased participation of financial institutions, which also influence the captives in recalibrating the risk of auto loans.

You have to wonder why "industry experts" persist in connecting the wrong dots, or remain oblivious to the emergence of new dots.

In the meantime CMS is enjoying mobility at $500 per month, and will keep on demanding and enjoying mobility. Its similar to a lease...especially when "everyone has skin in the game" pitching in to roll the negative equity risk down the road.



Oh Canada

Did you think that we were going to end the year without sharing our thoughts, or some of them on Canada. Here goes with our thoughts, rants, frustrations, and whatever else comes along. As usual in no particular order.

Great Country

Absolutely...stunning beauty, with immense potential.

Great Recession

How often have you heard, and keep on hearing that term. The "Great Recession", the meltdown. We never had one in Canada in 2009, although we might be headed for one now. A myriad of stakeholders ensured that we would at some point have a recession all by ourselves in Canada.

Real Estate Bubble

The Canadian CMS (Citizen Main Street) has been powering the Canadian economy since the presumed great recession of 2009. The quickest way to power the economy is through real estate, especially new construction be it homes or condos.

Absolutely its a bubble that has been powering and will continue to power up the economy in 2016.

Cheap Money

Canadian banks have made a ton of money in the past few years, making cheap money available to CMS to power the Canadian economy. Notice that banks are reeling in their expenses, since CMS is topped out.


What can you say...the ride is over, its increasingly denting, or is it side swiping the Canadian economy. Will it ever come back to the good ole days. Probably not...its a new Canadian and global oil reality. Perhaps we have not felt the full extent of the OUCH yet.


Canadian companies have resisted investing money in Canada. We believe that in 2016 it will start to bite them back. Back in the day of CMS powering the economy, with a stronger dollar, companies were urged to invest in Canada...never happened.


Citizen Main Street is in a commanding position in Canada. You could say that CMS rules, and has everyone by the "shorts" (we are being subtle). If CMS is rattled / disrupted it will initiate a domino effect that is literally scaring the living daylights out of everyone.


Its $1.00 a liter, we mentioned that a long time ago. It will stay at $1.00 a liter or higher.


We said months ago that it would increase. Now with the lower Canadian dollar its through the roof. Have you walked the aisles of any grocery store lately. It will impact discretionary spending in 2016.

Auto Sales

CMS empowered by cheap money, and manufacturers has developed a self serving Canadian "mobility" model which seems to be eluding everyone. A record year in 2015, and we all know how the auto business functions...always seeking more.


These folks have no desire to retire, especially empowered by technology. The leading edge are by now "mature" (being subtle). In their own way will remain a "force" in the foreseeable future.


The next wave, an immense force, with Boomer parents. Technology for a Millennial, is like electricity for a Boomer...its there you use it. What they remember as kids is capturing their imagination as adults, turntables, Polaroid, typewriters, old school agendas. Its the human thing...


We evolve in a Capitalistic society, Boomers had an easier time to make money, with an heightened sense of financial equality (up to a point). Millennials are challenged to make money, with a higher sense of the 1% having it all.

The Human Thing

In Canada we are human, understanding, accommodating. The faster we develop the human thing of relationships, empathy, the more success we will have. The more we get lost in the trees of technology, the more we miss the human forest.