LANE CHANGE Navigating What's Next Jonathan Smoke Agenda P R E S - PowerPoint PPT Presentation

LANE CHANGE Navigating What's Next

Jonathan Smoke Agenda P R E S E N T E R S VP / Chief Economist, Cox Automotive COVID-19 Market Update Essential things dealers should do with inventory Dale Pollak Executive Vice President, Essential digital capabilities dealers Cox Automotive should have in place Founder, vAuto Essential things dealers should do with new vehicle inventory Chris Hanna Performance Manager vAuto Lance Helgeson Moderator Chase Abbott Dealer Software Solutions 2

Housekeeping Listen only mode Submit questions via Questions panel Recording available tomorrow on coxautoinc.com 3

COVID-19 Market Update Economic & Industry Insights Jonathan Smoke VP / Chief Economist, Cox Automotive 4

NEW AND USED VEHICLE SALES INCREDIBLE RECOVERY USED MARKET AGAIN RUNNING ABOVE 2019 LEVELS WHILE NEW SALES ARE STILL MUTED IN LAST WEEKEND OF JULY Y/Y % Change in 7-Day Moving Average of Retail Sales New Used 30.0% 21.3% 20.0% 10.0% 0.0% -10.0% -20.0% -17.1% -30.0% -40.0% -50.0% -60.0% -70.0% 5 Source: vAuto /Cox Autom otive VMA Database

SUPPLY BUILT UP BUT IS NOW BELOW NORMAL Market Days' Supply Used New 200.0 180.0 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 6 Source: Cox Automotive/vAuto

ZERO PERCENT FINANCING DECREASES 0% APR Finance Share 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 7 Source: Cox Automotive

BANK DEPOSITS SOARED BY $2.3 TRILLION FOLLOWING THE CARES ACT Weekly Deposits at Commercial Banks Bank Deposits (SA) Savings Deposits (SA) $18,000.00 $16,000.00 $14,000.00 $12,000.00 $10,000.00 $8,000.00 $6,000.00 $4,000.00 $2,000.00 $- 8 Source: Federal Reserve Board Deposits at Commercial Banks

PURCHASE INTENTION PEAKED IN APRIL Plans to Purchase/Lease a Vehicle in the Next 6 Months 25% 22% 20% 15% 15% 10% 5% 0% Mar Mar Mar Mar Apr Apr Apr Apr May May May June June July July24-25 5-6 13-14 20-22 27-28 3-4 10-11 17-18 24-25 1-3 15-16 29-30 12-13 26-27 10-11 9 Source: 2020 Cox Automotive COVID-19 Consumer Impact Study

USED PRICES NOW AT NEW HIGH POINTS MY 2017 Retail and Wholesale Price Indices (wk1=100) 115% 110% 105% 100% 95% 90% 85% 80% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 2019 Retail Index 2020 Retail Index 2019 Wholesale Index 2020 Wholesale Index 10 Source: Cox Automotive

COVID-19 OUTBREAKS LEADING TO HIGHER RISK IN MOST REGIONS 11 Source: Cox Automotive

NEW SALES NOW HAMPERED BY SUPPLY — 2.5 MILLION UNITS AT END OF JUNE Active New Vehicle Inventory by Week 2019 Active Inventory 2020 Active Inventory 3,600,000 3,400,000 3,200,000 3,000,000 2,800,000 2,600,000 2,400,000 2,200,000 2,000,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 12 Source: Cox Automotive

MAY STARTED THE JOBS RECOVERY; HOW FAST WILL IT BE? 14.7 MILLION NET JOBS LOST SINCE FEBRUARY, MAY AND JUNE ADDED 2.7 AND 4.8 MILLION RESPECTIVELY; UNEMPLOYMENT RATE 11.1% Unemployment Rates Headline Unemployment % (U3) Underemployment Rate % (U6) 25.0 20.0 15.0 10.0 5.0 0.0 Jan-56 Jan-57 Jan-58 Jan-59 Jan-60 Jan-61 Jan-62 Jan-63 Jan-64 Jan-65 Jan-66 Jan-67 Jan-68 Jan-69 Jan-70 Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 13 Source: BLS

CONSUMER SENTIMENT DOWN AGAIN LAST WEEK MORNING CONSULT’S INDEX OF CONSUMER SENTIMENT ON MONDAY WAS DOWN 24.2% SINCE FEBRUARY 29 ICS Value (7-Day Average) 120 114.23 113.8 110 100 90 85.87 80 81.23 70 60 14 Source: Morning Consult

CONTINUED RECORD-SETTING PERFORMANCE IN WHOLESALE PRICES PRICES IN THE FIRST 15 DAYS OF JULY INCREASED 4.4% FROM JUNE 2020 AND WERE UP 11% COMPARED TO JULY 2019 160 155.9 155 150 145 140 135 130 125 120 115 110 105 100 95 January 1995 = 100 90 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19 15 Source: Manheim

Balancing your inventory equation in transition …as the year progresses Dale Pollak Executive Vice President, Cox Automotive Founder, vAuto 16

Balancing your inventory equation in transition Need Period Sales Pace Current Stock (+/-) 30 days 94 79 15 14 days 85 79 6 10 days 87 79 8 7 days 95 79 16 17

Top 5 essential things dealers should do with new vehicle inventory …as the year progresses Chris Hanna Performance Manager vAuto 18

Top 5 essential moves to make with your new car inventory #1: Recognize no one is going to run out of cars #2: Track dealer days supply #3: Address your “ unwants ” #4: Manage sales rate #5: Focus on your best price: manage sales rate 19

#1: Recognize No One Is Going to Run Out of Cars 1. Inventory levels/pipeline vary by OEM Every store has inventory that isn’t selling (frozen capital) 2. 3. Unsold cars reduce ability to get right cars 20 RETAIL

#2: Track Dealer Days Supply 1. Calculation (How many you sold, how many you have) Identifies vehicles you’re selling too quickly or too slowly 2. 3. Helps shape attack plan for unsold inventory 21 RETAIL

#3: Add ss You “ Unwants ” 1. Make sure merchandising is ship-shape 2. Be creative (Banners, payments, etc.) Offer “ unwants ” as alternatives/switch cars 3. 22 RETAIL

#4: Manage Sales Rate Market doesn’t stop selling when you run out 1. 2. Use DDS to know when to be more/less aggressive in model/trim configurations 3. Focus on in-market customers 23 RETAIL

#5: Focus on Your Best Price 1. OEM covenants have moved pricing offline (to lead management process) 2. Use DDS to set best price (sell aggressive/fast if you must, not because you can) 3. Offer best price based on in vs. out-of-market customers 24 RETAIL

Top 5 essential moves to make with your new car inventory #1: Recognize no one is going to run out of cars #2: Track dealer days supply #3: Address your “ unwants ” #4: Manage sales rate #5: Focus on your best price: manage sales rate 25

Essential digital deal-making capabilities dealers should have in place Take-away checklist Chase Abbott Dealer Software Solutions 26

Essential digital deal-making capabilities ✓ Get the online merchandising right ✓ Tell the world about your digital retailing experience ✓ Connect online to in-store ✓ Fly your F&I flag ✓ Dial in to the digital data ✓ Bonus: be social, and kind 27

Get Online Merchandising Right 1. Elemental step that goes beyond good photos, descriptions (360s, videos, etc.) 2. Make sure rates, incentives are accessible, accurate 28 RETAIL

Tell the World About Your Digital Retailing Experience 1. If you build it, they come faster - if you tell them 2. Be clear, complete about what you offer (hybrid or all-digital) 3. Set expectations for choice, experience (FaceTime, Zoom) 29 RETAIL

Connect Online to In-store Get your team on board — culture, responsibilities, roles change 1. 2. Start where customers stop online Beware of the pitfalls —systems don’t talk, double -entry deals 3. 30 RETAIL

Fly Your F&I Flag 1. Provide opportunity to self-explore and select 2. Put your people out there 3. Work faster with lenders, partners (e.g. approvals, titles) 31 RETAIL

Dial In to Digital Data 1. Be aware of AI opportunities 2. Use insights to prioritize cars, customers 3. Develop pre-conversion market 32 RETAIL

Bonus: Be Social, and Kind 33 RETAIL

Essential digital deal-making capabilities ✓ Get the online merchandising right ✓ Tell the world about your digital retailing experience ✓ Connect online to in-store ✓ Fly your F&I flag ✓ Dial in to the digital data ✓ Bonus: be social, and kind 34

Q&A Navigating What's Next 35

Thank You Dale Pollak Executive Vice President, Cox Automotive Founder, vAuto Dale.Pollak@coxautoinc.com dalepollak.com Jonathan Smoke Chief Economist, Cox Automotive Jonathan.Smoke@coxautoinc.com @SmokeonCars VISIT COXAUTOINC.COMFOR THE LATEST COVID-19 BUSINESS UPDATES & RESOURCES