Automotive News Canada - May 2022 - 24

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EXPERT INSIGHTS
THE USED-CAR INVENTORY CRUNCH
Change continues to buffet the automotive industry in
Canada, as evidenced by the severe shortage of usedcar
inventory. In fact, the pandemic, coupled with the
rise of digital tools, has dramatically altered the usedcar
landscape and transformed it into a more global
marketplace in order to meet rising demand. What
does this mean for Canadian auto dealers and how
can they capitalize on this trend? Luciano Butera, the
Executive Vice President and Chief Operating Officer
of TRADE X, as well as a member of the company's
Board of Directors, offers some compelling insights.
Q: How has the lack of new-vehicle inventory
changed the interest in and value of used-car
inventories?
Luciano Butera: The lack of new-vehicle inventory
has pushed demand for used-car inventory to unprecedented
levels. In the absence of new-car inventory and the extended waits to
obtain vehicles, used-car pricing has risen to the point where, in some cases,
late-model used cars are priced comparably - and sometimes higher - than
a corresponding new vehicle's manufacturer's suggested retail price. The
demand on both sides of the border also has driven up used-vehicle demand
and many dealers are finding it more lucrative to export used cars south of the
Canadian border or abroad to take advantage of the higher pricing.
Q: Traditionally, what were the primary ways dealerships used to acquire
used vehicles? How has that changed?
Butera: Traditionally, dealerships used to acquire
used-car inventory through auctions, dealer-to-dealer
wholesale acquisitions, customer trade-ins and
fleets. The pandemic accelerated the use of digital
auction platforms, which have dramatically increased
dealers' willingness, in certain markets, to search
outside their borders and procure vehicles internationally.
For example, many dealers in the United
States that typically shied away from Canadian vehicles
have now embraced Canadian inventory as a
viable alternative to stocking their lots and supplying
their local markets.
Q: Traditionally, how would dealers dispose of
used-car inventory that didn't match their market/
client base?
"
Butera: To dispose of unsold inventory, dealers traditionally
used the same outlets that they used to
procure used-car inventory - wholesaling to other
dealers and auctions. After that, depending on the
vehicles' age and condition, they'd send them to be
recycled or exported them to markets where there's higher demand.
Luciano Butera
vehicle. Dealers who quickly adopted new selling
techniques and technologies found favor with customers
and, in turn, they were able to continue to
sell and purchase vehicles throughout the pandemic
without much disruption.
Q: Historically, numerous barriers made it difficult
to move used vehicles, not only from one province
to another, but from country to country. Can
these barriers be removed and if so, how?
Butera: With the advent of modern digital resources
and platforms, moving vehicles from province to
province and between countries has become very
transparent, easy to navigate and as seamless as
local transactions. Dealers now have tools available
that allow for the safe and secure transportation of
vehicles, a simplified documentation process and
The pandemic
accelerated the use of
digital auction platforms,
which have dramatically
increased dealers'
willingness, in certain
markets, to search
outside their borders
and procure vehicles
internationally.
"
- Luciano Butera
Q: How has the used-vehicle marketplace changed over the past two
years? What opportunities has this created for the dealers in both buying
and selling used vehicles?
Butera: The pandemic has certainly taught the industry that the need for
traditional bricks-and-mortar selling outlets is not as critical as previously
thought. Many dealers have adopted digital contracting, touchless delivery,
remote trade-in valuation processes and home test drives and deliveries
to create a faster and more seamless customer experience when buying a
secure payment methods to help build trust between buyers and sellers.
Q: Do you believe the used-car industry has become a global market? If
yes, why is this occurring?
Butera: Yes, technology and trading platforms powered by artificial intelligence
are making it possible for both buyers and sellers on opposite ends of the globe
to gain increased visibility of vehicle valuations, vehicle conditions and arbitrage
opportunities, as well as safely transact payments and easily handle logistics
and compliance, just as if they were buying or selling
locally. Due to the pandemic's impact, dealers were
left with no choice but to expand their geographic
trade markets to survive the rapidly evolving way
business was being transacted. Dealerships strove to
keep their doors open and consumers required vehicles,
especially if public transportation had been their
primary mode of transportation - a means of travel
that posed a risk to people's health. Dealers quickly
expanded their selling and purchasing corridors to
global markets to maintain liquidity in the industry.
Q: How do dealers and consumers benefit from
this globalization trend?
Butera: Globalization is providing both dealers and
consumers access to vehicles they previously could
not buy or sell in their marketplace. In an export
market, the sellers have an advantage: they can sell
vehicles for what they're truly worth to the world's
highest bidders and according to arbitrage data for
each specific area. Meanwhile, buyers now have an
opportunity to access vehicle inventory that would
normally not be available or difficult to obtain. As a
result, increased availability has improved transportation and mobilization of
goods and services in local and global marketplaces.
Q: What opportunities do you see for Canadian dealers in terms of either
sourcing or disposal of used vehicles?
Butera: Canadian dealers can both source compliant vehicles that are in
demand and dispose of vehicles for much more than local wholesale values,
as there is a greater appetite for older vehicles in various international markets.
Vehicles typically deemed as having little more than scrap value in Canada are
in higher demand and carry significantly higher value in developing nations.
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