What April CPI data means for automaker profits

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What April CPI data means for automaker profits

00:00 Speaker A

The latest consumer inflation data are revealing a surprise for new vehicle prices in April. For more, let’s get to Yahoo Finance’s Pras Subramanian.

00:07 Speaker A

Surprise!

00:11 Pras Subramanian

Yes, the CPI data were a little bit, a little of a surprise for me in that, uh, prices in April were flat month over month and up only three tenths of a percent year over year. I thought that we might see some tariff impact there with those prices. But it seems to me what happened was, and I think what the data shows, that inventory was dipped into. We saw that these dealerships and automakers had, had built up on their supply, flooded the dealer lots with cars, sold off a lot of that, sold off some of that, uh, pre-tariff or non-tariff inventory, and basically what happened is, um, uh, supply went from 70 days to 60 days or so thereabouts in that month, which is kind of a big move for one month and shows that they do have some padding. But then at some point, when does that, you know, end up going away? Uh, also spoke to, saw KBB actually saw that ATPs or average transaction prices at the dealer level were up two and a half percent, actually. And I asked them, “Why do you think there’s a disparity between what you guys are seeing and what CPI is reporting?” And they say that some of the CPI data is a trailing indicator and they have more different data sets, probably a bit more newer information at the lots. So they’re saying that the trend is actually slightly uptick here in prices and that might, you know, they might actually continue if we don’t get any relief. I know we saw the *** trade deal with the British cars getting that little 10% tariff. That helps. We’ll see if that can extends to the Japanese car makers which we’ve seen them are suffering, uh, right now with that.

02:42 Speaker A

Let’s talk Honda for a second, cuz that, this number, Pras, I did a double take on this number this morning. I thought I was reading this wrong. Honda forecasts a nearly 60% profit decrease in the current financial year. Wh- what is going on there?

03:02 Pras Subramanian

So they’re talking about how they might take a four billion dollar hit to operating profit because of tariffs, right? And they can mitigate about a billion dollars. That’s about three billion dollars. But but that that winds up being half, almost sorry, a 60% hit to operating profit overall for the year, uh, just from the tariff impact and, and some headwinds from, from, uh, currency. So that’s a big problem for them. We’ve seen that with, you know, Toyota with an 1.2 billion dollar hit in two months. Uh, these are companies that are importing not just from Japan, but also Canada, Mexico. So they’re getting almost a triple whammy there because they have, they do operations in, in America, but not as much as, as they probably should.

03:58 Speaker A

Or, or by your point, Nissan per Reuters, operating profit in the 12 months to March, a decline of nearly 90% from the previous year.

04:10 Pras Subramanian

You know, Nissan has their own other issues that they’ve been dealing with. You know, they’ve been trying to obviously merge with Honda. That was one of the big stories from last year or late early this year. Didn’t, didn’t work out for them. They’ve had a lot of problems with older products, uh, management structure, change in new CEO. That’s all been happening on the backdrop of this, uh, potential, you know, whammy of tariffs for them too. Um, so Nissan, yeah, that’s a different story, but but you’re right, it’s the Japanese automakers are really struggling, and that’s a big part of their backbone. Industrial backbone is auto in that country. So it’s it’s even more, uh, crucial for them to get this right.

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