• Cox Automotive forecasts full-year 2023 U.S. auto sales to finish near 15.5 million units, up from 13.9 million in 2022 and down from the market peak of 17.5 million in 2016.
  
  
• Cox Automotive forecasts annual vehicle sales pace in December to be near 15.1 million, up 1.6 million from last December’s 13.5 million pace but down from November’s 15.3 million level.
  
  
• December’s sales volume is expected to rise 6.2% from one year ago and reach 1.36 million units. Volume this month will increase by 10.4% from November, which had two less selling days.

December new-vehicle sales will be announced this week and are expected to show gains over last year’s product-constrained market.

According to the Cox Automotive forecast released last week, sales volume this month is expected to rise 6.2 percent over December 2022. The seasonally adjusted annual rate (SAAR), or sales pace, was expected to finish near 15.1 million in December. This SAAR is 1.6 million higher compared to last year’s pace. However, it reflects a slight decline from this past November’s 15.3 million level that matched the lowest SAAR of 2023, which was recorded in May.

According to Charlie Chesbrough, senior economist at Cox Automotive: “December is generally a strong month for new-vehicle sales as holiday shoppers look for year-end deals, and this year will be no exception. With supply much higher now and incentives higher as well, this December is expected to finish significantly better than last year. But high vehicle prices and high interest rates remain the industry’s Grinch right now, and that trend will continue into next year.”

2023: A Surprisingly Strong Sales Year
New-vehicle sales have been stronger and more consistent than expected throughout 2023. The new-vehicle market has been supported by growing deliveries, improving supply levels and higher incentives. Full-year 2023 U.S. auto sales, based on vehicle counts by Kelley Blue Book, are forecast to finish near 15.5 million units, an increase of 11.6% from 13.9 million in 2022 and ahead of Cox Automotive’s forecast from one year ago.

Large year-over-year gains in 2023 have been delivered by Honda, Nissan, General Motors and Tesla. The Hyundai Motor Group, with Genesis, Hyundai, and Kia brands, had a strong year in the U.S. market, growing sales by more than 12% and passing Stellantis – maker of Jeep, Ram, Dodge, Chrysler and other brands – to take the fourth spot in overall U.S. sales, behind Ford. Of all major automakers, Stellantis is the only one expected to post lower year-over-year sales, as the company pursues a strategy of lower volume and higher revenue per sales.

Higher New-Vehicle Inventory Levels and Strong Fleet Activity Support Improved Sales Pace
New-vehicle inventory volume was 2.56 million at the start of December, higher by more than 900,000 units from one year ago. Meanwhile, days’ supply had climbed to 71, up from 60 at the start of November and more than 17 days higher than December 2022. At the beginning of December, new-vehicle days’ supply is closer to the pre-pandemic norm than in the last several years.

Fleet sales are expected to rise in December after experiencing two months of pull-back in commercial and rental vehicle sales. The lower fleet volume was particularly affected by big drops in fleet sales from the Detroit Three due to the UAW strike.

Chesbrough notes: “With the strike now in the rearview mirror, December is expected to show a return to stronger fleet activity, and these sales could have a big impact on the month’s final tally.”

December 2023 New-Vehicle Sales Forecast

Full-Year 2022 U.S. New-Vehicle Sales Forecast Highlights

• New-vehicle sales are forecast to increase 11.6% in 2023, reaching 15.5 million units.
• New auto sales in Q4 will be down 4.2% compared to Q4 2022.
• GM retains the sales title over Toyota in 2023 while Hyundai Motor Group jumps past Stellantis; Honda sees the largest year-over-year sales increase of the major manufacturers.

Full-Year 2023 New-Vehicle Sales Forecast

All percentages are based on raw volume, not daily selling rate. There were 27 selling days in both December 2023 and December 2022, while there were 25 selling days in November 2023.

Forecast: 2024
As the auto market drives into 2024, the Cox Automotive Economic and Industry Insights team anticipates weak economic growth, higher new-vehicle inventories, and an end to the seller’s market. Overall, the team expects 2024 to be the best year for car buyers since the pandemic. Last week, Cox Automotive Chief Economist Jonathan Smoke shared his team’s expectations for the U.S. automotive market in the year ahead. Forecast: 2024 outlines five themes expected to shape the automotive industry in the coming year.

About Cox Automotive
Cox Automotive is the world’s largest automotive services and technology provider. Fueled by the largest breadth of first-party data fed by 2.3 billion online interactions a year, Cox Automotive tailors leading solutions for car shoppers, automakers, dealers, retailers, lenders and fleet owners. The company has 25,000+ employees on five continents and a family of trusted brands that includes Autotrader®, Dealertrack®, Kelley Blue Book®, Manheim®, NextGear Capital™ and vAuto®. Cox Automotive is a subsidiary of Cox Enterprises Inc., a privately-owned, Atlanta-based company with $22 billion in annual revenue. Visit coxautoinc.com or connect via @CoxAutomotive on X, CoxAutoInc on Facebook or Cox-Automotive-Inc on LinkedIn.

SOURCE Cox Automotive

By David Ferris, James Bikales

Americans are being bombarded by two conflicting messages about electric vehicles: They’re booming. But they’re also piling up on dealer lots because no one wants them.

Both things happen to be true, just as the next election is poised to be the first to spotlight EVs as a campaign issue.

The U.S. market for EVs is growing, just not at the blistering pace it was a few months ago. Americans shattered records in November by buying a million electric cars in a single year for the first time, according to the National Automobile Dealers Association.

At the same time, certain high-profile EVs are slow to sell, including Ford Motor’s Lightning F-150, whose production targets last week were slashed in half.

“The answer to every question is ‘yes,’ followed by the word ‘but,’” said Alan Baum, an independent auto analyst in Detroit about the current state of EVs.

Electric-vehicle startups face cash crunch, Journal analysis finds

By Amrith Ramkumar and Shane Shifflett

Electric-vehicle startups were flying high just a few years ago. Now many are focused on survival.

At least 18 EV and battery startups that went public in recent years were at risk of running out of cash by the end of 2024 as of their most recent filings, according to a Wall Street Journal analysis. They include companies such as 

Three companies – Lordstown Motors, Proterra and Electric Last Mile Solutions – have filed for bankruptcy. Battery maker Romeo Power and charging firm Volta have been sold at a fraction of their valuations when they went public. Several of those remaining say they are working to reduce costs and have since raised capital.

The median stock among the companies that the Journal evaluated is down more than 80% from its market debut, and even further from its peak. The slide has wiped out tens of billions of dollars in market value in just a couple of years.  

“It was by far the most insane bubble I have ever seen,” said Gavin Baker, chief investment officer at Atreides Management.

Nearly all of the struggling companies went public through special-purpose acquisition companies. SPACs are alternatives to traditional initial public offerings that surged in popularity during the pandemic. Unlike IPOs, they let startups make unchecked projections about how quickly they could grow. 

The rapid change in fortunes for EV startups highlights the risks of investing in the industry, which continues to shift in unexpected ways. Demand is growing steadily, but hasn’t exploded as many startups and investors predicted. 

For all its success, even Tesla nearly went bust five years ago, before the company made it through what Chief Executive Elon Musk called “manufacturing hell” and started mass producing its cars. 

To analyze the performance of EV and battery startups, the Journal identified 43 companies that went public between 2020 and 2022. Five have filed for bankruptcy or been acquired.

To analyze the performance of EV and battery startups, the Journal identified 43 companies that went public between 2020 and 2022. Five have filed for bankruptcy or been acquired.

For the remaining 38, the Journal compared each company’s cash flow from operations with its cash and short-term investments, using the company’s most recent filings compiled by FactSet. 

The analysis found 18 companies were on track to run out of cash by the end of next year if they didn’t cut costs or raise new capital. Seven of those had just weeks of cash on hand. When contacted by the Journal, several companies said they raised or are planning new financing, and are cutting costs as they work to boost sales. Nikola, which has raised new capital since its latest filing, declined to comment. A Fisker spokesman said the company’s third-quarter costs aren’t necessarily reflective of future quarters, as it accelerates deliveries and improves logistics infrastructure.

Sixteen had enough cash to keep running beyond 2024, though struggles to increase sales are pressuring many of their share prices. They include Rivian Automotive, which makes pickup trucks that cost roughly $80,000 and promise sports-car handling, and Lucid Group, which makes luxury sedans that come with a similar price tag. Four of the companies were generating cash from operations.  

Among those under pressure is Faraday Future Intelligent Electric , which promised record-setting revenue growth when it went public in 2021. The company raised nearly $1 billion to develop a futuristic electric car with features such as self-driving capabilities and facial-recognition technology. The car, which comes with a starting price tag of about $309,000, took longer than expected to produce because of supply-chain disruptions. 

Faraday burned through an average of about $875,000 a day in the quarter ended in September. That brought its cash and short-term investments down to about $8.6 million at the end of the third quarter. A spokesman said the company has an agreement to raise capital and is focused on increasing production and reducing costs. 

Companies that had a cash runway beyond next year are hitting snags, too. 

Li-Cycle Holdings, which hopes to recycle old batteries for materials in electric cars, recently cited rising costs for pausing construction on its first big facility in Rochester, N.Y. That complicated discussions with the federal government about a potential loan. 

Among the companies that were in danger of running out of cash by the end of next year is Canoo, which had projected in 2020 that it would generate more than $1 billion in revenue within a few years.

“The targets were all based on a firm market and full access to unlimited capital,” said CEO Tony Aquila, who took over in 2021 after the previous chief executive who made the projection resigned.

Shares of the company are down more than 95% to about 25 cents. Aquila has changed the company’s strategy to save money. He said Canoo has an agreement to raise cash and that he is confident it can raise more from investors, including his family office. 

The declines in stock prices have boomeranged on big investors including BlackRock, Fidelity Investments and conglomerate Koch Industries that pumped hundreds of millions dollars into the sector. 

BlackRock declined to comment. Fidelity didn’t respond to a request for comment. A spokesman for Koch Industries said the company is taking a long-term view on its investments.

They aren’t the only ones that got burned. Many individual investors also got swept up by the big promises EV startups made when they went public. 

“Everyone was out there looking for the next Tesla,” said Brian Dobson, a managing director at investment bank Chardan who analyzes clean-energy companies. 

China-related restrictions on the subsidy are likely to kick in before automakers figure out how to replace China-produced graphite

By Scott Patterson and Andrew Duehren

The Biden administration hopes to use generous tax credits to boost electric-vehicle sales and push automakers away from Chinese suppliers. A key material in EV batteries shows why it is proving hard to do both at once.

A 2022 law that President Biden championed revamped a $7,500 tax credit for consumers who buy electric vehicles. Among the new rules, the law stipulated that the credits can’t go toward buying any EVs containing battery parts from a “foreign entity of concern,” which includes China.

“I would want to know how any automaker, based on the supply chain they’re working with today, meets these standards in 2025,” said Jay Turner, a professor of environmental studies at Wellesley College who wrote a book about batteries.  

Starting in 2025, no EVs with critical minerals sourced in China, Russia, North Korea or Iran will qualify for the $7,500 tax credit. A similar requirement for battery components manufactured in those countries kicks in next year. 

The number of EVs for which car buyers can claim the tax credit has already been whittled down by other requirements in the 2022 Inflation Reduction Act, including a provision that eligible vehicles must be assembled in the U.S.

Tesla has said some of its EVs won’t be eligible for the full $7,500 tax credit next year, when the “foreign entity of concern” rule begins for battery components. A Ford Motor spokesman said its Mustang Mach-E EV is unlikely to qualify for the tax credit beginning Jan. 1. A General Motors spokeswoman said it is “well positioned to maintain the consumer purchase incentive for many of our EVs in 2024 and beyond.”

Battery experts said it is unlikely that U.S. and European automakers can find enough processed graphite supply outside China to keep the list of eligible EVs from narrowing again in 2025. For some automakers, it is possible none of their models will qualify for the tax credit.

Democrats created the “foreign entity of concern” rule out of worries that China could weaponize its dominance over clean-energy technology against the U.S. In October, Beijing said it would tighten restrictions on exports of graphite, including the highly refined material used in batteries, citing national-security concerns.

At the same time, the Biden administration has said it wants half of new-vehicle sales in the U.S. to be electric by 2030, up from about 8 percent today. Tax credits are supposed to help bring down the price of EVs to make them more competitive with gasoline-powered cars and attract more buyers.

While rules released Dec. 1 by the administration leave room for U.S. companies to work with Chinese partners outside China, restrictions on minerals from China will pose a challenge to the administration’s goals over the next few years.

China produces 93 percent of the world’s battery-grade manganese, a key component of most lithium-ion batteries, 65 percent of refined lithium and 76 percent of refined cobalt, according to Benchmark. Overall, China is responsible for more than 80 percent of the production of battery cells, the building blocks of EV batteries.

Graphite, a crystalline form of carbon, is the primary material in the anode side of most lithium-ion batteries, which can contain roughly five to 10 times as much graphite as other key materials such as lithium.

In recent months, White House officials have held calls with graphite executives and other battery-industry representatives to discuss the challenges posed by China’s dominance.

“The White House is trying to figure out, is this a big deal?” said Jon Jacobs, chief commercial officer at Westwater Resources, which is building a graphite-processing plant in Alabama. He said he participated in the calls.

Jacobs said administration officials “were thinking, if we chuck money at this problem, graphite will be available tomorrow.” The problem, he said, is that it takes years to build a processing plant. New mines can take 10 or more years to develop. A steep decline in battery-mineral prices this year has caused mining companies to suspend or delay new projects and expansions.

A Biden administration official said the EV tax credit, paired with other subsidies encouraging manufacturing in the U.S., will eventually succeed in building up U.S. battery capacity. The official acknowledged that it could take several years and that the EV tax credit could be difficult to claim over the next couple of years.

“We recognize and acknowledge that it’s not going to be easy to make this transition,” the official said. “We think there is reason for optimism.”

EV makers have been scrambling to secure graphite supplies outside China. Syrah Resources, an Australian mining company that mines graphite in Mozambique, has an agreement to supply material to Tesla.

There are few cheap substitutes for graphite in a battery’s anode. Some companies, such as California’s Sila, are developing anodes that use silicon as the main material, which they say is more efficient than graphite. Battery experts say that the technology for using graphite is more established and that it will remain the primary anode material for years to come.

Sila announced Monday that it has an agreement to supply its silicon anodes produced in Washington state to Panasonic Energy, which supplies batteries to Tesla. Sila also has an agreement to supply its anodes to Mercedes-Benz. Production on the anodes will start in 2025, Sila said.

Sila hopes to be a big winner in the administration’s push for more domestic supplies of battery minerals and production in the U.S. Moving battery supplies outside China “is the intent of the law,” said Gene Berdichevsky, Sila’s chief executive, referring to the Inflation Reduction Act. “If you don’t create the incentive, you will not get the response.”

– Mike Colias contributed to this article.

 Reporting by Joe White in Detroit | Editing by Matthew Lewis

This was the year the auto industry’s race toward an all-electric future took a detour.

Heading into 2023, automakers were gearing up to invest $1.2 trillion by 2030 to move electric vehicles from niche products to mass-market models – many with batteries and software developed in-house, according to a Reuters analysis. 

As the year closes, legacy automakers as well as Tesla, Rivian and other EV startups are throttling back investments and reworking product strategies. Legacy automakers are appealing to policymakers for more help to offset the high costs of the EV transition, on top of billions of dollars already pumped into EV subsidies. 

Consumer demand for EVs is growing worldwide. But EV adoption is not happening as fast or as profitably as industry executives anticipated, especially in the United States. 

High interest rates have pushed many EVs out of reach for middle-income consumers. Lack of charging infrastructure is a deal-breaker for buyers used to adding hundreds of miles of gasoline driving range in just a few minutes.

“EVs are going to be the future of the passenger automobile business,” said Jeff Parent, COO of AutoNation, the U.S. auto dealership chain. But because of consumer concerns about price and charging, he said, “the next three to four years, things are going to be bumpy.”

Industry CEOs are amplifying hedges on their goals of shifting to all-electric fleets by the middle of the next decade.

“We’ll adjust to where the customer is,” General Motors CEO Mary Barra told the Detroit Automotive Press Association earlier this month when asked if GM still aims to be all-electric by 2035.

THE F-150 LIGHTNING: HIGH HOPES, THEN DISAPPOINTMENT

Ford’s F-150 Lightning electric truck shows how bullish forecasts got corralled.

Buoyed by enthusiastic early demand for the Lightning, Ford in August added a third work crew at its historic Rouge assembly complex in Dearborn, Michigan, to triple the production rate of the electric pickup truck to 150,000 vehicles a year. 

But in October, Ford cancelled the third shift, conceding that demand for electric F-150s was not enough to sustain the planned production pace. About 700 workers were furloughed. 

In China, Europe and the United States – the main EV markets – electric-vehicle demand is still growing faster than demand for vehicles overall. 

Global EV production is on track to triple by 2030 to 33.4 million vehicles, about a third of total production, according to AutoForecast Solutions. Much of that growth will happen in China, where government subsidies and a price war led by Chinese EV market leader BYD and Tesla are making EVs more affordable than combustion vehicles, according to an analysis by JATO Dynamics.

In North America, production of battery-electric vehicles could increase sixfold to nearly 7 million vehicles by 2030, according to AFS. That is equivalent to roughly 40% of the projected U.S. market – but well short of the Biden administration’s goals.

LOBBYING FOR RELIEF

Industry executives are lobbying the Biden administration to back away from emissions rules that effectively require EVs to account for two-thirds of U.S. new-vehicle sales by 2032.

Looking ahead, industry executives raise two concerns about the challenge of expanding the EV market beyond adventurous early adopters of technology: Affordability and access to charging.

The slow pace of charging infrastructure development forced major legacy automakers to cut deals this year with Tesla to allow buyers of their EVs to use Tesla’s Supercharger network – a competitive coup for Tesla. 

“The automakers’ capitulation to the (Tesla) standard is a clear signal that they are realizing that demand is held back by fears on charging,” said Mark Wakefield, co-leader of consultancy AlixPartners’ automotive practice. 

“Affordability” is industry code for convincing mainstream, middle-income consumers to pay enough for an EV to cover higher production costs and still yield a profit. For most legacy automakers, that has so far proven impossible.  

Even Tesla, which makes money on EVs, has been forced to cut prices to keep assembly lines running at full speed in China and the United States.

“If our car cost the same as a (Toyota) RAV4, no one would buy a RAV4, or, at least, they would be very unlikely to,” Tesla CEO Elon Musk told analysts in October. “Our car is still much more expensive than a RAV4.”

RAV4 models start at $28,475. Model Y’s start at $43,990, and until Dec. 31 come with $7,500 tax credits. Tesla has warned those credits could be reduced as tougher domestic content rules kick in.     

By Partner Michael Goodman and Associate Mark D. Metrey

HIGHLIGHTS:

• The Consumer Financial Protection Bureau (“CFPB”) issued a Consent Order against an indirect auto lender (“Company”) that provides automobile financing to consumers for allegedly operating an illegal scheme preventing borrowers from cancelling product bundles, which improperly increased car loan payments.
  
  
• The CFPB mandated that the Company pay $48 million in consumer redress and a $12 million penalty into the victims relief fund.
  
  
• The Company must also cease certain challenged practices and improve cancellation processes for bundled products.

On November 20, 2023, the CFPB imposed a $60 million penalty on an indirect auto lender for allegedly hindering borrowers from cancelling product bundles, elevating their monthly car loan payments. The Company is also alleged to have withheld refunds or issued incorrect amounts on bundled products, and failed to correct false consumer information sent to consumer reporting agencies.

The Company, a U.S.-based auto-financing arm of an automobile manufacturer, heavily involved in financing vehicles sold through its dealerships, offered optional bundled products alongside car loans. These included Guaranteed Asset Protection (GAP), Credit Life and Accidental Health (CLAH) coverage, and vehicle service agreements, significantly inflating loan amounts, monthly payments, and finance charges.

The Consent Order further alleged that, despite the Company being alerted that its refund system incorrectly calculated refund amounts for some consumers who cancelled their Vehicle Service Agreements during the contractual “free look” period, the Company failed to resolve the flaws and properly remediate the affected consumers. The CFPB further alleged that this course of action included directing consumers to a convoluted cancellation hotline, delaying refunds by applying them to principal payments, and withholding or miscalculating refunds, violating the Consumer Financial Protection Act’s provision prohibiting unfair, deceptive, or abusive acts and practices, as well as the Fair Credit Reporting Act’s unlawful furnishing activities.

The Company, without admitting the allegations, agreed to pay $48 million in restitution to affected consumers, halt unlawful practices, revamp cancellation procedures, and pay a $12 million fine to the CFPB’s victims relief fund. Furthermore, the Company must now refrain from tying employee incentives to product retention, enhance cancellation accessibility, monitor dealerships, and inform consumers of their cancellation options.

RESOURCES:

You can review all of the relevant court filings and press releases at the CFPB’s Enforcement Page.

• Consent Order
• CFPB Press Release

The company is cutting dealer training costs by half and reducing the number of chargers its retailers must install. It is also delaying the deadline to install chargers, citing supply chain shortages.

Ford Motor Co. is again altering its electric vehicle certification program for dealers, cutting training costs by half and reducing the number of chargers that retailers must install.

The moves follow a victory by Ford dealers in Illinois, where the state motor vehicle board said the automaker broke the law by requiring dealers to invest heavily if they want to sell EVs.

In a statement, Ford said it was altering the program “as we continue to adapt our overall EV strategy to the market and listen to dealer feedback.”

The biggest changes involve EV chargers.

The company said “Certified Elite” dealers — the more expensive of the program’s two tiers, primarily for those in larger markets — have to install three Level 2 chargers instead of the five it previously was mandating. The company also is removing a requirement to add a Level 3 charger by 2026.

Dealers on the lower-priced “Certified” tier are now required to install two Level 2 chargers instead of five.

For both tiers, the deadline to have chargers in place has been pushed back six months to June 30, 2024. A spokesperson said the company moved the deadline because of “charger supply chain and infrastructure delays.”

Ford also is cutting the cost of dealer training by about half, or up to $20,000, for the 2024 calendar year.

Charging requirements were among the areas of dispute in the Illinois case, where 26 dealers argued the program violated state franchise laws. The dealers also said more expensive Level 3 chargers were unnecessary.

“No witness testified that any dealer has yet to have a problem charging vehicles nor why, in the future, a Level 2 charger will be insufficient for maintaining cars for test drives,” a hearing officer wrote in a preliminary decision upheld by the motor vehicle board. “In fact, many dealers testified that they have never had a problem charging vehicles for delivery to customers or for taking test drives.”

The board ultimately said Ford wrongly implemented changes to allocation and distribution models, among other violations of state law.

In a statement, Ford said it would appeal the decision.

“Ford stands by its voluntary Model e EV program,” a company spokesperson said. “It is designed to make sure that Ford and its dealers provide Illinois Ford EV customers with a segment-leading experience throughout their purchase, service and ownership journey.”

The Illinois dispute is among battles nationwide over the EV program. Ford has had mixed results fighting the legal challenges.

A New York judge in September blocked the company from imposing facility and business requirements on five dealerships to sell EVs until a lawsuit challenging the brands’ dealer agreement changes is resolved. But Ford in July got a favorable ruling from a court in South Dakota, where a judge determined the program does not violate state franchise law.

Beyond the legal actions, the program has faced opposition from a majority of state dealer associations since it was unveiled in September 2022. Still, about 60 percent of Ford and Lincoln dealers initially chose to participate, and the company has shown a willingness to tweak certain unpopular aspects.

In January, Ford announced changes that included scaling back the amount of time a dealer would have to offer public charging each day and removing a cap that limited dealers from the lower-priced tier to selling no more than 25 EVs per year.

Lincoln this year also modified its version of the program to give dealers more flexibility.

After the changes, Ford allowed dealers to opt out of the program or switch tiers. The company said 53 dealers left the most expensive tier, while 24 dealers joined the lower tier. At the time, Ford said total enrollment fell 1.5 percent to 1,891 of its nearly 3,000 U.S. dealers.

The company on Monday said enrollment has since fallen to about 1,550 dealers, or about 53 percent of the total network. Ford says this would put 86 percent of the population within 20 miles of a Ford dealership capable of selling and servicing a Ford EV.

Two firms face allegations that rent-pricing systems facilitate collusion among some big apartment owners

If you want to know why apartment rents got so high, some people say look to big data. Many landlords outsourced their pricing decisions to software that told them what rents to charge.

These algorithmic pricing systems analyze giant troves of information about the rental market. Then they direct landlords on how much to increase rent for each lease renewal, or what to ask for newly vacated apartments.

Algorithms and other big data have changed the way many landlords do business. In the past, landlords would often make deep cuts to rents when the market started to head south, but algorithms showed them that wasn’t always necessary. Many building owners also once believed keeping their apartment buildings as full as possible was the best way to maximize profits.

Algorithmic pricing systems, by contrast, calculated that some landlords could earn more money by pushing up rents, even if that brought about higher vacancy rates.

At least dozens of landlords across the U.S. rely on pricing systems from two companies—RealPage and Yardi Systems—to determine what they charge millions of renters.

Now, these two firms face allegations that their rent-pricing systems facilitate collusion among some of the country’s biggest apartment owners.

Two lawsuits, one against RealPage and one against Yardi, allege that the pricing systems enable an exchange of confidential pricing information to set rents across buildings and markets. That reduces much of the natural competition that might exist if landlords didn’t outsource their pricing decisions to software, the complaints allege.

The lawsuits, brought by tenants in federal courts in Tennessee and Washington, allege that the two companies and their landlord customers are engaged in illegal behavior, and that it has translated into higher rents for tenants.

The U.S. Justice Department might soon weigh in on whether algorithms unlawfully drive up rents. The department’s antitrust division has been investigating RealPage’s practices and is considering a potential enforcement action, according to people familiar with the matter.

Earlier this month, the department filed a notice in the case against RealPage, saying it would consider posting a “statement of interest” by next month that would attempt to guide the court’s decision in that case.

The scrutiny is part of a broader effort by antitrust enforcers to examine whether the use of algorithms in price setting facilitates collusion or otherwise keeps prices artificially high.

RealPage has previously denied these allegations. It declined to comment further on pending litigation. Yardi denied the allegations against the company.

In a letter to members of Congress who called on the Justice Department to investigate RealPage, the company said last year that the purpose of its system wasn’t to boost rents or drive up vacancies. It was to analyze supply and demand so landlords can more efficiently manage buildings.

In some cases, that can mean lowering rents to preserve occupancy, RealPage said.

The firm pointed to the general decline in apartment-vacancy rates in recent years as evidence that its software didn’t contribute to an increase in empty apartments. It also played down the role that nonpublic pricing data plays in its algorithm. Yardi, meanwhile, has said it never uses nonpublic data to adjust rents. Both firms said they don’t allow their clients to directly see each other’s pricing data.

Apartment owners are hardly alone in embracing sophisticated pricing systems. Student-housing operators also use rent-setting software, as do owners of single-family rental homes. More companies, from grocery stores to ride-sharing entities, rely on automated pricing to make sales.

Regulators and the Biden administration have expressed concerns about the pricing effects of big data. In September, the Justice Department filed a complaint against Agri Stats, an analytics company focused on the pork and poultry industry, alleging that it was helping processors raise prices and reduce market competition.

“So many of the products we buy have prices set by algorithms,” said Zach Brown, an economics professor at the University of Michigan who has studied the effects of pricing technology. “These issues are going to be increasingly relevant, and for a long time.”

In the multifamily market, asking rents have flattened out this year and even fallen in some places after a boom in new construction. But rents rose to record levels during the pandemic, up about 25% between 2021 and 2022, according to some metrics.

The companies that offer pricing software have indicated that their technology helps landlords to raise prices. In promotions for Yardi’s pricing system, formerly called RENTmaximizer, one landlord said it allowed the firm to “push rents more aggressively” and “quickly.” Another landlord said it enabled her firm to eliminate concessions for tenants.

By Brian Planalp – Reporter, Cincinnati Business Courier

Kenwood Dealer Group, Greater Cincinnati’s second-largest auto group, has gifted more than $1.2 million to Cincinnati State Technical and Community College to help bridge a growing labor gap of auto technicians, especially those with the expertise to service hybrid and electric vehicles.

“Today’s auto technician is a highly skilled professional. Gone are the days when you can learn to be a mechanic in a back alley garage,” Dave Fay, director of fixed operations for Kenwood Dealer Group, said at a press event Nov. 16. 

Cincinnati State will rename its automotive program the Kenwood Dealer Group School of Automotive Technology. 

Kenwood Dealer Group’s Bob Reichert (center right) and Dave Fay (center left) announced a 10-year partnership with Cincinnati State to train the next generation of auto technicians. Cincinnati Business Courirer photo.

“The auto trade is going to change a lot over the next 50 years,” said Chuck Butler, professor and automotive program chair at Cincinnati State. “This partnership is going to allow us to take our program from where we are to where we need to be.” 

Bob Reichert, CEO of Kenwood Dealer Group, which has 14 dealerships and nearly 1,200 employees, described it as “a groundbreaking, once-in-a-lifetime opportunity” for his business. Kenwood Dealer Group is the region’s 18th-largest private company, according to Courier research, with $987 million in 2022 revenue.

The gift will augur a 10-year partnership, with funds used to create scholarships, expand offerings, fund facility upgrades and purchase new hybrid and electric vehicles to supplement the program’s 30 vehicles on-hand so students can learn from state-of-the-art machinery. 

“That’s one of the biggest things I see with some of these schools – they have a lot of cars, but they’re from the ‘90s,” Fay told the Business Courier. “So what we want to do is start upgrading that fleet so the students that are here are working on the newest technologies, and when they get to the dealer, its not the first time they’re seeing these new things.” 

The automotive industry doesn’t have enough workers to service the 290 million cars and trucks on American roads. 

The National Auto Dealers Association estimates the industry needs to replace 76,000 technicians every year just to keep up with retirements and new job demand, but U.S. career and technical colleges and training programs produce just half that. 

Cincinnati State’s program currently enrolls around 75 students. It is expected to expand to around 100 students in the first year of the new partnership. 

“We will attract more students by raising the awareness of just how lucrative a career in the automotive field can be,” Fay said. “A tenured certified auto tech has exceptional earning potential without a decade of student debt to go along with it.” 

The students Kenwood Dealer Group recruits to Cincinnati State will be free to get jobs anywhere they choose afterward.  

“I think Cincinnati State is the most under appreciated educational institution in the city,” Reichert said. “I’m proud and excited that we can be part of a program that can prepare these techs for a rewarding career no matter where they’re employed.” 

A spokesperson said Cincinnati State receives generous support in different forms from many local companies, but the partnership with Kenwood Dealer Group is groundbreaking in its comprehensiveness, and the college sees it as a model for other programs.

“I think Cincinnati State has been that secret on the hill for the last half century, and maybe today people are gonna find out about it,” Butler said. 

In April, the federal Environmental Protection Agency (EPA) proposed new rules on electric vehicles (EVs) that would even make California regulators blush.   

• The EPA now effectively proposes that two-thirds of new cars and trucks sold starting in 2032 be zero emission.

NADA has branded the proposal “too far, too fast.”

• The overly aggressive proposal is opposed by NADA and the Alliance for Automotive Innovation – the trade group representing automobile manufacturers doing business in the United States. Notably, the Alliance has not opposed past iterations of EPA regulations, but is vociferously opposing the EPA’s current proposal.

NADA Advocacy on the Proposal
NADA’s entire advocacy staff has been very active in response to the EPA proposals. Advocacy initiatives include:

• May 2023
  • NADA published Dealerships On Track to Invest $5.5 Billion in EV Infrastructure, highlighting the huge investment dealers are spending to support the sales and service of EVs.
    • The investment figure has since been increased to $6B to include commercial truck dealers.
  • NADA Regulatory Affairs Committee Member Jeff Weber testified on the problems of the proposal, and submitted remarks for the record.
  • Former ATD chair Jodie Teuton testified on behalf of ATD regarding the EPA’s aggressive greenhouse gas emissions standards for heavy-duty commercial trucks. See Jodie’s testimony here.
• July 2023
  • NADA filed extensive comments in response to EPA’s proposal, focused on the vehicle demand side of the equation.
    • NADA stressed that new standards must account for factors such as vehicle affordability, consumer incentives, charging infrastructure, utility capacity, and model availability.
• September 2023
  • Reversing EPA’s “too far, too fast” approach is one of NADA’s Legislative Priorities.
  • During NADA’s Washington Conference Dealers and ATAEs began pressing Congress to correct EPA’s EV policy.
  • NADA urged Members of Congress to sign a letter led by Rep. Lisa McClain, which expressed strong opposition to “EPA’s misguided attempt” to push EVs before consumers are ready. The letter currently has 179 total signers (21 Senators, 158 Members of the House).   
• September-November 2023
  • NADA began advocating for the “Choice in Automobile Retail Sales (CARS) Act,” H.R. 4468/S. 3094, which permanently prohibits the EPA from finalizing its emissions proposal.
  • NADA held numerous in-person meetings with senior White House and EPA officials, voicing practical concerns about the impact of the proposed emissions regulation and providing data demonstrating why the regulations will actually slow, rather than accelerate, EV adoption. 
• October/November 2023
  • NADA influenced a front-page New York Times article about the realities confronting policymakers with EV tax credits.
  • NADA Director and Past Chairman Rhett Ricart was quoted as a Ford dealer on the front lines.
• November 2023
  • NADA and ATD jointly submitted a letter to House Republican leadership in support of the House Interior-Environment Appropriations bill (H.R. 4821), which would prevent the EPA from finalizing or implementing the unrealistic EV mandates for light-duty and medium- and heavy-duty trucks. The House passed H.R. 4821 on November 3.

The Reality on the Ground
The Biden Administration holds the unilateral power to finalize the EPA EV rule, so NADA has engaged directly with the White House for the past 14 months to bend the Administration’s policy in a more realistic direction.

• That said, Congressional action can influence the Biden Administration. Republicans are united in opposition to the EPA’s mandate and while Democrats are generally supportive, some Democrats have supported legislation to rein in EPA because of practical concerns about the EPA regulations – specifically a lack of an adequate and reliable charging infrastructure. These concerns could affect the stringency of the final rule as well as lay the groundwork for potential changes in 2025.

In the Media

• NADA is currently pushing an op-ed by President and CEO Mike Stanton that offers a better way forward – broad promotion and adoption of plug-in hybrids as an alternative to the EPA’s zero emission mandate.

Adding Cooks to the Kitchen
The EPA mandate does not just impact automotive – it will broadly impact the economy, from trucking, to farming, wholesale distribution and a variety of other industries. NADA is in the early stages of forming a coalition broader than the automotive industry to voice concerns about the mandate and the negative consequences it will have on the broader economy.

Want to Go Deeper? Read…

• EPA Proposal
• NADA Comments
• Automotive News summary of EPA proposal
• NADA Legislative Priorities

Questions?
Email us at publicaffairs@nada.org