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Since the COVID-19 pandemic, the automobile industry has gone through changes of historic proportion. Amid a tight auto market, consumer behavior has changed in terms of what they’re buying, how they’re buying it -- and even the face of who is buying has changed for the first time in decades. Tyson Jominy, vice president of data and analytics at JD Power, delivers a striking assessment of the auto industry in this interview with Equifax’s Rissa Reddan.
A podcast where innovative business leaders discuss data: how to think about, how to use it and how it can help us all make better business decisions every day. As they tell their stories of trials and triumphs, you’ll gain key insights to leverage in your own day-to-day operations.
Data Dialogues, Episode 11
JD Power Transcript
Rissa (00:05):
Welcome to the Data Dialogues podcast brought to you by Equifax. My name is Rissa Reddan, and I am your host. The automotive industry has been front and center, as we continue to adjust to pandemic life -- from supply chain disruption to micro mobility to electrification and the connected car. There is a lot to talk about, and I'm delighted to be joined by an expert on this episode of Data Dialogues. I'm joined by Tyson Jominy, vice president, data and analytics at JD Power. Tyson, welcome. For our listeners today, could you please introduce yourself and talk a little bit about your role at JD power?
Tyson (02:39):
Well, thanks for having me on the podcast, Rissa. I appreciate the invite. You know, I basically had data in my career from the beginning. I started as a financial analyst at Ford Motor Company and worked my way through several automakers before landing a job at JD Power where I have worked with automakers on sales and pricing analytics. And now I'm the vice president of the group and I get to travel and work with automakers in the United States to help with their data needs and to assess what's going on in the market on a day-by-day basis.
Rissa (03:12):
Fantastic. So Tyson, much like Equifax is focused on harnessing the power of data to drive smarter decisions, JD power is focused on harnessing the power of automotive data to enable faster decision making and improve customization of products and services. Could you talk a little bit about what you're seeing, what the data is telling you about where we're headed from an automotive perspective?
Tyson (03:38):
Yeah, right now the industry is so influx and many people listening are probably familiar with the challenges the auto industry has had, particularly with the supply chain. The supply chain, it's a global supply chain, of course, and it remains fragile not in terms of just the number of parts coming in, but even the availability of workers and the ability to meet demand. And so what we've been seeing in the auto industry is, we haven't had any vehicles really to meet very strong consumer demand. We've been seeing sales that have been tapering off here, certainly in the United States as fewer and fewer vehicles have been reaching dealer lots to replace those that we've already sold. And so we're in the business of using data to help automakers plan better how they're going to respond to these challenges. And, as we'll see here, there's a number of challenges in a lot of different places right now.
Rissa (04:29):
I would love to hear more about the challenges that you're seeing and what advice you might offer as well to your customers. So, maybe talk a little bit about the challenges, and I'm curious too Tyson, if these challenges are COVID specific or if they are more general. But take us through the challenges that you're seeing for the industry.
Tyson (04:48):
It certainly started with COVID, as you know, everyone in their industry has had problems related to it. But the industry's response to COVID was a lot like what we did after 9/11. We incentivized vehicles very heavily. You may recall that we had offers in the marketplace of 0% APR for up to 84 months and six month payment deferrals on top of that. And so we responded with a very heavy incentives push, but what it turned out is it wasn't a demand issue. It was a supply issue all along and we ran out of vehicles pretty quickly. So basically, we've been running for about a year now with a very tight inventory. And then of course, as we got into 21, the real challenge began, which was the microchip shortage for the auto industry. A car today has hundreds of microchips that control everything from its powertrain operation, its engine and transmission through that touchscreen that consumers love that brings CarPlay all the way through the air bags and other safety features. And, once the industry didn't have enough of those microchips to meet demand, supply dwindled and transaction prices just started to climb to the point that here in September, we were actually seeing new vehicle prices that were up nearly a quarter from year over year standpoint.
Rissa (06:08):
And what else are you seeing from a COVID standpoint? I think that we're seeing people more interested in driving their own cars as compared to taking mass transit. Is that something that you're seeing?
Tyson (06:22):
Yeah, actually it manifests itself in a lot of ways. So one, if you live in a market like New York or Chicago or San Francisco that has a very robust public transportation network, the idea of being in a confined space with strangers you know, may have seemed scary. So what we saw is that a lot of consumers in those markets actually move over to individualized transportation and start buying cars in some cases for the first time ever. And, and so it brought a lot of consumers out of public transportation, but at the same time, it brought so many of us into our homes. And so we're seeing that not only the kind of cars that people are buying is changing but also the way that they're buying them is changing. We're seeing fewer leases. I mean, leasing continues to decline every month. And, and not only that, the kind of leases that people are getting are much shorter. So, you know, the 12,000 mile annual allotment lease, that has been a gold standard for decades. That's given way now to the 10,000 mile a year lease consumers believe that this is permanent and they are changing the kind of vehicles that they're getting. And the way that they're buying them is getting to be a much shorter ownership period as well.
Rissa (07:33):
I'd love to hear more about that Tyson, you mentioned the type of vehicle is changing. How, how is it changing? What does it look like today as compared to what it looked like in the past?
Tyson (07:43):
Well, one thing that's exciting and, and perhaps scary for the automotive industry is, is the rate of change is so fast. And in particular, the way that electric vehicles and other electrified vehicles have come in, you know, the electric vehicle market really began 10 years ago when Nissan launched the leaf. And it took us a full decade to go from 0% share for EVs to 2%. Well in one year now it's gone from two to 3%. So it's basically speeding up pretty quickly. So now, if you're at home, you know, your, your traditional nuclear family living in a suburb with, with kids and a dog and two cars you know, typically you had a car that you would commute to work in, and one car that you'd probably, you know, schlep kids to soccer around in, well, you kind of needed two cars to be able to do a lot of traveling. Well, when you're working from home several days a week, that's enabling consumers to take a chance and to get an electric vehicle. It's enabling EVs to come in, where you'll try it out first with primarily the commuter car, if you're not going to be traveling as much, you could try that, that EV and it's changing so rapidly. Again, we're up at basically 50% increase in sales in one year.
Rissa (08:55):
With that increase in EV sales, are we at a tipping point? How do you see the adoption curve for EVs?
Tyson (09:03):
I don't think we're there yet. And I think it's really close, Rissa. I think the iPhone moment is about to come and it's in the form of the F-150 lightning that is Ford's electric version of their F-150 truck. It has a very aggressive starting point. I mean, it's going to be advertised below 40 K and it brings all those things that Americans love about trucks. It's big, and it has the space and the utility. I think that product is going to be a home run product, and that is going to be the iPhone moment for the industry that finally brings EVs into the mainstream. If we can convince truck buyers to get an EV, we're going to have a much easier sell at all the other segments.
Rissa (09:42):
I am curious to hear your perspective. Recently I installed solar panels on my home. And one of the questions that the company had asked me was, do you have plans to purchase an EV because that will influence the amount of solar panels for the roof of your home. And I'm curious about that convergence of the one hand its power utilities, but it's also automotive on. Are you seeing a bit of a convergence of those two as we move into electrified vehicles?
Tyson (10:13):
Yeah. And we'll see a lot of that. I mean, I don't know what electricity prices are and where you are. It's a, it's a dime per kilowatt hour in Nashville where I am. And so to convert fully to solar powered for EV, for me it's going to be a very long break even period. But what I see is a lot of places where you have higher energy costs, perhaps less reliable energy infrastructure. We do see that convergence of more solar power going into, to power EVs. And, I could see those two going hand in hand in a lot of markets. One of the top markets for EVs anywhere is Honolulu. And I think we understand that their energy prices are very high, so their solar power is very high. Once you have that infrastructure, it's so easy to plug EVs into that space, so to speak and, and really expand the share there. And no surprise, Honolulu is the strongest EV market outside of California.
Rissa (11:08):
Fascinating. Tyson, how is data driving the digital retailing evolution?
Tyson (11:19):
That's been one of the biggest winners of the COVID and the post COVID period was the digital retailing that was going on. I mean, the old days where, where you would go and spend six hours at a car dealership negotiating. Of course during COVID couldn't happen. And so as a result we were able to see that dealers really need to understand the profitability of the two. And if they can make more money doing digital retailing, then traditional retailing they're going to be able to put more resources there. Well, during Coronavirus it jump-started all of that. You take a market like San Francisco. During the peak of coronavirus, the worst it ever got was that sales were running about a third of their normal rate, which means that in a normal world they would've been doing a third of all sales digitally, which is about three X, their normal run rate.
Tyson (12:09):
So as a result, the dealers have all made the investment in digital retailing. And now at the same time that we're having that happen, dealer grosses and the amount of money they're making selling cars has gone from about a thousand dollars a unit now to about $4,700 per unit during this period. And so what we're going to see is that investment that they've made now, there's a lot of factors that went into that increase. It's not just digital retailing, of course. But they've made that investment now and now they're seeing higher grosses from a new industry and the data is there to show dealers this can be done profitably. And I think it's here to stay. And I think, you know, brands like CarMax and Carvana are really leading the way forward here in the digital space.
Rissa (12:52):
So with the rise of digital retailing, I suspect that there is more data that is becoming accessible to auto makers and auto dealers. Is that a fair assessment?
Tyson (13:29):
Yeah, certainly. So as consumers are doing more online, we're learning more about, you know, what's going on down to the point that you know, we can see when individuals are logging into various automaker websites or competitors, while they're sitting at a dealership. I know you could even see it at that level. But you know, digital retailing and one of the things that's so cool about it is, you know, as a consumer you could have four or five offers on your used trade vehicle in, in a matter of minutes before you would ever even contact a dealer. And, and so now we're throwing off data at all sorts of different companies that are seeing the same customer show up in one place and come up in another. And so you're knowing about who, who is accessing the data and where. You know, at what point do they enter the sales funnel, and you can see when consumers have first looked at an automotive website from a configurator, at an OEM website too, we could see it in the data the day they went home with that car.
Tyson (14:28):
And you can link that together and start to figure out when consumers move through the sales funnel. And when should we even hit them with different levels of incentives? A lot of consumers don't need the big incentives that we have out there, and we have the ability and, and it's early days to start tailoring the offer that consumers see for the incentive based on who they are. And all that's coming relative, you know, from the digital sales environment that we see now.
Rissa (14:53):
With that digital sales environment, Tyson, talk to me a little bit about any generational differences that you may be seeing in those consumers. Are there any generational trends that are starting to emerge?
Tyson (15:06):
Oh how much time do we have Rissa because once you get restarted on generational, I'm never going to stop here. You know, we saw during Coronavirus, millennials become the number one buying demographic. And we, we looked at it and we're like, eh, that that's just because Corona virus is keeping boomers home. I mean, they don't want to be out during the pandemic. And it didn't stop. It started gaining steam and it's, and it's going further and further. So right now millennials are 36% of the buyers in the industry. And baby boomers are 28%. It has just widened. And this is the first generational shift that the auto industry has seen, let's be honest, since the 64 half Mustang launched. When baby boomers were all turning 18 and wanted that Mustang. And it went all the way until last year.
Tyson (15:53):
That baby boomers were number one in this industry at the same time that we had this pandemic, millennials took over, and they're the number one buying demographic. It's 17 of our 27 segments. They buy every other lifestyle vehicle, like three row crossovers and minivans. They're the number one. They buy large pickups, they buy small cars. I mean, they're, they're everywhere buying vehicles to commute to their jobs, and to haul their families around. And that's the first time we've had a generational shift in, in like 40, 50 years which is just, it's so fun to see, and it's coming at the same time that we're seeing the shift to digital, and we have different consumers like millennials with different expectations. We can't approach them the same way that we've always done. You know, this is a generation that's been raised on Amazon. They, they know how simple things can be, and that's pushing the industry to really improve quickly to try to meet that expectation
Rissa (16:44):
And to really drive customer experience, I would expect. A greater focus on that customer experience.
Tyson (16:48):
Oh yeah, absolutely.
Rissa (16:51):
So, Tyson, we've talked a little bit about the challenges that are present in the automotive industry. Let's talk a little bit about the wins. So how can the industry use data to drive success and to continue recovery?
Tyson (17:04):
Yeah, I mean, one of the things that we're, we're getting now in the auto industry, we're, we're going to have way more data than, than truthfully we can process, because now we're going to start having vehicles talk to us. And we're going to understand so much more about, about the ownership patterns and behaviors of, of buyers and, and drivers of vehicles. So, you know, what we really need is the actionable insights from that data and to transform it into ways that we can feed that back and make better decisions. Of course. So I think some of the, some of the cool things, you know, that, that we're going to know about really with EVs and autonomy in general, these vehicles are very communicative for the first time. And, and they're going to be telling us where the owners have gone. When they've charged. You know, what, what are the best places to put chargers?
Tyson (17:55):
You know, one of the biggest factors in the industry is we need to increase the infrastructure for EVs. So where do we put them? Well, we need to understand where the consumers are and put them in the right places and have the right EV charging capabilities in those places. You know, it's not always just about bigger is best and EV charging. So there's a whole lot of ways that we can start to use data to make better decisions, but truthfully understanding more about each individual consumer is kind of the next step in the auto industry. Today we do have a lot of incentive offers that are a thousand dollars customer cash or 0% for 60 month APR, just big offers designed to, to attract the largest number of people, but not everybody needs all of that, all of those incentives to do their transaction. So I think we're going to start to see the ability to really customize the experience and the, even the, the payment levels that consumers are getting
Rissa (20:54):
Tyson. I'm fascinated by something that you just said about cars talking to us. What will they tell us? What sorts of information will we glean from them?
Tyson (21:05):
Well, probably one of the best examples, and we're seeing it right now in the marketplace. Tesla is using its safe driver scores as the determining factor in their rollout of full self-driving software. So right now cars, Tesla cars are watching its owners drive. And if they are behaving well enough, they will actually get their full self-driving features turned on sooner than other consumers with the same vehicle. So cars are going to be whether, whether we want or not, they're going to be watching us. And, they're going to be working with us. In some cases it will be to upsell us. You know, they'll, they'll watch and, and, and cars we'll know if we're about to go on a long-term journey. Cars may offer us a subscription to adaptive cruise control or more advanced driving assist systems.
Tyson (21:54):
You know, likewise with being stuck in traffic, it may just say, Hey, do you want me to take over? But cars are going to be watching all this. And of course, reporting back on a lot of these, these items. Now some people may think that sounds big brother-ish. But for the most part, what we're seeing is it's watching to see what consumer behavior is like. And quite frankly, we're using that to train our artificial intelligence and ML codes to help create better advanced driving assist systems. And so cars are going to be reporting back a lot about safety, a lot about how cars are driven, in what conditions they're driven in more than anything else. And then of course, no, one's spying on anyone. That's not what any of this is about.
Rissa (22:35):
What'd you say, then that it is a risk score of sorts, and it's assessing the level of risk that a driver undertakes on a day-to-day basis.
Tyson (22:46):
Right. It's a lot like what progressive and others have been doing with the OBD, two ports that cars have to assess different insurance rates. So it is basically a risk scoring of drivers. And of course that does have very obvious parallels for insurance companies as well.
Rissa (23:03):
That's fascinating because I, when you mentioned the comment about, it feels like a big brother to some, I was hearing that more as driver's ed from many years ago and having that second steering wheel and the second break, and to, to have an assist along with you. Not necessarily a big brother along for the ride. That's fascinating. Great Tyson. This has been another great dialogue. Thank you so much for joining us today. Any last comments or thoughts before we sign off today?
Tyson (23:36):
Yeah, I just think it's a great period of transition for the industry. Certainly as, as it evolves to a much more sustainable business model in terms of EVs and, the assembly plants move toward more sustainable in our focus. And so the next few years may be a bit rocky for some but the industry is transitioning pretty quickly and being pushed along by a lot of external factors right now. So it's going to be exciting to be there. I think we're going to get some of the coolest cars and SUVs and trucks we have ever seen. They're going to do all the things that our gas powered cars can do, and in the form of electrified vehicles and, and they're going to be better for the environment and for all of us. So it's going to be a great future to watch here for the auto industry.
Rissa (24:23):
Thank you. And one last question for you, Tyson. For anyone who would like to connect with you to learn more, where can they find you?
Tyson (24:30):
Well, the easiest place to find me is Twitter. Some say I'm there too much. But if you want to find me, it's my first name, underscore last name Tyson underscore Hominy at Twitter. So you can find me there and usually there debating one thing or another, mostly about EVs and plugins though these days.
Rissa (24:49):
Great. Well, Tyson, thank you so much for joining us today for today's Data Dialogues. Thank you.
Tyson (24:55):
Thank you, Rissa.