The Auto Market Brief

Diesel prices have reached record highs, credit availability continues to improve, and automotive leaders are facing new questions about where to invest for the future.

In this episode of The Auto Market Brief, host Erin Keating and Cox Automotive Chief Economist Jeremy Robb discuss the latest economic indicators, including credit availability, inflation, diesel prices, real wage growth, and vehicle affordability. While lenders continue to expand access to credit and support vehicle demand, rising fuel costs and inflation pressures are creating new challenges for consumers and the broader economy.

Diesel prices reach record highs
Diesel prices climbed above six dollars per gallon, driving concerns about transportation costs, inflation expectations, and the broader cost of goods throughout the economy. Erin and Jeremy examine why diesel remains one of the most important indicators influencing transportation costs, inflation expectations, and the cost of goods throughout the economy.

Credit availability continues to improve
While affordability challenges persist, lenders are showing a greater willingness to extend credit, helping support vehicle demand across the market. The discussion explores what's driving that trend, including lender confidence, improved financing conditions, and the relative stability of vehicle values in recent years.

The industry faces tough questions about investment and innovation
As technology investments become more expensive and competition intensifies, automotive companies are being forced to make increasingly difficult decisions about where to invest capital and how to scale new technologies. The discussion explores autonomous vehicle deployment, regulatory oversight, the rising cost of technology investments, and how manufacturers are evaluating where to allocate capital for future growth.

The episode also covers CPI inflation, real wage growth, rising transportation costs, vehicle affordability, Volkswagen's portfolio strategy, Tesla's Cybercab rollout, NHTSA oversight, and the forces shaping the future of automotive technology and investment.

The Auto Market Brief delivers timely data, clear context, and practical insight to help industry leaders make smarter decisions—what's happening now, and what's coming next.

The Auto Market Brief is powered by Cox Automotive. For more industry insights and expert perspectives, visit our Insights Hub at Cox Automotive Insights.

Creators and Guests

Host
Erin Keating
Erin Keating is an Executive Analyst and Senior Director of Economic and Industry Insights at Cox Automotive. She brings 30 years of professional experience, including 14 years in the automotive industry, providing analysis on market conditions, automaker performance, and consumer demand shaping the economics of the new-vehicle market. Erin spent 10 years with Audi of America, including leading Audi Motorsport North America, informing her perspective on both commercial strategy and competitive dynamics.
Guest
Jeremy Robb
As chief economist at Cox Automotive, Jeremy Robb oversees the enterprise-level economic outlook, monthly forecasts, client advisory, media briefings and the strategic integration of data from the company’s extensive retail and wholesale platforms. Jeremy leads Cox Automotive's Economic and Industry Insights team, working directly with clients and executive leaders in sales, strategy and finance. He draws on his background helping companies consume data and insights to make better business decisions. He has been focused on finance and strategy for large corporations in the financial services and automotive industry for the past 20 years. Jeremy joined Cox Automotive in 2018 after spending 6 years at Nissan where he led functions in finance and remarketing.

What is The Auto Market Brief?

The Auto Market Brief, powered by Cox Automotive, breaks down the latest trends and forecasts shaping the automotive industry. The show is hosted by Cox Automotive Executive Analyst Erin Keating, coupling years of experience translating data and trends with the data and industry insights of the largest automotive services and technology provider.

Joined by other Cox Automotive experts and outside guests, you’ll get data-driven insights and industry outlooks from some of the industry’s leading voices.​

Erin Keating:

Welcome to The Auto Market Brief from Cox Automotive. Each episode, our experts and special guests break down the latest trends, insights, and news shaping the automotive market. We'll give you the information that truly matters so you can make smarter decisions and drive your business forward. Hello, and welcome back to The Auto Market Brief. I'm Erin Keating, your host and industry executive analyst here at Cox Automotive.

Erin Keating:

And as usual, I've got our chief economist, Jeremy Robb, alongside me today. Hello, Jeremy.

Jeremy Robb:

Good morning. We're in the unofficial end of summer now, right?

Erin Keating:

I know. Yeah, exactly. And I've been paying close attention to that sunrise in the morning, you know, trying to get my circadian rhythm to stay on, exactly, to stay on par. Well, I know we've got a lot of data that just dropped even just this morning, fresh off the skillet, if you will, with inflation reports. I know, timestamp for everyone, is Friday, September 11, so this is when the CPI gets pulled out.

Erin Keating:

So we're going have some news about that this morning. I know let's connect that as well as talk a little bit around real wage growth, Jeremy, because I know that whenever we're talking about inflation, it's important to think about incomes. Credit availability, which is helping our industry along here. Vehicle pricing, we just had the new ATP released. And then there's a couple of announcements that I picked up on this last week.

Erin Keating:

Volkswagen certainly limping large in the news these days, as well as NHTSA, so the National Highway Transportation Safety Administration. So let's get to it. We've got quite a bit to discuss today.

Jeremy Robb:

Yeah, the auto market is so dynamic, and it's, you know, we've talked about a lot, but all the metrics, like, really support it being pretty steady, you know, which is, I think, it's surprising to a lot of people, right? A lot of consumers, a lot of, even other economists and people we talk to, get kind of shocked sometimes when we tell them how steady things are, but it is, it's still going there. One of the things just to kind of kick it off, report on the Credit Availability Index every month, and that's been rising for quite some time now. Know, we saw, and that index that we put out and publish monthly contains a lot of data points around, are lenders willing to provide credit to consumers out there? And are they more willing or less willing through, like, letting people have more negative equity or a lower down payment, which it is showing we're seeing lower down payments and lower negative equity.

Jeremy Robb:

One of the other things that's happened to push this higher, and it's really moving higher across the board, whether that's new and used or the captive finance companies or anybody you look at it, so generally speaking, all moving higher, and has been for some time, is we've seen the yield spread collapse or compress. That actually went up, I think, about four basis points in August, so it widened by four basis points, but year over year, it's compressed by half a point or more. And when you see that in some of the slides that we have when we show interest rates by credit tier against a benchmark rate like the ten year, you can see those have continued to come down. It just shows you lenders have become getting a little bit more aggressive terms of passing that along. They're not holding back quite as much margin, and I think that's a competitive aspect of the lending world that is going on, too.

Jeremy Robb:

Not to mention, like we just talked about, the steadiness of the automotive market, and I was at a lending conference yesterday, actually just talked about this, but, you know, depreciation trends for the Manheim index, when we talk about the Manheim used vehicle value index in the movie, have been fairly steady the last two years. Right. And lenders, like anybody in business, likes things that they can count on and forecast and feel confident in moving forward. And if the collateral value, you know, moves at a pace where you feel confident within your modeling that it's going to remain within some, you know, margin of error, then I think that is one of the reasons lenders have felt a little bit more reason to show appetite to lend, so.

Erin Keating:

Yeah. Well, one the few stabilities, I guess, we can say that in the market, or at least the broader market, you know, feels uncertain quite often for a lot of people. As you said, the automotive market tends to be or is feeling pretty steady. Yeah. Mean, so with that, like, what have you seen in the CPI data?

Erin Keating:

Like, what are we what are we learning about

Jeremy Robb:

Yeah. The consumer price consumer price index, the CPI report that comes out, was just released today. It was up 3.4% year over year, clearly higher than the 2% level that, we've been, wanting to see. I mean, you think about where the Fed's gonna raise rates, but that was in line with expectations, and that's the name of the game, really with anything as it relates to economic data or anything related to Wall Street. Everybody's got a thought as to what it's gonna be, and the real thing is like, well, where does it come in in relation to that?

Jeremy Robb:

And so it's moved up 3.4%. That is up a little bit from, 3.3% last month. So, month over month, it was a point 4% core CPI, which pulls out food and energy prices, moved up 0.3% month over month, and that was actually a little bit hotter than the market had thought. So, you know, the reaction in the Fed Funds futures market this morning has moved up to 85% right now, pricing in, that the Fed will push a rate hike through in the meeting next week. I think that's probably related to that core CPI moving a little bit hotter, ex food and energy, because then and that metric has moved up quite a bit this week, but it's up another 10 points today.

Jeremy Robb:

So pretty interesting there, but still seeing things like maintenance and repair cost, you know, the chart that I've used a lot that shows it indexed to 2018, that's now the highest price level of anything related to automotive. It's up 5.2% on a year over year basis. But auto insurance, which was the number one culprit of pushing, you know, overall inflation in the automotive sector higher, is actually down 5.1% year over year. So we've continued to see better trends on automotive insurance, and it came down even again, in the data that we saw today. So pretty interesting to note that also.

Jeremy Robb:

The last one I'll note is just we talked about it before is public transportation, right? This will tie us right in to talk about the Producer Price Index report, which also came out this week. But public transportation was up 15% in

Erin Keating:

the '20 And remind us, what is, because of the categories, you know, the way the government groups them, so what is consistent within the public transportation? Do you know? I mean, I'm assuming.

Jeremy Robb:

That, it's, I think it's primarily like buses and trains.

Erin Keating:

That's what I

Jeremy Robb:

thought, Within a city. So that's what, I think that's the delineation, and I say I think because I look at it, but, you know, you're always trying to remember it off your head. But there's, you can obviously take a train or bus from city to city, but you're looking at intra city and thinking about and that's the movement they're trying to get more. And obviously, you know, we've seen energy prices go up a lot. Sure.

Jeremy Robb:

The price of diesel is all over the headlines right now. It hit over $6 a gallon this week. It is a, you know, big factor in those rising costs of public transportation and was really the main call out of the producer price index, or the PPI report, from this week too. The PPI was up 0.4% in the month, but really, know, all of the everything everyone's talking about is the energy cost component of that.

Erin Keating:

Of

Jeremy Robb:

course. Diesel itself, within that report, was up 24% month over month. It's up 78% year over year. That's

Erin Keating:

what, ugh, bananas.

Jeremy Robb:

You know, people know this, but if you're buying groceries, cars being transported, anything that's got to move, it is being moved by a hauler, and that hauler is almost assuredly running on diesel.

Erin Keating:

Exactly.

Jeremy Robb:

So the price of diesel is just incredibly important to the economy overall, and, one of the reasons I I saw this morning that the University of Michigan inflation expectations, reading, moved up a good bit in the month. I think it moved up to 4.6% from 4%, if I remember correctly. Let me look at that real quick. But it's important, right, because inflation itself is important, but, yeah, it's 4.6% over, the next year from 4% last month.

Erin Keating:

So, you

Jeremy Robb:

know, if consumers start expecting higher inflation, this is probably really tied into gas prices, it can get tricky. And that's where you're seeing things like, you know, the biggest financial component of what happened this week is really the Treasury yields.

Erin Keating:

Sure.

Jeremy Robb:

The ten year Treasury rose up above 4.8% earlier this week. As of right now, it's sitting at about 4.92%, you know, so really a lot higher. That's probably going to slow some things I down in the

Erin Keating:

mean, I think it's, again, you know, we were talking about this earlier this morning before recording, but all of, at least what I'm hearing from you is saying that this is why the automotive industry continues to put out sales numbers like we have. If you think about public transportation being very expensive, I always like to say in this country, you need four wheels and an engine, whether you're riding in someone else's or you're driving your own, to get places in this country. It's a large geographic expanse. If public transportation is going up so that individuals who are relying on that rather than potentially purchasing their own personal vehicle, right, they're feeling the crunch there. So it's not necessarily cheaper to not own a vehicle.

Erin Keating:

And if you don't have adequate public transportation, you're getting in a vehicle. Gas prices are rising. All of the rest of your wallet is being challenged because of the diesel fuel prices going up, your point. I mean, this is where the real rubber hits the road, for lack of a better pun, is that individuals are having to sort out how do they pay for everything when everything's rising except for, frankly, the price of vehicle. Like that's probably our least inflationary number in the whole equation of things, right?

Jeremy Robb:

Yeah, I mean, it's the pushing on a balloon against the spring kind of thing, you know, when other things shift, you know, you only have a set amount of dollars to spend. A lot of things have been outside of consumers' control for a long period of time. Gasoline prices are one of them. Your choices are, you know, do you consume less, or do you get into a more fuel efficient vehicle? Do you buy a replacement vehicle instead of making the $3,000 repair?

Jeremy Robb:

All of these things come into the calculus of should I go buy the new car? Right? And that's where we see this constant marginal demand of people buying, whether it's new or used cars, to replace the vehicles that they have. And with your average age of a car being thirteen years on the road, we're probably going to continue to see that, because I don't think your average car is going to go a lot longer

Erin Keating:

than Yeah, we're pushing 18 limits here.

Jeremy Robb:

Right, right, yeah. So, know, whether people are trading into a five year old car or whatever, that's it. But it does highlight the other thing I wanted to talk about real quick that is like, you know, you have your income growth and you have expense growth. And the the correlate the transition between the two of those is your is real earnings, and real earnings growth now has been negative for five months in a row. It's down 0.3% year over year.

Jeremy Robb:

So, adjusted for inflation, people are not making more money year over year. And that's, you know, those are trends that are really concerning for your everyday consumer, which is, you know, the vast majority of Americans in the marketplace.

Erin Keating:

Right. Interesting. Well, again, I think it's still positive news for the automotive industry. We still have plenty of reasons to be optimistic about individuals needing vehicles, new or used, and lenders, as you said, getting looser with their credit, being available for individuals who are in fact looking for vehicles. But interesting things to keep an eye on, especially when we look at just regular everyday expenses, and to your point, the diesel fuel prices are shocking, really.

Jeremy Robb:

Yeah. They are.

Erin Keating:

And these are the moments when it's helpful for people to see, like, where does that really fall down into impacting you as a daily consumer? I think it's becoming very apparent.

Jeremy Robb:

Yeah, it's front and center, you know, headlines, everything you read it. It's also the headlines we are this morning. I know you consume a lot of information. The whole factor about used cars and used car affordability is really front and center in a lot of publications right now too. I'm actually doing a recording for another group later today on the same subject.

Jeremy Robb:

So a lot of people are, the story, which we've talked about for a long time, you know, but it's very interesting in the economy, right? And it happens at the time when the average price of the new car went over $50,000 right, in the month of August. And if we're there in August, my guess is we're probably going to be there for the rest of the year. You know, like we're going to, we're pushing that because I think OEMs and dealers, they, they can't absorb the cost they've absorbed anymore. Sure.

Jeremy Robb:

They're having to press that along, and you're seeing that through lower incentives. And we know that as the actual price of whatever the top, the most recent vehicle is, if it moves higher, it will literally pull the used cars that are associated with that make model along with it. So it's just very, very dynamic how it all works.

Erin Keating:

And the model year shift is happening a little bit later this year, so yeah, to your point, that will impact the used vehicles that are following in line along the lineage of each model. Well, lots to think about, Jeremy. Thank you so much for getting us up to speed on where we are. Look forward to hearing about the FOMC, right? What does that stand for actually?

Erin Keating:

Federal?

Jeremy Robb:

The Federal Open Market Committee.

Erin Keating:

Open. There you go. Was like, I can't remember the O. Open Market Committee. We'll be meeting next week, so do you have a wager?

Erin Keating:

What do you think? Rates are going go higher or no?

Jeremy Robb:

Well, rates are already moving higher. It's like some of

Erin Keating:

these Well, I'm sorry, but yeah, the Fed. What does the Fed going to do? I Excuse

Jeremy Robb:

think they have to raise, you know, with a your lot of people think that if the futures market gets to over 55% or something, that they're almost surely going to raise. It's at 85% this morning. So then the real the real question is, is like, is it the start of a cycle? Then you are you gonna get more as we move along. But I don't know that anybody thinks that gas prices are coming down anytime soon.

Erin Keating:

Yeah.

Jeremy Robb:

And, you know, if consumers' inflation expectations continue to be raised, then, unfortunately, interest rates are probably going to keep moving higher.

Erin Keating:

Yeah. Self fulfilling prophecy a bit, too. Yeah. Well, thank you, Jeremy. I know we might sound downbeat, but I'm telling to our dealer audience, this is still a good time.

Erin Keating:

We have people who are still out there buying vehicles, so

Jeremy Robb:

They are. We see it in our data every week. Can't, every cannot dismiss it.

Erin Keating:

Exactly. And plenty of inventory on the ground, even if we're starting to see it shrink just a little bit, it's still really healthy and available. Great talking to you. We will talk to you again in two weeks.

Jeremy Robb:

Sounds good.

Erin Keating:

I appreciate you being here.

Jeremy Robb:

Great to be here today. Thank you, Erin.

Erin Keating:

All right, so moving on to a couple of the headlines that actually popped up for me this week. I am coming off of a Labor Day vacation, so quick read of what's happening out there. Volkswagen. Volkswagen has been in the news quite a bit lately and we know that because they, you know, a lot of the news is, they're a huge conglomerate, right? They're an enormous company, globally impacted by a lot by China because they invested heavily in China over the last two decades, but also just have a very broad business empire and have had to make some really interesting decisions.

Erin Keating:

So I'm taking a look at Volkswagen this week. I also want to look at the Tesla Cyber Cab that is now officially rolled out in Austin and what's going on there with NHTSA, which is the National Highway Transportation Safety Administration, and then touch a little bit more even closer on what's going on at NHTSA specifically. So let's talk about Volkswagen. Reports came out this week suggesting that they might be evaluating a possible sale of Ducati. This is their motorcycle brand that is actually owned by Audi.

Erin Keating:

Audi also owns Lamborghini. So as most people know, this is a very, you know, again, vast conglomerate here where different brands own different pieces. They did sell off their Bugatti stake this week. Bugatti was one of their small boutique brands. Full disclosure, I did work for the Volkswagen Group for ten years and it is interesting.

Erin Keating:

It's a brand that I always, a brand house that I always thought was really great at being able to run multiple boutique brands within it. But clearly Volkswagen is starting to sharpen its focus, trying to really think how do we not only reduce costs, but how do we evaluate the assets that we have? And Ducati is a good performing brand. It's a motorcycle brand. There's nothing necessarily wrong with Ducati.

Erin Keating:

It's just that the discussion really has to represent, you know, what are we doing here? Where could we invest better? Where do we need to focus? You know, for years automakers have really been looking across a broad spectrum. They've been thinking about electrification, software, autonomy, acquisitions, global expansion, etcetera, etcetera, etcetera.

Erin Keating:

And the assumption was always that the growth would justify the spending. But today, every investment's really being scrutinized and capital is a lot more expensive. So technology investments to keep up with China, keep up with competitors are having to grow larger, and competition is really fierce, especially again in that Chinese market where a lot of these manufacturers really built quite a presence and quite a reliability problem on their consumers to be able to hold up their sales. So, the simple question continuing to come down on different manufacturers is, you know, does this particular asset help us win in the future, right? We 've seen some of these decisions come out with manufacturers that are looking at batteries, investments that they've made or additional plants investments that they've made or acquisitions of other smaller brands.

Erin Keating:

And this is Volkswagen's burden to carry right now is to determine what are they going to do with their broader portfolio. They're not alone necessarily. This past week, Sean Duffy, our Transportation Secretary, publicly criticized Ford Motor Company's reliance on Chinese linked battery technology and supply chain relationships, and this, you know, again is Ford Motor Company having to think through, well, where do they have their relationships, what types of investments and assets do they have, and what do they need to be doing for themselves to be able to get ahead in technology without necessarily hampering their business in The US? And they're having to make these decisions, which of course Duffy was pointing at as saying, Hey, this could be harming American competitiveness and industrial policy if you aren't using US specific assets and or if you are using Chinese backed assets. So that you know, we know that there's a big play right now in the government to be looking at anything that is Chinese linked and Ford is certainly having their hands slapped over this right now.

Erin Keating:

And so I'm keeping an eye on what happens in that discussion. And of course GM is in the mix as well, so we don't typically see, at least not as of late, as of the last decade, I'd say Ford and GM necessarily being at each other considering that they are domestic production hub brands here. Know, Stellantis is a little bit more global, but man, they are really starting to come up against each other discussions. It should be interesting to see how that continues. That brings me to another discussion when it comes to policy is Tesla.

Erin Keating:

So Tesla officially released their cyber cab for operation in Austin, and the unique and interesting piece of it was that they don't have steering wheels and they don't have pedals in their cyber cab. That's not unusual. They can self certify that those vehicles are safe to use. Zoox did the same thing and Waymo did the same thing, and these are driverless vehicles, especially Zoox, that don't have those particular pieces of technology, the steering wheels or the pedals. The difference is that Zoox actually already faced the NHTSA scrutiny and submitted for approval, whereas Tesla just said, Hey, I can self certify.

Erin Keating:

That is okay. And now NHTSA is saying, We're not feeling like that's the way you can go. So they've opened an investigation into saying, We're going to look at whether you can actually have your vehicle, whether it really stands up and operates reliably like you say, and questioning the self certification of their ability to put vehicles on the road that don't have steering wheels and pedals. This could have broader implications for quote unquote robotaxis as we look forward into the future when AV's autonomous vehicles become more popular. What's interesting about this is that NHTSA is in its own sort of set of hot water because the agency continues to work through updates and rule makings related to emerging vehicle technologies, and there's a lot of criticism out there, and rightfully so, the regulation is really moving pretty slow.

Erin Keating:

It's not keeping pace with the pace of innovation. It's not entirely surprising. Many of today's regulations were written around the assumption that every vehicle was with, you know, having a human driver, steering wheel, pedals, mirrors, conventional controls, etc. But it's a problem because the technology continues to move forward and yet our regulatory environment isn't necessarily holding up to it, but can step into the progress if they haven't been able to make rulemakings yet. And that's a challenge.

Erin Keating:

However, I'd like to say it's worth remembering federal regulations just aren't the only force that shaped the industry. And I've talked about this before when we were speaking about prices having risen over the last decade on vehicles. IIHS, they do testing protocols, ratings and safety priorities for consumers. So they actually rate vehicles and in fact most manufacturers have started really catering towards the IIHS testing protocols rather than waiting for regulatory markers to come up into their production cycles. And in fact, most safety features, most innovations we see on vehicles today aren't federally regulated, which is really interesting because that means that we have this particular agency that's looking at the safety of vehicles and impacting how cars are built, how cars are perceived as being safe and such when our own regulatory environment is not keeping pace with saying whether those are findings from a government standpoint.

Erin Keating:

So we'll continue to watch what the fundamentals really say about this, you know, should we be more concerned that there's to be technology that's actually pulled back after the fact because it's so far behind where innovation is taking us? Our different brands and companies need to make specific decisions around investments, not only on technology, but assets they have, etcetera, etcetera. Just a lot that's moving through the industry right now outside, know, never mind what we're talking about from tariffs, which is of course a big conversation that continues to have. I mean, know, we had electrification come in and really caused a lot of havoc on budgets and capitalization. Innovation from a technology perspective is going to continue to be a big piece of that moving forward as well.

Erin Keating:

So when I kind of look at all of these stories, I'm just seeing an industry really wrestling with three fundamental questions. Know, where should we invest the capital, right? How do you scale new technology? And who ultimately decides what's acceptable? Know, Volkswagen's really faced with that first question as are other brands like Ford and Toyota, Honda, everyone is facing their asset allocation.

Erin Keating:

Tesla's really pushing on the second one and then of course regulators are working through the third, so innovation remains important. We're really entering a stage where execution is going to matter more than vision. And I think it's going to be that there are going to be winners and losers, but the winners are going be the companies that can afford it, that can scale it, that can navigate the rulebook that comes with it, etcetera, etcetera. That is what I've seen for this week. We're going to keep an eye on this and other topics that Jeremy and I discussed today about economics and the inflation and the rising costs for all of American households.

Erin Keating:

That's it for this episode. You can find more of our insights at coxautoinc.com. And if the conversation was useful, please make sure you share the episode, like the episode, subscribe to The Auto Market Brief, and we will look forward to having you back next week where we will hit some more of the economic high notes and industry headlines that matter. Take care. Thanks for joining us on this episode of The Auto Market Brief.

Erin Keating:

To stay up to date with all the latest news and perspectives from our team of experts, be sure to visit our insights hub at coxautoinc.com.