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It's noon here in Ventner City, New Jersey, and our nation's capital, Washington, D.C.
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And this is Car Edge Live for Thursday, March 19th with your host, me, Ray, hanging out
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here in Ventner City and Zach, hanging out in D.C.
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How are you today, handsome?
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How's the weather in Washington?
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Everything's good here in D.C.
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Grateful to get to spend some time with you this afternoon, Pops, and everyone.
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Today is another episode of Car Edge Live.
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Toyota and Nissan are slashing production literally right now.
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We're going to talk about that in just a moment before we do.
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A friendly reminder.
00:46
A friendly reminder.
00:48
Today's show is brought to you by caredge.com.
00:51
Six years ago, me and my dad and our incredible team went on a cruise, SAID, to provide consumers
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with a car buying service that takes care of vehicle research, dealer outreach, and even
01:01
We learn what matters to you.
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Contact car dealers.
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Imagine that, folks.
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You could have an expert do it instead of yourself.
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Compare the offers we get, negotiate to help you get the best deal.
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You can learn more back at caredge.com.
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We do this every once in a while.
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We're offering a promotion, $200 off our car buying service and 20% off Car Edge Pro.
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Really encourage everyone to go check that out, learn more, and of course, give us a
01:27
The big story this morning, dad, as with all things caredge life related, we are talking
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On the supply side of things, Chalker, a global war, the Iran war, is disrupting Japanese
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automakers supply chains.
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This is actually leading to Nissan and Toyota right now, to your point earlier, literally
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stopping some levels of production.
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Let's break down what's happening here.
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We will also do this through the lens of recently, this week, we talked about new vehicle inventory
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levels here in the United States.
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When we look at this chart, we know Toyota inventories are the lowest of any mass market
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brand in the United States.
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Nissan's are significantly higher over here, but still, these are two brands that maybe
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one of them is okay to be trimming production, the other, not so much.
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Dad, let's start here.
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Is this actually a big deal?
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Well, it's a big deal if you're in the Middle East.
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It's not quite as big a deal here in the United States, but the reason it's a big deal in
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the Middle East is the war is creating, the war in Iran is creating situations for well
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shipping and shipping parts and supplies that both Nissan and Toyota need.
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Aluminum, a lot of the aluminum that they get for their vehicles is out of the Middle
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I mispronounced it, whatever it is, but there's another resource that they get out of.
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Navigate, I think, is the North American free trade.
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It was in the article, I mispronounced.
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No, we're going to help my dad out here because it is confusing.
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We're going to pull it up on the screen.
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All right, continue.
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Which is needed in production for some of the plastics in the vehicles.
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And then it's difficult, thank you, and it's difficult to get the produced vehicles from
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Japan to the Middle East.
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Now, the Middle East for both Nissan and Toyota is their second largest market in the world.
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So when they're talking about cutting production, they are talking about cutting production
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for those parts of the world.
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Now, this is something that we haven't thought of.
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This could allow them to increase, at least on Toyota's behalf, to increase the production
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for North America since they will be producing fewer vehicles for the Middle East.
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That could benefit consumers in this country if that were to happen, if they decided to
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keep the plants running at full speed.
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Yeah, so these are vehicles that they're producing in their home country, their domestic country
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of Japan that they are, to your point, dad, now may be going to reallocate their factories.
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To be clear here, these manufacturers, Nissan and Toyota in particular, have already been
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cutting production of vehicles in Japan.
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Nissan was cutting monthly output in Japan, excuse me, by about 1200 vehicles, while Toyota
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was reducing production by as many as 40,000 vehicles through the end of April.
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So these manufacturers were already going down a path which is fascinating, because at least
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for Toyota, Nissan, maybe it's a little less fascinating, Nissan, we know, is struggling
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to sell whether it be here domestically in the United States or globally.
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But why would Toyota be on a path to reducing vehicle production in Japan?
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Obviously, maybe some of that has to do with manufacturing sites, so they don't want to
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produce vehicles in Japan and then ship them to the United States because of the tariff situation
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that could be impacting their decision making here.
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But it is an interesting thought experiment that if these manufacturers end up needing to
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produce fewer vehicles as a function of not getting their supplies, their factories are
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going to be sitting idle even more than they had already anticipated.
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Would they then reallocate that resource, the factories, to produce more vehicles for North
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America? If you're Toyota, why wouldn't you? You need inventory here.
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Exactly. This is strictly a guess. This is another one of Ray's crazy opinions.
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But my guess is that those at Toyota will look at this as an opportunity to, even though they
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like the idea of having on-time inventory, where they have the lowest day supply of inventory of
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any major manufacturer of the United States. I think they could look at this, and I think they
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will look at this and say, maybe instead of a 30-some day supply, we'd be just as well off.
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It was a 45 or a 48-day supply. Let's reallocate some production capability for vehicles to ship
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to the United States. That's what I think the direction is that they will go.
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They would have an opportunity to keep the plants running at a higher level,
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and they would have the opportunity to not necessarily significantly impact the number
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of vehicles that they're sending to the United States, but enough so that they could garner
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even more market share here and still have the lowest or one of the lowest day supplies of
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vehicles. It reminds me of that old saying, when life gives you lemons, make lemonade.
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I think this could be a situation where someone like Toyota looks at it and says,
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okay, so we're not going to sell as many cars or ship as many cars to the Middle East as we
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normally would have, but it's an opportunity for us to ship more cars to North America.
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Now, you know who this impacts adversely, I would say is Nissan. Dad,
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think about this for a moment. Nissan was the number two automaker in the Middle East last year.
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They sold more than 500,000 vehicles in that area. Think about this for a second. Nissan already,
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maybe a quarter of their vehicles here in the United States, get sold to fleet customers. The other
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three-fourths actually get sold to customers, consumers. They shut down what was it? Seven
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manufacturing plants globally. They've done massive, massive layoffs globally. Now, they're
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losing the market where they were second largest. This could be even more damaging for Nissan as a
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global entity. We talked about last year, is Nissan going to survive? When we, of course,
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think that the brand Nissan will survive, but maybe under new ownership, different financial
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structure, this is a huge, huge hit for Nissan. They don't need to be producing more vehicles.
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They need to be selling more vehicles and they're losing the opportunity to sell in a market.
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They were massive. Yes. The Middle East is a huge market for Nissan. The Nissan Patrol,
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which is their version of the Toyota Land Cruiser, the Nissan Patrol is a very popular vehicle
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in the Middle East. To lose the ability to sell as many cars in that region as you
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had expected to. That can be troubling for a company that was struggling to begin with.
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It's fascinating how much can change in a year. Here's what I mean by that. A year ago,
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Nissan was in real serious trouble. They still are, but there were talks
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between Nissan and Honda that they would merge. Honda took the position that they were the
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superior company and that Nissan, if they merged, would become a subsidiary of Honda.
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Nissan looked at it as a merger of equals. They said, if we're not going to be equals,
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we're not going to merge. Everybody thought, oh my God, what's going to happen to Nissan now?
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And they went down a path of closing manufacturing facilities, laying off 20,000 employees,
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restructuring the company, figuring out ways to save billions upon billions of dollars.
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And in 13 months, what has happened to Honda? It is 180 degrees from where we were a year ago.
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Honda is reporting huge losses like they've never had before. They've pivoted from their
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mistake of trying to go electric. And everybody thinks, well, they only had a couple electric
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vehicles in the United States. Still cost them huge tons of money because they did this with
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General Motors. They're still a huge write-off that they have to absorb. And so what Nissan
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thought was, we're the superior company and Honda is the superior company and Nissan is the inferior
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company. And so it's not a merger of equals. Well, now it's completely reversed in that maybe Nissan
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is the superior company and Honda is the inferior company. So the world has changed 180 degrees
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for what's going on in Japan's manufacturing sector in just the last 13 months. It's crazy.
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It really is crazy. And again, to be clear, what that means for us here in the United States of
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America, our focus, what happens to the car market here, Toyota's day supply, maybe it goes up if we
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start to hear some news of them shipping more vehicles to the United States. So that's something
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we're going to be keeping our ears to the ground. And if we hear, we see news reports, hey, Toyota
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is actually increasing production and shipping vehicles to the United States because they can't
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ship vehicles to the Middle East right now because the Strait of Hermuse is closed. Great.
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That'll be a good news for shoppers here in the United States of America. And similarly for Nissan,
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they already do have an oversupply of inventory for the most part, hearing the United States for
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Nissan and Infiniti. But you know what, if they need to find a place to ship these vehicles,
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they'll probably come in here. So those will be good news. Similarly for Honda, Honda's caught up
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in this as well. But definitely the stability of the Japanese auto market, it feels very similar
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to the instability of the European auto market with Volkswagen right now. Or quite frankly,
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the instability of the auto market here domestically with General Motors, Ford,
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the total write-offs, if I may just for a second, were over $70 billion in restructuring costs
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from those EV bets that have not panned out. So it's a very fluid moment for the auto industry.
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It is really turning in rather rapidly to a global concern for legacy automobile manufacture.
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This is turning into a boon for Russia because many of the Japanese auto manufacturers that get
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a lot of their aluminum out of the Middle East are turning to Russia to get aluminum
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directly from Russia. And obviously with the Strait of Hormuz, what's going on there,
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a lot of Russian oil is becoming more and more available. So this whole situation
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is like inverse of what I think everybody thought just 10, 12, 13 months ago, where
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Japan and China might struggle. Obviously we're seeing struggles here in the United States and
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in Europe. And Russia could see some real growth because of this.
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Yeah, but if I may, Dad, it's not like we're going to see an influx of Russian-made OEMs
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in the United States. You're talking like at the highest level. I'm keeping it very focused on
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the automaker level. So sure, maybe supply chain because the supply chain changes. There's going
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to be some beneficiaries here. But domestically here for customers, I think it continues to build
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the narrative, Dad, that the car market is a bit in turmoil. That is truly the state of the car
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market in 2026. Prices are too high. Inventory is building up. The only brands that have a limited
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base supply of inventory are some of those that we've talked about recently, Toyota, Lexus,
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even Chevrolet. For example, it's not a really good job managing their inventory. But the whole
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narrative here is that Toyota and Nissan are slashing production right now as a result of
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what's going on with the war. And our hypothesis is, which should be clear, it's just a hypothesis.
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We've got Igor here saying, Zach, no news yet for Toyota North America production increases.
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For now, I talked to my regional rep about it today. Great. The hypothesis is that they would
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rather invest in keeping those factories running and produce more vehicles for the United States
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versus just having them sit there idly. We'll see. And if they do that, then it is even more
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a benefit to consumers who are thinking about buying a car here in the US. It should help drive
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prices down. Well, you would think. And then the other concern, at least in my mind, is how long
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this continues. And what I mean by this, the war in Iran, how long that continues, the conflict
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continues in Iran. At what point, how long do you have to go to where Americans start thinking,
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well, I was thinking about a car, but I'm just not sure what the future is going to hold.
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And so there's a bit more trepidation for people to make large purchases,
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whether they're paying cash or financing them. And so I think maybe four weeks, six weeks,
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eight weeks down the road, we start from the impact of this, where sales are starting to
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bottom out more than what was expected for this year, because there'll be a fear for people to
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make large purchases. So this is really going to have some major impacts, not just here in North
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America, but obviously we're seeing it globally. Now, the one counterbalance to this, interest
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rates actually went down, dad, so far, and March for both new and used vehicles. The average new
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vehicle interest rate has dropped almost a point, that 88 basis point. So let's talk about this.
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This could be maybe the lever that gets pulled to try and get people to purchase vehicles,
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new and used, lower interest rates and lower monthly payments. We also know in conjunction
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with this, we've seen approvals for auto loans increase significantly. So what's your take
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on this, dad? This is another story that's really important in the context of what we were just
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discussing. Well, this is one of those deals where when you like to do experiments live,
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this would be a good experiment to do. And what I mean by that is we know that the average
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selling price today is, let's call it 49.5 for new cars. And so we know that interest rates
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in March have dropped 88 bits, basis points, so call it 1%. And so the average
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new car interest rate today is 6.81%. And what I would like the experiment to be
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is if we purchase a new car at the average transaction price of 49.5,
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what was the payment when the interest rate was 7.81% and what is the payment today at 6.81%
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and is that enough of a difference to bring people back into the market?
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So a couple things. So we'll use that price. Loan term, dad, we know is closer to what,
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like 72 months? Yes. So we'll do 72 months. And then let's do no down payment.
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And we'll keep all the other stuff the same. Sure, we're in Utah, other fees, whatever.
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All right. So we're at a monthly payment of $863.31. Yes.
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And so you're in February at the average new car rate in February. And now we're going to jump
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ahead to March with an average new car rate of 6.81%. So we're going to go from 863.31 to drum roll,
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$24 a month. If somebody couldn't afford $863 a month and a car payment,
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will they suddenly be able to afford $839 a month? My guess is they cannot. My guess is that it
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still remains out of reach for most people. And so even though it's significant that interest rates
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have dropped about a point on the new car side of things, the payment still remains well above
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what people can afford. And when you factor in how much more expensive gas has gotten
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over the last three weeks, we're up almost a dollar a gallon. How's that going to impact how
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people think about an $839 a month loan payment? So I don't know that interest rates have dropped
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enough that it's going to inspire a lot of people out there to say, yeah, I want to jump
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into the market, especially now that gas prices are up and we've got a war going on in Iran.
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I don't think any of this bodes well for the economy, honestly.
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I agree with you. And IC Cars has done some research that shows that these vehicles will
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turn our attention to used cars are sitting on dealer lots longer. So this is a really
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interesting analysis from IC Cars. Used Teslas are selling fast as the rest of the car market
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grinds to a halt. Look at this data that they have here. Dad, I'll scroll down
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to this chart. Average days on market for one to five-year-old used cars by month.
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The dark blue line is a solid line is showing you 2025 to 2026. Last year is in the dotted line.
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And you can see here, dad, that these vehicles, one to five-year-old used cars are sitting on
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dealer lots longer. So this is not only impacting the new car market, the same calculus as being
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done on the used car market, where obviously interest rates are even higher. And I think it's
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taking more and more people out of the used car market as well. This data from IC Cars,
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I think, demonstrates that. And do you think the reason for that would be is because used car prices
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for one to five-year-old used cars, which are the younger, better conditioned used cars,
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has remained terribly high in comparison. And so I think that is the reason some of those cars
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are sitting. And what would be interesting to see what like six to 10 or six to 12-year-old cars,
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how quickly they're selling. And the problem for those folks is going to be the quality of
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those cars based on what we see at auctions is some of the lowest quality vehicle used cars
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and highest mileage vehicle used cars we've ever seen. I mean, one of the things many new car
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dealers are doing today is there was a time when a new car dealer would look at a high mileage
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vehicle, an older high mileage vehicle, and they wouldn't even think about running it through the
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shop, reconditioning it and selling it as a used car at their used car facility. They would just
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instantly detail it and take it to the auction. Well, today, more and more dealers are looking at
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these high mileage older cars and going, we got to keep that. Yeah. Okay, because it's the only
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affordable used car we're going to have for some people. And, you know, I would, we need to talk
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the brand in at some point and find out if he's having difficulty finding cars right now, especially
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spring selling season, because more new car dealers are hanging onto older, crappier used cars.
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I don't have data on older vehicles, but I do have data on the slowest selling one to five-year-old
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used cars. Look at this list. Dad, well, actually, I'll scroll down just a touch so we can start with
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number 10. Land Rover Discovery sitting for 101 days, Genesis GV60 101 days, Nissan Z 108 days,
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Volvo XC90 108 days, the Ford Escape Plug-in Hybrid 112 days, GMC Sierra EV 116 days, Lincoln
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Nautilus Hybrid 118 days, Dodge Hornet. It's on all these lists, 123 days, BMW i5 153 days,
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and the Volvo XC60 Hybrid 170 days. These are the used cars, Dad, that are not selling right now.
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These are the ones that when you pair everything up, high interest rates, maybe low quality,
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and then lack of consumer demand, these are the ones that are just sitting longer than any others
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out there. Well, let me ask you a question. Looking at that list, do you see anything on there
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you would ever consider? 90, yes, someday, maybe, if I was a family and had a family,
23:53
stuff like that, sure. Yeah, maybe if the GMC Sierra wasn't an EV, perhaps, but you look at that list
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and you can understand why those cars are, in the case of the Volvo XC60, sitting more than
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three times more, taking more than three times the number of days to sell. It is, you can look at it
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and you can begin to understand it. And part of it that I don't understand is we know hybrid sales
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or new cars are way up and you would think hybrid sales for pre-owned cars should be up,
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but maybe it's whose hybrid that it is that determines whether or not it sells.
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Now, I think you're onto something here, Dad, because look, these are the fastest selling
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one-to-five-year-old used cars. You've got the Toyota Grand Highlander, sits on the lot for 15
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days. Porsche Macan, 15 days. RAV4 hybrid, 15 days. Grand Highlander hybrid, 15 days. Porsche 911,
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15 days. Lexus TX550H, that's a hybrid, 13.8 days. The 911 hybrid convertible,
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13 and a half. The Kia K4, 13 days. LC500, 10 days. And the Chevy Bolt, 10 days. It's a
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totally different list here, but some connections. Lots of hybrids, for example.
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And whose hybrid it is. Yeah, you know, there's something to be said for a Toyota hybrid over,
25:25
say, a Volvo hybrid. You know, there's a history. There's a proven history with the Toyota hybrids.
25:34
And so, yeah, it depends on who the manufacturer is and it sure as hell depends on how much you're
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asking for it to begin with. And we all know the Volvo is going to be a hell of a lot more.
25:47
And actually, it might not be a hell of a lot more than some of those Toyotas on the list,
25:53
but the Toyotas are going to be looked at in a completely different way than the Volvo.
26:01
Because, I don't know, Toyota has a better reputation than Volvo does at the moment.
26:07
Not that either one of them doesn't have their issues.
26:11
Yeah, for sure, for sure. Again, folks, this show is brought to you by caredge.com. Me,
26:16
my dad and our incredible team. For those of you that are unfamiliar, we provide a car buying
26:20
service. We take care of research, dealer outreach, and negotiation. We learn what matters. Do you
26:25
contact car dealers, compare the offers, and help you get the best deal without the stress. We've
26:30
helped tens of thousands of people already this year. You can learn more and take advantage
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of our limited time. Offer a $200 discount on our car buying service or 20% off caredgepro back at
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caredge.com. Let's call the show for today. Tomorrow's Friday. We are very close to the
26:47
weekend, y'all, which is very exciting. Oh, my gosh. Tomorrow is feisty Friday?
26:51
Sure. Tomorrow is feisty Friday. We hope you tune in tomorrow as well. We appreciate everyone
26:55
that spends 30 minutes of their day with us. Thanks for doing this as always.
26:58
Yes. Thank you, handsome. I hope the weather stays wonderful. I know you have a big run on
27:05
Saturday. What is it? The rock and roll half marathon.
27:10
There you have it. If I were you, I'd do it twice. Don't quit. Run it twice.
27:17
My marathon prep training plan has me running two hours and 48 minutes on Saturday. I'll run
27:26
a half marathon in 90 minutes, and then I'll probably do another hour and 15 on top of that
27:31
afterwards. That's going to be so rough, so bad. Wow. I need hobbies. Yes, you should have a hobby
27:38
like mine. It's called sitting on my ass. We're back here tomorrow. Love you, Dad. Love you too, handsome.
27:48
If you liked the show, please take a moment to rate, review, and subscribe. It really does help
27:54
the show to grow. Thank you for listening.
