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AutoNation CEO Mike Jackson on earnings and Covid boosting car sales

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AutoNation CEO Mike Jackson told CNBC the coronavirus pandemic has significantly shifted American attitudes toward personal vehicles, leading to the company’s blowout earnings report Wednesday.

“Coming out of the lockdowns, they said, ‘So much for sharing everything. I’d really like to have my own space that I define,'” Jackson said on “Squawk Box.”

The country’s largest auto dealership chain posted third-quarter revenues of $5.4 billion, eclipsing Wall Street forecasts of $5.19 billion. The company’s adjusted earnings per-share of $2.38 was an all-time record and topped expectations of $1.65.

“It’s our absolute best quarter ever,” Jackson said. “The demand for individual mobility has gone through the roof, and I think this pandemic/shelter in place has shifted the American psyche in a long-term way, and it’s hard to predict past five years, but for the next three to five years, there’s been a shift in demand,” he added.

Shares of AutoNation jumped nearly 8% in premarket trading. The stock was up nearly 30% year to date, as of Tuesday’s close. CNBC’s Jim Cramer said he’s not surprised by the strength in AutoNation stock Wednesday because during the pandemic, people have decided they want their own vehicles rather than carpooling or taking mass transit.

Surging auto demand is present across all price points and for both new and used vehicles, said Jackson, who also chairs AutoNation’s board. He added that the interest in buying cars has been buoyed by “incredibly low” interest rates, which makes financing the purchases more attractive.

Auto sales plummeted earlier this year as the coronavirus swept the U.S., with showrooms shutting down and consumers subject to stay-at-home orders. Inventories also have taken a hit as manufacturers shuttered plants.

While the sales figures have rebounded faster than expectations, Jackson said that AutoNation continues to face challenges on the supply side as production ramps back up.

“We made absolutely no progress in the third quarter. Our inventories are actually lower at the end of the third quarter than they were at the second quarter when it comes to new vehicles,” he said. “Industry inventories are still 25% to 30% below where they should be, if not even more, so it was challenging to adjust pricing to reflect the shortages.”

It showed up in AutoNation’s earnings. The company’s gross profits per new vehicle sold were higher by 56% at comparable stores compared to the same period last year. For used autos, that metric was up 43%.

Jackson said he believes inventories will “gradually improve” into next year, but added that the company will closely watch how that impacts its earnings.

“It’s always, as a retailer, a balance between pricing and volume, and we’re managing that well,” he said. “As the factories can do a bit better, we’ll adjust to that. But net net, we’ll either sell more volume and adjust pricing or the availability is not there and we’ll get it on the pricing side.”


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Transport Ministry begins exercise to formalise registration of vintage motor vehicles in India

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New Delhi: The transport ministry has issued a notification to formalise the registration process for vintage vehicles in the country, in a bid to preserve the heritage of old motor vehicles in India.

The ministry has proposed a fee of Rs 20,000 for a new registration and Rs 5,000 as fee for subsequent re-registration.

All applications for registering such vehicles will be applied on the “PARIVAHAN” portal of the ministry of road transport and highways. This registration shall be valid for 10 years.

The Ministry has published GSR 734 (E) on Wednesday seeking comments and suggestions in regards to amending Central Motor Vehicle Rules 1989, relating to Vintage Motor Vehicles.

“There are no existing rules for regulating the registration process of vehicles of heritage value. Through this notification the Ministry intends to formalize the registration process of the Vintage Motor Vehicles,” said a government official.

The government has defined Vintage vehicles as those two-wheelers and four-wheelers (non-commercial/personal use) which are more than 50 years old from the date of their first registration (including imported vehicle).

The definition, however, restricts any substantial overhaul of the vehicle which includes modification in chassis or body shell, and or engine.

All States registering authority will appoint a nodal officer who will process all applications for registration of vintage motor vehicles, as per the proposed rules.

Further, States will have to form a committee which will inspect a vehicle and declare whether the vehicle is fit to be registered as vintage.

The ministry has proposed to restrict the use of vintage vehicles on Indian roads.

“A Vintage Motor vehicle is allowed to run on Indian roads only for display, technical research or taking part in a vintage car rally, refueling and maintenance, exhibitions, vintage rallies, to and fro to such exhibition or car rally,” the official said, sharing details of the proposal.


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India can beat China in low-cost manufacturing if industry, govt work together: RC Bhargava

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NEW DELHI: India has the potential to surpass even China in low-cost manufacturing if the government and industry work in a cohesive manner, Maruti Suzuki India (MSI) Chairman RC Bhargava said on Thursday. Bhargava also said the government should focus on increasing the competitiveness of the Indian industry.

“India has the capability to become a lower cost country than China if the industry and the government work together,” Bhargava said.

He was sharing his views on making Indian manufacturing globally competitive at an online event organised by the All India Management Association (AIMA).

Bhargava said the only objective of government policies should be to increase the competitiveness of Indian industry so that it can make things at the lowest cost along with the best quality in the world.

“The more the industry can sell, the more jobs will be created in the economy,” he noted.

Bhargava pointed out that creating jobs across sectors was important for the overall growth of the economy.

He, however, criticised states which have reserved jobs in manufacturing for locals.

“It is an anti-competitive step,” Bhargava said.

He also said MSMEs have to be as globally competitive as the large companies because the entire supply chain determines the overall competitiveness.

Bhargava also noted that the industry cannot be competitive unless the promoters and managers treated workers as partners.

He pointed out that MSI owed its success to explaining to its workers that they will prosper if the company grew and backing that with policies and actions that delivered income and career growth to employees.


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Indian carmakers beat their foreign counterparts in vehicle crash safety

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MUMBAI: Domestic automakers have led the way when it comes to making safer cars for Indian roads. Seven out of the 10 safest affordable cars plying on Indian roads are made by Tata Motors and Mahindra and Mahindra, as assessed by Global New Car Assessment Programme (G-NCAP), an initiative by a UK-based charity that lobbies for safer cars around the world.

In fact, Indian automakers were the only ones to score 5 stars on a scale of 5 for adult occupant safety in the event of a high-speed collision.

“Global NCAP is neutral in terms of origin of different car companies. But it is pleasing to see Tata and Mahindra do so well in our ‘Safer Cars For India’ ratings,” said David Ward, president of Global NCAP.

“India’s made huge progress in the last few years. It is the country that has improved the most in the last decade,” he told ET in a recent interview.

The organisation has crash-tested as many as 42 cars sold in the Indian market since 2014. Of these, it found Mahindra XUV 300, Tata Altroz and Tata Nexon to be the safest.

“My 1st source of pride is that the 5 safest cars in India are Indian,” Mahindra Group Chairman Anand Mahindra said on Twitter.

To be sure, most of the vehicles tested so far come with a price tag below Rs 10 lakh and many premium cars sold by foreign automakers have not been tested. These vehicles could be safer if crash tested.

Other cars to excel on the test include Mahindra Thar, which got a 4-star rating earlier this week. Tata Tiago and Tigor, Volkswagen Polo, Mahindra Marazzo, Toyota’s now-discontinued Etios and Maruti Suzuki Vitara Brezza also feature amongst the top-10 on the list.

Foreign automakers have been criticised for making the same cars safer for export to other countries than the ones sold in India. A recently-launched high-selling SUV in India fared much better on crash tests in the US.

“It often depends on regulatory standards. For example, in most high-income countries electronic stability control (ESC) is mandatory but is not yet in India. Since the adoption of India’s crash test standards, it is more likely that the body shell strength will be more similar. Other differences may relate to number of air bags fitted,” Ward said.

Global NCAP attracted a sharp response from Maruti Suzuki when it rated the S-Presso as a 0-star car earlier this month. The market leader in a press statement said that all its vehicles were compliant with global safety standards and were duly tested and certified by the Indian government.

“It cannot be left to the opinion of any self-proclaimed party,” Maruti Suzuki’s statement read.


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