Auction Reinvention, Trade Tension, and AI Pricing for Flights

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Episode #1102: Today, we're unpacking the Detroit 3's tariff turmoil with Japan, exploring how "Auction 2.0" is reshaping used-car sourcing, and tracking Delta's AI-driven pricing turbulence as Senators demand answers. 

The U.S. automakers GM, Ford, and Stellantis are pushing back against a new trade deal lowering Japanese auto tariffs to 15%, while tariffs on Canadian and Mexican imports stay at 25%. The Detroit 3 warn this imbalance threatens U.S. auto jobs and industry.

• Matt Blunt of the American Automotive Policy Council says any deal that favors Japanese imports over high-U.S.-content North American vehicles is “a bad deal for U.S. industry and auto workers.”
• President Trump boasts of a “massive deal” with Japan involving $550 billion in investments and tariff cuts, calling it a historic win for U.S. automakers.
• Details remain murky on whether Japanese cars and parts will get carve-outs from existing tariffs; the deal comes as Trump threatens to hike tariffs on Mexico and Canada.
• U.S.-Japan talks included Japan’s chief trade negotiator meeting Treasury Secretary Scott Bessent, who says negotiations are “going very well.”
• Japanese automakers continue investing in U.S. production, with significant commitments from Isuzu and Toyota, aiming to boost local manufacturing despite tariff concerns.
  
  

According to recent data from Cox Automotive, NADA, and BCG, the traditional used-car auction model is failing franchised dealers due to rising fees, transport costs, and poor condition reports. Dealers are shifting fast to private-party acquisitions (PPA), creating a more local and cost-effective supply.

• Auction-sourced dealer inventory fell from 27% in 2019 to 18% in 2023, while private-party sourcing grew from 10% to 15%.
• Buy fees have increased by about 50%, transport costs are up roughly a third, and lane prices remain inflated, squeezing dealer margins.
• The Manheim Index peaked at 234 in early 2023, but lane conversion rates dropped to 58-64%, below the 70% pre-pandemic norm.
• NADA projects private-party sales will hit 40% of the used market by 2025, signaling a permanent market shift.

According to Sen. Ruben Gallego and other senators, Delta's new AI-based ticket pricing strategy could unfairly hike costs based on individual passenger data. Senators worry this could squeeze consumers financially during tough economic times.

• Senators are demanding clarity on what data Delta uses and how widely the AI pricing will be implemented, currently 3% but planned for 20% of routes by year-end.
• Delta says the AI tech streamlines longstanding dynamic pricing and denies using personal data for individualized offers.
• Critics worry AI could push prices to each consumer’s “pain point,” risking predatory pricing amid inflation pressures.
• Delta pre

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Episode Transcript

Paul J Daly (00:00):
Good morning. It is Wednesday, July 23 this is the
automotive State of the Union.
I'm Paul Jay Daly. This is Kylemount Cyr. Today we're talking
about an auction reinvention,trade tensions, of course, and
AI pricing for flights. Asenators, who I is and

Kyle Mountsier (00:16):
who I got opinions on stories today, baby.
You were wondering what we thinkwe're gonna hit we're gonna hit
you with it today. I look wenever, we never said we were
unbiased. We got, we gotopinions, and that's, that's

Paul J Daly (00:32):
what we share. We do right here. We have opinions.
We have new, some new contentout auto Collabs episode, our
other podcast, how to be yourown CDP with Nick askew
available now. Released it lastweek, but this one deserves
another mention because it issuch a good episode you need to
listen to what Nick's saying. Heis an innovator. He's a thought
leader, and he's just got thebest accent in the world. So

(00:53):
it's just fun to listen to himtalk. Yep, you know he says data

Kyle Mountsier (00:59):
date. Yeah.
We've also got a webinar comingup next Wednesday, August or two
Wednesdays from now, actually,August 6, driving loyalty with
data, with Shane Wilson and LeviBeatty, all about how you can
own the customer lifecycle andunderstand what their car is
doing out there on the road andget it back to the store. So

(01:20):
make sure you check that out.
Also, if you don't subscribe toour daily email or our LinkedIn
newsletter, make sure you go dothat. You can go find us on
LinkedIn by searching ASOTU, ormore than cars. I lost my audio.
Or you can go to asotu.com

Unknown (01:36):
and Oh, can you hear me? No, I can my audio. It

Kyle Mountsier (01:43):
did one of those weird, weird audio

Paul J Daly (01:46):
things when you're reading, when you're reading
copy for our webinars.
Apparently, there you go.

Kyle Mountsier (01:54):
But yeah, also, you can go to asotu.com, and you
can sign up for the daily email.
There. It's full packed ofinsights, what we're doing,
where we're going, what's goingon in the auto industry world.
So you should, you should checkit out. All

Paul J Daly (02:05):
right. Let's get into some news. The US,
automakers, GM, Ford andstellantis are all pushing back
against the new trade deal,lowering Japanese auto tariffs
from 25% to 15% while tariffs onCanadian Mexican imports are
staying at 25% Detroit three arewarning this imbalance threatens
the US auto industry and jobs.
Matt blunt of the Americanautomotive Policy Council said,

(02:27):
Any deal that favors Japaneseimports over us. Content, high
us. Content, North Americanvehicles is, quote, a bad deal
for the US industry and autoworkers. President Trump is
boasting a quote, massive dealthat sounds like his language
with Japan involving they'regoing to make a $550 billion
investment. That's half atrillion dollars, isn't it, as

(02:49):
well as tariff cuts. Calling ithistoric win for us automakers.
Details are still murky onwhether Japanese cars and parts
will get carve outs fromexisting tariffs. It's coming as
Trump threatens to hike tariffson Mexico and Canada US Japan
talks included Japan's Chieftrade negotiator meeting
Treasury Secretary, Scott bestBesant, who says negotiations

(03:12):
are going very well, Japaneseautomakers are continuing to
invest in us production withsignificant commitments from
Isuzu and Toyota, aiming toboast local manufacturing jobs
and manufacturing overall. Look,

Kyle Mountsier (03:27):
I the whole spin on this one goes back to the
cars report on where the carsare actually made and how much
stuff is actually manufacturedin in the US. I would call this
a bad deal for the US Big Threeautomakers, and maybe not the US
industry and auto workers,because it seems like what we're
actually going to get is moreplants, more parts, more cars
built in the US with faster pacefrom some of the counterparts in

(03:52):
Japan and probably South Koreaand other places that are
bringing vehicles into the USmarket. You know the imbalance
on Canadian, Canadian Mexicanimports. Hey, there's still,
there's still a question markaround BYD, being in Mexico, you
got to keep that out. Butobviously the big three are
importing a lot of parts, a lotof materials from Canada and

(04:13):
Mexico. So I can see how they'dbe upset. Yep, we'll see how it
plays out.

Paul J Daly (04:18):
Always, Will, always will. Speaking of how
it's playing out,

Unknown (04:21):
segway,

Paul J Daly (04:24):
according to recent data from Cox automotive, nada
and BCG, the traditional usedcar auction model, is failing
franchise dealers due to risingfees, transport costs and poor
condition reports, dealers areshifting fast to private party
acquisitions, creating a morelocal and cost effective supply.
So here's some information. Datafrom the reports, auction
sourced dealer inventory fellfrom 27% in 2019 to 18% in 2023

(04:50):
while private party sourcinggrew from 10 to 15% buy fees
have increased by about 50%transport costs are up by
roughly a third and late. Laneprices remain inflated, which
are all squeezing dealermargins. The Manheim index
peaked at 234 in 2023 but Laneconversion rates dropped to 58

(05:10):
around 58 to 64% below. Youknow, it was 70% back, pre
pandemic, nada, projectingprivate party sales will hit 40%
of the used car market by 2025signaling what looks to be a
permanent market shift. Industryexperts saying, quote, winning
in used cars starts with buyingsmarter, not just selling
harder, as dealers adapt to whatthey're saying is auction 2.0

Kyle Mountsier (05:34):
Yeah. I mean, you know, Carvana moved the
cheese on this one and anddealers started to figure it
out, their dealers are figuringout in the service drive,
they're figuring out fromprivate party acquisitions, from
all the vehicles that are listedonline, increasing, you know,
trade buys, making sure that youwin the trade. These are all
parts of a profitable used carbusiness. And we've known for a

(05:57):
very long time that the auctionis the lowest profitability when
it comes to Used Caracquisition, because you just
you have a time issue, you havea cost issue, and speed to
retail is everything inespecially if there's any level
of compression of of the market.
If you're not buying in the laneand buying from private party

(06:18):
acquisitions and making thatpart of your strategy, then
you're just falling behind. It'sjust, it's just a fact of the
matter. I to walk into adealership and not see, you know
that rising? You know, it'sactually surprising to me that
it's only 10 to 15% of thesourcing across dealerships.
It's probably because some isdown, then that zero to 2%

(06:39):
because just people haven'tcaught up. But I would say if
you're not in that 30 to 40%range, then you're just losing
profitability that's justsitting there ready for you in
the market.

Paul J Daly (06:49):
I think this is also just continuing opportunity
for dealers who build a strongregional brand. This is where
your brand building effortsactually can come back into your
acquisition lane. And that isn'tsomething that's historically
been thought about a lot orbroad scale. But now, when you
think about your marketingspend, when you think about how
you're building your brandstrategically in the market,

(07:09):
this is also a really clearpathway into getting consumers
to trust you enough that you'regoing to give them a great price
on their car and are a greatplace to sell your car. So all
the things align, and I think inthe end, this gives dealers what
they want, which is more controlover their inventory flow.

Kyle Mountsier (07:24):
Yep, yep, speaking of control over their
inventory, according to SenatorRuben Gallego and other
senators, Delta's new AI basedticket pricing, ticket pricing
strategy could unfairly hikecosts based on individual
passenger data. Senators worriesthis could squeeze consumers

(07:45):
financially during tougheconomic times. They're
demanding clarity on what dataDelta uses and how widely the AI
pricing will be implementedcurrently 3% but plan for 20% of
routes by year end, so that youknow delta is really trying to
press into this pricing model.
They say that AI techstreamlines long standing
dynamic pricing and denies usingpersonal data for individual,
individualized offers. Criticsworry AI could push pricers to

(08:08):
each consumers, individual painpoint, risking predatory pricing
amidst inflation pressures.
Gallego calls the plan predatorypricing and vows to challenge to
protect consumers. I mean,

Paul J Daly (08:22):
if you think about all of the things that AI is
capable of, and thesophisticated way it can think
and kind of engineer thingsreally delta is, you know,
their, I guess their prerogativeas a business is to maximize
revenue. That's right on anindividual basis, right? It's,
it's like pushing me as close tomy pain point on a flight price

(08:43):
as you possibly can. I hate it,right? Because I don't like the
idea that I potentially,especially because business
travel are willing to pay morefor a flight than someone that
isn't familiar with the pricingscheme. But are they using
personalized data to do it? Iknow they know my they know what
I've paid historically, right,right? So are they not using
that data like, I doubt it,right? I doubt it. So I'm glad

(09:07):
that they're looking into this.
I mean, again, it's like, is itpredatory? I don't know if it's
predatory or if it's just like,everybody wants someone to pay
as much as they'll possibly payfor a thing. And a flight is

Kyle Mountsier (09:17):
a fine line between predatory and
profitable. There is because,because,

Paul J Daly (09:21):
you know, a flight is, you know, a commodity,
right? It's something you haveoptions on. You can go to other
airlines. You can do otherthings. I mean, you make choices
based on convenience, based onpreferences, right? Like, do you
like the free Wi Fi? Well, thenyou might pay more for your
flight. So again, like, I don'tknow, I don't like it, but agree
with it, and I don't know thesenators doing their job. Delta

(09:43):
is doing their job, andhopefully, in the end, like we
all get the flight we want for aprice we can afford.

Kyle Mountsier (09:49):
That's all I want. I just don't I just don't
want a high price.

Paul J Daly (09:52):
You just want an upgrade, and you want to sync
your back your seat, back seat,to your account. You do that
when you're in a Delta flight.
Do you like? Do the sync up?

Kyle Mountsier (10:00):
No, I really don't, and it's because I don't
really like watch shows orwhatever.

Paul J Daly (10:05):
Do that the only time I'll ever watch show if
it's like, super late, and I'mjust like, right? You just don't
total total toast is super rare.
And also, I think it's funny,like, you put your name on the
screen, so then everybody runnew notion.

Kyle Mountsier (10:16):
Everyone's like, oh, there's Paul.

Paul J Daly (10:20):
Maybe I can now, I can't change my name on the
Yeah, because

Kyle Mountsier (10:22):
no one ever looks at anybody else's screen
on it on a flight. That's thatforever.

Paul J Daly (10:28):
Actually, the majority watching, the majority
of shows I watch, is like, issome news channel that a guy in
front of me is watching, and Ican see the subtitles. I'm like,
Oh man, that stuff is like, youjust can't look away. It's Oh
yeah. The headlines like,dopamine, dopamine, dopamine,
dopamine, oh my gosh, theworld's gonna end. This isn't
that kind of new show. We hopeyou left here feeling a little

(10:48):
more optimistic about whatyou're doing today in this
industry, in your life. Takecare of the people around you,
and I know you'll feel a lotbetter. We will see you here
first thing tomorrow morning.
Have a great day, everyone. You