Automotive State of The Union

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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Paul J Daly:

Good morning. It is Wednesday, July 23 this is the automotive State of the Union. I'm Paul Jay Daly. This is Kyle mount Cyr. Today we're talking about an auction reinvention, trade tensions, of course, and AI pricing for flights. A senators, who I is and

Kyle Mountsier:

who I got opinions on stories today, baby. You were wondering what we think we're gonna hit we're gonna hit you with it today. I look we never, we never said we were unbiased. We got, we got opinions, and that's, that's

Paul J Daly:

what we share. We do right here. We have opinions. We have new, some new content out auto Collabs episode, our other podcast, how to be your own CDP with Nick askew available now. Released it last week, but this one deserves another mention because it is such a good episode you need to listen to what Nick's saying. He is an innovator. He's a thought leader, and he's just got the best accent in the world. So it's just fun to listen to him talk. Yep, you know he says data

Kyle Mountsier:

date. Yeah. We've also got a webinar coming up next Wednesday, August or two Wednesdays from now, actually, August 6, driving loyalty with data, with Shane Wilson and Levi Beatty, all about how you can own the customer lifecycle and understand what their car is doing out there on the road and get it back to the store. So make sure you check that out. Also, if you don't subscribe to our daily email or our LinkedIn newsletter, make sure you go do that. You can go find us on LinkedIn by searching ASOTU, or more than cars. I lost my audio. Or you can go to asotu.com

Unknown:

and Oh, can you hear me? No, I can my audio. It

Kyle Mountsier:

did one of those weird, weird audio

Paul J Daly:

things when you're reading, when you're reading copy for our webinars. Apparently, there you go.

Kyle Mountsier:

But yeah, also, you can go to asotu.com, and you can sign up for the daily email. There. It's full packed of insights, what we're doing, where we're going, what's going on in the auto industry world. So you should, you should check it out. All

Paul J Daly:

right. Let's get into some news. The US, automakers, GM, Ford and stellantis are all pushing back against the new trade deal, lowering Japanese auto tariffs from 25% to 15% while tariffs on Canadian Mexican imports are staying at 25% Detroit three are warning this imbalance threatens the US auto industry and jobs. Matt blunt of the American automotive Policy Council said, Any deal that favors Japanese imports over us. Content, high us. Content, North American vehicles is, quote, a bad deal for the US industry and auto workers. President Trump is boasting a quote, massive deal that sounds like his language with Japan involving they're going to make a $550 billion investment. That's half a trillion dollars, isn't it, as well as tariff cuts. Calling it historic win for us automakers. Details are still murky on whether Japanese cars and parts will get carve outs from existing tariffs. It's coming as Trump threatens to hike tariffs on Mexico and Canada US Japan talks included Japan's Chief trade negotiator meeting Treasury Secretary, Scott best Besant, who says negotiations are going very well, Japanese automakers are continuing to invest in us production with significant commitments from Isuzu and Toyota, aiming to boast local manufacturing jobs and manufacturing overall. Look,

Kyle Mountsier:

I the whole spin on this one goes back to the cars report on where the cars are actually made and how much stuff is actually manufactured in in the US. I would call this a bad deal for the US Big Three automakers, and maybe not the US industry and auto workers, because it seems like what we're actually going to get is more plants, more parts, more cars built in the US with faster pace from some of the counterparts in Japan and probably South Korea and other places that are bringing vehicles into the US market. You know the imbalance on Canadian, Canadian Mexican imports. Hey, there's still, there's still a question mark around BYD, being in Mexico, you got to keep that out. But obviously the big three are importing a lot of parts, a lot of materials from Canada and Mexico. So I can see how they'd be upset. Yep, we'll see how it plays out.

Paul J Daly:

Always, Will, always will. Speaking of how it's playing out,

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segway,

Paul J Daly:

according to recent data from Cox automotive, nada and BCG, the traditional used car auction model, is failing franchise dealers due to rising fees, transport costs and poor condition reports, dealers are shifting fast to private party acquisitions, creating a more local and cost effective supply. So here's some information. Data from the reports, 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 by roughly a third and late. Lane prices remain inflated, which are all squeezing dealer margins. The Manheim index peaked at 234 in 2023 but Lane conversion rates dropped to 58 around 58 to 64% below. You know, it was 70% back, pre pandemic, nada, projecting private party sales will hit 40% of the used car market by 2025 signaling what looks to be a permanent market shift. Industry experts saying, quote, winning in used cars starts with buying smarter, not just selling harder, as dealers adapt to what they're saying is auction 2.0

Kyle Mountsier:

Yeah. I mean, you know, Carvana moved the cheese on this one and and dealers started to figure it out, their dealers are figuring out in the service drive, they're figuring out from private party acquisitions, from all the vehicles that are listed online, increasing, you know, trade buys, making sure that you win the trade. These are all parts of a profitable used car business. And we've known for a very long time that the auction is the lowest profitability when it comes to Used Car acquisition, because you just you have a time issue, you have a cost issue, and speed to retail is everything in especially if there's any level of compression of of the market. If you're not buying in the lane and buying from private party acquisitions and making that part of your strategy, then you're just falling behind. It's just, it's just a fact of the matter. I to walk into a dealership and not see, you know that rising? You know, it's actually surprising to me that it's only 10 to 15% of the sourcing across dealerships. It's probably because some is down, then that zero to 2% because just people haven't caught up. But I would say if you're not in that 30 to 40% range, then you're just losing profitability that's just sitting there ready for you in the market.

Paul J Daly:

I think this is also just continuing opportunity for dealers who build a strong regional brand. This is where your brand building efforts actually can come back into your acquisition lane. And that isn't something that's historically been thought about a lot or broad scale. But now, when you think about your marketing spend, when you think about how you're building your brand strategically in the market, this is also a really clear pathway into getting consumers to trust you enough that you're going to give them a great price on their car and are a great place to sell your car. So all the things align, and I think in the end, this gives dealers what they want, which is more control over their inventory flow.

Kyle Mountsier:

Yep, yep, speaking of control over their inventory, according to Senator Ruben Gallego and other senators, Delta's new AI based ticket pricing, ticket pricing strategy could unfairly hike costs based on individual passenger data. Senators worries this could squeeze consumers financially during tough economic times. They're demanding clarity on what data Delta uses and how widely the AI pricing will be implemented currently 3% but plan for 20% of routes by year end, so that you know delta is really trying to press into this pricing model. They say that AI tech streamlines long standing dynamic pricing and denies using personal data for individual, individualized offers. Critics worry AI could push pricers to each consumers, individual pain point, risking predatory pricing amidst inflation pressures. Gallego calls the plan predatory pricing and vows to challenge to protect consumers. I mean,

Paul J Daly:

if you think about all of the things that AI is capable of, and the sophisticated way it can think and kind of engineer things really delta is, you know, their, I guess their prerogative as a business is to maximize revenue. That's right on an individual basis, right? It's, it's like pushing me as close to my pain point on a flight price 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 more for a flight than someone that isn't familiar with the pricing scheme. But are they using personalized data to do it? I know 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 that they're looking into this. I mean, again, it's like, is it predatory? 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 pay for a thing. And a flight is

Kyle Mountsier:

a fine line between predatory and profitable. There is because, because,

Paul J Daly:

you know, a flight is, you know, a commodity, right? It's something you have options on. You can go to other airlines. You can do other things. I mean, you make choices based on convenience, based on preferences, right? Like, do you like the free Wi Fi? Well, then you might pay more for your flight. So again, like, I don't know, I don't like it, but agree with it, and I don't know the senators doing their job. Delta is doing their job, and hopefully, in the end, like we all get the flight we want for a price we can afford.

Kyle Mountsier:

That's all I want. I just don't I just don't want a high price.

Paul J Daly:

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:

No, I really don't, and it's because I don't really like watch shows or whatever.

Paul J Daly:

Do that the only time I'll ever watch show if it's like, super late, and I'm just 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 run new notion.

Kyle Mountsier:

Everyone's like, oh, there's Paul.

Paul J Daly:

Maybe I can now, I can't change my name on the Yeah, because

Kyle Mountsier:

no one ever looks at anybody else's screen on it on a flight. That's that forever.

Paul J Daly:

Actually, the majority watching, the majority of shows I watch, is like, is some news channel that a guy in front of me is watching, and I can see the subtitles. I'm like, Oh man, that stuff is like, you just can't look away. It's Oh yeah. The headlines like, dopamine, dopamine, dopamine, dopamine, oh my gosh, the world's gonna end. This isn't that kind of new show. We hope you left here feeling a little more optimistic about what you're doing today in this industry, in your life. Take care of the people around you, and I know you'll feel a lot better. We will see you here first thing tomorrow morning. Have a great day, everyone. You

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Kyle Mountsier

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Paul J Daly

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