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Elon Musk and others warn of looming auto disaster

Posted on
January 12, 2023
Peter McGuthrie

Because the auto trade faces a few of the harshest results of the Federal Reserve’s rising rates of interest to battle inflation, Tesla CEO Elon Musk and others are warning the general public in regards to the potential for a serious monetary disaster within the auto trade. 

Above: A virtually empty automobile lot. (Picture: Iewek Gnos / Unsplash)

@Musk tweeted {that a} delicate scenario with auto loans may “doubtlessly” change into “the most important monetary disaster ever,” as detailed in a report from The Road. The warning got here in response to a retweet of a submit from Twitter account @CarDealershipGuy, a extremely adopted and effectively knowledgeable account claiming to be an nameless automobile supplier group CEO.

CarDealershipGuy posted about financial issues following the Fed’s latest spherical of rising rates of interest, which they are saying may create “the proper storm” for customers, sellers and lenders.

“This morning I found one thing *extraordinarily* alarming occurring within the automobile market, particularly in auto lending,” CarDealershipGuy stated in a tweet. “I am now satisfied that there’s a large wave of automobile repossessions coming in 2023.”

The account went on to clarify this wave of repossessions, saying that many individuals who took out massive loans on automobiles in 2020 and 2021 are actually dealing with considerably declining worth on their buy. When attempting to commerce automobiles in, dealerships can be compelled to say no because of the client owing greater than the worth of the automobile.

In consequence, CarDealershipGuy says the “solely manner” for lenders to finance automobiles and assist sellers get vehicles within the arms of customers is to waive the open auto stipulations on loans — successfully letting consumers take out a further mortgage whereas a primary mortgage remains to be in progress, making a excessive threat of default.

The take even acquired the thumbs up from @Musk, who known as it a “good prediction,” in response to the thread, earlier than sharing the above warning of his personal.

Musk warned of the “greatest monetary disaster ever” when ARK Make investments head @Cathie Wooden retweeted CarDealershipGuy’s submit, including that the shift towards electrical automobiles would exacerbate the issue.

Specialists have famous the Fed’s financial coverage rising the price of automobile loans, simply as inflation reaches its highest level within the final 40 years. Shoppers are more likely to change into extra hesitant to take out loans, in keeping with Edmunds.

“Rates of interest for brand new and used automobiles are skyrocketing,” stated Edmunds analysis analysts.

Edmunds govt director of insights Jessica Caldwell echoed a few of Wooden’s issues, noting that the present market doesn’t permit for a few of the advantages accessible to consumers many years in the past — as an alternative, the rising EV market hasn’t fairly solved the affordability query but.

“The final time rates of interest had been this excessive, customers may not less than depend on decrease automobile costs and a larger vary of stock to melt the blow,” Caldwell stated. “That merely isn’t the case on this market.”


Sources: The Road / Twitter

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Electrical Automobiles,

Elon Musk





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