Over the last few weeks, we have been keeping a close eye on the growing glut of automobile inventory, exacerbated by demand falling off a cliff, plunging used car prices and rental car companies suffering from an unprecedented collapse in business (or, like Hertz, simply going bankrupt). To wit, just hours ago, we documented how declining fleet sales was having a profoundly negative impact on automakers. Previously, we pointed out how a crash in used car prices could be putting significant pressure on the rental car industry. And most notably, several days ago we also wrote that automakers were having so much trouble finding space for their unsellable inventory that ships bearing auto cargo from overseas were denied entry at US ports and sent back out into the ocean.
Now, we are seeing firsthand what buildups of inventory look like in major cities.
Philadelphia is rapidly becoming the case study which other cities will follow, because as Inquirer reports, the city’s sports complex parking lots are now being used as lots for rental car companies based at the Philadelphia Airport. In other words, there are so many cars available, not even airport parking lots can hold them anymore.
In an effort to deal with the drop in air traffic, “rental cars are being stored at off-site locations, including the Wells Fargo Center parking lots,” the Inquirer reported.
Phil Weinberg, executive vice president and general counsel for Comcast Spectacor, which owns the Wells Fargo Center, said: “Enterprise is a corporate partner of the Flyers and the Wells Fargo Center, and it is the only company with rental vehicles parked at the stadium. They approached us shortly after the stay-at-home orders became effective and asked if we could assist them in parking their cars, which are clearly not in service right now.”
According to the Inquirer, the Wells Fargo Center is letting Enterprise park more than 2,000 vehicles free of charge, with no fixed end date in sight.
The Wells Fargo Center isn’t the only sports venue in the country housing overflow rental vehicles. According to the Honolulu Star-Advertiser, Aloha Stadium has up to 1,500 rental cars from five companies parked in its lots.
And in Southern California, thousands of rental cars fill the parking lots at Dodger Stadium in Los Angeles and Angel Stadium in Anaheim, according to the Southern California News Group.
Lisa Martini, a spokeswoman with Enterprise Holdings, which owns the Enterprise, National and Alamo brands, said her company is working with Santa Anita to stage many of its cars there while the vehicles are being prepared and processed for rental, lease or sale. Business, she said, has fallen sharply in the face of the COVID-19 health crisis.
“Like others across the travel industry – and countless other companies large and small – we have witnessed an impact to our business,” Martini said via email. “This includes a significant decrease in reservations and customer demand as both corporate business and leisure travel have come to a virtual standstill.”
Pete Siberell, Santa Anita’s director of community services and special projects, said the parking arrangement makes sense.
“With Santa Anita not being able to race and having postponed many of our events, much of our parking lot space was available for us to help and we were glad to do so,” he said.
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Incidentally, earlier today we reported that Hertz and Avis had put stops on purchases and, in some cases, re-directed purchases they’ve already made to additional parking lots. These companies have cancelled “all orders of GM vehicles for May, June and into July”.
This has left GM and Hyundai taking back cars that it had agreed to sell to Hertz, Avis and Enterprise. Last month, Fiat underwent efforts to try and redirect almost 30,000 vehicles these companies had purchased, but was unable to transfer them.
The chaos has continued this month when Avis had to sell $500 million in junk bonds and Hertz was granted a last-minute concession from its lenders to narrowly avoid bankruptcy. Meanwhile, rental car sales fell 77% in April.
Most recently, Bloomberg reported this morning that rental icon Hertz hired advisors to consider a bankruptcy and the auto industry has placed a major bet on incentives to try and move inventory off of their lots.
Based on what we’re seeing in parking lots around the nation, it isn’t working.
Republished from ZeroHedge.com with permission