Tariff Impact on International and Domestic Markets
Management explained that evolving international negotiations, especially in Asia, India, and the EU, are causing delays in asset trading, particularly in sectors like biopharma, semiconductors, and machine tools.
Despite international delays, North American used equipment markets remain on track, with most assets moving normally and some blips in Canada having normalized.
Used vehicle prices have softened, but the marketplace continues to see record asset listings and sales, with management optimistic about future growth once prices normalize.
Impact of Tariffs on Supply Chain and Special Order Business
Tariffs on China imports increased by 145% in April, causing temporary suspension of China-based special orders.
Tariff reduction from 145% to 30% in mid-May provided clarity and allowed realignment of production out of China.
Supply chain teams are working to fully resume special order capabilities in Q3, with ongoing negotiations and adjustments to tariffs potentially affecting future product sourcing and pricing.
A significant recall affecting 4% of the Americas fleet, including high RPD segments like transit vans and mini vans, has negatively impacted vehicle sales and fleet management.
Despite challenges, the company maintains a target of at least $1 billion EBITDA in normalized years.
Gains on depreciation were smaller than the previous quarter and are expected to be minimal for the full year.
Pricing per day (RPD) has been challenged throughout the year, with volume stronger than pricing.
The quarter's financial results met expectations with consistent execution and minimal need for interpretation.
Used car gains have been impacted by tariffs causing delays in new model year vehicle deliveries, affecting fleet rotation and depreciation.
Impact of Tariffs on Pricing Strategy and Industry Dynamics
Management discussed the ongoing impact of tariffs on acquisition costs and pricing adjustments, noting that industry responses have been rational and similar to past cycles, with some timing differences.
They highlighted that tariff-related cost pressures are being managed through close supplier coordination, with some benefits from timing of price changes.
Management emphasized uncertainty around the magnitude and timing of future tariff impacts, but expects industry to reach an equilibrium over time.
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