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Alpha Warranty MarketingQ2 2024 ~ Industry Report

Top Factors Holding Dealer Business Back - 2024Data from www.coxautoinc.comTop Factors Holding Back the Business RankQ2 2024%Q1 2024%Q2 2023%Q3 2022%Q3 2021%Interest Rates 1 59% 62% 53% 35% 3%Economy 2 57% 55% 55% 53% 24%Market Conditions 3 41% 40% 42% 48% 37%Credit Availability for Consumers 4 31% 31% 44% 56% 62%Limited Inventory 5 29% 31% 30% 18% 12%Political Climate 6 36% 33% 30% 28% 17%Expenses 7 31% 32% 29% 30% 17%Consumer Confidence 8 28% 31% 26% 29% 10%Competition 9 15% 14% 12% 11% 12%Regulation 10 8% 8% 7% 4% --Business Impacts from COVID-19 11 -- -- 11% 20% 30%

Impact of inflation on areas of dealership

2024 Cox Automotive Forecasts – 3/25/24Data from www.coxautoinc.com

5 Key Themes for 2024This year in the U.S. auto market, you can expect inventory to rise, electric to stay in the forefront and a return to “normalcy” for the first time since the pandemic. That’s what our Cox Automotive Industry Insights team predicts for the next 12 months. Dive into our expectations for dealers, consumers and OEMs for the year ahead.

Data from www.coxautoinc.comConsumer Sentiment – Q2 2024Index of Consumer Sentiment has increased 1.1% in June as sentiment increased 0.4% w/w

Data from www.coxautoinc.comConsumer Spending – Q2 2024Spending growth is down 10% in restaurants and 3% for retail YTD.

New Vehicle Sales• June 24, 2024, sales finishes near15.7 M units (up from 15.4 M in Q4 of2023)• U.S. new-vehicle sales in June toshow mild improvement over lastyear, but high prices and interestrates continue to hinder a strongermarket.• General Motors is forecast to remainthe top automaker in U.S. new-vehicle sales through the first half of2024. However, GM sales areforecast to drop 0.1% compared tothe first half of 2023. Toyota, whichcontinues to operate with very leannew-vehicle supply, will remain No.2 after delivering a sizable 16.3%first-half year-over-year gain. Fordand Hyundai are on track to remainthe No. 3 and No. 4 automakers,respectively.11.618.21415.415.813.215.713.515.615.716.612.713.215.516.913.113.815.42020 2021 2022 2023 2024Q1 Q2 Q3 Q4Millions of unitsData from Cox AutomotiveData from www.coxautoinc.com & JD Power.com

New & Used Vehicle Sales EstimatesData from www.coxautoinc.com

Used Vehicle Days’ Supply• Up 3% from 2023. 2.26 million units as of June 1st. Supply was 45 days, lower by 8% from 2023.Data from www.coxautoinc.com

Used Vehicle Listing Prices• Up slightly from May 1st to $25,670 but down 6% from 2023.- Used-vehicle prices increased slightly month over month.Data from www.coxautoinc.com

Average Auto Loan Rates – Higher in 2024Data from www.coxautoinc.com9.97%14.17%

Affordability Gap for New & Used VehiclesData from www.coxautoinc.comWeeks of income needed to purchase a new light vehicle.Affordability Gap fell slightly from April 2024 from 37.6 weeks to 37.1 weeks at the end of June 2024.

Data from www.coxautoinc.comDealer Sentiment Index – Q2 2024How would you describe the current market for vehicles in the areas where you operate?

Data from www.coxautoinc.comDealer Sentiment Index – Q2 2024What do you expect the market for vehicles in your area to look like 3 months from now?

Data from www.coxautoinc.comDealer Sentiment Index – Q2 2024INVENTORY & PROFITS – How would describe your profits over the past 3 months?How would you describe your inventory levels?

Data from www.coxautoinc.comDealer Sentiment Index – Q2 2024U.S. ECONOMY – How would describe the current U.S. economy?

Industry Need to Knows…Cox Automotive Industry Snapshot Update1. U.S. Auto Dealer Sentiment Index: As market uncertainty grows, dealers remain pessimistic and cautious.a. Costs and Price Pressures Continue to Rise. The cost index in Q2 is at a record high, matching the peakin Q2 2022 for both franchise and independent dealers.2. Improving Sales and Inventory: While new-vehicle sales index improved for both Q1 and Q2 with a Q2reading of 53, it remains lower than in 2023, which was at 58. However, a reading score above 50 suggestsmore dealers view the new-vehicle sales market as strong.a. Used-vehicle inventory index declined in Q2, which is not uncommon for the spring survey. The indexscore of 42, while lower than Q1, is still higher than one year ago.• EV Sales Sentiment Remains Weak: Sentiment about electric vehicle (EV) sales fell to a new low in Q2. Whenasked about how EV sales compare to one year ago, the index score came in at 41, down from 42 in Q1. Ascore below 50 indicates that a majority of dealers describe EV sales as worse now than one year ago. Theindex has fallen each quarter since Q2 2023, when the score was 52.a. Expectations for the EV market in the future improved in Q2, increasing from 36 to 39. Still, the indexscore of 39 suggests that most dealers think the EV market will be declining, not growing, three monthsfrom now. On the positive side, a majority of dealers (with an index score of 57) see the existing taxcredits as having a positive impact on EV sales.Data from www.coxautoinc.com

Election Research HighlightsData from www.coxautoinc.comThe key takeaways from Cox Auto research study include:1. Nearly 3 in 4 consumers expect the upcoming U.S.presidential election to impact the economy.2. A notable 66% of consumers and 82% of dealers feel theoutcome of the election will affect interest rates.3. Inflation is the No. 1 concern among shoppers, with 74% ofconsumers and 81% of dealers believing the next election willinfluence it.4. According to 60% of consumers, the November election willaffect their next vehicle purchase.5. Most consumers feel the election will not impact theirpowertrain decisions; the majority are opposed togovernment mandates on electric vehicles.• [Read more]

CDK Cyber Incident - UpdateCDK continues rebooting, but will customers forgive it?• A CDK spokesperson said in a June 28 statement the company was continuing a phased rebootof its dealership management system and as of June 27 had brought Group 1 Automotive andtwo small groups of dealership customers back online. The company's reputation hung in thebalance, however, as the crisis that began June 19 — and affected more than 15,000 customersand much of the North American auto market — continued.• CDK, of Hoffman Estates, Ill., and Austin, Texas, informed affected dealerships on June 25 thatit didn't expect to restore all systems before June 30, a vital date for dealers who must reconciletheir month-end financial close processes. The company recommended customers makealternate plans.• The outage could cost retailers nearly $1 billion if it were to last until the July 4 holiday weekend,according to estimates from Michigan's Anderson Economic Group.• CDK had not yet disclosed whether the ransomware event compromised any customer or clientdata. Adding to the uncertainty, at least five lawsuits had been filed in the U.S. Northern District ofIllinois alleging harmful business disruption and exposure of personal information.More suits are likely.[READ MORE]

Timeline of the cyberattacks on CDK• June 19, 2024 - CDK Global acknowledged it was hit by a cyberattack early that morning and was investigating. Thecompany shut down a majority of its systems out of "caution and concern for our customers," it said in a note to customers.Dealerships across the nation and in Canada were left unable to log into software systems they need to process deals, sellparts or handle repair orders. By the afternoon, CDK said most of its core DMS functionality was restored. But that evening,CDK was subject to another cyberattack.• June 20, 2024 - Dealership managers across the country awoke to news of the second cyberattack. CDK again tookdown most of its systems and told customers not to use its DMS until it could confirm its security. CDK informed dealersthat there is not an estimated time frame for a resolution, but that the shutdown will likely continue for "several days."Reports also emerged of scammersposing as members or affiliates of CDK and asking dealerships for their credentials.• June 21, 2024 - CDK service systems continue to be down, leaving dealerships in a quagmire as they move into theweekend, typically a busy time for sales. In a message to customers, CDK reiterated it does "not have an estimated timeframe for resolution and therefore our dealers' systems will not be available likely for several days.“Bloomberg reports agroup that claims to have hacked CDK has demanded tens of millions of dollars in ransomand the company is planning tomake the payment. The hacking group behind the attack is believed to be based in eastern Europe.• June 22, 2024 - CDK Global, in a note to customers, for the first time referred to the crippling cyberattacks from the pastweek as a ransom event, and told dealers the restoration process for its systems was underway.From AutoNews

Timeline of the cyberattacks on CDK (cont.)• June 24, 2024 - BlackSuit, a group of reputed Russian and Eastern European hackers with ties to Royal Ransomware, isidentified as being behind the cyberattacks. BlackSuit operates as a ransomware gang, leasing their technical tools toaffiliates and taking a cut of extortion payments. CDK Global said it is working with law enforcement, and it could still be"several days" before there is a resolution. Lithia Motors Inc., AutoNation Inc., and Group 1Automotive Inc. all reported thatthey are facing disruptions and took immediate action to mitigate impacts once they were informed of the attacks.• June 25, 2024 - CDK said it does not expect to restore all systems before June 30, despite "making significant progress."Dealers should plan alternative month-end financial close processes, if necessary. CEO Brian MacDonald told AutomotiveNews the company is "working around the clock with leading third-party experts to get dealers back to business as usualand as quickly as possible." He also said CDK regularly updates customers via Critical Situation Updates through email andphone recordings. Two lawsuits seeking class-action status were filed against CDK related to the data breach in the U.S.Northern District of Illinois. One was June 22 by vehicle lessee Yuriy Loginov and the other was June 24 by formerdealership employee Eugene Buraga.• June 26, 2024 - A small test group of dealers were brought back live on CDK’s DMS. Once validated, CDK plans tophase in other dealers. J.D. Power and GlobalData estimate U.S. light-vehicle sales for June will fall by 2.6 to 7.2percent from a year earlier because of the significant disruption caused by the attacks. One forecast said the eventcould cut new-vehicle sales by about 100,000 in June. Auto manufacturers are planning to audit all U.S. DMSproviders to ensure their security protocols can prevent incidents, said Sharon Kitzman, president of Dominion DMS.• June 27, 2024 - Group 1 Automotive and an additional small set of dealership customers were brought back online aspart of CDK's phased approach to restoring services to the company's core DMS. Anderson Economic Group predicted thatif DMS outages last until the July 4 holiday weekend, it could cost retailers nearly $1 billion. The cyberattacks have delayedsome dealership acquisitionsand could stall further deals if the shutdown continues.From AutoNews

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