Raphael Stevens

YouTube made up nearly 10% of all viewership on connected and traditional TVs in the U.S. in May, according to Nielsen. Netflix ranked second, claiming 7.6% of viewership.
“We’re not talking about your mobile phone, your laptop … but on the biggest screen in the house, the TV,” said LightShed media analyst Rich Greenfield. “Every [media] executive has to be paying attention.”
Media companies such as Netflix, Disney and Warner Bros. Discovery don’t have a uniform strategy to deal with the threat.

It’s been almost 20 years since the founding of Alphabet’s YouTube, and Hollywood still doesn’t really know what to do with it.
YouTube, which effectively invented user-generated content, claims a daunting share of overall media consumption. And it’s no longer just dominating the internet, it’s dominating the living room, too.

YouTube made up 9.7% of all viewership on connected and traditional TVs in the U.S. in May — the largest share of TV for a streaming platform ever reported by Nielsen’s monthly “The Gauge” report. Netflix ranked second, claiming 7.6% of viewership. Among streamers only, YouTube’s total viewership was close to 25% market share.
“We’re not talking about your mobile phone, your laptop, that I’m sure you see your kids using all the time, but on the biggest screen in the house, the TV,” said LightShed media analyst Rich Greenfield. “Every [media] executive has to be paying attention.”
But media companies such as Netflix, Disney and Warner Bros. Discovery aren’t sure whether YouTube is friend or foe.
Some media executives see YouTube as a companion platform to subscription streaming services and cable TV — an unwieldy behemoth of non-narrative, creator-led content with a social media slant that doesn’t really fit the New York-Hollywood nexus of professional media. Others — even at times the same executives — view YouTube as an existential threat to the entertainment industry, stealing viewership from subscription streaming services and, with it, the cultural center of American youth.
Those competing truths have led media and entertainment companies to concoct a wide array of strategies to combat the growing threat.

Disney leaders discuss YouTube “every day” in strategic meetings and have considered adding user-generated content to Disney+, though it’s not on the immediate roadmap, according to people familiar with the matter, who asked not to be named because the discussions are private.
Netflix and Warner Bros. Discovery, on the other hand, have consciously chosen to focus on the other 90% of the TV viewing world that isn’t YouTube.
“I do think it snuck up on people that YouTube was as important a presence in people’s lives and people’s viewing experiences not just on the phone but in the living room,” said Tara Walpert Levy, YouTube’s vice president of Americas, in an interview.
“When Nielsen first noted that YouTube was winning the streaming wars in terms of viewing, full stop, not just for ad-supported platforms, I had a ton of my friends from advertising, from media, who were like, ‘Can you believe it?’ It exceeded even our expectations,” she said.

YouTube’s growing dominance

Google’s Tara Walpert Levy, now YouTube’s vice president of Americas, speaks during a 2016 Advertising Week New York event, Sept. 28, 2016.
John Lamparski | Getty Images

Earlier this year, YouTube Chief Executive Officer Neal Mohan announced that users watch more than 1 billion hours of YouTube content on TV screens each day. More than 150 million Americans watch YouTube on connected TVs each month, according to the company.
Ad dollars have followed. In 2023, YouTube took in $31.5 billion in advertising revenue, up 8% from 2022 and 271% from six years ago. In the first quarter of 2024, YouTube’s ad revenue climbed 21% from a year earlier to $8.1 billion.
YouTube, founded in 2005, sold to Google for $1.65 billion a year later. It’s since ballooned in size as advertisers flocked to the platform. MoffettNathanson media analyst Michael Nathanson estimated in March that YouTube would be worth a whopping $400 billion as a standalone company — more than Disney and Comcast combined.
“YouTube is still the 800-pound gorilla in this space, and I do believe they’re a pretty unstoppable juggernaut,” said Candle Media co-CEO Kevin Mayer, who previously ran Disney’s streaming business and was briefly CEO of TikTok.

Disney’s YouTube focus

Disney executives are particularly attuned to YouTube’s rising dominance, given its grip on younger people, according to people familiar with the company’s thinking.
Disney has a legion of super-fans who flock to YouTube and other social media sites to promote and critique its parks, rides and merchandise, movies and TV shows. Integrating some of that content as shoulder programming to Disney’s scripted series and movies could help keep users on Disney+.
A Disney spokesperson declined to comment on conversations about adding original content to the platform.

You’re betraying your audience. You’re leaving YouTube to act, and then you’re not posting online anymore, and you’re asking them to wait on a project that’s in development for what? A year, two years? People are going to forget about you, girl. That’s how the internet works.”

Brittany Broski
YouTube creator

“I think what we’re seeing from all of these traditional media companies is they don’t have enough content, and it’s too expensive to produce the types of premium content at scale that they need. And so maybe the [user-generated content] economy is a place they look … not to create their competitor, but as a lower cost way to add content to their services,” said LightShed’s Greenfield.
Disney is also considering putting more full episodes of Disney+ and Hulu series geared to older kids and adults directly on YouTube to entice an audience that isn’t currently subscribing to its streaming platforms, said a person familiar with the matter.
This is a strategy Disney has done with kids content for years, helping amplify hit animated series such as “Bluey,” “Spidey and his Amazing Friends” and “Mickey Mouse Clubhouse.”

Cartoon characters from the children’s show “Bluey” are displayed during the Brand Licensing Europe event at ExCel, in London, Oct. 4, 2023.
John Keeble | Getty Images News | Getty Images

“At the end of the day, Disney is a storytelling machine,” said Mayer. “We used short-form video on YouTube as a promotional device for our content. But I don’t think that we at Disney, nor have any other traditional media companies, leaned into YouTube as an original storytelling device the way they probably should have.”
According to internal research, Disney executives concluded that younger Americans use YouTube as an online encyclopedia, said one of the people familiar with the company’s discussions. That’s led the company to focus on the benefits of the platform’s discovery functionality while also programming against it, the person said.
Disney has made bespoke YouTube content for its new preschool series “Disney Junior’s Ariel,” which debuts June 27, to introduce the mermaid character to kids. It has also developed a series of “Winnie the Pooh” shorts so that it can research how the animated bear and his friends resonate with today’s youth.
The company is now considering making a full-length animated series on “Winnie the Pooh” based on the short-form video data, the person said.

Netflix’s muted response

Netflix is taking on YouTube from a different angle.
It doesn’t view the platform as the same singular threat to viewership that some of its peers do. Netflix famously considers everything that could occupy a user’s time, even sleep, as a long-term competitor.
For the time being, Netflix executives consider YouTube as catering to a different consumer need.
“We have built a hard-to-replicate combination of a strong slate, superior recommendations, broad reach and intense fandom, which drives healthy engagement on Netflix. Improvement in these key areas is the best way to delight our members and continue to grow our business,” Netflix said in its most recent quarterly shareholder letter.
Netflix has even found some success duplicating content on YouTube in specific instances.
“Cocomelon,” the animated toddler-geared short-form video series owned by Candle Media’s Moonbug Entertainment, has become massively popular on both YouTube and Netflix. “Cocomelon” has 175 million subscribers to its English language YouTube channel, and “many more if you add in all languages,” Mayer said.
At the same time, “Cocomelon” frequently tops Netflix’s most-watched list among kids shows.

Posters showing “Blippi” and “Cocomelon” characters are displayed at the Moonbug Entertainment stand during the Brand Licensing Europe event at ExCel, in London, Oct. 04, 2023.
John Keeble | Getty Images

The more immediate YouTube threat for Netflix comes from an advertising perspective. Netflix is now going head-to-head with YouTube for marketing dollars after introducing its ad-supported tier in November 2022.
Netflix said in May that it has 40 million global monthly active users for its advertising tier. That’s a far cry from YouTube’s more than 2 billion monthly active users.
Netflix is even contemplating launching free versions of its service in certain international markets to court advertisers, though there’s nothing concrete planned, Bloomberg reported earlier this week.
Netflix declined to comment for this story.

Other strategies

Comcast-owned NBCUniversal has experimented with new ways to copy the rabbit-hole effect of YouTube Shorts, which force-feed users content based on interest, by offering curated clips of “Saturday Night Live” sketches, scenes from “The Office” or favorite Bravo show moments.
If younger users are being conditioned to watch in a certain way, NBCUniversal’s Peacock streaming service wants to give consumers that choice in addition to its long-form movies and TV shows.
But simply curating feeds within a content vertical now feels like a “YouTube 1.0 strategy” given how TikTok, YouTube Shorts and Instagram Reels have redefined short-form viewing, according to Nathanson.
“I don’t think, at this point, there’s a strategy in place among any of the traditional media players to create content for the YouTube generation that’s more than just their branded strategy they’re doing now,” said Nathanson. “The future strategy is to use AI to deliver personalization for each of us. Today, none of the traditional media players has that. That’s YouTube 2.0.”
Amazon is trying a more direct plan of attack — pay YouTube’s biggest star to make a show for their own service.
The company announced a deal earlier this year with MrBeast, whose real name is Jimmy Donaldson, to make a reality TV show, “Beast Games,” that will pay the winner $5 million in cash. The format will largely borrow from previous MrBeast giveaway videos that pit many contestants against each other for cash, using a “fast-paced and high-production format,” as Amazon has promised.

MrBeast accepts the Favorite Male Creator award onstage during the 2023 Nickelodeon Kids’ Choice Awards in Los Angeles, March 4, 2023.
Monica Schipper | Getty Images

MrBeast’s YouTube channel has the most subscribers worldwide at 289 million and expects to take in a whopping $700 million in revenue in 2024, primarily through advertising and brand deals.
But while MrBeast may have crossover appeal, there’s skepticism among creators that YouTube celebrities will have success making shows for subscription streaming services. Moreover, the entire Hollywood system may operate too slowly for a younger generation that demands immediate content.

YouTube’s community

The popularity of YouTube stems from the authentic relationship creators have with their fans, according to Brittany Broski, 27, whose YouTube channel has more than 2 million subscribers.
“I still watch Netflix and HBO, where if I want a good fantasy series or whatever, I know where to go for that. But what YouTube is more concerned with is in this digital age, we’ve lost a sense of community and a sense of third spaces where we can go to hang out and meet new friends,” Broski said.
Broski’s audience, which she described as Generation Z and young millennial women and members of the LGBTQ+ community, ballooned during the pandemic. Stuck at home with limited social options, hundreds of thousands of people found Broski as they searched for fresh, real-time content.
That personal relationship is YouTube’s secret sauce, and it doesn’t translate when creators port to other services, Broski said.
“You’re betraying your audience,” said Broski. “You’re leaving YouTube to act, and then you’re not posting online anymore, and you’re asking them to wait on a project that’s in development for what? A year, two years? People are going to forget about you, girl. That’s how the internet works.”

Brittany Broski at VidCon 2022 in Anaheim, California, June 23, 2022.
David Livingston | Getty Images Entertainment | Getty Images

The business model of YouTube for successful creators incentivizes staying on the platform. YouTube has shared more than $70 billion with its creators over the last three years through its Partner Program, which shares advertising revenue with more than 3 million channels on the platform.
“Why would I create a show and sell it to a network when I could just put it on YouTube?” Broski said. “You’re self-funding, but if the money you’re making from AdSense is going right back into your content to make more money, why do you even have to contact that third party?”
YouTube also benefits from a low barrier to entry to create content and from instant feedback through comments from fans that often help shape future content immediately. That model can’t be replicated in a scripted form, where full seasons of TV shows are premade and rolled out on specific schedules.
“In the traditional industry, it’s about proving to other people that the content deserves to be made, deserves to be seen, deserves a marketing campaign, deserves dollars behind it,” said YouTube star and former professional cyclist Michelle Khare, 31, whose channel has more than 4.5 million subscribers. “With YouTube, if you have the drive, the ability, and in many cases, your phone, you can skip those steps and put it out into a democratic platform where the audience ultimately decides what rises to the top.”

Michelle Khare at The 2023 Streamy Awards in Los Angeles, Aug. 27, 2023.
Gilbert Flores | Penske Media | Getty Images

Aging out

Warner Bros. Discovery executives are perhaps the least concerned of all legacy media companies about YouTube’s rising dominance, which skews younger. Ninety-three percent of teenagers say they’ve used YouTube, far outpacing TikTok (63%), Snapchat (60%) and Instagram (59%), according to a 2023 Pew Research study. A 2023 survey from marketing firm InMobi found 61% of Gen Z respondents, or those ages 18-24 at the time of the survey, named user-generated content as their favorite form of media.
Warner Bros. Discovery’s Max streaming service has moved away from programming geared toward kids and teenagers — barring the occasional accidental hit such as “Euphoria.” The company’s focus on prestige dramas and adult movies is about as far away from YouTube’s typical fare as an entertainment company can offer.
Baked into the question of whether YouTube is friend or foe to the media industry is a second query: Will younger consumers simply grow out of YouTube’s bread and butter — the creator-led, non-narrative style of storytelling?
“My suspicion is that there will be a bit of an aging out,” said Mayer. “I think longer form storytelling is hard to replace with super short form storytelling.”
There may be room for both subscription streamers and YouTube to survive and flourish, with each operating in a lane that doesn’t impede the other’s too much. Still, YouTube is experimenting with episodic and scripted series to appeal to all audiences — a direct threat to traditional Hollywood. “Cobra Kai,” a spinoff of “The Karate Kid,” began on YouTube’s ad-free subscription service YouTube Premium, picked up a fan base and then moved to Netflix.
“There is some amount of conditioning that happens when you become familiar with a certain format that resonates with you, but what we are seeing is it’s not so black-and-white between a certain type of audience wanting a certain type of content,” said Nicky Rettke, YouTube’s vice president of product management.
There’s also the future threat of artificial intelligence on YouTube. While Hollywood’s use of AI is contractually restricted, and was a sticking point of recent strike negotiations, there are no current rules for user-generated content. Theoretically, this gives YouTube creators a huge leg up in experimenting with technology that could rival the production values of professional studios, putting even more pressure on traditional media.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC. More

Volkswagen plans to invest up to $5 billion in electric vehicle startup Rivian, starting with an initial investment of $1 billion.
The additional $4 billion is expected to be invested following the establishment of a joint venture, according to joint releases by the automakers Tuesday.
Rivian stock is down roughly 49% in 2024.

Workers assemble second-generation R1 vehicles at electric automaker Rivian’s manufacturing facility in Normal, Illinois, on June 21, 2024.
Joel Angel Juarez | Reuters

Volkswagen Group plans to invest up to $5 billion in electric vehicle startup Rivian, starting with an initial investment of $1 billion.
The additional $4 billion is expected by 2026. It includes plans for $1 billion each in 2025 and 2026, followed by $2 billion in 2026 related to an expected joint venture to create electrical architecture and software technology, according to a release by the automakers Tuesday.

Shares of Rivian soared more than 50% during after-hours trading Tuesday, two days ahead of an investor event for Rivian, which has been under pressure from Wall Street due to its cash burn and significant losses. Rivian stock closed Tuesday at $11.96 a share, down roughly 49% in 2024.
The initial $1 billion from Volkswagen will be in the form of a convertible note, which could be converted to Rivian shares on or after Dec. 1, the release said.
The deal will help Rivian on its journey to become cash flow-positive, Rivian CEO and founder RJ Scaringe said Tuesday night during an investor call.
He noted the capital is expected to carry the company through the production ramp-up of its smaller R2 SUVs at its plant in Normal, Illinois, starting in 2026, as well as production of the midsize EV platform at a plant in Georgia, where Rivian paused construction earlier this year.

“We believe the opportunity ahead is significant. This deal is possible because we’re focused on vertically integrating our network architecture, topology, V-CPUs, and associated software platforms,” he said. “I’ve spoken about the importance of these platforms in the past, and how difficult it is to replicate them.”

Volkswagen is expected to use Rivian’s electrical architecture and software stack for vehicles beginning the second half of the decade, according to Scaringe. He said the joint venture does not include anything with battery technologies, vehicle propulsion platforms, high voltage systems or autonomy and electrical hardware.
Scaringe said the expected joint venture will be led by a “balanced” leadership group, including two co-CEOs, with Rivian appointing the technical leadership and Volkswagen appointing a chief operating officer.
The closing of the joint venture is expected in the fourth quarter of this year, according to Rivian Chief Financial Officer Claire McDonough.

A provided image of Oliver Blume, CEO of Volkswagen Group and RJ Scaringe, founder and CEO of Rivian, as the companies announce joint venture plans on June 25, 2024.
Courtesy: Business Wire

Volkswagen will be the second legacy automaker to take a stake in the California-based company. Ford Motor was among Rivian’s largest stakeholders, at roughly 12%, alongside Amazon when Rivian went public in 2021. The Detroit automaker exited Rivian in 2023 after walking back a plan to codevelop EVs with the company.
The Volkswagen-Rivian partnership comes as automakers shift strategies amid slower-than-expected adoption of EVs.
Pietro Zollino, head of VW corporate communications, said the deal with Rivian does not change the German automaker’s plans to build a $2 billion EV plant for its announced Scout Motors trucks and SUVs in South Carolina.
“Our commitment towards Scout has not changed at all,” he said in an email Tuesday night.
Rivian has been on a cost-cutting mission for months. It has trimmed staff, retooled its Illinois plant to increase efficiencies and paused construction of a new multibillion-dollar factory in Georgia. That last measure is expected to save more than $2.25 billion in capital spending, including the impact of starting production of Rivian’s upcoming, less expensive R2 vehicles at its plant in Illinois instead of Georgia during the first half of 2026. 
McDonough said Volkswagen’s investment is expected to carry the company through the ramp-up of its new, less expensive R2 vehicles in Illinois as well as the midsize EV platform at its plant in Georgia.
The EV maker reported a loss of $1.45 billion during the first quarter of this year, as it retooled its plant in Normal, Illinois, to launch updated versions of its R1T pickup and R1S SUV EVs ahead of its next-generation vehicles in 2026.
Rivian reported $7.86 billion in cash, cash equivalents and short-term investments to end March, with more than $9 billion in total liquidity.

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The company reported revenue and earnings beats and a drop in capital spending on Tuesday for its fiscal fourth quarter.
FedEx is in the midst of a $4 billion cost-cutting effort, including the consolidation of its air- and ground-shipping businesses.

A pedestrian walks by a parked FedEx delivery truck on March 21, 2024 in San Francisco, California.
Justin Sullivan | Getty Images

FedEx shares soared more than 15% after hours Tuesday after the company reported results that topped analysts’ estimates in both earnings and revenue.
Here’s how the company did in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Earnings per share: $5.41 adjusted vs. $5.35 expected
Revenue: $22.11 billion vs. $22.07 billion expected

The company reported net income for the three-month period that ended May 31 of $1.47 billion, or $5.94 per share, compared with $1.54 billion, or $6.05 per share, a year earlier.
Revenue rose to $22.1 billion, up slightly from $21.9 billion a year earlier. For the full fiscal year, revenue was $87.7 billion, down from $90.2 billion.
FedEx reported that capital spending for fiscal 2024 was $5.2 billion, down 16% from $6.2 billion in fiscal 2023 and less than the $5.7 billion it forecasted in its fiscal 2024 guidance last year.
For fiscal 2025, the company said it expects low to mid-single-digit revenue growth year over year, driven in large part by e-commerce and low-inventory levels, FedEx Chief Customer Officer Brie Carere said on the company’s earnings call.
“We think e-commerce is going to outpace the B2B growth,” Carere said. “We like the fundamentals from an e-commerce perspective that will help us here in the United States and around the world.”

The capital spending decline comes as the company amps up its cost-cutting measures as part of a sweeping commitment to cut $4 billion by the end of fiscal 2025.
Following weak freight demand, FedEx enacted its DRIVE transformation program to cut costs and consolidate the business.
“DRIVE continues to change the way we work at FedEx. We achieved our target of $1.8 billion in structural costs out in fiscal year ’24,” CEO Raj Subramaniam said on the call.
Subramaniam said the company is firmly on track to achieve the $4 billion cost-cutting goal and further expects another $2 billion from the company’s plans to consolidate its air and ground services.
As part of the DRIVE initiative, FedEx announced in April 2023 that it will be consolidating its delivery companies Express, Ground, Services and others into a unified Federal Express Corporation, operating under the FedEx brand and alongside the company’s Freight segment which will continue to exist separately. The company said at the time that it expects the combined delivery business to handle all deliveries starting June 2024.
The newly combined segments are expected to be the larger driver of fiscal year 2025 adjusted income and margin improvement, finance chief John Dietrich said on the call.
FedEx further expects the demand environment to moderately improve through the next fiscal year, according to Carere.
Investor’s eyes are also on the company’s largest segment Express, which has been struggling with margin growth the past year. The segment’s margins ended the fourth quarter at 4.1%, unchanged year over year. Its operating margin for fiscal 2024 was 2.6%, up slightly from 2.5% last year.
Subramaniam said improving performance of the Express segment is a “top priority” for the company.
While the company hiked its quarterly dividend by 10% earlier this month, investors do foresee headwinds, particularly after the company lost its U.S. Postal Service contract to rival United Parcel Service n April.
UPS will become the primary air cargo provider for USPS starting Sept. 30, after FedEx’s contract expires. USPS was the largest customer for the company’s Express segment. The company shared that it expects a $500 million headwind from the loss in fiscal 2025.

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General Motors’ Cruise autonomous vehicle unit on Tuesday announced Marc Whitten, a former Amazon and Microsoft executive, as its new CEO.
His appointment comes at a crucial time for Cruise, as the GM subsidiary attempts to relaunch its autonomous vehicles on public roadways after the company ceased operations weeks following an Oct. 2 accident.
As of this month, Cruise has resumed supervised driving in Phoenix, Houston and Dallas, in addition to its ongoing testing in Dubai.

A Cruise vehicle in San Francisco on Feb. 2, 2022.
David Paul Morris | Bloomberg | Getty Images

DETROIT – General Motors’ Cruise autonomous vehicle unit on Tuesday announced former Amazon and Microsoft executive Marc Whitten as its new CEO.
Whitten was a founding engineer at Microsoft’s Xbox before leaving the company after more than 17 years to become chief product officer of audio company Sonos in 2014, according to his LinkedIn profile. He then worked at Amazon as vice president of entertainment devices and services before his most recent role as chief product and technology officer for software development company Unity’s Create.

His appointment comes at a crucial time for Cruise, which is testing and relaunching its autonomous vehicles on public roadways. It ceased operations weeks after an Oct. 2 accident in which a pedestrian in San Francisco was dragged 20 feet by a Cruise robotaxi.
Following the incident, several key leaders, including Cruise CEO and co-founder Kyle Vogt, departed the company.
“Marc is a proven technology and business leader with extensive experience in scaling products and building ecosystems around them,” GM CEO and Chair Mary Barra, who also leads the Cruise board of directors, said in a release. “He has sparked innovation and driven growth in complex, fast-paced environments throughout his career, and I believe that will prove crucial to Cruise’s vision of creating technology that provides real, tangible benefits to society.”
A third-party probe into the October incident ordered by GM and Cruise found that culture issues, ineptitude and poor leadership fueled regulatory oversights that led to the accident. The probe also investigated allegations of a cover-up by Cruise leadership, but investigators did not find evidence to support those claims.
During that time, San Francisco-based Cruise was attempting to expand its operations into a revenue-generating business for GM, which has been a majority owner of the company since acquiring it in 2016. Other investors now include Honda Motor, Microsoft, T. Rowe Price, and Walmart.

As of this month, Cruise has resumed supervised driving in Phoenix, Houston and Dallas, in addition to its ongoing testing in Dubai. It has not relaunched in San Francisco, where it remains under investigation related to the accident.
Cruise was a crucial part of GM’s plan to double revenue to $280 billion by the end of this decade.
GM announced Whitten’s appointment in conjunction with other executive changes. The automaker said Nick Mulholland, who led communications for Rivian, would become Cruise’s chief marketing and communications officer.
Craig Glidden, who has served as GM’s legal and chief policy officer, also will join Cruise as president and chief administrative officer, responsible for legal, government affairs, finance, communications, and human resources, the automaker said in a separate release Tuesday.
Glidden will be replaced by Grant Dixton, who has held senior leadership roles at Activision Blizzard and Boeing.
 ”GM is an iconic company I have always admired,” Dixton said in a statement. “I am grateful for the opportunity to work with Mary, her leadership team, and the strong legal and policy teams in place at GM to help the company achieve its bold vision as it continues to provide vehicles that customers around the world love.” 

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Cox Automotive expects U.S. sales growth to slow during the second half of the year to end 2024 at 15.7 million units, roughly a 1.3% increase compared to 2023.
Vehicle inventory levels are growing, incentives are increasing and there’s growing uncertainty during surrounding the economy, interest rates and U.S. presidential election.
That’s largely good for consumers, some of whom have been waiting years to purchase a new vehicle, but a headwind for automakers.

Cars sit on a Chevrolet dealership’s lot on June 20, 2024 in Chicago, Illinois. A cyber attack on CDK Global, a software provider that helps dealerships manage sales and service, has crippled the workflow at approximately 15,000 dealerships across the United States and Canada. 
Scott Olson | Getty Images

DETROIT — U.S. auto sales through the first half of the year are expected to be up by 2.9% compared to a year ago, but there are concerns that the auto industry may not be able to continue that momentum through year-end.
Vehicle inventory levels are growing, incentives are increasing and there’s growing uncertainty surrounding the economy, interest rates and U.S. presidential election, according to Cox Automotive.

The auto data and research firm expects sales growth to slow in the next six months to 15.7 million units, roughly a 1.3% increase from 2023. And, unlike in recent years, growth is coming from commercial sales rather than more profitable consumer sales.
“Overall, we’re expecting some weakness in the coming few months,” said Cox chief economist Jonathan Smoke during a midyear review briefing Tuesday. “We basically are making some assumptions that we can’t quite hold the pace that we’ve been seeing. But we’re not expecting a collapse either.”

Good for consumers

Such circumstances are largely good for consumers, some of whom have been waiting years to purchase a new vehicle amid unprecedented supplies of new vehicles and record prices during the coronavirus pandemic.
But those circumstances are a headwind for automakers, many of which posted record profits due to the high demand and low availability of new vehicles during the global health crisis. Wall Street has been predicting challenges in vehicle pricing and profit for most automakers compared to the record or near-record levels of recent years.

Brand-new Tesla cars sit parked at a Tesla dealership on May 31, 2024, in Corte Madera, California.
Justin Sullivan | Getty Images

“There’s a lot of uncertainty that lies ahead, and it may make recent sales successes hard to build upon,” Charlie Chesbrough, Cox’s senior economist, said during the briefing. “We are concerned that the second half of the year cannot maintain the growth we’ve seen so far.”

Rental, commercial and leasing are showing signs of double-digit growth, while Cox expects retail share of the overall industry to be down nine percentage points from 2021 to roughly 79%.

Winners and losers

The sales “winners” through the first half are expected to be General Motors, Toyota Motor and Honda Motor, according to Cox.
Chesbrough said if Toyota can continue its growth, it may once again challenge GM to rank as the top-selling automaker in the U.S. The Japanese company topped all other automakers for the first time ever in 2021.
Underperformers included Tesla, with sales estimated to be down 14.3%, and Stellantis, which is forecast to be down by 16.5% through June. Honda beat Stellantis in U.S. sales during the first half, pushing the Chrysler and Jeep parent to No. 6 in sales, down from its recent No. 4 rank.
Stellantis CEO Carlos Tavares earlier this month said the company is correcting what he described as “arrogant” mistakes by himself and the company in its U.S. operations that led to sales declines, bloated inventories and investor concerns.
“Higher supply means we officially bid farewell to the seller’s market that has defined the last four years … which means further deterioration in new vehicle grosses and dealer profitability,” Smoke said.

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Prices in April rose 6.3% compared with April 2023, according to the S&P CoreLogic Case-Shiller National Home Price Index.
Home prices are now 47% higher than they were in early 2020, with the median sale price now five times the median household income.
Half of all renter households — more than 22 million — spent more than 30% of their income on housing this year, which is considered “cost burdened.”

Home prices set another record in April, even as mortgage rates rose and the supply of homes for sale increased. Usually, under those circumstances, prices would weaken, but today’s housing market is unlike any other in recent history.
Prices in April rose 6.3% compared with the year-earlier month, according to the S&P CoreLogic Case-Shiller National Home Price Index. It marks the second straight month that the national index jumped at least 1% over its previous all-time high.

Although this is a three-month moving average, it’s important to note that those price gains come even as the average rate on the 30-year fixed mortgage jumped sharply in April, from 6.9% to 7.5%, according to Mortgage News Daily.
“2024 is closely tracking the strong start observed last year, where March and April posted the largest rise seen prior to a slowdown in the summer and fall,” said Brian Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, in a news release. “Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year.”
The only potential sign of relief is that the annual and monthly gains on the price index are slowing a little bit. March’s annual gain was 6.5%.
Still, it feeds into what is now one of the least affordable housing markets in U.S. history for both homeownership and renting. The housing cost burden has hit a record, according to a new report from Harvard’s Joint Center for Housing Studies.
Home prices are now 47% higher than they were in early 2020, with the median sale price now five times the median household income, according to the study.

For renters, even though rent growth is slowing due to a big increase in new apartment units this year, prices are still 26% higher than they were in 2020 and rising in three out of every five markets.
Half of all renter households — more than 22 million — spent more than 30% of their income on housing, which is considered “cost burdened” by HJCH. Twelve million of those households spend more than half their income on rent.
For homeowners, 20 million are considered cost burdened by their monthly payments.
All of those cost-burdened levels represent records.
Homeowners are also facing a sharp increase in insurance premiums, up an average 21% between 2022 and 2023, according to the HJCH report, and property taxes are also rising.
Prices continue to be supported by an imbalance in supply and demand. Housing supply was already low before the Covid pandemic hit, because homebuilders had yet to recover from the 2008 financial crisis. Then there was a pandemic-induced run on housing, causing supply to drop to record lows for several years. Homebuilders couldn’t keep up.
Supply is now rising, with an 11% increase in new listings in April from March, according to Zillow, and a 16% increase from April 2023. That pushed total for-sale inventory up 18% year over year. While that might sound like a lot, supply is still quite lean, especially compared with the strong demand.
“The rapid and sudden increase in mortgage rates in April pushed housing affordability further out of reach for many potential buyers while some who could still afford held back,” said Zillow’s senior economist Orphe Divounguy in a release. “As a result, the share of listings with a price cut shot up to 22.4% in April, the highest rate for April in the past six years, and a significant step up from 17.2% a year earlier.”
But he added that despite the relative slowdown in April sales, homes that were priced well sold in just 13 days, only three days slower than in April 2023.
In May, inventory rose to a 3.7-month supply. A six-month supply is considered a balanced market between buyer and seller.

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The Delta One lounge opens this week at New York’s John F. Kennedy International Airport, offering new perks for some of the airline’s highest-paying customers.
The 39,000-square-foot space is available to travelers flying in the Delta One cabin as well as travelers with the secretive, invite-only “360” status.
The lounge is the airline’s latest effort to reel in customers and offers perks like massages, showers and a high-end restaurant.

The bar at the Delta One lounge at New York’s John F. Kennedy International Airport.
Leslie Josephs | CNBC

Delta Air Lines’ most exclusive airport lounge opens this week to travelers flying on the right ticket.
The Delta One lounge at the carrier’s hub at New York’s John F. Kennedy International Airport will open Wednesday to customers departing or arriving in the Delta One cabin, the airline’s highest tier of service. It’s the latest effort by a U.S. airline to win over top-paying customers. CNBC got a peek inside.

The more than 39,000-square-foot space features a high-end restaurant, as well as a quick-bite bakery and walk-up food counter. It also features a full bar and a terrace overlooking the airfield.

Leslie Josephs | CNBC

The lounge, Delta’s largest, is a step up from its more accessible Sky Club lounges, with new areas to relax. Travelers are offered complimentary spa treatments for the eyes, hands and arms and what it calls “recovery remedy,” a 10-minute shoulder, scalp and temple massage.
There are eight shower suites complete with robes and slippers, and travelers can leave their clothes out to be steamed by staff within minutes, Delta says.

Amenities in bathroom and shower stall at Delta One lounge at John F. Kennedy International Airport.
Leslie Josephs | CNBC

For travelers who want to continue to work, the space includes eight soundproof booths. In total, the lounge seats 515 people.

Leslie Josephs | CNBC

Delta One lounge’s dining area at New York’s John F. Kennedy International Airport
Leslie Josephs | CNBC

Delta last year said the average age of its SkyMiles members has dropped from 44 in 2017 to 39 in 2022.
“It’s important to note that not every new member starts out as a Million Miler,” Dwight James, Delta’s senior vice president of customer engagement and loyalty, said in an interview. “This notion of premium that we talk about is also aspirational.”
James declined to say how much Delta is investing in the lounge.

Bar at Delta One lounge at John F. Kennedy International Airport in New York.
Leslie Josephs | CNBC

Delta has struggled with overcrowding at some of its other Sky Clubs, even long lines to get in at some of them. Last year, it unveiled more restrictive entry requirements, only to walk some of them back weeks later.
“I feel really confident that the line issue will be addressed once this lounge opens,” James said.
In addition to travelers on Delta One tickets, the lounge will also be open to travelers with the secretive, invite-only “360” status Delta hands out to a select few. Travelers on Delta’s partner airlines’ equivalent cabins will also have access.

A walk-up food counter at the new Delta One lounge at JFK Airport.
Leslie Josephs | CNBC

The Delta One lounge will also feature a dedicated security checkpoint starting in September or October, a perk the airline offers at Los Angeles International Airport for Delta One travelers.
The airline is planning to open Delta One lounges in Boston and in Los Angeles later this year. James said the company is studying Delta One lounges in other cities like its main hub in Atlanta and in Seattle.

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