CTR070729_Pricing.pdf

PROCUREMENT DETERMINATION

PRICE INCREASE

Cc: File Rev. 04/2020

Procurement

Sections 1 through 3 MUST be completed Use Attachments as Necessary

1) Name: Tom Kornell

Title: Senior Procurement Officer

Date: February 27, 2023

Contract Number: CTR059318

Contract Description: New Vehicles

Contractor Name: Larry H Miller Toyota

2) Line Item Pricing:

See attached spreadsheet.

3) Provide justification:

Procurement IQ reports that Passenger vehicle prices have exhibited high volatility during the last three years due to heavy fluctuations in the supply and price of manufacturing inputs. Larry H Miller Toyota is requesting price increases on all phase one line items and on delivery fees outside of Maricopa County. Changes to dealer incentives have dropped across all models, and the cost of delivery services and fuel increases have risen. Procurement IQ shows pricing continuing to grow annually at 4.7%.

Based on the information provided the price increase is determined to be fair and reasonable. It is in the Department’s best interest to approve this price increase request.

To Be Completed by Procurement Authority:

APPROVAL

Request Authorized Pursuant to A.A.C. R2-7-604A

Request Denied

Request Returned for Additional Information

See Comments

Comments:

Approved by:

Signature:

Title:

Date:

DocuSign Envelope ID: 53D8C7B8-FB11-481F-813F-B520F7410860

Procurement Manager

X

2/27/2023

Agreed to Pricing

Car Model

Original Contract

Percentage off

MSRP

New LHM Percentage off MSRP

Corolla 8% 4%

Prius 8% 3%

Camry 10% 5%

Venza 6% 4%

Sienna 8% 4%

Rav 4 7% 3%

Highlander 8% 6%

4Runner 8% 6%

Sequoia 10% 8%

Tacoma 6% 3%

Tundra 6% 4%

County Delivery Fee $ County Delivery Fee $ County Delivery Fee $

Apache $500.00 Greenlee $500.00 Pima $350.00

Cochise $500.00 La Paz $500.00 Pinal $300.00

Coconino $400.00 Maricopa $0.00 Santa Cruz $500.00

Gila $300.00 Mohave $500.00 Yavapai $350.00

Graham $350.00 Navajo $500.00 Yuma $350.00

2/13/23, 8:09 AM ProcurementIQ Procurement Research - 21986684 Passenger Vehicles https://client.procurementiq.com/procurement/reports/us/proqnow/print/?entid=1393 1/33

Opportunity Assessment

Buyer Power Score

Market Dynamics

21986684 Passenger Vehicles

Passenger Vehicles

Summary Passenger vehicles are automobiles that are used to transport small groups of passengers. Key buyers of passenger vehicles include consumers, government agencies, and rental and security service providers.

This Report Includes:

Sedans

Light Trucks

Sport-Utility Vehicles (SUVs)

Passenger Trucks and Automobiles

Electric Vehicles

Not In This Report:

Motorcycles

Freight Vehicles

Ambulances and Other Specialized Vehicles

Shuttle Buses

Commercial Passenger Vehicles

Classification:

21986684-Passenger Vehicles (Current Report)

52871454 - Taxicab Services

21149994 - Automobile & Light Truck Tires

21149327 - Automobile Wheels

21986687 - Limousines

20933636 - Industrial Trucks

21987272 - Semi Trucks

21986791 - Off-Highway Trucks

21986796 - Cargo Trucks

21142880 - Electric Vehicle Charging Stations

-1.4 Buy Now

ProcurementIQ recommends buying now. Despite the current buyer power score being below the average for 2020 to 2023, it is expected to fall next year resulting in harsher negotiating conditions.

-5 -4 -3 -2 -1 0 1 2 3 4 5

Supplier Power

Buyer Power

About Buyer Power Score

Passenger Vehicles - Buyer Power Over Time

0.70.70.7

-0.5-0.5-0.5

-1.4-1.4-1.4 -1.4-1.4-1.4

-2.8-2.8-2.8

2020 2021 2022 2023 2024 -5

-2.5

2.5

Source: ProcurementIQ

Year

- - - 3-Year Average: -0.6

Buyer Power

Supplier Power

Price Trend 2020–2023*

4.7% *Compound Annual Growth Rate

Price Forecast 2023–2026*

2.2 % *Compound Annual Growth Rate

Supply Chain Risk

2023 Market Pricing

$46,130.00 per vehicle

Key Drivers

Price Of Motor Vehicle Body Manufacturing

Price Of Motor Vehicle Gasoline Engine & Parts

Top Vendors General Motors Company

Ford Motor Co

Stellantis N.V.

Toyota Motor Corp

Honda Motor Co Ltd

Provided to: Arizona Department of Transportation - ADOT (2135209226) | 13 February 2023

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Legend:

Positive Impact on Buyer Power Neutral Impact on Buyer Power Negative Impact on Buyer Power

Request Custom Information Recent Development Buyer Power Lever

Recent Developments

Positive Trends

Crude oil and natural gas prices drop from summer peaks, but remain elevated and highly volatile Crude oil prices have slid from record highs of $114.84 per barrel this summer to $84.26 per barrel for WTI crude, as supply issues from early 2022 have been mitigated, and as global demand remains weak as China’s reopening policy remains uncertain.

Following a similar price spike as that of crude oil, the price of natural gas peaked at $9.33/MMBtu in mid-August 2022 and has since fallen as storage tanks are filled and supply catches up with demand, dropping to $5.82/MMBtu in the first week of November 2022.

As the price of crude oil has been falling from its near record highs, the price of gasoline has declined as well. Gasoline in the United States was $3.80 on November 7th, according to AAA, down from a record peak of $5.02 in June 2022, with other key petroleum and gas-based fuels declining in a similar fashion.

Sections Impacted: Cost Structure Analysis - Input Cost Drivers , Total Cost of Ownership , Supply Chain Dynamics - Upstream Analysis

The high-end semiconductor shortage is easing The shortage of high-end semiconductors has eased as of October 2022.

High-end semiconductors are used in the production of hardware such as computers, smartphones, and tablets. The fall in demand from cryptocurrency mining has been the primary contributor to growing supply.

Experts anticipate a glut of high-end chips used for consumer electronics in the next few months.

Sections Impacted: Cost Structure Analysis - Input Cost Drivers , Supply Chain Dynamics - Upstream Analysis , Planning Process - Buying Lead Time

Steel prices are continuing to fall amidst declining global demand Steel prices have begun to fall from record highs as global demand continues declining, reaching their lowest levels in nearly two years as of late 2022.

Steel prices surged to record levels in February 2022, as Russia’s invasion of Ukraine and the subsequent sanctions against Russia resulted in significant disruptions to the global steel market.

Since this spike in February 2022, prices have declined significantly as inflationary pressures mount and the US economy continues to cool off, leading to significant reductions in demand for steel. Prices for steel have declined nearly 20.0% between the months of July and October, and are currently around 60.0% lower compared to this time last year as a result of this drop in demand.

Demand for steel has dropped globally as high interest rates stoke recession fears and cause construction activity to slow, and as persistently high inflation continues to harm spending worldwide. Industry association Worldsteel is anticipating global steel demand to fall 2.3% this year, and for demand to fall 1.7% in developed economies.

Sections Impacted: Cost Structure Analysis - Input Cost Drivers , Supply Chain Dynamics - Upstream Analysis , Business Requirements - At a Glance

Neutral

Medium

ESG Level

Medium

Price Of Other Motor Vehicle Parts Manufacturing

Average Wages - Transportation Equipment

Per Capita Disposable Income

Number Of Vehicle Accidents

Total Vehicle Miles

Cost Structure 2023

Profit Purchases Overhead Wages

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Provided to: Arizona Department of Transportation - ADOT (2135209226) | 13 February 2023

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Prices of precious metals remain volatile as uncertain economic conditions continue Prices for palladium and platinum have begun to come down from extreme highs set earlier this year amidst the onset of the Russian invasion of

Ukraine, as signs of an economic slowdown begin to slow demand from key areas.

Major buyers of these precious metals, such as the automotive industry, have begun to prepare for reduced economic growth by cutting production levels, thereby slashing demand and pushing prices lower.

Prices for palladium and platinum have declined significantly from early 2022, with palladium declining from around $3,000 per ounce in March 2022, to an average of $2,069 in Q4 of 2022. Price drops for platinum have been similar, dropping from $1,100 per ounce in March to an average of $907 in

Q4.

Meanwhile, metals such as gold and silver have experienced price hikes after a surprisingly positive October jobs report was released.

Prices of precious metals are expected to remain highly volatile throughout 2022 and into 2023, as economic conditions continue to fluctuate quickly.

Sections Impacted: Cost Structure Analysis - Input Cost Drivers , Supply Chain Dynamics - Upstream Analysis

Warning Trends

Russian invasion of Ukraine is putting additional strain on US chip supply Until recently, the United States sourced nearly all of its neon gas (an essential material in the laser imprinting process to produce semiconductors) from Ukrainian and Russian producers. Previous conflicts between the two nations, specifically related to the Crimea conflict in 2014, resulted in a nearly 600.0% increase in the price of neon.

The Russian Ministry of Industry and Trade announced in early June that it would be limiting neon gas exports as part of its sanctions against countries it views as unfriendly. This move will add to lead times and prices for neon.

Downstream semiconductor manufacturers keep stockpiles of neon gas that have allowed them to continue manufacturing chips, though it is unknown how long these stockpiles will last. Semiconductor manufacturers will likely pay higher prices for neon gas outside Ukraine as global supplies dwindle.

Sections Impacted: Cost Structure Analysis - Input Cost Drivers , Planning Process - Buying Lead Time , Supply Chain Dynamics - Upstream Analysis

ProcurementIQ’s analysts constantly monitor the impacts of current events to give you the most up-to-date insights. Due to the timely nature of the Recent Developments section, information included in this section may differ from the rest of the report.

Buyer Power Levers

SWOT

No Buyer Threat

Availability of Substitutes: High

Buyers in this market have access to a wide range of suitable substitutes.

Product Specialization: Low

Customized solutions are rarely used in this market thus most suppliers are able to meet client's needs.

To Investigate

Supply Chain Risk: Medium

There is some risk of price swings, shortages and delays due to supply chain disruptions.

Threat to Buyer

Forecast Price Trend: Rising

Prices are forecast to rise quickly during the next three years.

Market Share Concentration: High

The top 4 vendors in this market control over 45% of the market share.

Price Driver Volatility: High

Key price drivers have fluctuated sizably in recent years.

S Strengths

Product specialization is low in this market, which indicates that most vendors are qualified and able to render products or services.

Buyers experience few unexpected or hidden costs in this market. Low total cost of ownership allows buyers to better budget. Most costs are expected or can be negotiated beforehand.

There is a high availability of substitutes in this market, indicating that buyers can leverage other products or services to secure discounts.

Market Share Concentration is high in this market, which indicates that vendors that vendors are unlikely to engage in price-based competition to win new business.

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Buyer Power Score

Buyer Power Score Components

W Weaknesses The Passenger Vehicles market has a high level of vendor financial risk, indicating that the average vendor in this market faces a high threat of bankruptcy which could cause disruptions for buyers.

The pace of regulatory change has been fast in this market indicating a sizable threat of changes due to new regulations.

O Opportunities

This market's short lead times means that buyers can quickly order, receive and integrate mark solutions to fill inventories or reduce downtimes.

Suppliers in this market have moderate commitments to ESG initiatives. As such, buyers are advised to seek out vendors that can satisfy internal ESG procurement goals or metrics.

T Threats

Prices are forecast to increase quickly during the next three years

Prices have been rising quickly during the past three years, which has forced buyers to act more urgently to avoid rising prices.

Prices for Passenger Vehicles have fluctuated sizably. Instability in market prices has been making it more difficult for buyers to anticipate prices and plan accordingly.

-1.4 Buy Now

ProcurementIQ recommends buying now. Despite the current buyer power score being below the average for 2020 to 2023, it is expected to fall next year resulting in harsher negotiating conditions.

About Buyer Power Score

Recent updates, quantitative and qualitative criteria are assigned numeric values that correlate either directly or indirectly with their level (very low, low, medium, high or very high). A score of 5 indicates that a factor works in favor of buyer power, whereas a score of -5 indicates that a factor works in favor of supplier power. A score range of 0 has a neutral impact on buyer power.

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Price Environment

Legend:

Positive Impact on Buyer Power Neutral Impact on Buyer Power Negative Impact on Buyer Power

Values

Buyer Power Score Components

2.52.52.5

0.50.50.5

0.30.30.3

-0.3-0.3-0.3

-0.3-0.3-0.3

-0.6-0.6-0.6

-0.7-0.7-0.7

-1.0-1.0-1.0

-1.8-1.8-1.8

-2.0-2.0-2.0

-4.2-4.2-4.2

Recent Developments

Availability of Substitutes

Product Specialization

Switching Costs

Supply Chain Risk

Average Vendor Risk

Price Driver Volatility

Market Share Concentration

Recent Price Volatility

Forecast Price Trend

Recent Price Trend

-5 -4 -3 -2 -1 0 1 2 3 4 5

Source: ProcurementIQ Current Buyer Power Score:

-1.4 ProcurementIQ’s analysts constantly monitor the impacts of current events to give you the most up-to-date insights. Due to the timely nature of the Recent Developments section, information included in this section may differ from the rest of the report.

Key Takeaways

Input costs have been rising in the past three years as motor vehicle parts manufacturers have faced higher overhead costs related to investments in production lines and expansion of their facilities, thereby pushing up vehicle prices.

During the next three years, the increasing usage of more powerful microprocessor chips, advanced sensors, larger screens, and other electronic components are expected to contribute to rising market prices. High savings and spending rates, combined with subsidies to purchase more expensive electric vehicles, are expected to contribute to rising market prices as well.

Passenger vehicle prices have exhibited high volatility during the last three years due to heavy fluctuations in the supply and price of manufacturing inputs.

Total cost of ownership (TCO) in the passenger vehicle market, including gas, maintenance and repairs, insurance, registration, financing and depreciation expenses is high. Thus, the long-term costs of owning a passenger vehicle are often on par with the original purchase price.

Product specialization in the passenger vehicles market is low. Passenger vehicles are mass-produced and are typically purchased off the lot

The passenger vehicles market has a high availability of substitutes, allowing buyers to leverage substitute options during negotiations with vendors to obtain more favorable vehicle prices.

Due to a high level of price driver volatility, prices for passenger vehicles have been fluctuating heavily, which makes budgeting for purchases more difficult.

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At a Glance

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Price Trend 2020–2023*

4.7% *Compound Annual Growth Rate

Price Forecast 2023–2026*

2.2% *Compound Annual Growth Rate

Recent Price Volatility

High

Level of Specialization

Low

Availability of Substitutes

High

Price Driver Volatility

High

Switching Costs

High

Key Drivers

Price Of Motor Vehicle Body Manufacturing

Price Of Motor Vehicle Gasoline Engine & Parts

Price Of Other Motor Vehicle Parts Manufacturing

Average Wages - Transportation Equipment

Per Capita Disposable Income

Number Of Vehicle Accidents

Total Vehicle Miles

Historical Trend

Years pe r ve hi cl e

Passenger Vehicles - Average Price

30k

35k

40k

45k

50k

55k

Source: ProcurementIQ

2023 Market Pricing

$46,130.00 per vehicle

2023 Vendor Average Cost Structure

Line Item Proportion of Revenue

Profit 3.2

Wages 10.6

Purchases 71.5

Vehicle Bodies 24.2

Engines 19.7

Transmissions 4.6

Wheels & Other Chassis Components

23.0

Overhead 14.7

Research & Development

3.4

Depreciation 2.2

Rent & Utilities 1.2

Marketing 1.0

Other 6.9

Total 100

Market Pricing

$5

.00

$1

0.0

$1

0.0

$2

0.0

$2

0.0

$3

0.0

$3

0.0

$4

0.0

$4

0.0

$5

0.0

$5

0.0

$6

0.0

Source: ProcurementIQ

Price Range per vehicle Market Pricing per vehicle $ 46130 per vehicle

Market Pricing Factors

Provided to: Arizona Department of Transportation - ADOT (2135209226) | 13 February 2023

2/13/23, 7:01 AM ProcurementIQ Procurement Research - 52869613 Vehicle Transportation Services https://client.procurementiq.com/procurement/reports/us/proqnow/print/?entid=1285 2/31

Legend:

Positive Impact on Buyer Power Neutral Impact on Buyer Power Negative Impact on Buyer Power

Request Custom Information Recent Development Buyer Power Lever

Recent Developments

Positive Trends

Crude oil and natural gas prices drop from summer peaks, but remain elevated and highly volatile Crude oil prices have slid from record highs of $114.84 per barrel this summer to $84.26 per barrel for WTI crude, as supply issues from early 2022 have been mitigated, and as global demand remains weak as China’s reopening policy remains uncertain.

As the price of crude oil has been falling from its near record highs, the price of gasoline has declined as well. Gasoline in the United States was $3.80 on November 7th, according to AAA, down from a record peak of $5.02 in June 2022, with other key petroleum and gas-based fuels declining in a similar fashion.

Sections Impacted: Cost Structure Analysis - Input Cost Drivers

Shipping and freight complications are beginning to ease as demand slows Both ocean and road freight disruptions are beginning to resolve after nearly two years of significant complications, as demand declines amid slowing global economic activity.

Extended wait times and delays in global ports have begun to resolve, allowing ports to return to pre-pandemic averages, while container shipping rates are stabilizing at much lower levels compared to their record highs during the peak of the pandemic. Most recently, ocean container prices were reported as being 64.0% lower compared to this time last year, according to Drewry’s World Container Index.

Road freight companies are also seeing rates come down as demand uncharacteristically continues to decline as the holiday season approaches, which is typically the peak of activity for shipping companies.

However, freight companies are still dealing with highly volatile fuel markets, which is continuing to contribute to significant surcharges on shipping, mitigating some of the declines in standard freight rates.

Sections Impacted: Supply Chain Dynamics - Upstream Analysis

Neutral

There are currently no neutral trends impacting the Vehicle Transportation Services market. ProcurementIQ will update this section as current events dictate.

Warning Trends

There are currently no negative trends impacting the Vehicle Transportation Services market. ProcurementIQ will update this section as current events dictate.

ProcurementIQ’s analysts constantly monitor the impacts of current events to give you the most up-to-date insights. Due to the timely nature of the Recent Developments section, information included in this section may differ from the rest of the report.

Buyer Power Levers

ESG Level

Medium Number Of Motor Vehicle Registrations

Cost Structure 2023

Profit Purchases Overhead Wages

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

No Buyer Threat

Forecast Price Trend: Falling

To Investigate

Availability of Substitutes:

Medium

Threat to Buyer

Price Driver Volatility: High

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