Drive Time

There are many ways to monitor the pickup in driving activity as lockdown restrictions ease. Ask around, sit beside a duel carriageway with a thermos and a clip board. Or poke Apple or Google for their mobility trends. All sources show a pick up. Bank of America uses credit card data. Given Bank of America has nigh on fifty million customer and small business accounts, their credit card data is a steamy stew of information. The analysts slice and dice the data – adjusting for all sorts of funnies – so that they can see how much petrol is being bought across America. They conclude: it is basically back to normal. Those who are choosing to work from an oversized bean bag in the garden, are being offset by a shift away from public transport. And with airlines grounded, the summer road trip is back in vogue, as staycationing grips middle America. Whilst a heap of publicity has been flared on the rising case counts across many southern states, there are increasing signs that the virus can be controlled without the need for blunt lockdowns. More testing, better data, sharper response. Some brokers are out suggesting that US is now well on the way to controlling the spread of the virus, the graphs have peaked. That means more driving. More driving, is the bread and butter of IAA, the leading marketplace for wheeling and dealing in damaged vehicles. The company reported Q2 numbers this week, and the numbers spoke of a gradual normalisation, a resilient model, and ongoing marker repair. Of more interest to investors is the progress made on the digital transformation. Auctions are now online, to the benefit of customers, and the benefit of long-term margins. Shifting to a digital offer oozes those margins higher, so too does recent moves made by management to restructure the business. Short term the recovery at IAA looks a bit sharper than expected, but long-term it is the structural upside to margins that is likely to surprise the street.