Will the Silicon Valley Bank Collapse Make Car Prices Increase?
No, you aren’t dreaming. The Silicon Valley Bank collapse does conjure memories of George and Mary Bailey barely keeping the Building and Loan bank afloat amid bank runs that plagued financial institutions (and, more importantly, the people whose money they had) right before the start of the Great Depression. While we know a run on a bank ain’t great, many are left wondering what this will do to the car industry. Will this affect carmakers? Are car prices going up again?
What happened with the Silicon Valley Bank collapse?
News Networks from around the globe are covering the Depression-era imagery of long lines wrapping (choking) around the bank branches. The lines are full of worried and even panicked people trying to withdraw all the money from their accounts to they can theirs before everyone else does.
According to MotorTrend, SVB held over $200 billion in assets before this past weekend. It has since gone through the second-worst bank failure in history. Part of SVB’s sharp rise and fall is due to the fact that the majority of its business was from tech startups and venture capitalists.
Did any car companies bank with SVB?
MotorTrend decided to dig into whether SVB worked with any car companies. While some car startups worked with SVB, there weren’t many. MT found that TrueCar, OTTO Motors, Clearpath Robotics, Beepi, AutoLeap, Trucker Path, and DRIVIN all got financing from SVB.
Most people might not recognize all those names, but many will recognize one; TrueCar. Most of the other companies wrapped up in the drama are heavy tech-based companies like Clearpath Robotics, which develops self-driving vehicle technology. Trucker Path is another service-based app for trucking companies that helps drivers plan efficient trucking paths.
What does it mean for companies that banked with SVB?
In the case of TrueCar, the company already got its funding. So, they are ok, at least until they need more funding, at which point, SVB will be little more than a memory.
For other companies or individuals who had money with SVB, the Fed have taken control of the bank. The bigger ripples that will come from this will be the Fed getting up close and personal with many of the affected businesses’ finances. This is likely making some companies sweat a little.
The automotive industry is only starting to recover from all the COVID-19 avalanche of problems. Now they have to wrestle with inflation and bank collapses. Even all the automakers that had nothing to do with SVB are sweating because the entire finance world is sweating.
MotorTrend cites Auto industry financial pundit Lucky Lopez’s prediction that things could get much worse in the future, but for now, he sees companies such as TrueCar dealing with cash flow issues. “TrueCar is a good example of this. They charge dealers a set amount of money to do business, but most of the money that they used to run their operations comes from investors,” said Lopez. “They are in need of a serious cash infusion.”
Will more banks fail?
No one can answer this without a crystal ball. However, for the time being, lending is likely to get tighter across the board. Even for companies not connected, SVB’s and its investors’ actions will have wide-reaching effects on the market as a whole. Of course, a very complex industry such as the automotive industry will undoubtedly be affected.
Editor’s Note: An earlier version included an inaccurate amount TrueCar received from SVB.