Retail Automotive Dealership Newsletters: Porsche is Boosting Production for its First Electric CarMarch 15th, 2019
NEW CARS SALES EXPECTED TO STALL, DINGING THE DETROIT 3
New vehicles are piling up on U.S. car dealer lots, creating concern just as sales are expected to sputter. The inventory of unsold new cars on dealer lots rose 2.1 percent last month, setting an all-time February high, a top industry analyst said in a research note this week. That total of 4 million new vehicles in U.S. stock is a 21-month high, Morgan Stanley’s equity analyst Adam Jonas wrote. In dollar terms, it’s about $140 billion in inventory, Jonas wrote.
That and other economic concerns have analysts worried the second half of this year won’t be as good for carmakers as had been hoped. “The rising inventory despite stalling sales trend is of particular concern to us given market expectations of a significant second-half … recovery in earnings for many of our U.S. names,” Jonas wrote.
The slowing sales and high inventory will affect General Motors, Ford and Fiat Chrysler Automobiles in different ways. Jonas said GM exhibits likely the strongest in a first- to second-half earnings growth, with minus 15 percent earnings per share shifting to plus 14 percent.
Jonas thinks Ford’s earnings per share will move from minus 20 percent compared with last year in the first half to up 7 percent in the second half. But Jonas warned, “FCA’s second-half earnings per share (is expected) to fall 18 percent year over year, growing 6 percent year-over-year in the first half.” Jonas said his Detroit 3 forecasts depends on profits in China, the world’s largest car market, recovering and improving from a weak 2018.
Jon Gabrielsen, an economist and consultant to the auto industry, offered a contrary view. He noted that GM and Ford have been continuously losing market share for at least a decade, whereas “FCA has been gaining market share for the same period.” “This FCA will be larger in the coming recession than in the past while GM and Ford will be smaller in a recession than they were in the past. The less scale you have in a recession the more your earnings (loss) suffer,” he said.
Other economists said that if President Trump enacts tariffs, that could lead to higher new car prices, killing consumer appetite and inflating stock on lots to even greater levels.
“February could be one of the last really strong months of the year because there are other headwinds facing us,” said Jonathan Smoke, chief economist for Cox Automotive.
It wasn’t that great a month. February sales were off 2.8 percent from 2018, Jonas wrote, and are down 2.4 percent year to date. Americans are buying lightly used vehicles coming off leases or are opting to keep their vehicles longer because quality and durability have improved.
Source: Detroit Free Press
PORSCHE IS BOOSTING PRODUCTION FOR ITS FIRST ELECTRIC CAR
Porsche AG will increase production of the Taycan after more than 20,000 potential buyers registered to purchase the brand’s first electric car, matching the entire annual output initially earmarked for the four-door sedan. “The overwhelming interest in the Taycan shows us that our customers and fans are just as excited about the first Porsche electric athlete as we are,” Porsche sales chief Detlev von Platen said Friday in a statement. “We’ve therefore increased our production capacities.” The car is part of a wave of new models from Jaguar, Mercedes-Benz and Audi that’ll challenge Tesla’s electric-car leadership.
CHINESE AUTO SALES STILL SLUMPING
Auto sales in China continued their downhill run into February, declining for the eighth consecutive month. Vehicle sales in January and February—a period that includes China’s movable Lunar New Year holiday—totaled 3.85 million, down 15% from a year earlier, the government-backed China Association of Automobile Manufacturers said Monday. Electric-vehicle sales were the exception: They doubled in the first two months of the year to 148,000.
Source: The Wall Street Journal
U.S. CAR DEALERS SLIGHTLY MORE OPTIMISTIC ACCORDING TO NEW SURVEY
Faced with the partial federal government shutdown, sales frozen by the polar vortex, concern about lower income tax refunds and the effect of import tariffs, U.S. auto dealers were pretty down in the dumps at the end of last year, but a new survey shows that sentiment is on a slight upswing. The latest Cox Automotive Dealer Sentiment Index (CADSI) reveals U.S. auto dealer sentiment rebounded in the first quarter of 2019, from a record low during the final three months of last year.
FORD CEO HACKETT TO EMPLOYEES: 2019 WILL BE TURNING POINT
Ford Motor Co. CEO Jim Hackett told employees 2019 will be the year the 115-year-old automaker turns “the corner toward a really bright future,” in an internal memo obtained by The Detroit News. Hackett is in the middle of orchestrating a global restructuring that would have Ford spend $11 billion to right-size struggling business units in Europe, South America and China, cut the global salaried workforce and slash $25.5 billion from the operating budget over the next few years.
Source: The Detroit News
TRUMP’S PROPOSED 2020 BUDGET WOULD END ELECTRIC-CAR TAX CREDITS
The federal electric-car tax credits survived the most recent tax overhaul legislation in 2018, but they’re back in the crosshairs. U.S. President Donald Trump’s proposed budget for the 2020 fiscal year includes the end of the tax credits for consumers who purchase a qualifying electric vehicle.
The Detroit News reported on the budget proposal on Monday, which does away with the $7,500 tax credit buyers receive after filing their taxes the following year after purchase. In total, the budget proposal amounts to $4.7 trillion and the president said ending the electric-car tax credits would save $2.5 billion over the next 10 years. As the law currently stands, every automaker receives the same number of tax credits, up to 200,000 vehicles. Once an automaker sells its final qualifying electric car, it triggers a sunset period. The credit is halved to $3,750 for six months before it halves again to $1,875. The $1,875 is available for another six months before it falls to $0.
Last year, Tesla was the first automaker to reach the cap and General Motors followed later in the year. Both automakers have teamed up with Nissan to lobby for an extension on the tax credits. The law was designed to sell electric cars at a discount to keep them in line with gas- and diesel-fueled vehicles while technology helped make batteries and EV powertrains more affordable. Tesla and GM say they would be at a disadvantage to other automakers just now readying their own electric vehicles.
GM pushed back on the proposal to end the tax credit and said “removing the federal tax credit right now would be premature and damaging” to any efforts to make electric cars more affordable to U.S. buyers and work toward the automaker’s zero-emissions future.
VW SLASHES 7,000 JOBS TO REFOCUS ON ELECTRIC CARS
Volkswagen AG’s namesake brand said Wednesday it would cut up to 7,000 administrative jobs over the next five years as the company focuses its spending on technology. Volkswagen is spending billions to develop and produce electric vehicles outfitted with state-of-the-art communications and infotainment systems. To unlock capital for these investments, it is also modernizing its processes from the office tower to the factory floor.
Source: The Wall Street Journal
FORD JOB CUTS
Ford Motor Co. is eliminating more salaried jobs, the company confirmed Wednesday. Salaried workers in accounting, human resources and administrative support working at Ford World Headquarters in Dearborn are reportedly being let go, sources close to the situation confirmed to the Free Press
Source: Detroit Free Press
THE AMERICAN PUBLIC IS STILL VERY AFRAID OF SELF-DRIVING CARS
Seven in 10 Americans don’t want to go anywhere near self-driving cars. The portion of Americans who fear autonomous vehicles—71 percent in the American Automobile Association’s latest survey—is virtually unchanged from a year ago and up eight percentage points from 2017. While public skepticism isn’t new, its consistency is noteworthy.
TOYOTA, SOFTBANK IN TALKS TO INVEST $1B IN UBER AV UNIT, REPORT SAYS
A group of investors led by SoftBank Group Corp. and Toyota Motor Corp. is in talks to invest $1 billion or more in Uber Technologies Inc.’s self-driving vehicle unit, which would value the unit at $5 billion to $10 billion, said two people familiar with the talks. The investment would provide a cash injection for Uber’s self-driving program that is costing the unprofitable startup hundreds of millions of dollars without generating revenue.
AUDI E-TON ARRIVES
Audi’s new E-Tron electric SUV will hit the road in the US in the coming months. It’s a big step forward for the German automaker’s electrification plans, but as it turns out, it’s only the tip of the iceberg. At an event at Audi’s headquarters in Ingolstadt, Germany, on Wednesday, company executives confirmed the brand will launch 30 electrified vehicles by the year 2025.
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