Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: The Kids Grow Up
What a difference five years makes! When I started working here, every hot take artist in the game was out there wondering, “Why don’t the millennials buy cars?” And our answer to this was always: it’s the economy, stupid! The millennials weren’t buying brand new Mustangs two at a time because they were saddled with student loan debt, and just starting out with entry-level salaries, and in many cases moving to bigger cities to follow jobs where they didn’t necessarily need cars. Also, don’t equate new car buying with car culture, but that’s a whole other thing.
Well, now the tables have turned, so to speak. The millennials, many of whom are now well into their 30s, are having their own baby boom, moving to the suburbs and buying—wait for it, wait for it—giant SUVs. From Bloomberg:
The generation of Americans aged about 18 to 34 have become the largest group of home buyers, and almost half live in the suburbs, according to Zillow Group data. As they shop for bigger homes to accommodate growing families, they’re upsizing their vehicles to match. U.S. industry sales of large SUVs have jumped 11 percent in the first half of the year, Ford Motor Co. estimates, compared with increases of 9 percent for midsize and 4 percent for small SUVs.
“We do see that demographic group driving larger sport utility sales as they acquire homes, create families and gain some wealth,” said Michelle Krebs, an analyst at car-shopping website Autotrader. “They started with compact sport utilities and now, with families, they’re moving up.”
The shift to suburbia may surprise those who’ve chided millennials for being more interested in pricey avocado toast than in saving for a home. Much of the generation delayed marriage, child bearing and home ownership after graduating with heaping student-loan debt and entering a weak job market. As more millennials overcome this, many want the life of their baby-boomer parents — the kids, the house in the ’burbs and the beefy SUV.
And here’s what that means for car sales, specifically:
“There’s going to be an extra 25 million people passing into and through the 35-to-44 year old demographic over the next 10 to 15 years,” Merkle said. “That’s going to lead to a gradual increase in the growth of large and midsize SUVs that’s already starting to happen.”
Cars and houses tend to be a good measurement of health in any economy. If people aren’t buying houses and cars, your economy’s boned. Glad us millennials are doing our part, probably by saddling ourselves with insane levels of debt, just like mom and dad did.
2nd Gear: Your Car Is Worth Less Than You Think
As regular Morning Shift readers are no doubt aware, the surge in new car sales in recent years—a surge that’s been dropping off as of late—has led to a glut of new cars on dealer lots. Many automakers like General Motors have a huge new car oversupply problem. And that’s kneecapping the used car market too, making it especially hard to sell your used car for a decent price at the moment, reports Bloomberg:
Car sales in the U.S. have been rising for seven consecutive years now, and it’s denting the value of whatever is currently parked in your garage or driveway. With so many new cars rolling out of dealerships lots and instantly becoming used cars, the secondary market is glutted and the pace of depreciation is rapidly accelerating.
Your not-that-old car might not be a clunker quite yet, but it’s probably a lot closer than you think.
The average used car lost 17 percent of its value in the past 12 months, dropping from $18,400 to $15,300, according to data from Black Book, an auto analytics company. That annual depreciation figure has been increasing steadily, too. The average used car today depreciates nearly twice as fast at it did in 2014, when the annual rate was just 9.5 percent.
“We’ve got ourselves in an oversupply situation,” said Jim Hallett, chief executive officer of KAR Auction Services Inc., which sells about 5 million used cars every year. “Nobody is interested in stockpiling inventory right now.” Translation: If you’re trading in a used car, don’t expect to get much of a deal.
Emphasis mine. That sucks.
3rd Gear: The Next Nissan Leaf Is Expected To Go Cheap
Automakers keep putting their eggs into the electric basket because that’s the future, but for right now, EVs are kind of a tough sell. Ask the Chevrolet Bolt about that. A new Nissan Leaf is on the way too, but how can it appeal to buyers?
Apparently, by being cheaper, reports Automotive News:
According to unconfirmed reports, the Leaf will debut with an EPA-rated battery range of roughly 150 miles on a full charge. That is a sharp improvement from the outgoing Leaf, which has an EPA-rated range of 107 miles. But it is significantly lower than General Motors’ new Chevrolet Bolt, which delivers about 238 miles to a charge, or the luxury-class Tesla Model S, which gets 235 miles.
Nissan has not revealed its marketing plan for the new Leaf. But signals from the automaker suggest that the car eventually will come with more than one battery option, similar to a vehicle that is available with a four-cylinder or a V-6 engine.
Nissan’s strategy appears to focus initially on affordability — aiming for about $5,000 less than the Bolt — rather than on industry-beating technology.
But subsequent trim levels of the Leaf will include a battery with a greater range, and a higher sticker price. Nissan will now rely on an outside battery maker to pull that off.
Yes, 150 miles is better than the outgoing Leaf, but it seems to me the way to convert buyers to EVs is to sell them on range. And I can see 150 miles scaring away a lot of the regular-joe, fitbawl-watchin’ American buyer Nissan has spent years coveting with zero brand identity, blasé CVTs and TV ads boasting cash-on-hood deals.
4th Gear: Germans Sad
In Germany, the VW Group, BMW and Mercedes all face questions about whether they colluded to bring down parts costs, in some cases for parts possibly used to lower diesel emissions. The government has ordered an overhaul of millions of diesel cars, and more and more European cities are mulling diesel car bans at some point.
It’s all very bad news for Germany, the home of diesel power, and its vitally important auto industry. And investors are feeling the sadness feelings over it, reports Reuters:
The mood among German investors fell for the third month running in August, a survey showed on Tuesday, linking the drop to an emissions scandal engulfing the country’s car industry.
The sector’s reputation and the “clean” diesel technology at its core has been battered since Volkswagen admitted in 2015 to cheating U.S. emissions tests to conceal polluting fumes.
Last month EU antitrust regulators opened an investigation into claims of collusion among German carmakers over pricing diesel emissions treatment systems.
More and more, the end of diesel seems to be on the horizon.
5th Gear: Everyone Wants Jeep
Our own David Tracy believes that Fiat Chrysler’s potential sale of Jeep—and only Jeep—to Chinese automaker Great Wall would be monumentally stupid for FCA. David’s a smart guy, but you don’t have to be smart to see what a terrible deal this is. It’s common sense, and FCA losing its best and most lucrative brand would be the kind of shoot-your-own-dick-off move destined to be taught as a bad example in business schools for decades to come.
Who agrees? Everyone else who has eyes, reports The Detroit News:
Many analysts think selling Jeep on its own – not as part bigger deal for the automaker as a whole or with other parts of its operations – could be a mistake.
The Agnelli family, which controls the majority of Fiat Chrysler, has long sought to exit the volume-car business, said Dave Sullivan, an analyst with AutoPacific. So getting rid of some of the holdings under the company’s umbrella might make sense. And CEO Sergio Marchionne has been vocal about his interest in taking on a partner or an outright sale of Fiat Chrysler, meaning the company is not afraid of a major shakeup.
But Jeep and the Ram truck line are considered Fiat Chrysler’s most highly valued properties. Without Jeep, analysts said the automaker would be greatly diminished.
“It would be great for a buyer, if you could only buy just Jeep,” Sullivan said. “That sounds like an amazing opportunity. It does not leave much left, however.”
I don’t think this deal will happen, but if it does... wow.
Reverse: One Of Many Reasons The Citroën DS Rules
Neutral: Are You A Millennial Living The Boomer Lifestyle?
If you’re reading this site there’s a decent chance you fall into that cohort. Has your lifestyle changed? Are you switching from the project MR2 to a brand new CR-V to live in the ‘burbs with your partner and 2.5 kids?