Ford’s electrification plans, still-slumping car sales in India and China, talks of Nissan’s next CEO, and bills that could give franchise dealers in California more freedom and better automaker reimbursement from warranty work. All of this and more in The Morning Shift for Thursday, Sept. 12, 2019.
1st Gear: The Reasons For Ford’s Electrification Plans
Electrification, for most automakers, seems to be all about the “future of cars” and “going green,” although it was just a few years ago when we began finding emissions-cheating devices in all kinds of automakers’ vehicles. But Ford? Ford is electrifying its more popular cars, Bloomberg writes.
Why? Because we’re all apparently too used to high gas prices by now.
Bloomberg writes that Ford said fear of high gas prices is no longer a motivator for people to go after low-emission vehicles, so it’s instead going for reputation over practicality. That’s why the plan is to a bring a “Mustang inspired” electric crossover and a battery-powered version of the F-150 to the market.
“People are now used to $4- or $5-a-gallon gasoline. They might gulp at $5 gas, but they wouldn’t have the same reaction today as was occurring 10 or 20 years ago,” said Bob Taenaka, senior technical leader of Ford’s electrified vehicles. It would take pump prices rising to double those record levels to change consumer behavior, he said.
So Ford is hoping the sex appeal of an electric model invoking the performance of the Mustang muscle car and a battery-powered F-150 pickup will trickle down to other models, much as large-displacement engines once were the source of bragging rights. “These are two of the most iconic vehicles that we produce,” Taenaka told reporters following a speech at an electric vehicle forum in suburban Detroit.
The idea, Taenaka said, is to “show EVs can be fast and tough and are not just science projects.”
It seems Ford is going out of its way to publicize its EV strategy, something we (and many others) have found unclear over the past few months. Investors and financial analysts too are concerned that Ford’s latest CEO’s turnaround plan, which includes an emphasis on electrification, isn’t working so great. Maybe this will help.
2nd Gear: China’s Car Sales Likely Aren’t Getting Better Anytime Soon
After more than two decades of annual growth, China’s auto sales took a downturn recently, and they’re not improving yet. In fact, Reuters reports, it’ll probably only get worse before it gets better.
Car sales, Reuters reports, fell 6.9 percent from a year earlier last month to 1.96 million, according to the China Association of Automobile Manufacturers. That was after drops of 4.3 percent in July and 9.6 percent in June.
Shi Jianhua, a senior official at the association, told Reuters that sales in the second half of the year should be better, but they’re not sure how much. But things don’t look great for the near future, he said. From Reuters:
“Perhaps the next three years will be at a low or small negative growth. We’re all looking forward to sales picking up, but it’s normal if we don’t get that,” he said, adding the key reason for the poor outlook was low consumer confidence amid a economic slowdown and trade tensions with the United States.
As recently as three years ago automakers had enjoyed double digit annual growth in the world’s largest auto market, before the brakes came on with the first annual contraction since the 1990s last year.
Subsidy cuts have also hurt sales of new-energy vehicles in China, Reuters reported, and those sales numbers are dropping as well. There’s more on the story here.
3rd Gear: Used Cars Are Likely What’s Behind India’s Auto-Sales Slump
Car sales in India, like China, are down, with Bloomberg reporting that new-car sales had their biggest monthly decline on record last month with deliveries falling 41 percent from a year earlier to 115,957 vehicles. But while Bloomberg reports that Indian Finance Minister Nirmala Sitharaman asserted that millennials going for ride-hailing services factors into the drop, there’s also another major contributor to consider: the rise of used car sales.
Bloomberg, citing a report from analysts Edelweiss Securities Ltd., reports that the used-car market grew from 0.8 times that of new cars in 2012 to 1.2 times that by March of this year. Slowing income growth and other factors come into play when considering why people are going used.
Here’s more, from Bloomberg:
The spurt pushed up the annual growth rate of the segment to 11% versus 4% for new cars in the period, the analysts said.
Last seven years have seen a steady rise in the number of organized players in the used car segment, helping boost consumer trust. Pre-owned vehicles are now perceived to offer better “value-for-money” than newer models, according to the analysts.
The attractiveness for used cars improved further after the government slashed tax on pre-owned vehicles to 12%-18% from 28% depending upon the engine size. The price gap also widened after regulatory changes made new cars more expensive, the note said.
The story also said that according to the report, the share of “replacement buyers,” or people who sell their used cars to buy other used cars, has more than doubled in fiscal year 2019 from fiscal year 2016 to 11 percent.
4th Gear: Choosing Nissan’s Next CEO
Nissan CEO Hiroto Saikawa, who was involved in the downfall of Carlos Ghosn and was recently discovered to be overpaid what people involved said was more than $400,000, will be out as CEO in four days. He’ll need a replacement, then, and Reuters has some ideas as to whom that replacement may be.
Reuters, citing four unnamed people familiar with the matter, reports that two of the top candidates to take over the soon-to-be-vacant role are the head of Nissan’s China business, Makoto Uchida, and an executive, Jun Seki, whose task was to lead the company’s revival.
The story cited the sources as saying Uchida is favored by Renault members of the board, while Seki is the Nissan preference.
Here’s some more, via Reuters:
There is also a possibility that another candidate could still be successful, with temporary Chief Executive Yasuhiro Yamauchi seen as one possibility, according to two sources.
The appointment of Nissan’s next CEO in October will have vast implications for both the future of Japan’s second-largest automaker and its strained alliance with top shareholder Renault SA (RENA.PA). The next leader could push for deeper ties with Renault or greater independence from it.
Nissan, Reuters reports, didn’t immediately respond to its request for comment. Reuters has more on the story here.
I also applied for this job and will let you know how it goes.
5th Gear: California Bill Could Give Dealers More Freedom, Compensation From Automakers
Automotive News reports that lawmakers in California, after a similar bill got vetoed last year, passed dealer-franchise legislation that would give dealerships more freedom in their automaker relationships, as well as adjust reimbursement rates they receive from car companies in doing warranty and recall work.
The bill is, of course, backed by the California New Car Dealers Association, and it’ll go to the governor’s desk again. It deals with, among other things, rates dealers get for warranty and recall work from automakers, which Automotive News reports can be 40 percent less than what retail customers would pay.
From the story:
Currently, state law sets warranty reimbursements generally on what’s considered reasonable. The bill, if enacted, would set the reimbursement that manufacturers must pay dealerships for parts and labor on warranty and recall work at “rates equal to the franchisee’s retail labor rate and retail parts rate,” according to the bill. Dealers would calculate those rates based on a formula spelled out in the legislation, using data from past retail repair jobs. [...]
The bill also addresses other dealer franchise-related issues, including preventing automakers from requiring dealers to upgrade their facilities within 10 years of the last improvement, and allowing dealers to challenge automakers’ performance standards before California’s New Motor Vehicle Board.
Automotive News has more here.
Reverse: Mae Jemison Goes To Space
Spacelab-J — a joint NASA and National Space Development Agency of Japan (NASDA) mission utilizing a manned Spacelab module — conducted microgravity investigations in materials and life sciences. The international crew, consisting of the first Japanese astronaut to fly aboard the shuttle, the first African-American woman to fly in space and the first married couple to fly on the same space mission, was divided into red and blue teams for around the clock operations. Spacelab-J included 24 materials science and 20 life sciences experiments, of which 35 were sponsored by NASDA, 7 by NASA and two collaborative efforts.
Jemison later left NASA, according to her Jemison Foundation biography, and started the Jemison Group, a technology-consulting firm with the goal of integrating socio-cultural issues into the designs of engineering and science projects.
Neutral: Popularity Versus Practicality In Electrification
Is popularity over practicality really the right way to go for electrification? Are we all really that used to high gas prices these days?