Volkswagen no longer thinks it can even break even in the U.S. this year, Lyft thinks they have a plan for this, and car sales in China are up for the first time in 21 months. All that and more in The Morning Shift for May 7, 2020.
1st Gear: VW Thought It Might Finally Break Even Here Until Coronavirus
Volkswagen is the world’s biggest carmaker by volume (by some measures), marketing its cars in scores of countries across the world, but that doesn’t mean it makes money in all of the places. Like in the U.S., for instance, where it has lost money for years as it has struggled post-Dieselgate with a lineup heavy on sedans and compacts in a largely SUV world.
That was supposed to change this year, but because of the pandemic VW is resigned to again lose money here.
From Automotive News:
Under VW Group CEO Herbert Diess’ restructuring plan presented in 2016, all the company’s money-losing regions including the U.S. were slated to return to the black this year.
In a conference call with reporters, VW Group CFO Frank Witter said the economic slump stemming from the pandemic had forced it to postpone its goal for the U.S. market.
“We were well on our way to reaching our target of a breakeven for the VW passenger car brand in the USA in 2020,” Witter said. “Due to the coronavirus, it naturally won’t be possible to meet this now, unfortunately. It’s a setback, but it doesn’t change our basic aspiration.”
I’m impressed that VW has stuck with the American market, despite it not paying off for them so far. Automotive News also notes that it’s unlikely VW is going anywhere either, with the Atlas now being built in Chattanooga alongside the Passat. Still, it’s kind of remarkable how the introduction of the seventh-generation Jetta last year just kind of came and went.
2nd Gear: Car Sales Are Up In China For The First Time In A While
It’s a bit early to be drawing any grand conclusions about whether this represents some kind of new normal in a post-coronavirus society, though it does suggest some light at the end of the tunnel.
From The Wall Street Journal:
Sales reached around 2 million vehicles nationally last month, [the government-backed China Association of Automobile Manufacturers] said on WeChat, a social media platform, citing provisional data. That would be a roughly 1% increase from the 1.98 million vehicles sold in April 2019. Final sales data will be announced next week.
Even marginal growth will come as a relief to an industry that last logged monthly year-over-year growth in June 2018. It has since been gripped by an unprecedented downturn following decades of increasing sales. Expectations for a 2020 rebound were scotched by the coronavirus pandemic, which helped bring about a 43% collapse in first-quarter sales.
3rd Gear: Lyft Still Thinks It Has A Path To Profitability
That’s despite some pretty dour pandemic numbers.
From Reuters:
For April, rides were down 75% year over year but Chief Executive Logan Green said Lyft saw moderate week-on-week growth in ride requests starting in mid-April.
In the United States, rides rose 21% in the first week of May compared with a low point on April 12.
Ridership grew 25% in Atlanta, 35% in Chicago, 29% in Houston, 39% in New Orleans, 22% in New York City and 25% in Seattle between the week ended April 5 versus the week ended May 3.
Based on April volumes, Lyft expects a second-quarter loss of less than $360 million before interest, taxes, depreciation, and amortization.
[...]
The company did not say whether it stuck to its goal of being profitable on an adjusted basis by the end of 2021 but on Wednesday said cost cuts would help it on the “path to profitability.”
Separately, Uber announced a huge amount of layoffs yesterday. From CNBC:
Uber said Wednesday it will lay off 3,700 employees and that CEO Dara Khosrowshahi will forgo his base salary for the rest of the year.
The layoffs to its customer support and recruiting teams represent about 14% of its 26,900 employees, based on Uber’s most recent headcount.
Khosrowshahi made $1 million in base salary in 2019 but gained the vast majority of his compensation from bonuses and stock awards.
4th Gear: Hertz, Avis, And Enterprise Are Calling Off New Car Orders
This isn’t entirely surprising given that rental-car business has fallen off a cliff, but it’s still striking.
Via Bloomberg:
General Motors is taking back cars it agreed to sell that were on their way to Hertz Global Holdings Inc., Avis Budget Group Inc. and closely held Enterprise Holdings Inc., a spokesman said. Hyundai Motor Co. also confirmed it has redirected some vehicles to its retailers that it was planning to produce for fleet customers.
Early last month, Fiat Chrysler Automobiles compiled a list of almost 30,000 vehicles the rental-car companies had purchased and circulated it to other prospective fleet customers, according to a person who shared the document with Bloomberg News. The attempt to transfer any of the cars to other customers ultimately fell through for logistical reasons, a Fiat Chrysler spokesman said.
[...]
Hertz, Avis and Enterprise have canceled all orders of GM vehicles for May, June and into July, according to a person familiar with its operations who asked not to be identified because the information is private. Hertz said in a filing Tuesday that it doesn’t expect to acquire new vehicles for the remainder of this year.
Fleet deliveries are around 20 percent of total deliveries in the U.S. for automakers, and sales to rental car companies are about 80 percent of that figure, according to Bloomberg.
5th Gear: The Tesla Model 3 Is The Best-Selling Car In Britain
This is perhaps some kind of statistical blip since car sales are down 97 percent in the U.K., but in April the Model 3 took the crown.
From Autocar:
Figures from the Society of Motor Manufacturers and Traders (SMMT) show that 658 Model 3s were sold in April, accounting for around 15% of all new car sales. With dealerships closed and customers adhering to the nationwide stay-at-home directive, just 4321 new cars were sold in April, down from 161,064 in the same period last year.
The Model 3 led an unusual list of the 10 best-selling cars in April, with the UK’s traditional biggest sellers largely absent. The list featured both electric cars such as the Model 3 and Jaguar I-Pace, and MPVs including the Ford Tourneo Custom and Peugeot Rifter.
Second place belonged to the Jaguar I-Pace, while the final eight were a very European mix of car (and a Ford and Nissan):
The Vauxhall Corsa placed third in the list, with 264 units sold. In March, the supermini came in at number six with more than 20 times as many sales. Vauxhall’s larger Crossland X crossover placed fourth with 143 units sold.
Ford’s Tourneo Custom MPV and its Peugeot Rifter rival were next, with 108 and 94 sales respectively, followed by the Seat Leon with 80 sales, the Mercedes-Benz A-Class with 72 and the Nissan Leaf with 72. Rounding off the top 10 was Peugeot’s 308 hatchback, with 67 sales.
Reverse: DaimlerChrysler
From History:
The purchase of Chrysler, America’s third-largest car company, by the Stuttgart-based Daimler-Benz marked the biggest acquisition by a foreign buyer of any U.S. company in history. Though marketed to investors as an equal pairing, it soon emerged that Daimler would be the dominant partner, with its stockholders owning the majority of the new company’s shares. For Chrysler, headquartered in Auburn Hills, Michigan, the end of independence was a surprising twist in a striking comeback story. After a near-collapse and a government bailout in 1979 that saved it from bankruptcy, the company surged back in the 1980s under the leadership of the former Ford executive Lee Iacocca, in a revival spurred in part by the tremendous success of its trendsetting minivan.
Chrysler’s minivans really were trendsetting back then but its funny to read the phrase “trendsetting minivan” these days.
Neutral: How Are You?
I was driving the other day and I hit a bump, heard a snap, and looked in the rearview mirror to see the following part come off my car:
David Tracy thinks it could be an exhaust hanger, which wouldn’t be the end of the world, though I haven’t had time to get underneath and investigate. I welcome your theories in the comments.