Chinese automakers have struggled to sell in the U.S. for decades and it’s only getting harder, VW is almost out of its dieselgate mess, and Boeing is losing more sales. All that and more in The Morning Shift for Tuesday, July 7, 2020.
1st Gear: China Wants Its Cars In America, But It’s Tough
Decades of growth in the Chinese economy, new trade negotiations, a negative public perception, and seemingly-impossible barriers to entry have mostly kept Chinese automakers out of the North American market. We’ve had a handful of cars make it over here, like the surprisingly bland Coda, but that’s about it.
As growth in China’s maturing car market slows and Chinese car companies look to expand their markets, however, the window to sell in the U.S. is rapidly closing, according to Automotive News:
Chinese automakers have stalled in the U.S. for a variety of reasons. One has been that an easier and more attractive growth opportunity was beckoning in the home market of China, where vehicle sales ballooned to 28.9 million in 2017. Chinese producers often weren’t motivated to do the heavy lifting needed to break into U.S. retailing, where success might take decades, when there were easier pickings at home.
Another challenge: U.S.-China trade friction has raised the stakes on how to operate here, Dunne said. In past decades, foreign automakers entered the U.S. purely as imports, without needing to first build U.S. factories to localize their production. But that option is not viable for Chinese manufacturers, given tensions about U.S.-China trade imbalances.
“The window for exports from China into the United States is closed,” he said. “If they want to sell them in the U.S., they need to build them in the U.S. It’s not good enough to just bring in a model at a 20 percent discount to what the Japanese and Korean brands are offering.”
Due to the current global economic climate, it just no longer seems feasible for a company to sell in America without also building most of its cars in North America, too, which exponentially complicates the logistics.
Prospective Chinese automakers are also now well aware that, in America, the customer relationship is what you’re really after, not just selling the car. Automakers here manage their owners directly, through dealers with service networks often, and that’s not something a Chinese company wants to leave to a third party.
That makes it increasingly more difficult to make it in America. If you’re going to show up, you have to show up big.
2nd Gear: Close The Dieselgate
Volkswagen’s long national nightmare may nearly be over. The U.S. government’s dieselgate oversight team is finishing up its monitoring work of the automaker’s apology efforts for cheating emissions. From Auto News:
Larry Thompson, the former U.S. deputy attorney general appointed by the department to monitor VW, has concluded in his third and final report that the automaker has met the settlement terms it agreed with the Department of Justice and California’s Attorney General, VW said in a news release on Monday.
“The report did not find any new violations and states that Volkswagen has met its obligations under the Third Partial Consent Decrees with the United States Department of Justice and California Attorney General,” VW said.
The findings, which can be downloaded from a VW website, put the company on track to exit the monitoring around the middle of September.
The diesel emissions scandal has cost VW about 31 billion euros ($35 billion) in settlement costs since 2015.
Thompson and his U.S. team are expected to vacate the area Volkswagen loaned them to work from by September 14, which means we should probably start investigating the meeting they have on the 15th almost immediately.
3rd Gear: JLR Targeting BMW, Audi Bosses
Jaguar Land Rover was not looking rosy before the global pandemic and resulting economic crash, and on top of that mess, it also needs to find a new boss. Nothing officially happened to the old one, he just aged out of the job at a really good time to no longer be in charge, according to Auto News:
JLR said in January that Speth would retire in September, triggering a search for a replacement.
Speth reaches 65 in September, which requires him to retire under the company policy of JLR parent Tata Motors. He will become non-executive vice-chairman of JLR.
The shortlist includes Froehlich, Schot, Nick Rogers, who is JLR’s head of engineering, and Fred Schulze, head of production at Audi’s home plant in Ingolstadt, Germany, the FT said, citing multiple sources familiar with the search.
Froelich retired from BMW at the end of June after reaching 60, the mandatory retirement age at BMW.
Former Audi CEO Bram Schot left Audi after being implicated in the dieselgate scandal. If anybody needs some tricks up their sleeve, though, it’s JLR right now.
4th Gear: Bad For Boeing
Boeing probably had enough on its plate as the planemaker dealing with a global pandemic, economic insecurity, and a 737 MAX plane that crashed twice. Now the company just suffered more losses, according to Reuters:
Aircraft lessor Avolon on Tuesday announced the cancellation of an additional 27 Boeing (BA.N) 737 MAX planes after cancelling 75 of the jets in April.
It also canceled one Airbus A330neo widebody jet, the fifth it has canceled since the start of the COVID-19 crisis, and deferred the delivery of three A320neo aircraft until 2022.
The Dublin-based lessor said it has reduced it near-term commitments by over 140 aircraft since the start of the year as it grapples with the fall-out of the COVID-19 pandemic.
It’s simple. I do not want to buy a plane that crashes. Also nobody has any money, and nobody should be traveling anytime soon. Not sure where that leaves Boeing.
5th Gear: Mobility Startups Under Fire For Taking Government Money
Quite a few transportation and mobility startups, often with billion-dollar valuations managing a desperately underpaid workforce, received the federal government’s paycheck protection loans, according to Bloomberg:
According to federal data released Monday, each company received between $5 million and $10 million in federal loans approved in late April. Some companies included on the list of loan recipients have said they did not actually apply for or accept the money, casting some doubt on the official data, but Getaround and Turo both confirmed they’d taken the loans, though they didn’t respond to questions about their exact values.
“On a global basis, our business was drastically impacted by the lockdowns and restrictions stemming from the coronavirus pandemic,” Getaround said in an emailed statement. “The PPP program helped reduce the otherwise severe impact on the health of our organization. In turn, this enabled us to continue providing an essential service to the communities we serve.”
“PPP funds were a lifeline for our 244 employees and our community of hosts and guests who rely on Turo to offset the cost of owning a car and travel affordably,” Steve Webb, a spokesman for Turo, wrote in an emailed statement. “At a time when millions of Americans are struggling to make ends meet, we’re proud that our marketplace is still here to help folks generate extra revenue.”
Meanwhile, how long will it take for these people to convince everyone car-sharing is the future again? Because right now, it may be a bit.
Reverse:
Neutral: Where Does JLR Need To Go?
You get a call five minutes after reading The Morning Shift. It’s someone with a British accent you can’t understand because they’re also crying, and they tell you that you are now in charge of Jaguar Land Rover. What should you do?