A 'Price War' Could Be Coming As Carmakers Scramble Over Sales Decline

Illustration for article titled A 'Price War' Could Be Coming As Carmakers Scramble Over Sales Decline
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1st Gear: PRICE WAR

New car sales are “plateauing”! We’ll close out this year at a slightly less insane 17.3 million to 17.5 million new vehicles sold, Honda’s American sales chief John Mendel said yesterday. Last year, that number was a record high 17.47 million.


This makes sense. Strong new car demand cannot last forever. And Mendel told Bloomberg that he’d be happy if the industry leveled off at a healthy 16.5 million. But until then, for automakers, there could be a creeping problem of more and more incentives to move metal, which is less profitable for them:

He warned, however, that the industry could be sliding into a “price war” as incentives jumped 12 percent this year through August, according to researcher Autodata Corp.

While the absolute value of discounts rose to more than $3,000 per vehicle, they are somewhat offset by record high transaction prices as the market has shifted to larger vehicles loaded with communications and driver-assist technology. Honda’s brand incentives have dropped 22 percent this year through August, according to data provided by Honda attributed to Autodata/PAI.

But in general incentives are on the rise, even as the cars get more and more expensive.

2nd Gear: Michigan’s Hypocrisy

Tesla’s pretty fed up with being blocked by Michigan from selling direct to customers, so it’s taking the state to federal court. And The Detroit News points out that Michigan is kinda full of shit on this one, since it’s trying to position itself as an innovator and leader of autonomous driving laws.


Innovation can only happen when the dealer lobby is happy, right?

Worse, if Musk gets his way in Michigan, what’s to stop Detroit’s automakers from moving to directly sell their metal to would-be buyers, gutting a nearly 100-year-old dealer ecosystem that forged a powerful business lobby and created a lot of millionaires along the way?

Plenty, if the experience of other states is any indication. Tesla sells directly in 23 states and the District of Columbia; the Palo Alto-based automaker has been unable to secure a license to sell in Michigan, Texas, Connecticut and Utah.

Are dealer networks in other states around the country in free-fall? Nope. Neighboring Ohio has revised its franchise laws to allow Tesla to sell in the state, even as the laws limit its outlets. And other states allow Detroit’s California nemesis to open galleries outside their existing franchise laws.

[...] Look, Michigan wants to have it both ways. It wants to be the vanguard of a new, quick, technology-leading auto industry capable of attracting top talent and claiming leadership as a mobility hub. And it wants to use the power of state law to protect a politically connected system that is deeply rooted in communities here and nationwide.


3rd Gear: You’re Next, Fiat Chrysler

Canada’s auto union Unifor just won some big promises from General Motors. It has selected Fiat Chrysler, which makes Hellcats and other cars I think, as the next automaker it wants to negotiate with. Via Automotive News:

Unifor represents about 9,750 workers at three FCA plants in Ontario: the Brampton assembly plant, which builds the Chrysler 300, Dodge Challenger and Dodge Charger; the Windsor assembly plant, which produces the Dodge Caravan and Chrysler Pacifica; and the Etobicoke casting plant, which makes aluminum die castings and pistons.

In an interview with Automotive News, [union chief Jerry] Dias said he chose FCA over Ford Motor Co. because the Brampton plant is the one most in need of new investment between the two companies.

“If I really prioritize my biggest concerns in Canada, the GM Oshawa plant was the No. 1 problem,” Dias said. “The No. 2 problem is that there’s been a cloud hanging over Brampton.”


4th Gear: Canada’s Union Chief Is Kind Of A Badass

Dias, Unifor’s president, came into these negotiations amid concerns that Canada’s auto industry was dying. He and his team’s work is securing that future after all. Not a lot of folks can take on GM and win. Via The Detroit Free Press:

Conventional wisdom was that Dias set the bar for himself and Unifor extremely high and potentially boxed himself into a corner.

Why? Analysts said GM didn’t have any products in the works that it could provide to Canada even if the automaker wanted to. Dias showed grit and determination and got a deal done and GM stepped up, Volpe said.

“Jerry Dias often does not get the credit he deserves for fighting for the Canadian automotive industry and (GM Canada President) Steve Carlisle and his GM team really does get credit for putting their money where his mouth is.”


5th Gear: VW Investor Wonders Why Managers Get Paid So Well

You know who’s doing alright in spite of everything? Volkswagen executives. The ones who survived the Dieselgate purge, anyway. Now one activist investor is openly wondering why they’re pulling in such big pay, reports Reuters:

The letter is billionaire Chris Hohn’s latest push for change at Volkswagen (VW) through his hedge fund TCI, which is famed for high-profile spats with company boards.

Hohn weighed in publicly in May to demand an end to boardroom “extravagance” after VW paid its top 12 managers a total of 63 million euros ($71 million) for 2015, even though the company plunged to a record loss after admitting to cheating diesel emissions tests.

In his latest letter, Hohn called for an overhaul of VW’s current pay system which he said paid executives “huge sums of money” if the company earned over 5 billion euros of earnings before interest and tax.

“This is obviously wrong,” said the letter, dated Sept. 7.



Reverse: What Could Possibly Go Wrong


Neutral: Is Michigan Full Of Shit?

Or is protecting its well-monied dealers just part of the game?

Editor-in-Chief at Jalopnik. 2002 Toyota 4Runner.

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Justin Hughes

Neutral: The traditional dealer system, as we know it, wouldn’t exist today if it wasn’t for laws that basically require it to work this way. Imagine using the “build your own” feature on a manufacturer’s web site, and on the summary page there’s an Amazon-like “buy now” button. After arranging financing (which you can also do online) and shipping arrangements, your new car gets delivered to you. Wouldn’t that be awesome?

I don’t know anyone who actually enjoys the dealer experience. “Dread” is a more appropriate word. Unfortunately, to buy a new car you have to put up with it. If there was an alternative, I’m sure many people would take it, and the dealers would either lose out or have to change their ways, neither of which they want to do. I wonder if Tesla may be busting through that wall like the Kool-Aid man.