Automakers in Britain are sad, some car buyers are resorting to new tactics, and Elon Musk. All that and more in The Morning Shift for December 23, 2021.
Before the pandemic, my standard advice to people who had the luxury of time and a little extra money was to not be afraid to expand your search for a new or used car to well beyond your local area. What you might value in a car is very different than what someone in Topeka or Columbus or Phoenix or New York City might value, and vice versa, so deals could often be found if you were willing to make a little adventure of it.
Now, with the pandemic and the chip shortage, people are being forced to look beyond their local markets for cars whether they want to or not, according to The New York Times. That’s not even for deals or to get something interesting, but just to get the normie car they want. It is either travel, or wait. Desperate times, desperate measures, etc.
Take this poor woman, who had to travel over 500 miles for a Ford Escape SE Plug-In Hybrid:
When Rachael Kasper started shopping for a new car in August, she had her heart set on a Ford Escape plug-in hybrid. The problem was that Ford hasn’t made many of them this year because of a computer chip shortage that has slowed auto production around the world.
Ms. Kasper first came up empty in her home state of Michigan and, later, in neighboring states. When she expanded to the East Coast, she found one — at a dealership 537 miles away, in Hanover, Pa.
“I flew to Baltimore, took a Lyft to the dealer, and then drove all the way home,” said Ms. Kasper, who owns a water-sports equipment retailer. “It was quite an adventure.”
Or this poor guy, who is stuck in purgatory waiting for his new Porsche Taycan:
As Ed Matovcik, a wine industry executive in Napa, Calif., neared the end of his lease on a Tesla Model S, he decided to switch to a Porsche Taycan, a German electric car. He ordered one, but it won’t arrive until May, three months after he has to give up the Tesla.
He is planning on renting cars until the Taycan arrives and is looking on the bright side. “It’s a different world now, so I don’t really mind the wait,” he said. “I’m thinking of renting a pickup for a week so I can finally clear out my garage.”
Or this poor guy, who simply wanted a used Ford EcoSport at a reasonable price and, when he couldn’t find that, decided to own his son:
Tom Maletic, a retired medical sales executive in New Orleans, recently started shopping for a two- or three-year-old Ford EcoSport, a small sport-utility vehicle. He had hoped to find one with fewer than 20,000 miles priced around $15,000, which is what he paid for an EcoSport for his wife earlier in the year. “But it was 17, 18, 19, 21,000” dollars, he said. “And these were five years old, six years old, with a lot of miles on them.”
In the end, he flew to Michigan to take back a 2015 Ford Escape he had passed on to his son, and drove it the 1,100 miles back to New Orleans.
I’m hoping he showed up at his son’s place with as little notice as possible.
The sales came as Mr. Musk exercised more than 2.1 million Tesla stock options, according to regulatory filings late Wednesday. He sold more than 934,000 of the shares in the company he runs, valued at around $928.6 million, to cover tax withholdings, the disclosures state.
The latest transactions are part of a plan Mr. Musk set on Sept. 14 to exercise options and sell shares. The options he’s exercised are part of a tranche of around 23 million vested stock options set to expire in August 2022. He has exercised about 21.3 million of those options.
Mr. Musk said Wednesday on Twitter before the filings became public, “There are still a few tranches left, but almost done.”
Mr. Musk held around 170.5 million Tesla shares when he posted the Twitter poll and pledged to sell 10% of those holdings. He has sold around 14.8 million shares so far, leaving him at least a little more than $2 million in stock sales short to meet his commitment. The precise number depends on how he defines his ownership stake.
Exercising Tesla stock options has netted Mr. Musk more shares than he held at the time of the Twitter poll. His Tesla stock holdings now top 177 million shares.
Elon Musk is filthy rich, reports say.
CarMax made over $269 million in its latest fiscal quarter, on net revenue of over $8.5 billion, according to Automotive News.
“Our solid execution, customer-centric omni-channel strategy, and macro factors are driving strong performance across our diversified businesses,” CarMax Inc. CEO Bill Nash said in a statement Wednesday. “Our top line momentum continued into this quarter and we achieved record levels of third quarter unit sales in both retail and wholesale, generating all-time record revenues. We also bought more cars from customers than ever before.”
CarMax increased retail sales 17 percent year over year to 227,424 vehicles during the third quarter, which ended Nov. 30. Wholesale volume rose 49 percent to 187,630 vehicles.
On the supply side, CarMax nearly doubled the amount of vehicles it purchased directly from customers during the quarter. The company said it acquired about 194,000 of those 383,215 vehicles through its online instant appraisal feature.
I’ve always heard better things about CarMax than, say, Carvana.
Automakers in Britain have been having a time of it just like everyone else, thought it is still startling to come across statistics like this, that they are having some of the worst times in decades.
British car manufacturers had their slowest November in 37 years as the sector struggled to cope with the impact of the coronavirus pandemic on global supply chains, industry data showed on Thursday.
Car production fell by 28.7% compared with November 2021 to 75,756 units, despite a 53% increase in electric vehicle output, the Society of Motor Manufacturers and Traders (SMMT) said.
It was the fifth consecutive month of decline and represented the worst November performance since 1984.
The main reason is what you think.
It the first 11 months of 2021, British car production of just under 800,000 units was down by 433,000 compared with 2019, before the pandemic hit.
“COVID is impacting supply chains massively, causing global shortages - especially of semiconductors - which is likely to affect the sector throughout next year,” Hawes said.
Arndt Ellinghorst is a guy who the Financial Times calls “Europe’s top auto analyst,” and I’ll take their word for it. Ellinghorst is in the middle of getting out of the auto analysis game, though, and offered an exit interview of sorts with the FT, in which he criticizes legacy automakers for not doing enough to transform themselves and being caught flat-footed by the likes of Tesla.
“In the US people have taken a view that these companies are just metal benders,” says Ellinghorst, while in Europe, particularly in Germany, “the market has taken a view that the influence of labour unions, the co-determined supervisory boards make these companies too slow to restructure.” Recent drama in Wolfsburg has done little to dispel this notion.
But Ellinghorst also places a significant part of the blame on those sitting in boardrooms, who “treated their product with disrespect”. For years, he has been complaining that the industry has run an “overly volume centric business model”, a “stack-em-high” strategy that led to high fixed costs and higher break-even points, both hard to reduce in a cyclical downturn.
Then came Tesla, and executives (with the honourable exception of BMW, a pioneer that simply rolled out the technology too early) were “not fully convinced that they could transition their brand equity into the electric world,” until Dieselgate and regulation forced their hands, he says, recalling conversations with complacent German managers.
The VW brand has also recreated its complexity in the EV world, launching several similar models instead of focusing on one or two breakthrough products. VW, which will sell far fewer than the 600,000 electric vehicles it hoped to sell this year, partially due to a lack of semiconductors, “has not been convincing, both in terms of technical performance and the volume”.
This all rings true, if a little textbook, but who knows how VW or any of the other legacy automakers will do with EVs in the next decade; they have been around for decades and decades for a reason. I am down with this though:
Given these headwinds, what, I ask, is the bull case for Germany’s auto powerhouses?
Ellinghorst’s first two suggestions are unsurprising. Drastically reduce spending on combustion engines and petrol/diesel models, and be more rigorous on pricing, without which “all the restructuring is worth nothing”.
His third recommendation, however, does not come from an Excel spreadsheet. “The product must be exciting and emotional,” he says. “Porsche’s Taycan (which is outselling the 911) is probably the best example. It is so far the only example.”
The Mercedes EQS would like a word, but beyond that it is hard to argue with this take, which seems hotter and hotter the more I think about it.
Here is an old TV documentary about it:
Season’s greetings, however or whatever you celebrate. I’m going to go listen to “A Long December” now, again.