Car Sales Are Slipping Into Recession-Level Decline

Remember 2009? This is what 2009 looked like.
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Car sales seem to be hitting recession levels of decline, China is eyeballing hydrogen fuel-cell tech, oil tanker attacks boost oil prices, and Infiniti seems to be getting some much needed help. All this and more in The Morning Shift for Thursday, June 13, 2019.

1st Gear: Demand in the U.S. and China Is Looking Pretty Bad

May was another bad month for automakers as demand in the U.S. and China—the world’s two biggest car markets—continued to slip. One analysis claimed the sustained decline in the auto industry is reaching a level that hasn’t been seen since the recession, which are not good words for anybody except all of you still hoarding Geo Metros.

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Here’s more from Bloomberg:

Global light vehicle sales fell 7% in May, dragged down by a 16% decline in the Chinese market and stagnation in the U.S. and Europe, research firm LMC Automotive said in a report. “The global automotive industry is enduring a sustained downturn not seen since the Great Recession,” the report said.

Many automakers that have spent the last few years shifting focus to the Chinese market for growth are now hoping things magically turn around in the second half of the year, but it’s not looking likely:

The pace of sales declines in China is “still quite a bit shocking, and what’s equally shocking is a lot of companies are simplistically thinking this will stabilize in the second half of the year,” Murphy said. That kind of optimistic appraisal “is a little bit concerning for companies making large capital commitments that we all know are five plus years out,” he said.

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While the Chinese market is big enough to likely still show growth for companies investing in the country, it’s seeming less and less likely the companies will see growth on the scale they predicted on time. Remember that this recent decline is the first time it has seen a drop in 20 years.

And with companies like Jaguar and Tesla heavily reliant on pulling off a strong foothold in China to support themselves, if that fails, the companies won’t have any other markets of growth, as demand in Europe and the U.S. also continues to slip.

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It’s going to be a very expensive few years coming up, it seems.

2nd Gear: China May Already Be Shifting Focus To Hydrogen

Speaking of Tesla in China, one of the key figures in the Chinese government responsible for the rapid growth of electric vehicles in that country is now shifting his focus to hydrogen, and if the government follows his advice, it could mean a massive investment shift across the entire industry.

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Here’s more on Wan Gang, former Chinese science-and-technology minister and current vice chairman of China’s national advisory body for policy making, via Bloomberg:

“We should look into establishing a hydrogen society,” said Wan, 66, who’s now a vice chairman of China’s national advisory body for policy making, a role that ranks higher than a minister and gives him a voice in the nation’s future planning. “We need to move further toward fuel cells.”

That means the government will commit resources to developing such vehicles, he said. While China plans to phase out the long-time subsidy program for the maturing EV industry next year, government funding for fuel-cell vehicles may stay in place to some extent, Wan said.

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Hydrogen powertrain technology has been most an also-ran attempt at turning away from fossil fuels over the last two decades, with most government incentives and company investments going into battery electric technology instead. And to a large degree, the purely battery-electric movement has been very successful.

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But battery resource demand is already stressed to meet current global demand. With companies as big as Volkswagen Group shifting their entire strategy to battery vehicles, and some hundreds of companies in China, we may hit a resource emergency for EVs sooner than later.

That leaves some to think that hydrogen is still the future, as it has been promised to be for a long time coming. And if the Chinese government is throwing the same resources that put millions of EVs on the road in just 20 years toward hydrogen tech, maybe we’ll all be trading in our electric VW microbus for a fuel-cell car a couple of decades down the road.

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For what it’s worth, Wan also said he doesn’t think people will ever completely yield control of the car to a self-driving system. Maybe he’s on to something.

3rd Gear: The Guy Behind the FCA-Renault Deal Is Sad

The brief proposal for a merger between Fiat-Chrysler Automobiles and the Renault-Nissan alliance blew up in everybody’s face in almost record time, and now Renault is left picking up the broken pieces of its deal with the French government and Nissan, both of which seem even more upset now.

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It would appear that Nissan didn’t like the idea of more cooks in the kitchen in its alliance with Renault. The relationship wasn’t exactly healthy before FCA proposed, and it apparently only got worse after, causing the whole thing to flop in just a week.

Renault Chairman Jean-Dominique Senard, the guy brought in to make sure none of that happened, has a finger to point, and he’s pointing at the French government, via Automotive News Europe:

“It was the first time there was a chance to create a European champion at a time when people keep complaining that it doesn’t exist,” he said. “This was a perfect example for France, for Renault and Europe to prove that we can do something together.”

He placed the blame for the derailing squarely with the French government, and noted ironically that it was Finance Minister Bruno Le Maire who first “suggested” Renault approach FCA “a few months ago.”

The deal collapsed after Nissan said it would abstain at a Renault board meeting to vote on the merger proposal, prompting Le Maire to request the Renault board to postpone the vote for five days. “We simply asked for five extra days. Five additional days seems entirely reasonable to me,” Le Maire said. “Fiat withdrew its offer, as it was entitled to do. But believe me, the state will never react under pressure.”

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To me, it sounds like FCA made the proposal in earnest, then immediately opened the door on all of Renault and Nissan’s messy baggage, and given the first opportunity to reevaluate their decision with the five-day extension request, got the hell out of there. Honestly you have to respect FCA for seemingly making a smart move.

4th Gear: Oil Prices Climb After Tankers Seemingly Attacked

The price of oil has been pretty low this year so far due to worries over slowing demand, but a recent string of what the U.S. calls Iranian attacks on oil tankers (and what Iran calls I don’t know what you’re talking about) is now causing prices to bounce back up a bit.

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From Bloomberg:

Brent crude soared as much as 4.5% following reports of an assault on ships near the Strait of Hormuz, a critical passage for cargoes from the Middle East. The Japanese owner of one of the vessels told local media it had been hit by a “shell.” The second tanker, owned by Norway’s Frontline, suffered three detonations, the Norway Maritime Authority said. Both ships were evacuated.

The incident comes just a month after four vessels, including two Saudi oil tankers, were sabotaged in what the U.S. said was an Iranian attack using naval mines. Tehran denied the charge, and nobody has claimed responsibility for the latest assault.

“In the past weeks, the market has been in a panic about the perceived weakness in oil demand,” said Eugen Weinberg, head of commodities research at Commerzbank AG. “We’ve been wondering what piece of news would break the dam, and lead to a jump in prices.”

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Kind of weird to me that damage to supply lines would be good news for the oil market, but that’s just fucked up world we live in I guess. But at the end of the day, attacks on shipments is not a sustainable boost in demand and will hopefully be prevented in the future, so the bump in price could be very temporary.

5th Gear: The Designer Turning Around Lincoln Moves To Nissan

David Woodhouse, a designer under Ford’s roof for the last 20 years and the guy helping the design revolution that’s currently boosting Lincoln’s crossover sales, has suddenly jumped ship to go work for Nissan and Infinti, the Japanese automaker announced.

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Here’s more from Motor1:

At the time of his departure he was the automaker’s director of global design, and he played a not insignificant role in recent Lincoln projects including the Continental and Aviator concept vehicles – both of which led to production versions that garnered praise among the motoring press.

“As we celebrate the 40th Anniversary of Nissan Design America, I am pleased that David Woodhouse will be leading and inspiring our talented team in San Diego,” said Alfonso Albaisa, senior vice president of global design, for Nissan. “David’s talent, leadership and vision will ensure that NDA shapes an exciting future for the Infiniti and Nissan brands as well as groundbreaking user experience concepts for our customers for years to come.”

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I imagine some Nissan bosses are going to walk in to meet Woodhouse with two photos—one of the new Aviator and one of the new Navigator—and then point to a series of boring Nissan crossovers in the corner, and then leave Woodhouse locked in that room with a pen and some paper until Infiniti starts to show some signs of life.

Reverse: The French Have an Automobile Race

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Neutral: You Ready For a Fuel Cell Future?

The last time we seemed to talk about fuel cell vehicles in detail was back in 2015, when Elon Musk, known to be in the pocket of Big Electricity, was shitting on the technology.

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But the current problem with fuel cell tech is that you have to put too much energy into producing the product, which makes it not very efficient, and as the market reflects, it just makes more sense to use all that energy to charge some batteries instead.

On the other hand, if you work all of that out, hydrogen fuel cells would be the easier to integrate into our current gasoline and diesel infrastructure and better mesh with the internal combustion engine way of life, and the idea of quicker refueling is still appealing over the current wait times associated with electric car charging. Infrastructure, on the FCV side, hasn’t been looking fantastic as of late, though.

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If they can figure out how to better synthesize hydrogen and somehow make fuel cells work, do you see yourself leapfrogging EVs in the next 20 years?

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