Carmakers Think They're Recession-Proof

OEMs are dedicating themselves to experiencing only peaks.

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Car manufacturers have decided they’re going to jump from peak to peak, everyone and their mother is investing in semiconductor production, and VinFast officially has a U.S. showroom presence. All that and more in The Morning Shift for Monday, August 1, 2022.

1st Gear: 2008 Never Happened, Car Sales Will Go Up Forever, We’re Never Gonna Die

Depending on who you ask, we’re either on the brink of a recession or already in one. If you ask automakers, however, they’ll tell you that they simply don’t care: Everything is fine, and will be forever, historical evidence be damned. From the Wall Street Journal:

Even as consumer spending cools, one place buyers continue to splurge is at the car dealership.

Auto executives reporting earnings earlier this week displayed confidence that not only would demand for cars and trucks remain resilient in the second half of the year, but also an easing of supply-chain disruptions would help power profits in coming quarters.

A customer-order backlog, historically low dealership stock and car shoppers paying higher prices for vehicles all have led to a string of profitable quarters for most global car companies. The unique dynamic is fueling optimism across the industry that it can weather the mounting economic uncertainty better than it has done in past recessions.


“Inventory on the ground at dealers hasn’t changed in really about six quarters, even as production has gone up,” said Paul Jacobson, GM’s chief financial officer. “There’s a big pocket of demand that hasn’t been met yet,” he added.

The upbeat tone is unusual for the car business, which is typically among the first sectors to get hit by any downturn in consumer sentiment.


Look, okay, sure, there’s a recession right around the corner. But that’s never gonna happen to us, man! We’re invincible! We sell cars, and who doesn’t love cars? Don’t even worry about it, everything’s gonna be fine. I mean, yeah, we’re cutting thousands of jobs, but that’s just like, a precaution, y’know? Don’t sweat it, it’s all good.

2nd Gear: C’mon, Invest In Semiconductor Production, All The Cool Kids Are Doing It

If there’s one thing we all learned from the pandemic, since we clearly learned nothing about public health, it’s the importance of semiconductors in modern life. For the past two years, getting your hands on anything with a microchip has been a massive struggle, and where there’s struggle there’s often profit. From Automotive News:

In response to a catastrophic worldwide chip shortage that has so far knocked more than 13 million vehicles out of production since early 2021, chip producers, including Bosch, and governments, including the U.S. Congress, are pledging unprecedented sums of money into boosting semiconductor capacity — not only to address the shortage but to meet ever larger demand for chips across multiple sectors.

Congress last week passed a bill that will provide more than $52 billion to U.S. companies producing chips and providing tax credits for investing in chip manufacturing.

The European Commission is establishing an investment war chest of more than $45 billion, similar to the U.S. bill just passed.

Large amounts of funding are being committed by individual companies worldwide. More than 90 new wafer fabs or expansions of existing wafer fabs — the industry term for chip fabrication plants — are expected to come online globally over the next four years, according to SEMI, an electronics design and manufacturing industry group.

As technology generally marches forward, investing in semiconductor production is likely to be a pretty future-proof move. But doing so specifically for cars, where chips are outdated by design, could lead manufacturers into some dead ends.

3rd Gear: VinFast Now Has Stores

VinFast used to make an LS-powered BMW X5, and now makes electric crossovers that look like Pontiac Trans Ams. If that sounds like a downgrade to you, then you haven’t realized how fun EVs can be — or you’ve forgotten how good the ‘77 Trans Am looked. But if you need a reminder, VinFast now has stores where you can see for yourself. From the Wall Street Journal:

Vietnam’s Vingroup became a corporate juggernaut in its home country, operating everything from luxury resorts to hospitals, shopping malls and supermarkets.

Now, it wants to break into the U.S. car market with a little-known electric-vehicle startup, called VinFast, that has a novel way of pricing its models.

The young Vietnamese car manufacturer opened its first U.S. showrooms in July in California and is moving aggressively to expand its operations in the states, including a plan to spend $2 billion to build a new EV factory in North Carolina.

To fund its growth, VinFast has also filed paperwork with U.S. regulators for an initial public offering to be held later this year or next, making it the latest company to test investors’ appetite for seemingly out-of-nowhere startups focused on the increasingly competitive EV market.


VinFast is starting with six outlets in California and plans to open another two dozen locations in the state this year, before expanding to other U.S. markets. The sites don’t sell vehicles, but rather act as galleries, where shoppers can browse options and work with staff to place reservations online.

The EV company, established in 2017 in Vietnam, plans to sell two all-electric sport-utility vehicles in the U.S. to start: a midsize SUV, called the VF 8, that starts at $40,700, and a larger VF 9, starting at $55,500. U.S. buyers can place orders now with deliveries expected to start at the end of 2022.

Unlike other EV rivals in the U.S., VinFast has a unique business model in which buyers pay one price for the vehicle, but then lease the battery for a monthly fee. The company offers two battery-subscription plans, costing anywhere from $35 to $160 a month, depending on how much the owner wants to drive, the model purchased and the type of battery.

The fee includes maintenance of the battery and replacement when charging capacity drops below 70% of its original capacity.


Buying a car but renting the powertrain is the sort of galaxy-brain business model I’d expect from Elon Musk, but at least VinFast offers complete battery replacements — a nice balm for anyone who’s ever priced out replacing a Prius battery.

4th Gear: Nio’s European Foothold Expands Into Manufacturing

China-based Nio sells cars in Norway, and wants to expand out to more of Europe. To help with that goal, it’s building a plant in Hungary — but not one that will produce cars. From Reuters:

Chinese electric car maker Nio plans to open its first overseas plant in September to make power products for the European market as it accelerates expansion abroad.

The plant, in Pest, Hungary, will develop and manufacture power products such as battery-swapping stations to serve European users, Nio said in a statement late on Friday.


The company is also partnering with oil giant Shell PLC (SHEL.L) to build battery swapping stations globally, starting with China and Europe this year, according to a Nio statement on Monday. Shell will open its charging network in Europe to Nio users, it added.


Tesla quietly abandoned its much-hyped battery swap plans years ago, but Nio seems to be sticking with it. Battery swapping has its pros (speed) and its cons (unknown condition of the replacement battery), so it’s nice for owners to at least have the option to do it. Bring it over here, we love our long drives.

5th Gear: Get A Load Of This Shit

In the U.S., buying a car means interacting with often-skeevy dealerships who want nothing more than to rake you over the coals and extract every possible penny — then turn you over to the service department to do the same job over again. Because of this behavior, dealerships are widely reviled by pretty much every living person. But, and hear them out here: What if they had dumb names? Would that help? From Automotive News:

Van Horn Automotive Group has had a digital retailing presence since before the pandemic began in 2020, with the goal of selling vehicles to consumers entirely online.

The group, with 19 dealerships in Wisconsin and Iowa, initially drew on its established brand name and called its offering Van Horn Direct. But the process turned out to be disjointed, and it wasn’t possible to complete a purchase fully online, said Adam Gaedke, the group’s vice president of dealership operations.

Van Horn plans to change that with CloudLot, a digital brand it launched in June for used vehicles. Underpinned by Cox Automotive’s new Esntial Commerce digital retailing tool — co-developed with Penske Automotive Group and white-labeled for other dealerships to use — CloudLot enables vehicle selection, financing, delivery and signatures to be done online, according to the dealership group.


Other dealership groups are trying a similar approach. Titus-Will Automotive Group, with six franchised stores in Washington state, in March debuted CarBreezy, a digital sales platform also based on Cox’s technology. Last year, Koons of Silver Spring in Maryland converted its Inride vehicle subscription platform into a standalone used-vehicle acquisition brand, with its own dedicated staff and a new website and mobile app in the works.

In some respects, launching a digital brand takes a page from the playbook of online used-vehicle retailers Carvana and Vroom, which have marketed themselves as convenient and easy alternatives to franchised dealerships. Some dealers say they expect a separate brand can help them expand into markets outside of their home turf or reach customers who might not have considered a traditional dealership before.


If your business model is so bad that you have to pretend to be an entirely different company just to get buyers to even consider suffering your bullshit, maybe the brand name isn’t the issue. Maybe it’s the customer experience, the terrible websites, the uncaring (or actively conniving) sales teams, the F&I rigamarole, the lack of product knowledge, or the lobbying that mandates car buyers go through all of those things. But, no, I’m sure putting Cloud in your name is gonna fix all of that.

Reverse: We’re Never Getting The Winds Of Winter, Are We?


Neutral: It’s An Oats Day

My latest One Hell Of A Town order should arrive today, just in time for a new batch of merch to drop on the store at noon.


I need that Normalize Hitting The Curb sticker, and probably the Corvair one too. What’re you grabbing?