Dealers Make Even Less Sense In An Electric Car World

Illustration for article titled Dealers Make Even Less Sense In An Electric Car World
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The Chrysler brand might not be long for this world, Tesla is set for even bigger stock market gains, and dealers. All that and more in The Morning Shift for January 4, 2021.

1st Gear: Everyone (Doesn’t) Love Dealers

No one really has much use for dealerships: not consumers, because dealers overcharge for just about everything; not automakers, because they would all much prefer to sell direct like Tesla; and maybe not even dealers themselves, because they love talk about how tough their business is.

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Still, they persist because of state franchise laws, and they will probably keep persisting thanks to those laws, in the near future at least. That said, the future for dealers does not look especially good as the world transitions to electric cars, since a lot of dealership revenue is from the service department and EVs simply have fewer parts that need fixing.

The EV question more generally has led to a reckoning of sorts, according to The Detroit News.

If he made $2,500 from every Cadillac he sold, it would take 80 sales to pay off the $200,000 investment for EVs. Instead, [Dick Nourse, president of the Nourse Family of Dealerships in Marietta, Ohio] decided to save that $200,000 and take the $500,000 from the automaker and put it back into his company. Besides, Nourse doesn’t think many people in Marietta, a blue-collar town on the Ohio River, will be in line to purchase a luxury EV.

“It’s not that big of an investment. We spend a lot more money on image campaigns for the different franchises that we’re involved with. But the $200,000 plus the termination money that they threw onto the table, the combination of the two of them ... being in rural Ohio it just made more sense than trying to trudge along with Cadillac wondering whether they got it right this time or not,” he said.

I’m really only quoting the above because it’s delightful to hear a Cadillac dealer talk a little shit on his way out. More to the point:

The initial EV investment isn’t all dealers have to weigh. Electric vehicles require less maintenance, which means fewer trips to the dealership’s service department. And, as manufacturers contend, longer-lasting vehicles won’t need to be replaced as often as a gas-powered vehicles produced on traditional assembly lines.

“There’s significantly less opportunity for revenue after the sale,” [Jeff Laethem, owner of Ray Laethem Buick GMC in Detroit] said, “so that is going to be probably the biggest disruption.

“The biggest value add that we can be as a dealer is to be the experts in knowing all of the functionality and how it interacts with the consumer. More than ever, we’re going to have to be the subject matter experts, because so much of this from a technology side is going to be pretty new to our customers.”

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If dealers see their biggest value add in the future as providing information that customers can get themselves with a few minutes of Googling, well, uh, that doesn’t seem like much. The good news for dealers is that the transition to electric is going to be decades-long, and all the internal-combustion engine cars they are currently selling will need plenty of service in that time as well.

2nd Gear: Peugeot’s Merger With Fiat Is Approved By Shareholders

Peugeot and Fiat’s merger has been good to go for weeks now, but today Peugeot shareholders officially approved it.

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From Reuters:

Shareholders in Peugeot owner PSA gave the green light on Monday to the French company’s merger with Fiat Chrysler (FCA), one of the last steps towards creating the world’s fourth largest automaker.

At a special shareholder meeting, the deal to form the new company called Stellantis was first backed by top investors with double voting rights, including the Peugeot family, China’s Dongfeng and the French state, via Bpifrance.

All other PSA shareholders backed the deal at a second meeting held online with a 99.85% approval rate among votes cast. FCA investors are due to give their verdict later on Monday.

“We are ready for this merger,” PSA Chief Executive Carlos Tavares said, adding that the date for the closure of the deal would be announced shortly if all shareholder approvals were granted. He said the deal had now passed all regulatory tests.

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3rd Gear: Related: Chrysler May Not Be Long For This World

Raph wrote in November about how the merger might be very bad news for Chrysler and, well, according to a new report by the Associated Press, that seems to be exactly what’s happening.

The low-performing Chrysler brand might get the axe as could slow-selling cars, SUVs or trucks that lack potential.

Already the companies are talking about consolidating vehicle platforms — the underpinnings and powertrains — to save billions in engineering and manufacturing costs. That could mean job losses in Italy, Germany and Michigan as PSA Peugeot technology is integrated into North American and Italian vehicles.

“You can’t be cost efficient if you keep the entire scale of both companies,” said Karl Brauer, executive analyst for the iSeeCars.com auto website. “We’ve seen this show before, and we’re going to see it again where they economize these platforms across continents, across multiple markets.”

[...]

Analysts say the Chrysler brand could be in jeopardy in the U.S., where it has only two models, the aging 300 sedan and the Pacifica minivan. U.S. sales of the brand were off 19% through October.

The two companies have yet to announce any decisions on brands. Fiat Chrysler, in a statement from Michigan, said one of Stellantis’ greatest strengths is its historic brands, including 10 from FCA, adding that there are no plans to close any plants. But PSA said in a statement from Paris that it hasn’t announced any plans for the brands. “We will communicate in due on this matter, as the EGA (shareholders’ vote) is not the closing date, neither the announcement of a strategic plan,” the statement said.

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Remember “imported from Detroit?” Chrysler really seemed like they had a live one there for a minute.

4th Gear: Tesla Stock Still Shooting Up

The stock market is closed for regular trading on the weekends, which means it wasn’t open to react to Tesla’s big news Saturday that it delivered nearly half a million cars in 2020. No matter, the stock market is back open and predictably Tesla shares are again rising in price.

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From Reuters:

“We are raising our forecasts to reflect higher 4Q deliveries and reports of strong demand for the Model Y in China, which is also suggestive of higher future deliveries,” J.P. Morgan analysts said in a client note.

The brokerage also raised its bearish price target on Tesla to $105 from $90. Street’s median target on the stock is $424.5, nearly $300 below its current trading price, according to Refinitiv data.

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This is all truly great news for Tesla and its shareholders, but the thing about Wall Street is that its response to news like this is always the same. The response is, “We’ll take more of that now please.”

“The bad news is to keep up with this demand, the company needs to quickly build new factories in Austin, Texas, and Brandenburg, Germany,” said Gene Munster, managing partner at Loup Ventures.

“... Ramping production is difficult and will be one of the most important Tesla topics in 2021, along with the status of FSD (Full Self-Driving)”.

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5th Gear: Byton Isn’t Dead Yet

The electric car startup Byton has been on the ropes, but thanks to new investment from the Apple supplier Foxconn, Byton may soon come off the ropes. Or stay on the ropes. Some kind of ropes will be involved.

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From Bloomberg:

The companies, aided by the Nanjing Economic and Technological Development Zone, aim to start mass production of the Byton M-Byte by the first quarter of 2022, according to a statement Monday. Foxconn, whose main listed arm is Hon Hai Precision Industry Co., plans to invest around $200 million in the venture, a person familiar with the matter said earlier, declining to be identified discussing information that isn’t yet public.

The deal could represent a lifeline for Byton, which is struggling to produce its first vehicle having unveiled its M-Byte concept car several years ago. Under the arrangement, Foxconn will supply Byton with its advanced manufacturing technology, operation management expertise and supply chain resources. The Taiwan-based company is however also talking to other Chinese electric-car makers on potential collaborations, another person familiar said.

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Reverse: EV1

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This was 24 years ago today and more than seven years before the founding of Tesla. One wonders, in hindsight, how differently GM might have done it.

Neutral: How Are You?

I saw a flawless 914 on a walk yesterday. They are always so shockingly small, this one especially so as it was situated next to a current Silverado. The trucks are too big.

News Editor at Jalopnik. 2008 Honda Fit Sport.

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DISCUSSION

whatthehellisgracielawdoinghere
whatthehellisgracielawdoinghere

1st Gear: If Tesla is the alternative case then a robust dealer network is preferable to me. Buying a Tesla was no easier than getting a car through a traditional dealer and getting a Tesla serviced is a lot more difficult. It can take over a month to get an appointment. Plus no one answers the phone at Tesla service. Its a common thread on the forums so I’m not alone. There may be less to break but there’s still plenty left to break.

If you want hassle free shopping, any dealer will gladly sell you a car at MSRP over the phone like Tesla does. They’ll even detail it proper and fill the tank for you if you ask.