Detroit Is Falling Behind On Crossovers Because Time Is A Flat Circle

A billion dollars going to a new manufacturing plant, 700 million losing out to tariffs and more await you on The Morning Shift for Tuesday, July 31, 2018.

If there's one thing you can trust the Big Three to do, it's fight amongst themselves and cede ground to foreign manufacturers even on Detroit's most sealed-up market segments, as Bloomberg details in a new report today:

During broadcasts of Wimbledon tennis matches this month, a promotional game was playing out between General Motors Co. and Ford Motor Co. Unfortunately for Detroit, the two look outmatched by other opponents.

The advertisements were for crossover vehicles that are crucial to automakers' success in the U.S., with consumers buying them in droves at the expense of sedans. GM was dangling a hefty 18 percent discount on most Buick Encore models. Ford was hitting back with an ad in which the narrator opened: "Considering Buick Encore? You should look at the all-new Ford EcoSport."

But the dueling commercials highlighted an all-too-familiar story. In a sequel to Detroit's virtual capitulation of the still-sizable U.S. passenger-car market, GM and Ford are trying to pick off one another's customers as they struggle to go toe-to-toe with the likes of Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. The ground they're giving up to Japanese automakers now is with the crossovers that boast better handling and fuel economy than truck-based sport utility vehicles.

The news, specifically, is that Detroit held a solid 60 percent of the crossover market here in America back in 2005 and went down to 45 percent in 2017. Analysts expect that to be down to about 30 percent by 2023, which will be a big deal, as the Sedanocalypse will have likely culled all cars that are not crossovers from the market. Everything will be a crosscoupecab with body cladding, a descending roof, and a convertible top, and will be all things to all buyers.

Read all of Bloomberg's report here, and then re-read it by replacing all the dates with the 1970s and change "crossovers" to just "cars in general."

BMW, fresh off hiking up prices on SUVs as tariffs loom has now selected a new site for a $1.2 billion auto plant and that location is............not the American South. It's Hungary.

And it's out there. The plant will go up near Debrecen, a town a good 120 miles east of Budapest, as Automotive News Europe reports.

This is BMW's first new plant in Europe since it got a new one in Leipzig back in the simpler days of the year 2000.

Denso, the super supplier within the Toyota empire, has some rosy news for us as the Trade War beginneth. It figures that it alone will lose a good 80 billion yen in "additional costs," as the Japan Times reports:

Auto parts supplier Denso Corp. said Tuesday that U.S. tariffs on imported cars and auto parts, if invoked, could result in some ¥70 billion to ¥80 billion in additional costs for the company each year.

"It is a very worrying factor," Yasushi Matsui, executive director of the Toyota Motor Corp. group company, told a news conference. "We hope that fair trade rules will be maintained."

That's about $716 million at today's exchange rate. Cool.

Tesla might be having a slightly hard time keeping itself going these days, but at least its big battery partner Panasonic seems to be doing well by it. Panasonic expects to be making a profit from its business making batteries with Tesla after two years' work, as Reuters reports:

"For the past two years, Panasonic has spent on capex and R&D without being able to record revenues against those costs," analysts at Jefferies said in a recent client report.

"By the end of this financial year, as Model 3 production run-rate becomes stable and sustainable, it (Panasonic) should be able to record profits in its Tesla battery business."

Panasonic maintained its profit forecast for the year through March at 425 billion yen, 2 percent below the average of 21 analyst estimates.

Ah, yes. Stable Model 3 production. Nevermind then.

Expect your next self-driving car to handbrake turn into a ditch because the brains behind the most enthusiastically driven homologation specials in history are working on autonomous vehicle tech, as Automotive News Europe reports in an interview with Cosworth CEO Hal Reisiger, in relation to Cosworth's new Michigan offices:

Q: What's Cosworth's role in automated vehicles?

A: In 2004, when the shareholders bought the company from Ford, they also bought a company called Pi Research, a spinoff out of Cambridge University consisting of mathematicians applying their skills to electronics. We became experts at data acquisition, telemetry and analysis.

We have a long-standing experience integrating sensor data output with data analysis. In controls, we've done power management and [electronic control units], along with other electronic subsystems, principally based in motorsports. But as we looked at the strategy five years ago, we said how do we apply the brand, our powertrain and electronics core competencies? We put together a strategy that enabled us to become a Tier 1 supplier both on the powertrain and electronics side.

Give an example of how Cosworth has united powertrain and electronics expertise.

With our AliveDrive technology we take video and visual image processing and integrate them using intellectual property that synchronizes visual image processing with CAN bus data that describes completely how the vehicle and the driver are performing. That sets the foundation. When you hear about [advanced driver assistance systems] and [autonomous vehicles], it's all about artificial intelligence and machine learning. How quickly can we get a car to work like a human? And this is a big challenge because sensors aren't eyes and processors are not brains.

Cosworth argues that it has experience working with extremely tight data monitoring from its work on race cars and that all translates to the sensor-driven world of AVs. I imagine they just realize that people will only be asking for better-breathing cylinder heads for so long.

Do you think this analyst report on Detroit losing ground to crossovers makes sense? Is it fair to expect GM, Ford and Fiat Chrysler to keep losing ground on tall hatchbacks when they seem to be holding steady on trucks in spite of everything?