The car market is white hot (really), and then there is Lordstown. All that and more in The Morning Shift for July 16, 2021.
We have been saying it for a while, but, when newspapers like The New York Times and The Wall Street Journal begin writing stories about it for normies, you know that things have reached a critical mass. Here, for example, is a WSJ story offering advice on how to navigate the current market, which includes things like “buy a sedan” and “maybe lease and don’t buy” and “trade in your car, it is worth something” and “the old advice about buying certified pre-owned and not new maybe isn’t valid at the moment.”
That is all sensible stuff, but what I’m really here for are the stories from the ground, and the NYT has me covered on this front.
Rick Ricart is expecting nearly 40 Kia Telluride sport utility vehicles to arrive at his family’s dealership near Columbus, Ohio, over the next three weeks. Most will be on his lot for just a few hours.
“They’re all sold,” Mr. Ricart said. “Customers have either signed the papers or have a deposit on them. The market is insane right now.”
“The industry has had strikes and material shortages before that have left us short of inventory, but I’ve never seen anything like this,” said Mark Scarpelli, the owner of two Chevrolet dealerships near Chicago. “Never, never, never.”
His dealerships normally have 600 to 700 cars in stock. Now, he has about 50. Once or twice a week, a truck arrives with five or 10 vehicles. The cars disappear quickly because of customer waiting lists, Mr. Scarpelli said.
And this charming man, who was super stressed about getting a second-generation Buick Encore:
Gary Werle, a retiree in Lake Worth, Fla., recently traded in a 2017 Buick Encore for a 2021 version, drawn by its safety features such as blind-spot monitoring and automatic braking. “I’m 80, and I thought it would be good to have those,” he said.
On Memorial Day, his dealer called, and Mr. Werle didn’t hesitate. “I was at a party and left to buy the car,” he said. “I’d heard about the shortages, so I wasn’t sure the car would be there the next day.”
It is high comedy that this guy left a party and his excuse was that he had to buy a Buick Encore. My late grandfather was also a devoted Buick man. Anyway, I feel like I say this every week but if you’re in the car market right now and don’t absolutely need it, consider taking a timeout. Sadly, most people in America absolutely need it, because our public transportation system is garbage.
Their terms are getting longer and longer and longer, the WSJ is the latest to report. This is because cars are getting more expensive, but buyers want their monthly car payments to stay the same.
Prices of new and used vehicles are at record highs, bolstered by a semiconductor supply crunch that has kept a lid on car production just as consumers are itching to get out and shop for them. Used cars and trucks were 45.2% more expensive in June than they were a year earlier, while new cars were 5.3% pricier, according to the Labor Department. Monthly payments don’t look all that different to consumers, though, thanks to lower rates, longer terms, or putting up more cash. For new cars, average monthly loan payments increased just $7 in the first quarter of 2021 compared with a year earlier, according to consumer-credit reporting company Experian. Monthly loan payments for used cars rose $19, or 5%, in the same period.
Loan durations had been getting longer even before the pandemic. The average length of an auto loan was 70 months for new cars and 68.9 months for used cars in the second quarter, according to data from Edmunds; 10 years ago, they averaged 64 months and 62 months, respectively. Much of that happened as competition grew among lenders and as car prices gradually increased, with auto makers adding new technology and customization options on vehicles. Longer payment terms were designed to make vehicles look more affordable.
There is some argument to be made (and it is often made by auto lenders) that, because modern cars are pretty good and last longer, then longer car loans are just fine, too. Still, this feels like a disaster in the making, and taking out a loan on a depreciating asset will never feel like a great choice. If the APR is zero, like many automakers have been offering, I can sort of see it, but those deals are going to be less and less of a thing with supply so constrained.
Ford Motor Co. is weighing plans to start shipping partially built vehicles that are awaiting semiconductors or related components to dealerships around the country, a move that, if approved, would place responsibility on its retail network to complete the assembly once the chips are available.
The automaker began detailing the plans, which are not final, to some of its dealers this week, according to four people with knowledge of the discussions. Only dealers who would choose to receive the unfinished vehicles would get shipments and service technicians would be trained on how to install the chips, one of the people said. Dealerships would be compensated for slightly less than an hour’s worth of labor for each vehicle, the person said.
Still unclear is whether the dealers would be responsible for the vehicles while they sit on their lots awaiting chips. Dealers are not expected to have to floorplan the vehicles before they’re finished, one person said. The people asked not to be identified discussing internal company plans.
In its comments to AN, Ford said that it was “exploring a number of different options,” which is the kind of nothing comment you would expect on a story like this. I was struck, earlier, by automaker executives telling the NYT that the market hasn’t been like this since the end of World War II, which is the kind of comment I would normally throw some side-eye at, but you know what? I believe that. It’s often hard to know when you are living through Extraordinary Times but that isn’t the case now.
Lordstown’s run of total chaos seems set to continue, as here is a paragraph from its latest filing with the Securities and Exchange Commission:
We have in the past been and may in the future be subject to, or become a party to, litigation, regulatory actions, and government investigations and inquiries. For example, we have received two subpoenas from the SEC for the production of documents and information, including relating to the Merger between DiamondPeak and Legacy Lordstown and pre-orders of vehicles, and we have been informed by the U.S. Attorney’s Office for the Southern District of New York that it is investigating these matters. We have cooperated, and will continue to cooperate, with these and any other regulatory or governmental investigations and inquiries.
The disclosure of the investigation by federal prosecutors is new, as Reuters reports. Normal stuff, normal company.
Still, they are experiencing the same kind of uneven recovery that we have seen here, though demand there at the moment seems a little bit less than the demand here. This will be up and down for a while.
From Automotive News:
Registrations rose by 13 percent year-on-year to 1.28 million vehicles in the European Union, Britain and European Free Trade Association, according to data from industry association ACEA, published on Friday,
Among brands, the monthly winners included Hyundai, whose registrations rose 75 percent, and Jaguar, which gained 55 percent. Kia and Mazda each reported 47 percent increases.
Losers included Renault brand, down 24 percent, and Ford, which slipped 20 percent.
In the first half, registrations rose 27 percent to 6.49 million cars, remaining well below levels the industry was accustomed to prior to the pandemic.
By the time Magee came to Oklahoma City to start a newspaper, the Oklahoma News, his new hometown shared a common problem with many of America’s urban areas—a lack of sufficient parking space for the rapidly increasingly number of automobiles crowding into the downtown business district each day. Asked to find a solution to the problem, Magee came up with the Park-o-Meter. The first working model went on public display in early May 1935, inspiring immediate debate over the pros and cons of coin-regulated parking. Indignant opponents of the meters considered paying for parking un-American, as it forced drivers to pay what amounted to a tax on their cars, depriving them of their money without due process of law.
I can’t tell if this is the writer of this History.com story being daft or that is what actually happened back then. I’m guessing it is the latter.
There was a man selling cakes outside the liquor store last night that were in the shape of penises, astonishingly realistic ones. New York is back, baby.