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Chevrolet and GMC’s slow truck rollout explained, electric vehicles can’t get any love as hero cars in movies, other sectors feel the sting of slow car sales and more for The Morning Shift of August 5, 2019.

1st Gear: The Trucks Are Here At Last

If you’ve been in the market for a new truck, and are a fan of the trucks General Motors makes, you’ve probably wondered: where are the trucks? The rollout of the various models of the new Chevrolet Silverado and GMC Sierra pickups has been relatively slow compared to competitors, allowing some—Ram in particular—to snatch up market share.

But GM counters by saying that this was done on purpose, and its trucks are still making all the money. Via Automotive News:

The automaker last week posted better-than-expected net income of $2.4 billion, up 1.6 percent from a year ago. In North America, GM earned $3 billion on a 10.7 percent profit margin, thanks largely to the sale of more lucrative crossovers and pickups.

“You’re really starting to see the earnings potential of our truck franchise,” CFO Dhivya Suryadevara told reporters.

That franchise has come under attack in recent months as the Silverado has slipped to third place behind Fiat Chrysler Automobiles’ Ram 1500 in the hypercompetitive full-size pickup sales race. Through the first half of the year, Silverado sales fell 12 percent, while Sierra sales were down 3.4 percent.

“If you look at it from a sales standpoint, you’d think things are not particularly positive,” Jessica Caldwell, executive director of industry analysis at Edmunds, told Automotive News. “But I think that from a profitability standpoint, it looks a lot different. It’s the cornerstone of their business.”

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The more expensive heavy duty and diesel trucks (the latter do score some impressive fuel economy numbers) are finally on the way soon, and production is ramping up. But while the financials are good—never forget the American automakers are essentially pickup truck manufacturers that happen to make other stuff as a side-hustle these days—analysts worry about GM’s lost market share from the slow rollout.

The automaker is preparing to increase annual capacity of the pickups by 60,000 and has plans to roughly double production of the Silverado Trail Boss trim to more than 20 percent of its mix after dealers asked for more inventory.

“We had a deliberate strategy that our launch would be cadenced,” Suryadevara said. “It was a strategy that was rolled out on purpose, and it’s working.”

Despite the boost to earnings, Caldwell said the blows GM has taken to its sales are troublesome.

“You could have a deliberate launch strategy, but if your direct competition is gaining share, that’s a threat to your business,” Caldwell said. “There has to be some concern somewhere. We can see what the numbers are, and Ram is certainly taking advantage of the slow rollout and has gained some new customers as a result.”

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But if GM’s profitable with trucks, something must be working, right?

2nd Gear: FCA Is Single But Down To Mingle, Maybe

Self-described capital junkie and merger enthusiast Sergio Marchionne may be no longer with us, but the idea that Fiat Chrysler could merge or partner with another automaker did not die with him. It’s just a bit more measured these days under new CEO Mike Manley, and not seen as an immediate necessity given FCA’s strong profits. Via Automotive News:

The topic continues to intrigue curious analysts, who brought it up several times last week during FCA’s quarterly earnings call, its first since the company in June pulled back its proposal to merge with Renault.

CEO Mike Manley, instead of shying away from questions, fanned the flames with an honest response: FCA is still open to opportunities.

Although the Renault deal didn’t happen, Manley sang the praises of the shelved tie-up, saying it “clearly added very, very significant synergies.” But he made clear that FCA has “a relatively robust business plan that survives with or without that type of merger.”

Immediately after withdrawing the proposal, Manley said, he held a global town hall meeting with FCA employees. He told them the merger was a great opportunity for both companies. But Manley said it was not a “necessary step for us in terms of how we develop our business going forward.”

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Maybe FCA will settle down with someone someday—a dashing French company, perhaps—but for now it’s fine being single.

3rd Gear: India’s Car Market In Trouble Too

We hear a lot about slumping new car sales in the U.S. and China, but one of the world’s biggest, fastest growing and most important new markets is India. But sales there haven’t been great either lately. Via Reuters:

Across India dealerships are being pushed out of business and the Indian auto sector is going through its biggest slump in nearly two decades. Passenger vehicle sales fell for eight straight months until June, and in May sales dropped 20.55% - the sharpest recorded fall in 18 years.

Preliminary data indicates passenger vehicle sales may have plunged as much as 30 percent in July. The slump in India, along with a simultaneous slide in Chinese auto sales, is a blow for automakers wrestling with higher costs driven by more stringent emission norms and a push to develop electric cars.

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The reasons why are different, though. Reuters calls it a “shadow banking crisis” that has tanked India’s lending market, and thus new car sales:

Prime Minister Narendra Modi’s 2016 ban on high-value bank notes, higher tax rates under a new goods and services tax regime, a boom of ride-sharing firms such as Uber and Ola, and a weak rural economy have all played a role.

But many dealers and automakers agree it is a deepening liquidity crunch among India’s shadow banks that has been the biggest single factor in an auto sales collapse, which some fear may lead to more than a million job losses.

Non-banking finance companies (NBFCs), or shadow banks, have dramatically slashed lending following the collapse of one of the biggest, IL&FS, in late 2018.

IL&FS, or Infrastructure Leasing & Financial Services Ltd, was a behemoth in shadow banking and its defaults and unraveling, amid fraud allegations, have dried up funding for rivals and led to a surge in their borrowing costs.

Non-bank or shadow banking firms generate credit outside traditional lenders, by means such as collective investment vehicles, broker-dealers or funds that invest in bonds and money markets.

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No finance, no new car sales. And as a result nearly 300 car dealerships have shut down in the last 18 months. That story’s worth a read in full; I doubt it’s the last we’ll hear about this situation.

4th Gear: No Hero Moment For EVs?

Go see any action-packed summer movie and you’re guaranteed to see a car chase, or several. But for now at least, product placement-driven scenes are devoid of electric cars—it’s still McLarens and Porsches and Camaros and the usual stuff, as Bloomberg notes.

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Sure, there’s a few exceptions, like Tony Stark’s electric Audi in the Avengers: Endgame. But often EVs are the butt of jokes rather than hero cars in these movies.

There’s a business reason for this, Bloomberg says, and it has to do with companies not wanting to spend marketing dollars on vehicles that aren’t hugely profitable:

Plug-ins may be capturing more cool factor, especially Tesla Inc. and its high-tech rides, but they’ve yet to land much time on screen. Since these models typically lose money and still make up less than 2% of the U.S. market, automakers still devote much of their precious marketing dollars promoting combustion cars by getting them cast for roles on make-believe roads.

“The business 101 would be that you’re making a ton of money on your large pickup trucks and your large SUVs, so the dollar you put into marketing on those pays back more than the dollar you put into the EVs that you’re losing money on,” said Mark Wakefield, head of the automotive practice at consulting firm AlixPartners.

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Tesla, still the poster child of EVs, doesn’t advertise, so it’s gonna be like this for a while. (And I don’t think all the Teslas driven by the oppressive, totalitarian, misogynistic government in The Handmaid’s Tale is the kind of product placement anyone wants.)

5th Gear: Slow Car Sales Bad News For Semiconductor Companies

Remember, the auto industry is a global one where everything is connected. As sales slow, it’s bad for chip manufacturers too, reports Bloomberg:

Semiconductor companies are wincing as consumers around the globe are buying fewer cars amid continuing trade tensions between the U.S. and China.

China has been a pain point for the sector as the two countries continue to spar on trade, and chipmakers had braced for slumping demand in the country to dent performance. The automotive sector has emerged as one of the biggest sources of weakness and is now threatening to dampen the chances of a recovery in the latter half of the year.

[...] Most of the automotive chip manufacturers have a larger piece of their business associated with traditional auto, and “that is not doing so well because there isn’t any market share or penetration to be gained; it is simply a units game,” Kumar said, referring to the fewer number of cars being sold.

Maxim Integrated Products Inc., which makes chips that are used in various parts of a car including lighting, infotainment and driver assistance systems, said it expected the calendar third quarter to be slow, due to a “soft environment” for automotive production. The company’s battery management systems used in electric vehicles will also have fewer shipments, given the market uncertainty in China, the company said.

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Reverse: Thanks, Cleveland

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Neutral: Are You Buying A Truck Soon?

Or did you recently? What did you get?