New car inventory still hasn’t completely recovered, Porsche is expanding its subscription program in the U.S., and Tesla. All that and more in The Morning Shift for March 25, 2021.
New car inventory plummeted last year because of pandemic factory shutdowns, though many were expecting it to recover by now because it will have been almost a year and car factories have been up and running for most of that time. Except then came an unexpectedly bad winter, and a global shortage of semiconducters, and problems at the ports.
Dealers (and consumers) are feeling it, according to The Wall Street Journal.
For buyers, there are slimmer pickings, higher prices and longer waits, dealers and analysts said. Many consumers have had to order models from the factory or pick from vehicles still in transit to the dealership, rather than immediately driving their new rides off the lot.
At the end of February, dealers had 2.7 million vehicles in stock or being shipped to stores, a 26% drop from the same month last year, according to Wards Intelligence. That is nearly as low as last summer, when U.S. car factories were stirring back to life after the shutdown.
“Stimulus is flowing, tax refunds are being issued, and consumer sentiment is recovering,” said Jonathan Smoke, chief economist at research firm Cox Automotive. Because consumer demand for new vehicles is expected to strengthen this spring, the inventory crunch is likely to get worse, he added.
For buyers, bargains are becoming harder to find. Many auto makers have curtailed the deep discounts they offered early in the pandemic. Car companies on average spent about $3,562 per vehicle on discounts and other sales incentives in February, a $600 drop from the same month a year earlier, according to research firm J.D. Power.
For years before the pandemic, we came to expect (relative) stability out of the car market, at least since all the tumult of The Great Recession. It sounds like we can now continue to expect chaos.
Tesla throws a lot of shit at the wall, some of it sticks, some of it doesn’t, in the form of cars, technologies, and claims, though I have to say that I am 100 percent down with its take on penalties for automakers that fall afoul of auto emissions regulations.
Tesla Inc is pressing a U.S. appeals court to immediately reinstate a 2016 Obama regulation more than doubling penalties for automakers who fail to meet fuel efficiency requirements, according to court filings.
The Trump administration on Jan. 14 delayed the start of higher penalties until the 2022 model year. Tesla told the Second Circuit U.S. Court of Appeals the Trump action was “unlawful” and “diminishes the value of performance-based incentives that electric vehicle manufacturers, such as Tesla, accrue under the standards”.
Tesla first asked the appeals court to act on March 4, saying the Trump administration’s “egregious action presents a situation as extraordinary as it is unjustified and inflicts immediate and irreparable injury on Tesla.”
In a filing Monday it said that the government’s position that there was no immediate harm to allowing the Biden administration time to review the Trump decision “ignores the ongoing impacts” on the credit-trading market.
Tesla is motivated by self-interest here, of course, given that the value of the regulatory credits it sells to other automakers would likely increase if the penalties were higher, but, still, those penalties should be higher and automakers should have more incentives to quit making gas-guzzling cars, not fewer.
Hyundai has a big, expensive recall of Kona EVs on its hands, and it doesn’t seem to be handling it particularly well. That’s at least according to Kona EV owners that talked to Reuters.
Hyundai said last month it would replace the battery systems in some 82,000 electric vehicles globally at a cost of $900 million following fires in 15 Kona EVs.
But Hyundai has yet to convey a clear plan to owners on when and how they can expect to have a potential fire hazard they are driving fixed, some of the owners have complained.
“When I asked Hyundai’s repair centre when exactly my Kona EV will be getting a battery replacement, they just told me that they would put me ahead in the line, but I haven’t received the exact date yet,” a 34-year-old Kona EV owner in Seoul surnamed Kim told Reuters.
Owners who spoke to Reuters declined to give their full names, citing concerns about privacy and a potential backlash from Hyundai.
“There were only a few EV options when I bought my Kona EV back in 2018, but now that there are way more EV models available, I don’t think I would go for Hyundai again,” Kim said.
This is to help give Taycan a lift, according to Bloomberg. More than a few automakers have experimented with car subscriptions in recent years with mixed success, though Porsche seems still committed.
The subscription service, dubbed Porsche Drive, is coming to four new cities in California — San Francisco, San Jose, Irvine and Monterey — as well as Houston, Texas, bringing it to nine cities in total. The German luxury brand started the program in Atlanta in October 2017, offering $2,000 and $3,000-a-month subscriptions that let drivers flip models like the 718 Boxster or Cayenne.
“This is profitable,” said Kjell Gruner, who took over as chief executive officer of Porsche North America in November. “We wouldn’t expand it if it wouldn’t be very meaningful for us and the business of the dealers,” he said in an interview.
Porsche models tend to have high residual values, which helps keep costs down, he said. Subscription prices are roughly 20% above the monthly cost of a two-year lease, which covers expenses like technology, insurance and maintenance.
Subscribing to an electric Porsche won’t come cheap. Renting a Taycan 4S, a high-performance version of the vehicle, will cost $3,250 per month — the most expensive model in the program. The base rear-wheel-drive version goes for $2,500.
Automakers have also seen subscriptions as a way to get younger buyers, and perhaps snipe a few would-be Tesla owners, though it also seems like the tried-and-true methods of getting someone into a new car — selling for cash, leasing, or financing — aren’t really broken.
Such that as of Wednesday, you can no longer loan somebody $40,000 or less in Illinois at an annual interest rate higher than 36 percent, according to Automotive News. Illinois joined 17 other states that have capped interest on some loans, including auto loans and gap insurance products that factor into interest.
The Illinois General Assembly passed the actin January as part of a broader initiative by the Legislative Black Caucus to curb racial inequities in the state. The law borrows heavily from the federal Military Lending Act, which contains the same interest rate cap for service members and covered relatives.
[Lisa Stifler, the Center for Responsible Lending’s] director of state policy, said in a statement that the law will help bring an end to predatory debt traps that disproportionately impact communities of color.
“Illinois joins the strong trend across the nation toward passing rate caps to stop predatory lending,” she said. “We must also pass federal reforms to protect these state caps and expand protections across the country.”
According to the act, Illinois families pay over $500 million per year in consumer installment, payday and title loan fees. Nearly half of Illinois payday loan borrowers earn less than $30,000 per year.
You should probably never accept a loan with a double-digit interest rate no matter what it is for, let alone a loan that has an effective interest rate in the 30s. But people still do, often because they feel like there are no other options. Be careful out there!
He won Dakar once, you may recall.
I’ve noticed in my neighborhood that more older folks have been going unmasked outdoors, which I take to mean they have been vaccinated, though I’m still a little twitchy about the whole thing.