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Companies like Honda and Volkswagen are excited to scoop up Ford and GM’s sedan margins, Nissan is still figuring its Chairman role out, California loves Tesla, and Lotus is going to China. All that and more in The Morning Shift for Thursday, Jan. 17, 2018.

1st Gear: Honda, Nissan, Volkswagen and Hyundai Have an Eye on American Automakers’ Sedan Pie

With U.S. automakers like Ford, General Motors, and Fiat Chrysler all controversially scaling back or shuttering sales of four-door sedans in a pivot to better-selling  crossovers, SUVs and trucks, some global automakers see it as an opportunity to increase their own sedan sale margins.

Here’s what Bloomberg heard from companies still committed to the sedan market at the Detroit Auto Show:

“Many people are talking about the demise of the passenger car, but if you just do the basic mathematics, there were over 5 million passenger cars that were sold last year and will be sold this year — that’s a huge market,” Henio Arcangeli Jr., senior vice president of automotive operations for Honda Motor Co.’s U.S. unit, said in an interview. “As other automakers decide to leave, we see this as a great opportunity to grow our market share.”

[...]

U.S. automakers’ stampede away from sedans has been a boon of sorts for Hyundai Motor Co., said Brian Smith, chief operating officer for Hyundai Motor America. As other companies exited some passenger-car lines, that created a vacuum in segments such as sedan sales to corporate and government fleets. Hyundai has been glad to fill those gaps with its models, Smith said.

[...]

Volkswagen AG’s top-selling U.S. model is the Tiguan SUV, but its second-best seller is the Jetta car, Scott Keogh, chief executive officer of Volkswagen of America, told reporters. And the core car market where VW focuses its lineup is still more than 4 million sedans, he added. “This is still a market we believe in — we have to believe in it in a smart way,” Keogh said.

The car also has a future at Nissan Motor Co., which got about 60 percent of volume last year from light trucks, according to Chief Planning Officer Philippe Klein. Nissan will continue to focus on models such as the Altima as more buyers shift to trucks because the company doesn’t see “the sedan going to zero,” he told reporters.

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Those numbers are far more promising than Ford, GM or Fiat Chrysler’s outlook, with only about 20 percent of sales volume coming from cars at Ford and GM, and less than 10 percent at Fiat Chrysler.

Of course, none of the companies hanging on to the sedan market are ignorant to the fact that crossover, SUV and truck sales are where the actual growth of the industry lies. Hyundai expects sales to tip in favor of a majority of light trucks for the first time in 2019, according to Bloomberg. Light trucks make up around half of VW’s sales, and about 45 percent of Honda’s.

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These companies are also aware that America’s piece of the five million passenger car sales pie is now potentially up for grabs, even if the segment isn’t exactly a rising star. One automaker’s trash could be another’s treasure, etc.

2nd Gear: Nissan May Throw Carlos Ghosn’s Chair Out Instead of Fill It

In the midst of the current financial misconduct scandal engulfing Nissan and its former Chairman and CEO, Carlos Ghosn, the automaker is strategizing new company governance and considering abolishing the Chairman role altogether, according to Bloomberg:

Carlos Ghosn’s downfall, with the auto titan accused of financial crimes that could put him behind bars for decades, saw Nissan swiftly dismiss him as chairman, leaving the carmaker he once saved from the brink of collapse with a leadership vacuum at the board level. While dispensing with a chairman would raise eyebrows in the U.S. and Europe, Japanese law allows companies to operate without one, with some choosing that route as a way of distributing power across top management.

“We are digging up everything and clarifying and proposing what we can do better to improve governance,” Keiko Ihara, one of Nissan’s three independent directors, said in an interview in Tokyo. “There is also the debate whether we really need a chairman.”

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Carlos Ghosn’s protege, Hiroto Saikawa, claims the nature of the chairman position lead to the alleged misconduct going unchecked, via Bloomberg:

A concentration of power in the hands of one person set the stage for the misconduct and Nissan lacked the transparency needed to detect it, Saikawa, 65, said shortly after Ghosn’s arrest. Saikawa also said the company would look for a sustainable structure that doesn’t rely on one person. The Japanese carmaker didn’t nominate an interim chairman after ousting Ghosn Nov. 22.

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Honda, another Japanese automaker, removed its Chairman role in 2016 as part of a governance shakeup, as did Kobe Steel amid its scandal involving faked data reporting.

Following Ghosn’s arrest and pending trial, Nissan has set up a special committee to reform the company’s governance, which plans to meet next week and offer a finalized proposal by March, according to the report.

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Leadership at Renault is also shaken up, where Ghosn is still Chairman despite his arrest, as the French government pressures the French automaker to sort out its alliance with Nissan in the wake of the scandal.

3rd Gear: Half of Tesla Model 3's Registered Last Year Were In California

Through October of last year, 39,606 Tesla Model 3's were registered in California, which accounts for 49.3 percent of all Model 3 reservations in the U.S. in that period, according to Bloomberg.

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The second-highest state registrations for the Model 3 was in Florida, which only accounted for 4,064 cars, or just 5.1 percent of total registrations. The other eight states in the top ten list of Model 3 registrations, in order from highest to lowest, includes Texas, Washington, Arizona, New Jersey, Illinois, Virginia, Georgia and New York.

As Bloomberg pointed out, it’s important to note that California has the highest state population in the country, with 40 million people, which is also about double the population of Florida.

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While it’s a rather obvious example of California’s advanced position on electric vehicle adoption, it’s also likely a side effect of the lacking EV infrastructure and limited incentives in the rest of the country.

It’ll be very interesting to watch these numbers shift in the future. Either we’ll be able to track the spread of EV adoption across the country month to month, or we’ll discover that effective EV interest doesn’t expand too far beyond California’s borders. Time will tell.

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4th Gear: Tesla’s Also Ending Its Referral Program Soon

Tesla CEO Elon Musk has announced that the company’s referral program is ending on February 1.

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With a referred Tesla customer, the new buyer gets six months of free Supercharging, or nine months free if they skip a test drive and order a car without having driven one, according to Tesla’s website.

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The person making the referral benefits from a cumulative list of rewards, including launching a photo into space for one referral, a small Tesla Model S for kids or a special wall charger, and more as the referral count grows.

According to the follow up tweets, the program costs the company too much money, particularly for the profit-strained Model 3 that went into production in late 2017. Musk also said there were no plans for a new referral program.

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Supercharging was free to all new Tesla customers up until November of 2016, and the now-outgoing referral program was announced in May of 2017.

5th Gear: Lotus Goes to China

Geely, the Chinese company that now owns Lotus, is looking to not only push the tiny British sports car brand up market, it’s also hoping to dramatically increase sales volume up from sales of just 1,630 cars in 2018.

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That plan now involves a new production facility in Wuhan, China, which would be used for combined Geely and Lotus vehicle production, targeting the Chinese market with an upcoming Lotus SUV model, according to Reuters:

But in a major break with the past, two sources familiar with the matter said Lotus would likely make luxury SUVs instead of sports cars during the Wuhan plant’s initial phase.

One of the sources said Geely wanted to emulate premium carmakers like Porsche (PSHG_p.DE), whose luxury SUV models were selling well in China.

The share of luxury SUVs in China’s overall passenger car market grew from 4.07 percent in 2014 to 5.01 percent in 2018, according to data from consultancy J.D. Power.

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According to the report, Lotus will still have some manufacturing in its current home of Norfolk, England, alongside the planned $1.3 billion China plant. It won’t be fun sitting through all of the heads exploding at the concept of a Chinese Lotus SUV if it’s ever confirmed.

Reverse: The First Corvette Prototype Debuts

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Really makes you wonder if Chevrolet wanted to unveil the mid-engine Corvette on this anniversary this year before the alleged development delays. It would have been great timing!

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Neutral: Will Sedans Ever Hit Zero?

It really only seems like the stronger sedans have survived. The question now becomes, are they attractive enough to hold the light truck onslaught at bay, or will that five million car margin continue to slowly trickle down to nothing?