Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know, which will help you survive today and move into the next and before you know it, the weekend will be here.
1st Gear: Elon’s Plans For The Model 3 Don’t Jibe With The Industry’s Reality
Anyone in the auto industry with a pulse believes sales are tapering off and that it would take a miracle to stave off any forthcoming declines. It’s an interesting dynamic to consider, especially now that Tesla has launched production of a $35,000 all-electric sedan called the Model 3. Electric vehicle demand is slightly up, but not enough to offset any declines across the rest of the industry, according to Blomberg. So how does Tesla CEO Elon Musk plan to sell 500,000 vehicles by next year? Good question!
One key to EVs, hybrids, plug-in hybrids and hydrogen-powered fuel cell cars regaining steam this year has been an improved variety of body types, including the introduction of crossovers like the gasoline-electric Kia Niro.
“If automakers want car shoppers to adopt green technology, they can’t just offer it exclusively in a little econobox,” Edmunds analyst Jessica Caldwell said in an email. “As tastes have taken a dramatic turn away from passenger cars, and battery technology improves, automakers have an opportunity to drive adoption forward by offering electric powertrains in vehicles shoppers actually want.”
Another catalyst could be the progress toward charging infrastructure. Musk said Friday that Tesla plans to triple the size of its supercharger network to 18,000 worldwide by the end of next year.
Bloomberg reports that EV sales jumped 41 percent in the first half of 2017, but still only make up 0.5 percent of the total light-vehicle market.
So can the Model 3 attract enough buyers to push the electric skepticism aside for good? Maybe with the Chevy Bolt and the forthcoming Nissan Leaf, we’ll start to see the tide turn.
But Musk not only has to swim against the industry’s current decline in sales, but he said Tesla has to go through a “production hell” over the next six months to start pushing out enough Model 3s to meet the demand of 500,000 reservation holders. It’s going to be an interesting second half of 2017.
2nd Gear: FCA Gets Diesel Approval
Fiat-Chrysler has been ensnared in regulatory and legal battles with the U.S. government over the alleged use of defeat devices on more than 104,000 vehicles to skit diesel emissions tests. While FCA has been duking it out with the U.S. justice department in court, the automaker has been trying to get a software fix approved to address the allegedly tainted vehicles and to receive certification to sell 2017 diesel vehicles.
On Friday, the certification was granted, netting FCA a minor victory, Reuters reports.
Fiat Chrysler had begun assembling diesel trucks this month in anticipation of approval. The software update will have no effect on the fuel economy ratings or vehicle performance, the automaker said.
The company has denied any wrongdoing, saying there was never an attempt to create software to cheat emissions rules.
FCA, however, still has to deal with the lawsuit over the alleged use of a device that allowed 2014-2016 Jeep Grand Cherokees and Dodge Ram 1500s to emit excess excess pollution in normal driving conditions.
FCA has denied any wrongdoing.
3rd Gear: FCA-UAW Scandal Likely To Widen
Last week, FCA also found itself in an another unseemly situation for non-diesel related matters. The automaker’s former chief labor negotiator, Al Iacobelli, was indicted by the feds for allegedly funneling $1.2 million to union officials. It’s a eye-popping document that outlines the use of funds to pay off everything from fancy pens to a Ferrari 458 Spider. The former wife of a United Auto Workers VP and a FCA financial analyst were also charged.
But the indictment mentioned several unnamed FCA officials, and, as expected, that was likely a signal that more individuals are expected to face charges, according to Automotive News.
The indictment specifically mentions at least eight unnamed people while vaguely mentioning “other” groups of people. Separately, federal officials announced fraud charges against former FCA financial analyst Jerome Durden, who is accused of creating false tax returns to hide payments to Holiefield, Iacobelli and other beneficiaries who were not identified.
“More could be charged,” said Peter Henning, a former federal prosecutor in Washington, D.C., and professor at Wayne State University Law School. Henning said it’s typical in investigations such as these for additional witnesses, informants and co-conspirators to be named after the initial round of arraignments.
FCA said it wasn’t aware of the scheme and didn’t sanction any of the actions. The scheme wasn’t much of a well-kept secret. The FCA financial analyst charged in the investigation told the feds that the money was used to keep UAW officials “fat, dumb and happy.” I’m not sure if you can get more direct than that.
4th Gear: Car Prices Falling, Lenders Profits Are ... Rising?
Yeah, it may sound a bit off, but Bloomberg reports the doomsday scenarios in the industry haven’t reached lenders just yet, despite a notable decline in car prices.
Ally Financial Inc., the bank that gets most of its revenue from auto loans, saw record adjusted earnings in the second quarter. General Motors Co.’s finance arm reported all-time high pretax profit in the period, and Ford Credit’s was its best since 2011.
This is not the tune auto lenders were singing at the beginning of the year, when a surge of vehicles with expiring leases was sinking used-car prices and roiling earnings. The weak underlying market dynamics are still there — more than 3 million vehicles will hit the used-car market this year, a third more than in 2016, according to J.D. Power. But with used-car values holding up better than expected, banks and captive finance companies avoided taking the hit from vehicles being sold at depressed prices.
How swell, knowing the financiers are all good.
5th Gear: Autonomous Tunnel Driving
Ready to take your robot car on an international drive? At least two autonomous cars are making such a trek on Monday, with tests planned in the Detroit-Windsor Tunnel in the Detroit River. It’s all part of an arrangement between the Windsor and Detroit city governments, The Detroit News explains:
Neal Belitsky, president and CEO of the tunnel, said Friday that the Detroit-Windsor Tunnel has partnered with the Michigan Department of Transportation and volunteered to be a site for self-driving vehicle tests. The tunnel is jointly owned by the two cities.
While nationally there are tests of self-driving cars on open roadways and highways, “There’s very little testing doing three things: One is getting through toll plazas, the second is going through an underwater tunnel and the third is how do you handle the whole situation with crossing a border and getting through customs and immigration,” he said.
It’s unclear whose vehicles are behind the tests, or how automated the self-driving cars are. The News says only that a “Chrysler and a Cadillac” that are “advanced” would cross the tunnel and take a trip through Michigan to Traverse City, where an automotive research seminar kicks off this week.
If you’re in the area and happen to see one of these cars, snap a photo if you’d like and send it along to firstname.lastname@example.org.
The entire auto industry’s forecasting a decline, yet Musk thinks Tesla can deliver a half-million cars by the end of 2018, at a time when electric vehicles still have yet to catch on. Is he nuts?