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.
1st Gear: Japanese Automakers To Up Their Pickup Game
You know the story by now. Gas is cheap and people are buying SUVs and trucks like crazy, leading to record sales for General Motors, Ford and Fiat Chrysler (supposedly.) This has left the Japanese automakers in the lurch a bit as demand for Civics, Camrys and Altimas begins to slide.
According to Reuters, the answer is MOAR TRUCKS:
Faced with slowing demand growth for smaller models including the Civic, the Camry and the Altima, Japanese automakers such as Honda Motor Co (7267.T), Toyota Motor Corp (7203.T) and Nissan Motor Co Ltd (7201.T) now want in, launching beefed up models at the Detroit auto show this week.
“We’re looking for 5 percent share of the full-sized pickup truck segment,” Nissan North America Chairman Jose Munoz said at the Detroit auto show this week, citing a figure that dwarfs Nissan’s roughly 0.6 percent market share of the full-sized pickup segment last year.
The automaker launched a hulking concept design for its Titan XD pickup model at the event.
They may never be able to beat Ford et al. in terms of volume, but the smart strategy is to fill the gaps and offer something different. This is why we dig the Honda Ridgeline and its insane tailgating potential.
2nd Gear: VW Takes A Sales Hit In Europe
It’s fair to say that in terms of public outrage, Dieselgate has been a much bigger deal in the U.S. than it has in Europe and other markets. But those cars were still affected by emissions cheating, and in December it seemed to cause trepidation among buyers even in VW’s home market. From Automotive News:
VW Group, Europe’s top-selling automaker, saw its market share drop to 22.5 percent last month from 25 percent in December 2014. VW brand’s share fell to 11.6 percent from 12.7 percent.
“Volkswagen customers are so far taking a wait-and-see attitude” as the automaker works to resolve its emissions scandal, said Carlos da Silva, a Paris-based analyst at forecaster IHS Automotive.
3rd Gear: Are Tech Companies An Existential Threat To Car Companies?
Morgan Stanley analyst Adam Jonas thinks tech companies should be treated as deadly enemies to automakers instead of potential partners. Here’s what he said at the Automotive News World Congress in Detroit, according to Bloomberg:
“You’re talking about the end of human driving, the end of private ownership, the end of the internal-combustion engine and the end of car dealerships,” Jonas said at an Automotive News conference Wednesday in Detroit. “Other than that, it’s business as usual.”
Google may form a partnership with a company like Ford relatively soon, but mainly to get access to knowledge the automaker has gained by having millions of cars on the road worldwide, the analyst said. Ford and Alphabet Inc.’s Google are discussing working together, including a joint venture to build cars using the Silicon Valley company’s technology, a person familiar with the talks said last month.
“They would use Ford as a host and devour them later,” said Jonas
His take is a lot more severe than mine, at least for now. While it’s true automakers need to start thinking what their business will look like decades down the line, and autonomy and ride sharing present interesting transportation solutions in urban areas, I think the complete end of private car ownership is a ways off if it ever happens at all. But we’ll see.
4th Gear: Wall Street vs. Detroit
The Detroit News’ Daniel Howes breaks down the problems that lie beneath the “golden age” veneer that we seem to be in right now, which includes the stuff you read about in 3rd Gear. You should read his whole article, but here’s another notable concern:
Finally, Wall Street still doesn’t truly believe in the New Detroit. For evidence, look no further than the range-bound share prices of GM and Ford. Seven years of improving performance, more than $70 billion in adjusted North American operating profit and robust returns on invested capital still are not enough to persuade investors they’re for real.
It’ll take two things, fundamentally, to answer skeptical investors wondering whether Old Detroit still lives: first, weathering another downturn without an assist from the American taxpayers and without beggaring investment in vital product programs.
And second, demonstrating that automakers can successfully negotiate the transformational threats of Silicon Valley to traditional pieces of the business. If they fail, Kodak won’t be the only one left behind in the innovation graveyard.
5th Gear: Ford Plans New Factory In Mexico
Before Google kills the business entirely, the automakers have to build and sell cars in the meantime. And here’s more details from Reuters on Ford’s planned new factory in San Luis Potosi:
The plant should produce around 350,000 cars annually, according to two officials, and the investment should be worth slightly over $1.5 billion, one of them said, speaking on condition of anonymity.
Ford declined to comment on the reports.
“We do not comment on speculation,” company spokeswoman Kelli Felker said. It is not clear yet which model will be built at the plant.
Ford said in November that it will stop building Focus compact cars at a factory in Wayne, Michigan in 2018. Officials at the United Auto Workers union have said the replacement for the current Focus will be made in Mexico.
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Reverse: Ford Foundation
Neutral: Will Tech Companies Kill Car Companies?
I find that hard to believe, especially after seeing all the synergy and partnerships on display at CES and Detroit. Silicon Valley is great at software but they aren’t masters of manufacturing. But the future is hard to predict at this point.
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