Used cars have maybe never been hotter, Tesla reduces the price of the Model Y, and Fisker goes public. All that and more in The Morning Shift for July 13, 2020.
Used car prices at auction are at record highs, according to Automotive News. Prices at dealerships, strangely, haven’t spiked along with them. Dealers source their used car inventories in part from buying cars at auction. There, the action is setting records, mainly because retail customers are snapping up used cars, depressing used car inventory in a time when new car inventory is also depressed.
The latter, of course, is still trying to rebound from factory closures and, in GM’s case, a strike. Per AN:
Scott Gruwell, owner-partner of Courtesy Automotive Group in Arizona, attributed the rise to shoppers returning to the market in May and June after being mostly sidelined by the coronavirus pandemic in April. That created higher demand with dwindling supply.
“For a while it wasn’t that bad, but towards the back half of June and the first days of July, it’s been extremely difficult,” Gruwell said. “The market supply is pretty tight.”
Still, there have been only modest increases in retail used prices, according to J.D. Power. For the week ended July 5, retail used prices rose 0.5 percent from the previous week and were 2 percent above pre-virus levels.
Wholesale used-vehicle values on Cox Automotive’s Manheim Used Vehicle Value Index rose 9 percent in June vs. May. The index, a measure of price change for used vehicles sold at Manheim auctions in the U.S., hit a record high for June and posted a 6 percent year-over-year increase. It marks a wild swing from the index’s “historic decline” in April of 11.4 percent, Cox Automotive Chief Economist Jonathan Smoke said last week.
It now starts at under $50,000. Tesla makes a pretty big show about how it doesn’t offer incentives, like traditional automakers do, but recent price cuts across its lineup show that the automaker isn’t immune from tactics to juice sales.
The reduction follows price cuts in May on Tesla’s Model 3, Model X and Model S.
The company headed by Elon Musk this month posted a smaller-than-expected fall in car deliveries in the second quarter, resilient results despite the pandemic that hit the global auto industry.
The Model Y now starts at $49,990, down nearly 6% from its previous price of $52,990, according to the carmaker’s website.
The electric vehicle startup bubble keeps getting bigger. The latest evidence is that Fisker, like Nikola before it, said Monday it would be going public. Fisker, you’ll remember, is Henrik Fisker’s latest bid to maybe compete with Tesla at some point in the distant future, with the Fisker Ocean to begin production at some point in 2022.
Electric-car maker Fisker will go public through a merger with a blank check company backed by private equity firm Apollo Global Management Inc (APO.N) at a $2.9 billion valuation, the companies said on Monday.
Reuters reported last week that the special purpose acquisition company, Spartan Energy Acquisition Corp (SPAQ_u.N), was leading a bidding war among blank-check companies for Fisker.
A “blank check company,” if you’re curious, is defined as the following, per the Securities and Exchange Commission:
A blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, other entity, or person. These companies typically involve speculative investments and often fall within the SEC’s definition of “penny stocks” or are considered “microcap stocks.”
In addition, a blank check company registering for a securities offering may be subject to additional requirements for the protection of investors, including depositing most of the raised funds in an escrow account until an acquisition is agreed to and requiring shareholder approval of any identified acquisition.
A type of blank check company is a “special purpose acquisition company,” or SPAC for short. A SPAC is created specifically to pool funds in order to finance a merger or acquisition opportunity within a set timeframe. The opportunity usually has yet to be identified.
Steve Carlisle, formerly head of Cadillac, was announced as GM’s North America boss last week. In some ways, it makes sense, as Carlisle was leading Cadillac’s push into electric vehicles, a push he will now help lead across GM’s other brands. Though I’m still wrapping my head around the fact that the boss of Cadillac got a promotion.
This morning, Automotive News took a look at the work ahead for Carlisle.
Carlisle will be expected to accelerate GM’s path toward electrification. GM has pledged $20 billion for EVs and autonomous vehicles through 2025 and plans to launch 20 EVs globally by 2023.
“We don’t know how long the transition will take, so we’re in a good spot to continue to grow the business and fund the business with our internal-combustion portfolio while we work on ramping up on the battery-electric side,” Carlisle said.
Under Carlisle, GM will change the way it manages its North American brands. Currently, the North American president oversees Chevrolet, Buick and GMC while Cadillac has a separate leader. Carlisle will oversee all four.
“With this shift to electric, there’s an even greater need to find synergy opportunities, but there’s no less of a need to provide the autonomy and do the right thing from a brand point of view,” he said.
Some 1,250 workers will be laid off at GM’s Wentzville Assembly plant outside of St. Louis, the Detroit Free Press reported this weekend. The layoffs come as coronavirus cases swell in the area.
The plant will go from three shifts to two.
From the Freep:
“We believe in the short term a two-shift operation plan will allow us to operate as efficiently as possible and accommodate team members who are not reporting to work due to concerns about COVID-19 in the local community,” GM spokesman David Barnas told the Free Press on Saturday.
But the layoffs will delay GM’s efforts to restock supplies of the usually hot-selling Chevy Colorado and GMC Canyon pickups, Barnas said. Second-quarter sales saw a big decline in the slowing economy.
There are 1,250 workers per shift at Wentzville, he said. GM is still working on the details regarding the exact number of workers for temporary layoffs, he said. Also, there is no time frame set yet on the length of the layoff.
The layoffs seem in part tied to the fact that many workers simply aren’t showing up out of fear of the virus.
In a union communication posted earlier Friday also obtained by the Free Press, Chambliss said there are now 23 confirmed COVID-19 cases in the plant.
GM’s policy is to not confirm the number of coronavirus cases in its plants.
On June 12, Wentzville had five cases, since restarting operations in mid-May. At that time, Kage told the Free Press the union had asked GM to shut down the plant and GM declined. But GM sprayed the plant with chemical disinfectant over the Fourth of July weekend.
The plant employs 4,100 people, so 23 is a small percentage of the workforce. Still workers’ fear of community spread has caused absenteeism in the plant to soar, two sources familiar with plant operations said. They declined to be named because they were not authorized to share that information with the media.
The worker anxiety stems largely from a surge of cases in the surrounding community. Wentzville is located in St. Charles County. As of 4:45 p.m. Friday, there were 1,526 confirmed cases of COVID-19 in St. Charles County and 77 deaths, according to the county’s public health website. That is up from 786 cases and 60 deaths in the county on June 1.
I made Anthony Bourdain’s beef bourguignon this weekend, as I have a few times now. It did not disappoint.