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There Are Two Very Different Reasons Why People Are Spending More On New Cars

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Photo: Mazda

Don’t expect many deals on new cars even though it’s Labor Day weekend, Ferrari is trying to get its shit together in Formula One, and Elon Musk. All that and more in The Morning Shift for September 4, 2020.

1st Gear: New Cars Are Pricier Than Ever Even Though Sales Are Down

This Wall Street Journal story is worth reading in full even though it is hugely depressing. The gist of it is that the divide between the rich and the poor is getting bigger during the pandemic, and one manifestation is that new cars are more expensive than ever. The haves flock toward pricey SUVs and trucks, while the have-nots have to make do with an increasingly small selection of small sedans and hatchbacks. From the WSJ:

The average new vehicle sold in August cost a record $35,420, according to research firm J.D. Power, capping a surge in prices that began before the pandemic hit the U.S. This weekend could offer some reprieve from those highs, analysts say, but without the kind of big discounts dealers typically offer.


Younger car buyers are getting priced out of the new-vehicle market as auto makers have turned away from cheaper small cars and sedans to focus on bigger, higher-margin vehicles.

“The folks that are struggling right now, it’s going to be a real challenge when they need a new car,” said Vince Sheehy, president of Sheehy Auto Stores, which has dealerships in Maryland and Virginia. “And those are customers we’re going to lose.”

But those returning to showrooms are splurging on pricier SUVs and trucks, largely benefiting the Detroit auto makers, who have long ruled these two categories, as well as other car companies like Hyundai Motor Co. and BMW AG, that have in more recent years expanded into bigger vehicles.

Bob Carter, Toyota Motor Corp.’s North American sales chief, said the Japanese auto maker is benefiting from the higher pricing, despite the recent drop-off in U.S. sales, and trying to produce more of the lucrative SUVs and trucks that are in high demand right now.

“I’m building all the 4Runners, Highlanders, RAVs, Tacomas and Tundras I can possibly build,” Mr. Carter said.


My case for the Mitsubishi Mirage grows stronger every day.

2nd Gear: Elon Talking Big Again

Tesla CEO Elon Musk says that the company’s Berlin plant will be an automaking revolution. Or something. Sure.


Per Reuters:

Musk made the comments to bystanders at Gruenheide, on the outskirts of Berlin, where the automaker is building its new European factory, a video on the Teslarati website showed.

Tesla plans to manufacture a new version of its Model Y crossover vehicle, and possibly even battery cells at the site.

“It will be the first time that there will be a transformation in the core structural design of the vehicle. It’s quite a big thing. Both manufacturing, engineering and design as well,” Musk said in the video.

This “transformation” is likely just a new diecasting process but it’s fun to learn that this is how Elon talks all the time to random bystanders. It’s quite a big thing.

3rd Gear: Ferrari Says It’ll Be Back In The Formula One Mix By 2022

Mercedes has won every constructor’s championship since 2014, much to Ferrari’s dismay. Historically this has meant that heads would roll, but Ferrari’s CEO Louis Camilleri told The New York Times that wouldn’t be the case this time. Mattia Binotto has been running Ferrari’s F1 team since last year and it seems like he’ll keep on doing that even as the bad grand prix results keep on racking up.

It would be easy for Camilleri to make changes, especially at the top, something the company has done with frequency over the years. Mattia Binotto was appointed team principal in January 2019 and is Ferrari’s fourth since Jean Todt stepped down from the role at the end of 2007. In comparison, Christian Horner has been team principal of Red Bull since 2005, and Toto Wolff has run Mercedes Motorsport since 2013.

“I have to say I have every confidence in Mattia Binotto and his team,” Camilleri said. “The results aren’t there to prove what I’m saying, but these things take time. Regretfully in the past, there has been too much pressure and a history of people being let go. There was somewhat of a revolving-door atmosphere, and I’m putting a stop to that.

“What we need is stability and focus. If you look at Red Bull’s period of winning championships, Mercedes today, other than talent, one of the key things they had was stability, and that’s something frankly our team has been lacking.”


Better luck next year! Correction: better luck the year after that, when new rules come into play.

Camilleri feels Ferrari could end the dominance of Mercedes in 2022. “I would hope that by 2021 we can certainly improve on this season,” he said.

“For 2022, the new regulations come into play, and every time there has been a huge revolution in terms of the technical framework, it gives an opportunity for teams to be one up on the others. That’s our hope.

“We have the talent, work ethic and determination to get there, and I’m confident we will be up there battling again.”


4th Gear: The Dealers Win Again

Car dealerships are basically the most useless actors in the galaxy of cars but they persist thanks to franchise laws and the powerful pull of lobbyists. The latest example comes to us from California, where a bill to allow month-to-month electric car memberships—bypassing dealers—was recently defeated.


From Automotive News:

The proposed law — Assembly Bill 326 — would have created a legal framework for EV memberships and allowed consumers access to EVs without financing or long-term commitments through a direct month-to-month agreement with the EV manufacturer.

The measure’s defeat on Tuesday in the California legislature is a big win and relief for franchised new-vehicle dealers in the state but a disappointment to some consumer and environmental organizations as well as EV startup Canoo, the sponsor of the bill.


Brian Maas, president of the [California New Car Dealers Association], told Automotive News the group’s members are “very pleased” with the bill’s defeat.

He said the proposed law, in its final form, would have “exempted a subset of manufacturers from all the rules applicable to all other licensed manufacturers and dealers — and without DMV oversight.”

“The bill was rushed through at the end of our legislative session in an attempt to create a new ‘membership’ structure to benefit the company pushing for its adoption,” he said. “The proposal was ill-conceived and would have been one of the most harmful automotive-related laws enacted in many years in our state.”


Don’t just take it from me that car dealers are useless middlemen; ask any automaker executive after a drink or two and they will tell you how they really feel.

5th Gear: VW Still Wants To Buy Navistar

Navistar makes International-branded trucks in addition to lots of other shit. It’s all part of VW trying to get an opening into the North American heavy truck market, as Bloomberg reports:

Volkswagen Group’s heavy-truck business plans to make a fresh push to acquire Navistar International Corp. after talks were put on hold amid the coronavirus pandemic, according to people familiar with the matter.

VW’s Traton is seeking to restart negotiations this month to win over Navistar’s management and the main shareholders, including billionaire investor Carl Icahn, said the people, asking not to be identified because deliberations are private.

The German company’s truck unit in January offered to buy the rest of Navistar for $35 a share in cash, or $2.9 billion, to secure a bridgehead in the U.S. heavy-truck market and step up its challenge to Daimler and Volvo AB. VW already owns 16.7 percent, the second-biggest stake, according to data compiled by Bloomberg.


Reverse: The First 500-Mile Race In NASCAR History


Neutral: How Are You?

I’ll be honest: Personal hygiene has really taken a hit in pandemic times, though it’s all ... fine. Anyway, if you can make a coherent argument for how car dealerships add any value at all for consumers please do so in the comments.