This is just for the third quarter but it still feels like a watershed moment. All that and more in The Morning Shift for October 11, 2021.
A new report from the Wall Street Journal reflects on how the chip shortage has had an uneven effect on the car industry as a whole. BMW, as the WSJ notes, has been doing just fine with healthy supplier relationships and low-volume, high-profit-margin vehicles. Others, like GM, have been struggling, getting passed by Toyota in market share for the first time:
BMW otherwise may be something of an outlier. The Bavarian company seems to have been less impacted by the chip shortage than most, perhaps because it traditionally outsources more component production and therefore has more experience with managing suppliers.
General Motors GM sits at the other end of the spectrum, with third-quarter profit expected to be particularly weak. One reason has nothing to do with chips: In August it expanded its previous recall of Bolt electric vehicles at great expense. But it was also an unexpectedly bad quarter for production as the pandemic hit important semiconductor suppliers in Southeast Asia. After decades as the U.S. leader, GM’s market share fell to just 13.1% in the third quarter, well behind Toyota at 16.5%.
At the start of October we reported that GM was looking shaky in its number one U.S. sales position, something it has held since taking the title from Ford in 1931. The book is still not yet closed on 2021, and we don’t know for sure if Toyota will edge out GM for the year in its entirety.
Still, this does feel like something I’ll remember for a long time. Growing up, GM as America’s largest automaker felt like one of those holdouts from the past, a symbol of the grip previous generations still held over mine, the past still gripping the present, stifling the future. I looked out from California at seas of Malibu Classics and wondered: these guys?
There will never be enough written about GM in the 1980s, when it as a company became untethered from reality. The Roger and Me era saw GM most firmly committed to making the blandest, indistinguishable, sadsack cars in the company’s history, and shut down factories and give up on its workers. On the other side were projects ambitious and at times nonsensical, like creating Saturn, or buying up Hughes and Ross Perot’s Electronic Data Systems. There’s no real way to untangle the mess that was GM’s 1980s mindset, which ended up with GM running both Tomahawk cruise missiles and DirecTV at the same time.
All of this acquisition is what got staid old GM the rather incongruously high-tech OnStar. It’s still a bit of an outlier at GM, which is kind of why I enjoy seeing GM praising it in the press at the moment. Here is Automotive News:
GM says it will double its annual revenue to about $280 billion by 2030 while expanding its profit margins to as high as 14 percent, but building and selling vehicles won’t be the primary driver of that growth. The company plans to develop software and technology designed to keep customers coming back, stretching a typical one-time vehicle transaction into recurring purchases. Within a decade, GM expects as much as $25 billion in annual revenue from software and subscription services.
But can GM pull all of that off? The software space is competitive, with the likes of Apple and Google already dominating the market. And if average transaction prices continue to climb, consumers may be unwilling or unable to pay additional subscription fees each month.
“The only way consumers will buy into this is if it’s more convenient and cheaper and a better experience than just using an app on their phone,” said Sam Abuelsamid, principal analyst at Guidehouse Insights. “As long as Apple CarPlay and Android Auto exist, this might be a very tough sell.”
GM executives are confident in the subscription strategy, in part because of the company’s 25-year-old OnStar in-vehicle safety and security business. OnStar has 4.2 million paying subscribers and will generate about $2 billion in revenue this year at a margin of more than 70 percent, GM said.
The summary of this is that people are perhaps seeing the eventuality of GM’s decline as an automaker come into clear view, and GM wants to highlight anything it has in its portfolio marked “not cars.”
Tesla, a company that can’t keep getting away with this, continues its streak of getting warnings from governments but not actual regulations. This time India is politely asking Tesla to not sell cars made in China, as Bloomberg reports:
India’s Road Transport Minister Nitin Gadkari said he asked Tesla Inc. to avoid selling China-made cars in India ahead of the electric-vehicle maker’s expected entry into the South Asian nation.
Tesla should “make cars in India, sell in India and export from India,” and rely on local suppliers, Gadkari said at an India Today Conclave event on Friday. Tesla models in India will cost 3.5 million rupees ($46,671) each and the government will provide whatever help the U.S. carmaker needs to make a foray into the nation, he said.
Tesla is selling but not building cars in India, something that the Indian government could do more about if it wanted to.
In another familiar story, car sales have rebounded in India ... for the rich and not the poor, as the Financial Times reports:
Porsches, Lamborghinis and Mercedes are roaring through the streets of Delhi and Mumbai as demand for luxury cars rises in India, a sign of the country’s economy accelerating out of the worst of its pandemic downturn.
India’s auto industry has struggled for several years as higher costs, production cuts and the current global semiconductor shortage depressed sales. But executives said purchases of premium and supercars, while comparatively small by international standards, were approaching their highest-ever domestic levels.
“On the luxury segment, we really are bullish right now,” said Gurpratap Boparai, managing director of Skoda Auto Volkswagen India, which also owns the local franchises of Porsche, Lamborghini and Audi. “That’s the strata of society that has come out of Covid quicker than the rest.”
The FT says this is a sign of the country’s recovery from Covid and the increasing rollout of vaccines. It sounds more universal to me, describing how the rich skated above the rest of the world through this pandemic.
As ever, strikes work, with the UAW representing the ZF Marysville factory. The recognition of the union comes after more than a week’s worth of work stoppage back in September, as the Detroit Free Press reports:
An auto parts supplier in Marysville reached an agreement Friday to recognize union representation for its employees after a week-long strike in September, the United Auto Workers announced.
ZF Marysville and Stellantis jointly operate an axle plant north of St. Clair, and ZF took over operations, and negotiations with UAW, in 2019.
The plant was staffed by Stellantis workers under a labor contract, the UAW said. Their company agreed during the 2019 negotiations to transfer them to other Stellantis locations, where their representation would be recognized, and have ZF staff the plant with its own. That transfer is still in process.
When a majority of ZF employees, 340, chose to seek collective bargaining and representation, the union said, ZF reneged on a neutrality agreement and triggered a strike.
There are other things that happen along the way between “strike” and “get union representation,” or at least that’s what your union rep will probably tell you.
I have loved the Toyotas I’ve driven in the past — the ‘92 Camry I learned to drive on, the ‘93 Lexus I blew up, the second-gen Prius I borrow from my folks time and time again — but there are so many bland modern Toyotas I struggle to even will myself to drive. Have you driven a new Highlander? RAV4? Did you maintain the will to live through the experience?