Unsold New Cars Are Overflowing Into Empty Shopping Centers and Fields

Image: AP/David Zalubowski
The Morning ShiftAll your daily car news in one convenient place. Isn't your time more important?

Dealerships have too many cars, Volkswagen is planning its pickup truck offensive, Chinese EV startup Nio is making a splash, and questions about how to profit from autonomous cars. All this and more for The Morning Shift of Monday, April 29, 2019.

1st Gear: Too Many Cars

We saw last week that lots of automakers are going through slumping sales as global demand weakens. Now Automotive News has a story about ballooning vehicle inventories around the U.S. It seems that there are simply too many cars currently for sale on dealer lots, and that’s a problem for automakers and dealers alike.

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From the story:

The estimated 4,188,200 unsold vehicles on April 1 was the highest inventory number for any month since that reported for July 1, 2017, and just 114,300 vehicles less than the modern-day record set in May 2004, according to the Automotive News Data Center. It’s over half a million vehicles more than automakers and dealers were grappling with in the spring of 2007, when the Great Recession was just around the corner. The figures do not include the estimated 18,000 electric vehicles that Tesla had in inventory this month.

The story refers to all these cars as an “unwieldy pool of vehicles that has spilled into vast overflow lots popping up wherever enough wide-open space is available: shuttered factories, vacant shopping centers, barren fields.”

Dealerships, Automotive News mentions, are having trouble finding space for all these cars—cars that some are apparently accepting to make automakers happy, and others are accepting due to pressure from the manufacturers. Take this story from an FCA dealer in the Detroit area:

“First they told us to order [Dodge] Durangos because they were going to put extra support on them, so we stocked up, but the support never came. Then they stuffed us full of [Jeep] Compasses. Then they told us that in order to get [Jeep] Gladiator allocation, we had to order Ram pickups, so now I’ve got those coming out my ears.”

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All of this is putting quite a bit of stress on the dealers, whose floor plan costs—the cost of obtaining inventory via loans—are on the rise due to increasing interest rates.

2nd Gear: VW Is Planning a Pickup Truck Offensive in the U.S.

As we saw with the MQB platform-based, South America-bound Tarok concept at the New York Auto Show, it’s clear that VW is thinking about pickup trucks right now. But what are its plans for the U.S.? Automotive News spoke with VW of America’s CEO Scott Keogh, who laid out a few options for how VW might proceed with a pickup for the U.S. market.

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From the story:

1. Homologate a Ranger-derived, body- on-frame midsize pickup from Ford Motor Co. that will be sold as a replacement for the Amarok across the rest of the world.

2. Develop a unibody midsize lifestyle pickup based on the Atlas crossover, similar to the Tanoak concept VW showed at the 2018 New York auto show

3. Build a car-based, A-segment unibody pickup like the Tarok using the MQB platform in Mexico to keep costs down and import it to the U.S., where it might appeal to consumers who don’t want to spend more than $30,000 for a body-on-frame midsize pickup.

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In the interview, Keogh talks a lot about the feasibility of bringing a vehicle like that Tarok concept shown at the New York Auto Show to the U.S. He mentions how there’s no pickup that small available in the U.S. right now, and he asks rhetorically if it would make sense to modify that truck for the U.S. market. From the article:

“the theory is quite straightforward: It’s an A-segment sized vehicle. There’s no pickup truck in the U.S. market that is quite that size at all.”

While that means there’s nothing similar that lets the company gauge potential sales, “there could be a space here,” he said. “This is what life’s all about.”

[...]

“We think we can make that work, from our initial study. Now we’ve got to see what the market says.”

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I will say that, of the three VW pickup truck strategy options that Automotive News mentions in the story, I do prefer the last one, so I’m glad that VW’s boss seems to be considering it so seriously. Sure, I bet a Ford Ranger-based truck might sell better, and so might a bigger Atlas-based design, but I selfishly just want to see more small pickups on the road. Trucks these days are getting too damn big.

3rd Gear: Chinese EV Startup Nio Is Turning Some Heads

Young Chinese-backed EV startup Nio has some wacky and some good ideas about EVs, with arguably the best of them battery swapping stations (this needs to happen).

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Though the company has gone through some considerable financial trouble lately, it does have some good things going for it, per Automotive News:

Nio already has hundreds of mobile recharging vans on standby throughout China’s biggest cities and operates a network of battery-swapping stations and fast chargers dotting the nation’s highways and byways.

The carmaker also has built dozens of Apple Store-inspired customers-only Nio House cafes and has a smartphone app with more than 800,000 users. Moreover, its vehicles are churned out at a new assembly plant in this city west of Shanghai, whirring with modern robots and more than 2,000 workers.

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The story mentions how Nio likes to brand itself as innovative by mentioning all the high-tech features in its EVs, its social media-based marketing and sales strategy, the way the company contracts out its vehicle production to an outside company, and the brand’s a sub-three-year product development timeline.

Apparently Toyota is paying close attention to startups like Nio, with Automotive News writing:

“These startups have very innovative ideas,” acknowledged Dong Changzheng, executive vice president of Toyota’s China operation. “We are very serious about their products. We study them carefully.”

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Ford, too, is clearly keeping its eyes on China and its startups:

“The Chinese government says the future of the industry lies in electrification, and startups are coming from nowhere and addressing that,” said Tim Slatter, Ford’s executive director for product development in China. “We absolutely need to address that — but do it while running the rest of the company. We can’t afford to be interested in only one thing.”

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Right now, Nio sells an ES8 crossover, and is planning a smaller crossover to be sold in June according to Auto News. Oh, and there’s also that expensive EP9 supercar. Though it may still be in the red in terms of finances, the company and other startups like it in China are making waves in the EV space.

4th Gear: How Do You Make Money Off Autonomous Cars?

Autonomous cars are all anyone’s talking about right now, with discussions usually centering around technical, ethical, and political feasibility. But what about the basic question of profitability, particularly when it comes to self-driving commercial fleets, which are likely to be among the first applications of autonomous cars? The Detroit News tackles this topic in a new story, writing:

But it’s still unclear what those commercial services might look like. Leaders like General Motors Co.’s GM Cruise LLC and Alphabet Inc.’s Waymo LLC appear focused on ride-hailing services, looking to mirror the success of Uber and Lyft without the added cost of human drivers. Others, like Ford Motor Co., are more concentrated on delivery and e-commerce.

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Ford’s plan to manage this uncertainty is to hedge its bets:

“Our work with companies like Postmates and Walmart is helping us figure out which segments autonomous vehicles really work for,” said Sherif Marakby, CEO of Ford Autonomous Vehicles LLC, the Blue Oval’s driverless car development arm. “We’re thinking about a strategy that makes sure we’re reaching full utilization of the vehicles

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GM, too, the story mentions, is starting to work with Doordash (a food-delivery service), and with Amazon. And it’s these kinds of partnerships that will be key to managing the uncertainty of how to make money on driverless cars:

“One of the key elements (in deploying a business model) is going to be building partnerships,” Marian said. “The (manufacturer) used to be at the center of everything, but now they have to be realistic about what their core capabilities are and what they need in this field to be a key player.”

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5th Gear: Detroit Residents Get First Dibs on New Fiat Chrysler Jobs

In February, Fiat Chrysler announced big plans to pump billions of dollars into its Michigan assembly plants. Included among those plants are the Mack Avenue and Jefferson North facilities, which are both in the city of Detroit, and which will both build the next-generation Jeep Grand Cherokee (the Mack plant is expected to also build a three-row Jeep, and the Jefferson plant will continue to build the Durango, FCA said in February).

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The Detroit News says, as part of a “community benefits agreement,” city residents will get first dibs on the new jobs at these facilities. From the story:

Detroit residents will have the opportunity to apply in July for open production positions in advance of the general public. Job fairs and kiosks would focus on helping residents in the surrounding neighborhood apply.

“Detroiters are going to get the first crack at these jobs. They are going to apply for and be selected for these jobs first,” said Arthur Jemison, the city’s director of housing and revitalization. “These jobs put a person on the path to middle-class life in our city. They’re jobs where everyday Detroiters have a real chance to come in and win those wages immediately after training.”

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Makes sense to give locals a first shot, I think. And, in general, I’m all for more jobs in the city of Detroit.

Reverse: Oldsmobile, America’s Oldest Car Brand, Gets Put Out to Pasture

Via History:

On this day in 2004, the last Oldsmobile comes off the assembly line at the Lansing Car Assembly plant in Michigan, signaling the end of the 106-year-old automotive brand, America’s oldest. Factory workers signed the last Oldsmobile, an Alero sedan, before the vehicle was moved to Lansing’s R.E. Olds Transportation Museum, where it went on display. The last 500 Aleros ever manufactured featured “Final 500″ emblems and were painted dark metallic cherry red.

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Neutral: Which VW Pickup Truck Plan Do You Like Most?

Do you want a Ranger-based VW in the U.S.? What about a unibody truck based on the Atlas? Or would you rather have a small truck like the Tarok?

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About the author

David Tracy

Writer, Jalopnik. 1979 Jeep Cherokee Golden Eagle, 1985 Jeep J10, 1948 Willys CJ-2A, 1995 Jeep Cherokee, 1992 Jeep Cherokee auto, 1991 Jeep Cherokee 5spd, 1976 Jeep DJ-5D, totaled 2003 Kia Rio