The floor falls out from under used Tesla prices, while the company slashes Shanghai production — and automakers as a whole consider doing the same. All that and more in The Morning Shift for Tuesday, December 27, 2022.
Tesla’s cars once came at the tail end of a long waiting list, meaning those who actually twiddled their thumbs long enough to get one could immediately turn around and offload it to less-patient buyers for a quick buck. Now, as Tesla enthusiasm wanes and demand levels out, that business model seems to be dying out. From Reuters:
Tesla buyers who waited months for their new car have had an unusual choice for much of the past two years: keep the new electric vehicle, or sell it at a profit to someone with less patience.
But the days of the Tesla flip are numbered - a potential threat to new car prices that are already getting cut.
Prices of used Teslas are falling faster than those of other carmakers and the clean-energy status symbols are languishing in dealer lots longer, industry data provided to Reuters showed.
The average price for a used Tesla in November was $55,754, down 17% from a July peak of $67,297. The overall used car market posted a 4% drop during that period, according to Edmunds data. The used Teslas were in dealer inventory for 50 days on average in November, compared with 38 days for all used cars.
I, for one, am not sure the economy can handle this incredible loss. You’re telling me that we may see an end to the days of good, hardworking scalpers reselling brand-new cars for a profit? But that’s the American Dream!
Maybe used Teslas aren’t the only ones seeing a drop in demand. The company will idle its Shanghai plant for nearly half of next month, supposedly due to the Chinese New Year. That’s it, that’s all, no other reasons to do with demand or the company’s financial footing turning to quicksand. Just the New Year, nothing to see here. From Reuters:
Tesla (TSLA.O) plans to run a reduced production schedule at its Shanghai plant in January, extending the reduced output it began this month into next year, according to an internal schedule reviewed by Reuters.
Tesla will run production for 17 days in January between Jan. 3 to Jan. 19 and will stop electric vehicle output from Jan. 20 to Jan. 31 for an extended break for Chinese New Year, according to the plan seen by Reuters.
Tesla did not specify a reason for the production slowdown in its output plan. It was also not clear whether work would continue outside the assembly lines for the Model 3 and Model Y at the plant during the scheduled downtime. It has not been established practice for Tesla to shut down operations for an extended period for Chinese New Year.
You know what would really help Tesla out, in this demand lull? More factories. That’s how supply and demand works, right? Demand drops, so you build another production facility to increase supply. I am very smart.
When you run a big expensive company, you want to produce your small expensive products so that people can buy them and give you money. So when a government starts shutting down your big expensive factories, you may start looking for other locations to set up shop. It seems, in the wake of Covid, that’s exactly what carmakers are doing. From Financial Times:
...international groups have now launched a quiet yet concerted effort to cut their reliance on China’s sprawling network of components makers, according to industry executives and supply chain experts.
“There is a large-scale rethinking of logistics operations [across the industry],” said Ted Cannis, a senior executive at Ford. “The supply chain is going to be the focus of this decade.”
The move has been prompted by two developments. The first is uncertainty caused by China’s zero Covid-19 policy that forces plants to close at short notice.
“The longer the pandemic stretches, the more uncertainty there is,” Volvo Car boss Jim Rowan said earlier this year, when announcing the Geely-backed carmaker was increasing its use of non-Chinese components.
But the second is a longer-term concern about a larger political decoupling in the event of a breakdown in China’s relations with the international community, similar to Russia, that could threaten trade.
Zero-Covid, as a policy, is fraught. Many in China seem unhappy with the constant lockdowns and testing interfering with daily life. On the flip side, we in the U.S. seem to have just given up, forcing everyone to be continually reinfected with a still-not-entirely-understood virus for the sake of the almighty dollar while entirely barring immunocompromised people from participating in society with our lack of countermeasures. But hey, the line goes up!
CES is no longer the Consumer Electronics Show, meaning it’s no longer bound by that restriction on its attendees. As such, automakers have been flooding its show floor to debut their newest innovations in electrification. This year, it seems, will be no different. From Automotive News:
CES will again serve as a global showcase for the latest innovations in transportation, from scooters to space technology.
After a topsy-turvy two years in which COVID-19 stymied efforts to hold a large, fully in-person show, event organizers expect more than 100,000 attendees when CES kicks off Thursday, Jan. 5.
In Las Vegas, those visitors will find an emphasis on electric vehicles in particular and electrification overall. BMW and Stellantis will unveil EV concepts that underpin their production plans set in the not-too-distant future.
BMW will showcase its Neue Klasse next-generation platform, which it expects to build vehicles upon starting in 2025. Stellantis will highlight its Ram EV pickup, scheduled to launch in 2024. Both BMW CEO Oliver Zipse and Stellantis CEO Carlos Tavares are set to deliver keynote remarks.
Unfortunately, after reading this piece, my brain saw “not-too-distant-future” and can no longer think of anything beyond Mystery Science Theater 3000. Cars? Electronics? No, cheesy movies.
Stellantis has said that its Belvidere, Illinois, plant — current production site of the Jeep Cherokee — won’t necessarily die when the crossover’s production moves down to Mexico in late February. That’s little solace for the plant’s workers, however, who have to deal with their source of income being “idled” for an indeterminate period of time. From the New York Times:
The Jeep Cherokee was a strong seller just a few years ago. In 2019, a plant in Belvidere, Ill., produced about 190,000 of the sport utility vehicles, employing close to 5,000 people and operating three shifts a day.
Since then, sales have fallen. The factory laid off the third shift, and then the second. This year it is on track to make fewer than 20,000 vehicles.
Shane Mathison, a line operator who has worked at the Belvidere plant since 2006, said the news hit hard at home, especially for his wife. “She’s freaking out,” he said. “She’s scared to death. But I told her, we’ll make ends meet. If I have to wash dishes at two different places, I will. I have to do what I have to do for the family.”
For now, the northwestern corner of Illinois is bracing for the impact of the idling of the plant, the largest employer in Belvidere, which has a population of 25,000. At Buchanan Street Pub, Jim Edwards, the bar manager, fretted at the notion.
“It’s been affecting us,” he said. “You don’t have that second and third shift coming by anymore. Most of the workers live here in Belvidere. It’s going to be a ghost town.”
With any luck, the Belvidere plant will begin producing something else — EVs, most likely — and keep its current staff employed. But with an economic downturn coming any second, the plant’s future remains unclear.
As of this writing it’s sitting at $115 and dropping, with a nearly seven-percent drop so far today. Could we see two-digit prices soon? If I learned anything in business college, it’s that you generally don’t want your stock price numbers to be red, but maybe that’s the Elon Musk Business Genius knowing something I don’t.