Talking Car Tuesday: How will the industry change after Corona Virus
I work in healthcare, so the last few weeks have been a bit of a blur; especially the last few days.
Today, I had a break in my new (still spartan) home office and I was texting with a buddy who works for FoMoCo. It got me wondering what the tail end of this looks like?
Auto Sales are down almost across the board. Some European companies are talking about shuttering plants for awhile. Some automakers will likely be okay, if they have their tail feathers singed. Others, like Ford, might be facing an existential crisis when they needed a big year to rebound from last year's debacle of an explorer launch.
What is your predictions? Will we survive relatively unscathed? Or will this be a bit like '08 where we have some major moves?
March 17th, 2020 at 12:26 PM ^
Wonder if people will still want to use Uber and Lyft as much knowing that anyone else could have already sat in the car and coughed in it, etc.?
I'm platinum on Uber (company often doesn't authorize rental cars for travel), and except for when I've been in San Francisco, Ubers are some of the cleanest (at least to the eye) cars I have I ever been in. I'll take my chances with a ride share over a traditional taxi company.
That and even before this pandemic, I've always kept a travel size of wipes and sanitizer in my bag.
Some of the more "professional" Ubers I've been in, they have little snack bars, water, power cords (one guy recently had an array of apple, USB-C, and older USB types running to the back seat), streaming TV on a headrest mounted tablet, etc... I imagine those folks will be adding hand sanitizer (when it becomes available again) to the perks too.
I travel a lot, and Uber is incomparable to decent executive car services.
Yeah... that's partner level stuff for us. I'm not there yet.
But Uber is so bad in the Bay Area, in terms of shitty drivers, I just bought a used road bike and kept it at the office on weekends when I flew home.
March 17th, 2020 at 12:41 PM ^
My Fiance's lease ends at the end of this month. We were out looking at cars on Sunday and the lots were vacant with very few customers. This is Los Angeles. We are definitely in a good buying position this month.
Isn't it weird how closely fiancé and finance are spelled?
Car sales will be down for the year unless there is pent up demand which could cause a boom in Summer...a government incentive "Cash for clunkers" or vulture-style buying could mitigate that.
The biggest problem I see, for the automotive industry, is they will experience slowdowns in their profitable SUV plants which will be very expensive. This will cause a pullback in spending for day to day perishables & potentially pull back or delay new vehicle programs which are millions of dollar spend packages.
Other than that I don't think this new flu will change the way things are done much at the automakers or their suppliers.
Please excuse the semi-political nature:
https://news.yahoo.com/officials-seek-750-billion-economic-043257156.html
It appears both parties are looking at some big infusions of cash into the economy.
I'm not an economist so not sure the effect this will have. What I wish they would have done is put some sort of mandatory sick pay policy in place for workers who are involuntarily idled or a mandatory 2 week paid sick leave for those who call in with symptoms (2 weeks is the expected quarantine period) with the caveat that people must provide evidence (Dr note?) of the symptoms and evidence they are clear to work.
Alot of hourly (& possibly salary) workers are going to be hurting until this thing blows over.
I hope we don't go through something like TARP again.
I heard airlines are asking for money... eff that. They make billions on baggage fees alone and have had 10 years of favorable fuel prices.
If someone didn't put money aside for a rainy day, that's their fault
It's not our job as a taxpayers to prop up someone's balance sheet or stock price. It needs to end.
I’d definitely vote bubble up stimulus over top down bailout
I am an economist. I think a cash infusion is okay now, but it’s going to need to be ongoing, with the biggest infusion coming when people are actually able to purchase things again. Cash right now helps people pay for essentials like housing, food, utilities, and medicine. But the demand shock is literally because people can’t buy things right now. If you want to spur the economy, you give a big boost when we’re all able to spend on discretionary items.
Joe Kennedy's proposal is much better and more realistic, given that we're going to be dealing with this crisis for an extended period of time:
$4000 per adult if income is less than $100,000, $2000 if over $100,000 (and capped at a higher level), plus an additional $2000 or $1000 per child for families at the above levels.
Predictions?
If this goes into July/August like some have prognosticated, I imagine how a company weathers the storm is directly proportional to the health/maturity of their supply chain management.
If they can move parts to assembly lines quickly, they'll be good long term. But I think everyone's balance sheets are going to suck for the next two quarters.
I bet Tesla comes out of this really healthy... and before I get flamed by those who haven't been out of the state of Michigan, there's a lot of the vehicles on the road from them and charging infrastructure in the I-5 and the northern I-95 corridors.
Is that because Tesla has a much stronger North American supply chain or is their something else that makes Tesla better suited to weather this storm?
Tesla outsources to Europe and Asia just like any other manufacturer does but... I was basing my prediction on the core components -- motor, batteries, electrical, are all manufactured by Tesla.
For the third parties, Tesla has Toyota-like requirements on those companies or you don't get to do business with Tesla.
I'm not saying it's a flawless/perfect system, but IMHO it's more resilient than others.
Thanks. Lots of former classmates are engineers in the automotive field but it is definitely something I know little about.
I agree with you on Tesla; and I'm a guy known for my less than positive Tesla views. The market still loves them, and if there is pent up demand I could see many people using that on a cool new electric.
The cool electric I want is Rivian.
Their technology is ahead of Tesla's... not necessarily in batteries but in design and in some components.
I'm really interested to see if their partnership with Lincoln pays any dividends with market penetration or speed to production compared to Tesla.
What to me is interesting, is that for the first time, Tesla will not be first to the market with a vehicle. Rivian's truck will beat the Cybertruck to market. And the Cybertruck (IMO) is likely to cannibalize sales much more than add to Tesla's market share. It'll be interesting to see what happens with Tesla's sales in the next year.
Interestingly enough, Musk is welcoming the competition from Rivian. He said in an interview it's good to see other manufactures make it.
Just like McDonalds are more profitable when a Burger King is near, Tesla will do better with more competition in the electric market.
It is good for them to have Electric Vehicles legitimized and increase their market and need for overall support and structure.
I think the Tesla S is an amazing car that looks really good. The truck and Model X I think are missing their mark. Rivian SUV and Truck are really cool and I think are going to appeal to a much larger group of buyers.
Hoping they both do well. Also hoping Big 3 do well. They have taken a lot of steps towards electrification themselves. Agree with poster above that I was disappointed with new Explorer. Keeping my 2017.
Styling is important. It'll be interesting to see how buyers respond to the Cybertruck and who they are. Personally, I think it has to look futuristic to some extent, but boy, they really pushed the envelope. If you're into attention-getting, that truck certainly meets your needs.
Let's see, cash on hand at the end of March:
Ford $30 billion
GM $21 billion
Tesla $6.9 billion (and stock has dropped by 50% in last 3 weeks undermining ability to simply issue more stock)
Not sure, Tesla is in the best position to survive a complete collapse of the car market that last 6 months.
Yet Tesla cannot build cars fast enough, they have surpassed production goals the investment bankers said they never would...
All the while Ford and GM are cutting models... and in Ford's case, they shifted to a mostly SUV line up and fucked up the new Explorer.
But cool, $30 B in the bank. I hope no automaker asks for a government bailout this time around with that type of cash on hand.
To be clear, Ford did not ask for, or take, any public assistance in 2008/2009. Chrysler was in the red and didn't get the option - they were forced into selling out everything. GM had almost enough cash to last a couple of weeks before declaring bankruptcy. Ford had ~$2B left and decided to go it alone. They did request the same consideration that GM would get, though, should the others go under and take the supply chain with them.
With $20-30B in cash, neither company should need a dime of public assistance right now, or 8 months in the future.
The worry I'd have would be the stock prices. Tesla may have less cash on hand but seemingly just has to go to Wall street and get more money whenever they want because Tesla. GM and Ford don't have that option.
To be clear, Ford did not ask for, or take, any public assistance in 2008/2009
Yes.
I know that.
I didn't say otherwise.
Came here to say electric cars in general. We've all heard the stat that your phone has more germs than a public toilet seat...what has way more germs than your phone? The handle on the gas pump. A population that becomes much more germphobic may gravitate towards electric cars. Also, since you brought up Tesla, they have HEPA filters in their cars and have advertised Bioweapon Defense Mode.
I'm not sure an economic recession benefits any car company, but I think electric vehicles could benefit from a change in consumer mindset.
So how does one charge an electric vehicle? Apparently not with your hands touching the pump. As for "bioweapon defense mode,"... outside of comic books, no filter can reliably stop microscopic viruses (including the N95 mask worn by surgeons). You do realize that even before the pandemic (lowers gas prices to a low of $1.50 per gallon) that electric car sales have collapsed in each country (notably China &US) where subsidies have been phased out. Seems strange that you would suggest it is the Big 3 relying on the state when Tesla received a loan from the same fund and has rarely sold cars without a government subsidy.
The majority of people charge electric vehicles at their homes. You’re less likely to contract a disease if you’re the only one touching the charger, surely you understand the difference and are just being facetious. (Btw there are YouTube videos of people using an “automatic snake charger robot” which doesn’t require any hands). Also I didn’t mention the big 3, and wasn’t really looking to turn this into a Tesla specific discussion, because the big 3 all sell electric cars. I realize gas is cheap but it’s still no where near as cheap as the electricity in your home. And just because HEPA filters and masks are 100% fool proof, doesn’t mean they aren’t beneficial. There’s a reason hospitals and planes use HEPA filters and a reason healthcare workers right now are wearing masks. Maybe you hate electric cars for some weird reason, but I think most people would agree gas stations in general are gross, and pump handles specifically are not sanitary.
I actually drive a hybrid and have no problems with electric, its just the Tesla fan boy stuff gets old. Suggesting that a driver and passenger in a Tesla is less likely to get the coronavirus is ridiculous. I am just trying to demonstrate that anyone can pick random facts to support what they emotionally believe (explains the election of our current President). You could just as well argue that gasoline, which is among the household items that kill germs and viruses allow regular fill ups at gas stations to also serve to disinfect your hands at the same time (don't try that with your electric charger). Second, do you believe that even a minute percentage of virus transmission takes place through moving vehicles? Much more likely the passenger in your car just exited through a door with the virus on it and has entered with it in to the biowarfare Tesla that ensures the virus never escapes until expiring in 8 days or sticking to the innocent driver.
I'm not saying electric cars stop coronavirus. I'm saying that due to the extreme measures taking place and the disruption to peoples lives they may be more germ conscious in the future. So I'm only making two points: 1. Gas station pump handles are gross and many germs live on them, increasing the likelihood of transmitting a disease (google "gas station pump germs", plenty of articles) and 2. Electric cars don't require you to use gas stations.
I don't know what you're trying to demonstrate other than it seems you want to have an argument about Tesla. Which again, I don't. I merely mentioned an interesting feature or marketing tactic that people may pay more attention to now. I guess we could argue the scientific merits of having a HEPA filter in your car, but thats not really my point. We could argue the merits of a lot of car features that companies market, but the fact is, it's a feature that may be more attractive to some people in the wake of a global pandemic. Rational or not.
"Gas station pump handles are gross and many germs live on them" this was exactly my thought as I put the pump handle back the other day. I threw a pair of gloves in the driver's door bin when I got home. Won't surprise me if we start seeing a lot of people habitually doing things like using gloves to pump gas, etc.
I wonder how many every day things connected to our cars we will see change?
IIRC GM is planning on releasing 11 new electrics in the next two years.
GM Has some serious engineering talent, and I have no doubt that they will be competitive. Whether GM actually tries to advertise for them is another matter. THey let the Bolt and Volt largely just rot.
I’m curious about this assertion that “electric car sales have collapsed”
You may have a different (better?) source of data, but what I found is linked below. It suggests that EV sales had a significant increase from 2017 to 2018 (79%) and a decrease of 6% between 2018 and 2019. I would not characterize a 6% decline as cratering. Looking at monthly sales, for the first half of the yesr sales were generally higher in 2019 than 2018, but in the second half the 2019 numbers fell below 2018 numbers (33% below in October). Maybe this is what you refer to as cratering? It seems worth noting that for every month with reported data in 2019, sales exceeded 2017. That really doesn’t seem like cratering to me.
Anecdotally, one of the things that keeps me from buying an electric car is that the range and selection increases every year. It is easy to hold on to your old car and say I want to wait for next year’s model.
I’m really not sure I’d be dancing on the grave of the EV just yet.
My job as a consultant is to look beyond the numbers... but Kyiv's point about cash on hand is well taken... and I'm not day a trader.
On the other hand it's certainly debatable when one peels back the onion layers and looks at the fitness of a company as a whole.
To your point:
I would not characterize a 6% decline as cratering
Totally agree.
Again, when one reads between the lines, and looks holistically at the subject, I would say:
1. the 79% increase was a reflection of adoption and sophistication in infrastructure. As I mentioned an earlier post this is no longer a concern in certain parts of the country. When I go to parts of California, chargers are as ubiquitous as gas stations.
2. The drop off from 79% to 6% could be due to incentives phasing out... electrics can still be out of reach for many people.
But it never fails when one posts about EVs in this board, someone with old fashioned thinking or never been out of a state where Teslas aren't sold makes negative comments about technologies and brands which are indeed here to stay. Heck people in Denver drive Teslas to go skiing... so much for the myths about range and cold weather performance as well.
Electric vehicles (with the possible exception of Tesla) do not sell without significant government subsidies ($7,500 per vehicle). Why? Because they cost $8-12 thousand more to produce than an equivalent size gas vehicle and no automotive company wants to sell them at a loss (once again, with the possible exception of Tesla).
Which is why the mainstream makers are doing the right thing by going electric with their already over-priced SUVs. People are willing to pay for those and it's a lot easier to bury $10k in one. Was basically Tesla's model with their earlier vehicles - doing the expensive stuff first. One of the big problems with GM's Volt and Bolt. People see them as really expensive Cruzes and Sonics (even if it's simply not true), compare them, and the economics of it don't add up... so they buy a Civic.
It's when mainstream buying kicks in that we'll find out which makers are going to survive. I suspect it'll be a bit like the 1920s to the 1930s when the list of car makers gets dramatically paired down - including some that we see as stalwarts. We'll be looking at this as a similar bygone era.
Won't the really low gas prices make electrics and hybrids somewhat less attractive? I was hoping so since I'm in the market for a hybrid vehicle.
Of course low gas prices make electric vehicles less attractive. But why are you in the market for a hybrid? Hybrids are really the worst of both worlds with a gas engine and an electric motor. Unless you really enjoy less interior room than a comparable size vehicle.
First off, most hybrids are just the regular vehicle with a different powertrain. There are some, like the Fusion PHEV, that just stores a huge battery in the trunk and thus ruins all the trunk space, but that's rare.
Second, a PHEV that doesn't make those trade-offs (and they are on their way) is the best of both worlds, not the worst. The no-gas commuting benefits of an electric and the long range and short fill-up time of an ICE.
Bank infrastructure is still healthy, market is being infused with liquidity from the treasury, unprecedented measures are in place to prop up the economy.
my two sense is the consumer will be the sector that spurs growth. After 2 weeks (please be the case) of quarantine and the start of spring, I envision consumers going out and enjoying liberties.
Probably for things like going out to dinner or even vacations, but people may be leery of big purchases like cars until the stock market recovers.
1. bounce back this summer. will depend at least a little though on who is leading in the polls.
2. please don't use the word 'spartan' in your OP's. hurts my eyes...
little s, little s. Nonetheless I apologize...
Curious about this. Presumably people vote at least in part (if not in large part on who they think will be better for the economy? If so, wouldn’t it have more to do with the size of the lead, then the candidate? A big lead would mean a greater number of confident consumers, a close race could result in more uncertainty and thus less consumer confidence?
I very well could be wrong about that simplistic analysis, I am just trying to understand what you are getting at.
Re #1, how so?
Re #1, isn’t that a matter of personal perspective and opinion?
Consumer confidence was high before this, and it was reflected in the markets. This has thrown a massive uncertainty into the market, which is the primary reason they’re down right now. They will likely stay pretty down because quarterly earnings will get reported and be total shit for Q1 and Q2, at least. How can you say with any certainty which candidate is better for economic recovery? This is an event we’ve never seen. I really don’t think anyone could possibly predict which philosophy is better in 6 months, if either one even is good at all.
There will be incentives. If you're in the market, it will be a great time to buy.
I believe Ford and GM already announced 0% for 7 years and/or a delay in the start of payments. Haven't read anything from FCA yet.
No idea where inventories stand - took a quick look at local dealers and they were pretty lean.