AD #1443 – IndyCar Gets All Shook Up, Investing In Autos, German Suppliers Told To Partner Up
August 25th, 2014 at 12:01pm
Runtime: 8:17
- IndyCar Gets All Shook Up
- German Suppliers Told To Partner Up in China
- Chinese Students Buy Luxury Cars
- Investing In Autos
- Recalls Don’t Hurt Residuals
- Audi’s Robot Technician Aid
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In today’s show, Indy racers get shaken by an earthquake, China cracks down on German suppliers and Audi puts robots in dealerships. But let’s look at today’s top stories.
INDYCAR GETS ALL SHOOK UP
A 6.1 earthquake hit Napa Valley in California early yesterday morning. And with the IndyCar series racing at Sonoma raceway, which is right smack in the middle of Napa, most of the drivers were rudely shaken awake when the quake hit. Many of the drivers including series leaders Will Power and Helio Castroneves said they thought they were going to die. Power said he got out of his hotel as it came crashing down around him. James Hinchcliffe said he just had time to grab a towel so he didn’t go running outside naked. Ryan Hunter Reay chuckled over the fact that his and his wife’s baby son slept through the whole thing. Then yesterday afternoon all the drivers did something they found to be far safer. They climbed in their cars and raced their brains out at speeds approaching 200 miles an hour. The race was won by Scott Dixon.
GERMAN SUPPLIERS TOLD TO PARTNER UP
Recently China began cracking down on foreign automakers over the high prices of spare parts. But now the government is going after the companies that build those parts. Unlike carmakers, suppliers did not have to form joint ventures with domestic Chinese companies. But it looks like that’s about to change. German newspaper StuttgarterZeitung reports that three unnamed German suppliers were told by China that they can no longer run their business independently and will need to form partnerships. And i can assure you this is going to send a chill down the spine of every foreign supplier operating in China.
CHINESE STUDENTS BUY LUXURY
Speaking of China, there are a lof of Chinese students in the United States, mostly from families of the elite. One way we know that is by looking at the kinds of cars these students buy. According to CNW Research, the average Chinese high school student in the US has a car that costs over $42,000. The average college student’s car costs $56,000 and the average grad student, $62,000. By the way one out of three pay for those cars in cash. Their favorite brand? Mercedes-Benz. Oh yeah, the average non-Chinese student in the US has a car that costs under twenty grand.
INVESTING IN AUTOS
Is it worth investing in the automotive industry? Normally no, but since 2009 it’s been one of the best industries to put your money into. According to a study by the Boston Consulting Group, the automotive industry outperformed 21 of the 26 industries it studied. Boston Consulting looked at total shareholder return, including stock price, dividends, splits and share buybacks. From 2009 to 2013 automakers provided a 29% return, suppliers delivered a 33% return. If you look at the last three years the best companies to invest in include:
1. Tesla
2. Fuji Heavy industries (Subaru)
3. Great Wall
4. Hino (Toyota heavy truck)
5. Chang’an (Ford’s partner)
6. Mazda
7. Toyota
8. Harley Davidson
9. Brilliance (BMW’s partner)
10. Isuzu
I think that Great Wall would be off the list today. The Chinese SUV maker has run into a lot of problems lately and its stock is down 40% from last year’s high. Chang’an is Ford’s partner in China and benefitting from Ford’s rocketing sales. Same goes for Brilliance, which is BMW’s partner. How interesting to see Hino and Isuzu. The Japanese heavy truck makers are riding the wave of booming global truck sales.
RECALLS DON’T HURT RESIDUALS
We began reporting about 6 months ago that the residual value of the recalled GM vehicles remained strong. In some cases they actually went up. And now a study from Black Book backs up what we’ve been saying all along. In fact it turns out that most owners hold onto their recalled vehicles. Interestingly, the strength of a brand may help in mitigating the effects. There’s still a need for good used vehicles and once a recalled vehicle is fixed there may not be any major issues, so people snatch them up.
Were you aware that Audi is starting to put robots in its dealerships? That’s coming up next.
THE ART OF AUDI
Automakers are always looking to improve the customer experience at the dealership. And one way is to get an owner’s car out of the shop as soon as possible, that’s why Audi is now starting to use a robot to help its technicians. They call it ART or Audi Robotic Telepresence. Audi brought ART to the AAH studios last week and here’s an example of how it works.
(The Audi ART demonstration is only available in the video version of today’s show.)
Hey before we go, have you seen the newest section to the Autoline website? We call it Seat Time and it gives you quick, fun to read, write-ups of the latest cars we’ve been test driving. Check it out, I think you’ll get a kick out of it.
But that wraps up today’s report. Thanks for watching and please join us again tomorrow.
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Comments (20)
August 25th, 2014 at 12:30 pm
The demand for “partnering” by the Chinese fits a long term “angst” that the Asians have. They want a full reveal of the technology so they can “innovate” future designs. They are not satisfied with the “basic work” of assembling the products. They are reaching for what they see as the high dollar value add work. For years they were bitter against the Japanese for this exact reason. They were given the work but forbidden the underlying technology. What they are asking for is the intellectual property they would get as “partners”. An impossible situation other than for existing “known by all who want to know” technology.
August 25th, 2014 at 1:23 pm
I don’t know about the rest of you guys, but the price of this “Average high school student’s” car was $55 and wore Adidas badging.
August 25th, 2014 at 1:36 pm
Hey MLB, I had the same transportation in high school that you did, but at $55 you must have had the upmarket version!!
August 25th, 2014 at 1:45 pm
Well actually, I just put Adidas in there for effect. My folks never sprung for the name-brand stuff, and I honestly don’t remember them ever getting up off of more than about $35 for a pair of kicks for us back then.
Plus walking home in a pair of the latest Air Jordan’s or the like just made you too big a target in my neighborhood. I wasn’t trying to get all shot up over that.
August 25th, 2014 at 1:59 pm
This average high school student didn’t have a car, just occasional use of the family car.
August 25th, 2014 at 3:11 pm
I didn’t get my first car till my junior year (of college); borrowed the family car (like Kit mentioned) while still in high school (and only on a rare occasion at that). This in the late ’60′s.
And my thinking, on investing in the automotive fields, I would remain cautious (the great recession, more or less has ended, and thus, so the quicker stock price increases of late.
August 25th, 2014 at 3:56 pm
I, too would be very cautious about investing in the auto business. People will continue to buy cars, as old ones wear out, but I keep thinking that some day, more people will buy what they need, rather than those very high profit $50K pickup trucks and $60K+ SUV’s. If that happens, most car companies will have a hard time making money.
August 25th, 2014 at 4:27 pm
>>>”Will Power said he got out of his hotel as it came crashing down around him. James Hinchcliffe said he just had time to grab a towel so he didn’t go running outside naked”
>>>
NEVER run out of a building. Most earthquake corpses are people who ran outside & were hit by falling bricks or trees or power lines. Just like a storm, the best place to stay is inside (perhaps under a desk).
August 25th, 2014 at 5:05 pm
My high school car was a Dodge costing three thousand dollars ($5600 in today’s devalued dollars). After that piece-of-junk died it was traded for a demo car costing ten thousand ($18,000 in fiat paper money). That was my college car and it lived 360,000 miles.
So I fit into the “sub-twenty grand” described in the story.
August 25th, 2014 at 5:59 pm
8,
Doesn’t that depend on the type of building? I think I’d rather take my chances with running away from an un-reinforced masonry building, rather than waiting for it to collapse on top of me. Maybe I’m missing something, though.
August 25th, 2014 at 6:03 pm
On the Audi ART segment, wouldn’t you look first at the spark plug if you had a misfire? Looking at the cylinder wall seems many steps down the line.
August 25th, 2014 at 6:37 pm
11, Yeah, I’d think a plug, or an injector or associated electronics.
August 25th, 2014 at 8:00 pm
I bought my first car my junior year; A 69 MGC for $1100 cash. In a few months I should get it back from restoration….20 times the initial cost!
Investing in the auto industry is risky. The 30% returns mensioned are over 5 years and predicting future gains has too many variables to make a sound evaluation. For the most part, the standard ratios used by finacial managers indicate there are safer and better investment oportunities which are more sound. I sleep better knowing I’m not invested in any of them.
August 25th, 2014 at 10:58 pm
Investing in the auto industry right now! I say you’re too late, unless you’re like Joe Average that buys high and sells low. The buy time was March 2009 when Ford was less than $2.00 and now over $17.00 with a dividend. Or there’s auto dealer Auto Nation that had you bought for $5.00 you would have had a 10 bagger…closed to-day at $54.00.
The low hanging fruit has all been picked.
August 26th, 2014 at 12:21 am
My 1958 Chevrolet Del Ray was seven years old when it became mine in high school. A $300 bequest from my godmother bought it and it took me through high school hi-jinks. Another $300 bought the Austin-Healey Sprite I drove in college. Depending on an English car taught me more about car repairs than college did about sociology!
August 26th, 2014 at 8:28 am
10. Gotta agree to an extent. I say it depends heavily on timing and circumstances.
- Single-story structure: nothing’s going to drop on you, get the heck out!
- High-rise hotel in the beginning stages of a quake: run fast and don’t look back. The bulk of debris hasn’t yet fallen. But if it has already started collapsing, yeah, you’re likely to get konked on the noggin. Though, I would think your chances of survival are about the same by staying put inside due to the sheer weigh and mass of concrete, steel and glass being hurled down upon you by Mr. Gravity.
August 26th, 2014 at 8:48 am
Interesting story about AutoNation’s beginnings. I should write it down someday.
August 26th, 2014 at 9:52 am
14, I was never very good at buying stock. I bought some Ford when it seemed a good buy at $15, about 15 years ago. It was mostly downhill from there, until recently.
August 26th, 2014 at 7:28 pm
Welp I didn’t have a car in High School. I rode with a friend or on the Magic Bus. I actually had to WORK and buy my 1st car and everyone since. A $650 1973 Chevy Monte Carlo. I cost me more a year to insure it than it did to buy it. I was really proud of it and the fact that my own money and hard work made it happen. I remember in HS that the kids that did drive all had cars no newer than 5 years old. Today kids wouldn’t be seen dead in any thing that old. I pass a HS near home that it isn’t unusual to see KIDS in Porsches , Audis , Jeeps and nothing more than a year or 2 old.
August 27th, 2014 at 5:34 pm
California buildings (where the quake occurred) are earthquake-compliant. They might shed some bricks, but they won’t collapse. In the Disneyland/Anaheim quake a few months ago, someone died from a brick falling on her head.
If she had stayed inside, she’d still be alive.