AD #2134 – New Camry Interior Sizzles, Activist Investors Should Back Off, Green Cars the Fastest Growing Segment
June 20th, 2017 at 11:42am
Runtime: 7:56
To watch this episode on YouTube click here.
- Green Cars the Fastest Growing Segment
- Used Batteries Get Second Life
- Ford Experiments with Subscription Services
- New Camry Interior Sizzles
- Activist Investors Should Back Off
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On today’s show…green cars are now the fastest growing segment in the American market…Toyota makes a bold statement with the interior of the new Camry…and why Wall Street is wasting its time with car companies. All that and more coming right up on Autoline Daily.
This is Autoline Daily the show for enthusiasts of the automotive industry.
GREEN CARS THE FASTEST GROWING SEGMENT
Looks like sales of green cars have hit a tipping point in the U.S. market. For each of the last four years, the green car segment has been shrinking, dropping by a total of 95,000 units. This includes hybrids, plug-ins and electric cars. While sales of EVs and plug-ins were growing strongly, sales of hybrids were falling, which brought the entire segment down. But so far this year the trend is in the other direction. Sales of green cars are up a strong 22%, thanks to growing sales of hybrids, which are up 12% for the first five months of the year. Although sales of the segment leader, the Toyota Prius, are down, new entries into the segment and strong sales of other hybrids are making up the difference. New entries include the Hyundai Ioniq, Kia Niro and Honda Accord hybrid. Moreover, the Ford Fusion and Toyota Highlander hybrids posted strong sales increases. Put it all together and the green car segment is now the fastest growing segment in the American market, despite low gasoline prices. And that’s why we think this could represent a tipping point.
| U.S. GREEN CAR SALES, JAN-MAY 2017 | ||
|---|---|---|
| Plug-in | 33,541 | +44% |
| EV | 37,871 | +47% |
| Hybrid | 146,923 | +12% |
| TOTAL | 219,713 | +22% |
| Source: Wards Auto | ||
USED BATTERIES GET SECOND LIFE
Speaking of electric cars, Tesla isn’t the only automaker working on battery storage for homes. Now Renault will do the same thing. It’s teaming up with a UK-based solar power company called Powervault. Starting this summer they will take used EV batteries no longer suitable for cars and use them for home storage of electricity generated by solar panels. These used batteries could cut storage costs by 30% to 35%. EV batteries have a life-cycle of 8-10 years, but this could extend their life by another 10 years. If the initial tests are successful, the plans are to roll this out on a large scale.
Coming up next, Ford is experimenting with a way to let people use cars on a subscription basis.
FORD EXPERIMENTS WITH SUBSCRIPTION SERVICES
Automakers know that the emergence of mobility services could represent massive growth. So they’re experimenting with different ways of selling services to customers to see what works. This is why Ford Credit, the finance arm of the Ford Motor Company, acquired a company called Canvas last year. It offers short-term, month-to-month vehicle subscriptions that are targeted at younger drivers. The service includes a payment for the car as well as roadside assistance, maintenance, and insurance. This could especially appeal to young drivers who face sky-high insurance rates. You pick the car you want online and it’s delivered to your house. Prices range from $395 a month for a Focus, to $535 for an F-150. It’s an interesting business model. Canvas buys Fords after their leases are up, which hold costs down and helps boost residuals. The program began in May in the Bay area, and is expected to roll out to other cities later on.
NEW CAMRY INTERIOR SIZZLES
Here’s a heads up for all of you in the design community. We’re sick and tired of limited choices on interior colors. All we get is black, beige or gray. You can get better choices if you go upscale to Alfa Romeos or Bentley’s, but not in mass market cars. That’s why we’re thrilled to see Toyota offer a red interior with the all-new Toyota Camry. And what a difference it makes, with red inserts on the instrument panel, the center console, the seats and the door trim panels. It really richens up the interior. Now the true test will come in the market place. We’ll have to see if dealers actually order these interiors. By the way, you’re going to start seeing a whole lot of stories about the all-new Toyota Camry this week. The news embargo comes off on June 21st and that will open the floodgates. In fact, this coming Thursday we have an entire Autoline After Hours dedicated to the car. And we have a ton of information on what it’s all about.
Still to come, why Wall Street is wasting its time trying to get car companies to boost their stock.
ACTIVIST INVESTORS SHOULD BACK OFF
Wall Street is fighting a winless war. It thinks it can pressure GM and Ford into making major changes that will boost their stock prices. But the hardest thing in the world to change is public perception. And the public perception of car companies right now is that they’re a terrible place to invest. That’s not going to change anytime soon.
In the last five years GM and Ford have enjoyed soaring sales and record profits. But as their bottom lines grew, their stock prices fell. That tells you all you need to know. If the stock market didn’t reward these companies for a huge run-up in sales and profits then, it never will.
Activist investors like Maeva’s Harry Wilson pressured General Motors into spending billions buying back shares. By the end of the year GM will have spent $9 billion. This helped to dramatically boost GM’s earnings-per-share going from $2.71 in 2013 to $6.12 in 2016. But the market doesn’t care. GM’s stock price has gone absolutely nowhere.
Interestingly, all the major automakers in the world have lousy price-to-earnings ratios, except Tesla. Tesla does not have a price-to-earnings ratio because Tesla has no earnings. But the activist investors don’t dare go after automakers outside of the United States because they know the European, the Japanese, the Korean and the Chinese governments would quickly snuff out any attempt to go after their beloved car companies.
So it’s time for the activist investors to face reality. Come on back in a decade or so when today’s investments in mobility are hopefully generating big profits. Maybe then the market’s psychology will change and investors will come to see car companies as a brilliant sector to invest in. Right now, they’re just not buying.
Anyway, that’s how I see it. As always, we welcome your feedback.
And with that we wrap up today’s show, thanks for watching.
Thanks to our partner for embedding Autoline Daily on its website: WardsAuto.com
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Comments (26)
June 20th, 2017 at 11:58 am
Color selection for both exteriors and interiors for the big three are dismal,uninspired,and boring as hell.At least Ram has a huge pallet to chose from for exterior colors,GM on the other hand sucks.
June 20th, 2017 at 12:07 pm
I have to admit that the red interior looked good in the new Camry. The red was quite subdued and the flatness (perhaps more flattering if I said satin) was appealing.
Personally I don’t have too much of a problem with the GM exterior/interior colors. Maybe I’m dull but my vehicles are usually white or silver and I lean towards light colored interiors (living in the south with wicked summers).
June 20th, 2017 at 12:16 pm
Kudos to Toyota for offering a colorful interior in a mainstream car. I hope that helps them sell more cars. Then, the rest of the industry would follow suit.
I been annoyed for years, that you can get only black, grey, or beige interiors in mass market cars, while in the 1960′s and 1970′s, you had about 10 choices. Even in 1989, there was some choice. My ’89 Caravan has a blue interior.
June 20th, 2017 at 12:19 pm
My 1974 Duster was green, with white bucket seats, a great combination, (to me). Now, you have to buy a $300K Bentley, or similar, to get that color combination.
June 20th, 2017 at 12:30 pm
It looks like the major green car growth is with EVs and plug-in hybrids. Both seem to becoming popular regardless of fuel prices. The regular hybrid I think is more of a reaction to fuel prices and does not satisfy enough the market’s need to feel green.
June 20th, 2017 at 12:36 pm
John,
A bit sad to see you lump all companies in your interior comment.
Malibu at least has had a very nice optional interior for two+ years.
June 20th, 2017 at 12:51 pm
My interest lie in pickups,especially the resurgence of the midsize.Having said that,the color selections for GM are terrible,both exterior and interior.I need something different,I want options.Black,gray,beige.Exterior,different shades of metallic gray,white,silver,black,a horrible shade of blue,and red.
Ford has a much better exterior color palette,but not much for the interior.Ram has a great dark green metallic,and their interior option has a nice color of which I can’t remember the name of it,but in person it looks awesome.
June 20th, 2017 at 12:52 pm
You can get a pretty nice brown interior in a Malibu, (with optional leather), but no red, blue, green, turquoise, gold, white, etc. like you could get in the “good old days” of the ’60′s and ’70′s.
June 20th, 2017 at 1:05 pm
I congratulate toyota for adding a red interior.It looks nice. Cars seem to have a bit more in color selection than the pickups do.I know I’ve said this many times,but my 68 Torino GT,polar white exterior and a medium dark burgundy interior.It was stunning,and comfortable.Yeah Kit,’the good old days’…sigh.
June 20th, 2017 at 1:06 pm
Looked at Chevy Silverado trucks when thinking of buying and they push the black interior and charge extra for several exterior colors. I think it would be nice having more choices when you plan on buying a $50,000 vehicle
June 20th, 2017 at 1:07 pm
As late as the early 90′s you could get green or red interiors on some cars. Come to think of it the last gen T’ bird offered colors. Those interiors were beautiful. Most likely will see 2 tones re appear for a while. Surprised that there was no mention of the Focus production moving to china. While I think it is a good move (for now) Ford’s public reasoning is questionable.
June 20th, 2017 at 1:14 pm
The working family aspires / dreams of owning a Tesla but the reality is that they can only afford a Hybrid. People want to be “Green” because “Saving the Planet will mean Saving Ourselves”. The price point for the Tesla Model 3 will make those vehicles more accessible to the mass public however people living in inner cities and apartment houses will not be able of taking advantage of this technology due the recharging issues and accessibility. EV Carpooling where employees can recharge for free at work during the day and have a suitable place to store the vehicle at night might be a very viable way to reducing pollution and get several additional vehicles off the roads.
June 20th, 2017 at 1:17 pm
Those off-lease vehicles in Canvas’s subscription program will need new tires and brakes at some time. Who will be responsible for that?
June 20th, 2017 at 1:41 pm
11 The last T-Birds had some nice colors, interior and exterior, but those were expensive cars, $40K in 2005-2006.
I thought they should have built that car on a cheaper platform, so they could have sold it at a much lower price. The car was clearly a “cruiser,” and didn’t need the Jaguar/Lincoln LS platform and powertrain for the intended market.
June 20th, 2017 at 2:06 pm
I currently own a 2006 Mustang GT with a red leather/vinyl factory interior. With a black exterior, eleven years later, I still get compliments in the nice looking contrast. It reminds me of the old days growing up with red, green, and blue color keyed interiors.
June 20th, 2017 at 2:22 pm
@John or Sean,
Do you have any data on the effect on potential buyers regarding cars from China? Does that country of origin drive potential customers away from the Volvos and Buick from China?
The Focus, being a truly mainstream car, would seem a real test of that effect. People, including myself, have become comfortable with some products, like phones and computers, coming from China, but for me at least, cars are different. I definitely would not have bought a Corvette from China, and probably wouldn’t have bought a Chinese Prius.
June 20th, 2017 at 3:37 pm
14) A less-expensive variant of Ford’s (DEW) platform known as DEW Lite was under development, and much of that went into the D2C platform of which the 2005-20014 Mustang was built on. The differences between D2C and DEW are mostly in the suspension. Maybe if the T-Bird could have hung in there a few more years, it would have thrived on that Mustang platform.
June 20th, 2017 at 3:44 pm
On reusing EV batteries for home power storage, how would you build a business on needing a supply of used batteries. If you have to wait 8 to 10 years for a small quantities of EV vehicles to need battery replacements, it seems like it would be very unpredictable supply. Would you also have to buy these used batteries from the owners, or do you buy the EVs, remove the battery, than scrap the car??? It is probably too expensive put a new battery in an 8-10 year old car.
June 20th, 2017 at 5:49 pm
Uncrashed 10 year old EV’s in areas without road salt or sea spray should be in very good condition, well worth a new battery. The power train is very simple with little to wear out. In normal driving, the brakes last almost forever, with much of the braking being regenerative charging of the battery.
I don’t know about pure EV’s, but I’ve heard that for 2nd generation Priuses, there are enough, or nearly enough used batteries from wrecks to support the demand for replacements. I’d think that might be the case with Leaves, the highest volume pure EV.
June 20th, 2017 at 6:39 pm
every time EV’s are the subject, I feel the need to mention this—https://www.cnet.com/roadshow/news/nissan-e-power-combines-gas-and-electric-but-not-like-a-typical-hybrid/ SIMPLE, LIGHT, CHEAP! Most of the conglomerated disasters we’re being saddled with today are the results of design engineers trying to justify their existence
June 20th, 2017 at 7:06 pm
20 Cheap, (maybe) but only because of an excess of unused Leaf motors. With its big motor, and fairly big generator, it has more “rare earth” materials than a Toyota or Ford hybrid, so if produced in high volume, it would not be cheap.
Then, it will be a gas hog under many conditions, especially highway driving. I only wish it were widely sold, so we could get real world mpg and other info. I keep looking for info.
June 21st, 2017 at 7:14 am
I feel your use of earnings is not clear or misleading for most people. According to http://www.investopedia.com :
Earnings, specifically retained earnings, and profit are often used as synonyms in corporate finance, although they are different terms and have different meanings. These differences largely center around accounting treatment. A company’s earnings are equal to revenue less costs of production over a given period of time. Profit is equal to total revenue less all expenses. In the right context, these could be equal to each other, although that is rare. Big gaps between earnings and profits might be a sign the company spends too much time and money on unproductive activity.
Earnings Vs. Profit: An Example
Consider an example where a toy manufacturer sells $10,000 worth of toys in one week. It did not make any money from other sources over the same week, so its total revenue is $10,000.
If it cost $7,000 to manufacture those toys, the earnings for the company are $3,000 for the week, or $10,000 – $7,000. This does not take into account other fixed costs, however. The company may have paid interest on some debt, had to pay an accountant or fix a toilet at its facility. Suppose the company incurred $1,800 worth of these overhead expenses during the week. Now, its weekly profit is only $1,200 even though earnings show $3,000.
Read more: What is the difference between earnings and profit? | Investopedia http://www.investopedia.com/ask/answers/070615/what-difference-between-earnings-and-profit.asp#ixzz4kdMTcODL
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Tesla brought in $7000,000,000.00 dollars last year. Their earnings is that minus cost of producing the cars. However because reinvestment of earnings into massive growth there is no profit left. There is a loss. That does not mean there is no earnings.
June 21st, 2017 at 7:54 am
In PriusChat, we track the past four months of efficient car sales which includes diesels (hit my link) and we see:
(1) Prius hatchback recovering with the new model and TSS-P
(2) Ford Fusion caught fire in January and not cooled off
(3) RAV4 hybrid a surprising sleeper keeps climbing
(4) Niro giving the RAV4 a race
Past experience is a new model goes through a four month boost in sales before flattening out. The Niro may be entering that cool down phase.
Bob Wilson, Huntsville, AL
June 21st, 2017 at 8:12 am
We waited forever for the new (2017) Mazda CX-5 to arrive but can’t believe the limited colors, and mostly all have the black interior. Hate the limited selection and the “tan/parchment” is really black with off white inserts, equally unlikable. So, were back to the CRV, but don’t really want a 1.5 liter with a turbo. But Honda does have a whopping 3 interior colors, but still very limited exterior colors. I guess your are OK if you want silver or white. I don’t.
What to do???
June 21st, 2017 at 8:42 am
#22
I was surprised that they have TSS-P/adaptive cruise control on all 2017 Priuses, but that is part of why I bought one. My 2010 was giving no hints of problems.
I wish CR would hurry up and test the Niro and Ioniq. I’m curious about the gas mileage they will get when they do their full tests.
June 22nd, 2017 at 9:05 am
When my sister bought her Hyundai Elantra (about 20 years ago), she wanted red or blue but they only offered those colors if she paid more for the sporty GT model so she ended up with silver. I wonder if that is part of the vicious cycle of drab colors; no one is buying them due to no availability on the vehicle they want or not wanting to pay extra for a good color, so then the manufacturers don’t offer what isn’t selling…