AD #2464 – ADAS Drives Up Repair Costs, OTA Needed to Boost EV Sales, Tesla Pops the Champagne Corks
October 25th, 2018 at 11:35am
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Runtime: 6:25
0:30 Tesla Pops the Champagne Corks
1:10 Ford Profit Plummets
1:40 Tesla Stock Up, Ford Down
2:32 Consumer Reports Drops Tesla Recommendation
3:16 ADAS Drives Up Repair Costs
4:36 OTA Needed to Boost EV Sales
5:27 Gestamp Opens Factory in Japan
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On today’s show…Tesla stuns its critics and posts a pretty good profit…the AAA says all those safety features on cars are driving up repair costs…and why over-the-air updates can help boost sales of electric cars. All that and more coming right up on Autoline Daily.
This is Autoline Daily the voice of the automotive industry.
TESLA POPS THE CHAMPAGNE CORKS
Just as we predicted in yesterday’s show, Tesla posted impressive 3rd quarter financial numbers. Its revenue shot up 128%. Its car sales shot up a jaw dropping 220%. It posted an operating profit that represents nearly a billion-dollar swing from its loss a year ago. And it posted a net profit that also represents a nearly billion-dollar swing. This is an important milestone for the company, if, if this is a sustainable performance that continues for many quarters to come. If it’s just a flash in the pan, the critics and shorts will have a field day.
| TESLA Q3 2018 EARNINGS | ||
|---|---|---|
| Revenue | $6.8 B | +128% |
| Sales | 83,775 | +220% |
| Operating Profit | $416 M | +$951 M |
| Net Profit | $311 M | +$930 M |
| Source: Tesla | ||
FORD PROFIT PLUMMETS
Meanwhile, Ford also reported its 3rd quarter earnings yesterday and it’s lucky that the media’s attention was focused firmly on Tesla. Revenue rose a bit to just over $37 billion. And yet the company sold 10% fewer vehicles. That shows the kind of pricing power that Ford is getting with its trucks and SUVs. But the company’s operating profit dropped 38% and its net profits plummeted 58%.
| FORD Q3 2018 EARNINGS | ||
|---|---|---|
| Revenue | $37.6 B | +3.3% |
| Sales | 1.3 M | -10% |
| Operating Profit | $1.0 B | -38% |
| Net Profit | $991 M | -58% |
| Source: Ford | ||
TESLA STOCK UP, FORD DOWN
Clearly the stock market is not impressed with Ford’s numbers. The stock closed at $8.18 yesterday and it looks like it could drop to $7. In fact, it’s been dropping now for four straight years. Conversely, the market was clearly impressed with Tesla’s numbers. The stock closed up nearly 10% on the news and at one point was flirting with $300 per share again.
But coming up next, we’ll tell you why Consumer Reports just crucified Tesla.
CONSUMER REPORTS DROPS TESLA RECOMMENDATION
Consumer Reports released its Annual Reliability Survey and 12 models on the list including the Tesla Model S lost their buy recommendation. But on the flip side, 16 models earned a recommendation. The Model S lost its recommendation because of suspension problems cited by CR members in the survey. The company made air suspension and all-wheel-drive standard in 2017. The car’s road test ratings remained high compared to other models but the suspension issues dropped its score. It isn’t the first time the Model S lost its recommendation, doing so back in 2015 but Tesla gained it back the following year.
ADAS DRIVES UP REPAIR COSTS
While advanced driver assistance technology, or ADAS, will help prevent accidents, if your car gets involved in a minor fender bender, you’ll end up with a hefty repair bill. A new study from AAA found that vehicles equipped with ADAS technology that are involved in just minor front or rear collisions, have repair bills as high as $5,300, which is two and a half times larger than vehicles without those systems. While that will put a dent in your wallet, you may remember that it can cost $34,000 to repair the front end of a Kia K900.
A programming note here. There will not be an Autoline After Hours later today, but join us next week when we’ll have the all-new Chevy Silverado in the studio, along with Tim Herrick, the Chief Engineer who will take us through how they developed the truck.
Coming up next, how over-the-air updates can boost sales of electric cars.
OTA NEEDED TO BOOST EV SALES
Electricity is a lot cheaper than gasoline. So electric cars are cheaper to operate. Most people can probably save nearly $700 a year with an EV. So if you keep the car long enough, say 8 to 10 years, you can save thousands—enough to make up for the big sticker price. The problem is, people who buy new cars don’t keep them that long. Typically they keep them 5 years. Then they want a new car with new features. That’s why over-the-air updates are critically important. That allows an automaker to add new features and improve your car while it’s parked in the garage. And that makes owners want to keep it longer. Right now only Tesla can do that. But every car company is going to have to do it to make electric cars competitive.
GESTAMP OPENS FACTORY IN JAPAN
Well here’s an interesting development. The German company Gestamp is opening a stamping plant in Japan that will provide hot-stamped body-in-white panels to Honda. It is almost unheard of for foreign companies to operate automotive factories in Japan, especially involving something as traditional as stamping. Japan has historically been off-limits to this kind of investment. This is a sign of how fast things are changing in the world, especially in the automotive industry, and it’s a very welcome change.
And that brings us to the end of today’s report. Thanks for watching and please join us again tomorrow.
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Comments (37)
October 25th, 2018 at 11:49 am
So I get to eat some “crow” today after suggesting that Tesla will/might offer more excuses about why they didn’t make a profit in Q3. Well, they did make that profit, however, almost in that same sentence they offered that Q4 and Q1 next year may see that vanish (profit) as bonds will be up for payment putting them, perhaps, back in the red forthcoming. Too soon to tell, so I guess we’ll wait and see.
October 25th, 2018 at 12:17 pm
Sad to hear that there’s no Afterhours today. I truly enjoy watching it and learning from you and all your guests. Just glad to know you’ll be on next week.
October 25th, 2018 at 12:28 pm
The real sign will be once Tesla fills all the back orders. They will continue to have a steady stream of sales and money coming in until those orders are filled. I wonder if there are orders still coming in for model 3′s
October 25th, 2018 at 12:33 pm
Tesla= Smoke & Mirrors!
October 25th, 2018 at 12:53 pm
For EVs the ovr the air upgrades will not really encourage people to keep their car past 10 years as the “newer car” on the market will look “modern” and have better specs than the older model. Give the EV a range boost after 5 years of ownership and maybe they will reconsider. BUT,,, the “industry wants the owner to trade in or sell the “Older model” and but the newer model. This was the big sea change in auto marketing in the late 20′s to sell more cars. The annual model “change”.
Why not walk “us” through the timeline” for this Detroit Marketing concept????
October 25th, 2018 at 1:17 pm
5 The mid 1950s to late 1960s was the big time of annual model changes in car appearance. Now, people buy new cars to get the latest electronic gadgets.
As far as styling tweaks, the “refreshes” often seem to make the cars look worse, rather than better. To me, that is certainly the case with the front of the 2019 Camaro.
October 25th, 2018 at 1:31 pm
1 If they can keep selling 20,000 Model 3s a month for ~$55-60K, that will help a lot. When the pipeline is filled with those buyers, and they need to sell the promised $35K model 3s, it will be tougher. Now, according to the Tesla web site, you can order a “mid-range” Model 3 for $46K, with a $2.5K deposit, promised delivery in 6-10 weeks.
October 25th, 2018 at 1:38 pm
The ADAS systems employed by GM and Subaru which are mounted in the front windshield behind the rearview mirror should not be damaged in the event of a minor collision.
Systems that have cameras mounted in the front grill of a vehicle should be moved out of harms way. This will be a major consideration when I make my next new car purchase. I therefore hope that Honda/Acura move there system from behind the front grill logo and up out of harms way.
October 25th, 2018 at 1:52 pm
I agree with Kit. No one knows what the unit demand per year will be for the Model 3 once the backlog is filled. With more EV choices on the market in the next year or two, its hard to imagine Tesla continuing the production volume and sales of the Model 3 that they are enjoying right now.
Along with the decline in revenue from a lower level of Model 3 sales, Tesla will have big development and pre-production expense for the Semi, the Model E and the Pickup.
Still waiting to hear the announcement of where the Semi will be built. If they are going to deliver trucks in 2019, that should already be under construction. Hmmmm, another hastily stated deadline that will be missed?
October 25th, 2018 at 2:04 pm
Now that Wall Street is predicting that Ford stock will drop below $7.00 per share maybe Elon Musk should see if Ford would be willing to sell the Model “E” trademark to Tesla?
October 25th, 2018 at 2:04 pm
Question for John: as gasoline sales decline due to EVs, I expect governments to start taxing electricity for cars. Can you tell us if EVs would still be competitive with gas cars if both were taxed at the rate gas is now?
October 25th, 2018 at 2:07 pm
If Ford would be willing to sell the Model “E” trademark to Tesla then Tesla’s vehicles lineup would be the Model S, E, X, Y (in the pipeline)!
October 25th, 2018 at 2:19 pm
4 GM CRUISE is INDEED “smoke and Mirrors”, Steverino. And Wall Street is catching up on it.
Get a clue. OR are you one of these poor souls GM is paying to post favorable comments in social media?
October 25th, 2018 at 2:27 pm
Actually the proposed EV tax works perfectly fine for gas cars by reducing or eliminating the gasoline tax. The Federal and State governments are assured of a steady, income for road projects and the gasoline cars get some much needed relief.
October 25th, 2018 at 2:28 pm
10 Related to your post, here is an equation for you and all the rest in this forum:
Tesla = Ford plus FCA. (approximately).
Solution: Everybody: see the two cut and pastes below, read them CAREFULLY. Maybe you will learn something, since I believe I am the only one (besides Bob Wilson) in the group that carefully read the Tesla details link posted here yesterday
“…Now might be the time for Tesla to keep one eye out for an opportunity to buy Ford. Tesla’s market cap is 54 billion. Ford’s is 33 billion. I can see Ford falling to 25 billion. Making a tender offer of Tesla stock may let Telsa acquire Ford for a stock dilution of about 1/3 with Tesla gaining control. Ford has profitable trucks, but virtually no cars and, most distressingly, nothing in the pipeline. Ford seems to have lost direction regarding electric vehicles. Ford has underused manufacturing plants. Tesla has a can-do mentality, but sometimes doesn’t have the means to carry out the ambitious projects. Ford seems to have no ambition, but does have a solid engineering pedigree. The Ford family might actually admire Musk for doing what Henry Ford did. I’m sure “Ford” would have to be in the combined company’s name. PLUS, if Tesla buys Ford, I think the company could sell another 200,000 Ford electric vehicles (that look A LOT like Tesla Model 3s) with 7,500 tax credit.”
and then read this other comment:
“..Note the FCA market cap is only 23 billion, but there are so many issues with the company that I wouldn’t think of buying it. ..”
Now do the math. Do you see why my equation above is correct? LOL
PS I am STUNNED at all the negative spin on the STELLAR news. Go back for important details in yesterday’s show’s comments posted in the evening, after detailed study of the news.
October 25th, 2018 at 2:31 pm
https://www.thetruthaboutcars.com/2018/10/more-evidence-that-self-driving-cars-are-on-a-road-to-nowhere/
here is the full article on the GM Cruise real “SMOKE AND MIRRORS”!
Study it if you want to know “The Truth about Cars”. This is the site that had a GM “Death watch” for years every day until GM went broke in 2008, and nobody was paying attention to it, BTW.
October 25th, 2018 at 2:37 pm
15. They could put a big blue oval in the nose of the rebadged Model 3, to fill up that empty space.
October 25th, 2018 at 3:01 pm
I have a problem calling Tesla news as stellar; positive, yes but not stellar. I was reading elsewhere some of the advisors were saying about Tesla stock. I don’t remember the exact number of recommendations but I would say 40% sell recommendation, 30% hold and 40% buy. That certainly sounds arbitrary on the news of today’s reporting.
October 25th, 2018 at 3:03 pm
Make that 20% hold; fat fingers (again).
October 25th, 2018 at 6:08 pm
18 Getting a significant number of Model 3s out the door was a good thing for Tesla, and showed up in the numbers. Time will tell how things go, moving forward.
October 25th, 2018 at 6:28 pm
Duesenberg has been mentioned here, and there is an interesting history. The “two notches above a Rolls-Royce” model J was mainly a result of E. L. Cord. Cord made cars in the 30s, front drivers, which were noted for innovative styling. Cord bought a bunch of companies, including Duesenberg and Auburn car companies, but also Lycoming, Stinson, and others. Lycoming built the twin overhead cam straight 8 engines used in the Duesenberg J. The Cord empire collapsed in 1937 or so. It’s anyone’s guess how it would have turned out, had there not been the great depression. The Auburn-Cord-Duesenberg museum, in Auburn, Indiana, is worth a visit for any car nut, especially those interested in the “classic” era of the 1930s.
October 25th, 2018 at 8:14 pm
John, ADAS may be expensive to fix, but how many fewer accidents occur when cars are equipped with these ADAS. I would bet that if the research was done the overall costs associated with ADAS is actually less for the insurance companies than for non-ADAS equipped cars. I can guarantee that you will never get that information from the insurance industry otherwise they wouldn’t be able to say “all this new ADAS stuff is expensive so we need to raise the rates to cover repairs… They will always cry poverty even if their profits increase.
October 25th, 2018 at 9:16 pm
Re:ACD–Kit—During WW2, when I was learning the trade, Dad took on major engine rebuild of Auburn Speedster engine ( had a mint body) Took 3 of us to handle the crank . amazing that all engine parts were readily available from ACD. Got to test drive when rebuild was done, unforgettable thrill for a 14 yr old even if he was born with a wrench in his hand
October 25th, 2018 at 10:42 pm
21,Kit, the ACD is a great museum, including the building. I just came back from the Gilmore Museum today. They will soon have a Duesenberg exhibit ( they were still setting it up). They also have a nice lineup of 1934 Auburn V12s and a few Cords. Another great museum and probably only a few hours north of the ACD.
October 26th, 2018 at 7:35 am
24 I’ve never been to the Gilmore museum, but should go sometime.
The art deco ACD Museum building was the Auburn factory showroom. Yep, the building is almost as cool as what’s in it.
October 26th, 2018 at 7:40 am
23 Quite an experience you had. When I was a kid in the ’50s, it was fairly common to see at Auburn or Cord, and occasionally a Duesenberg in a local car show in Indiana. Now, I doubt that many of them ever leave museums, and run under their own power.
October 26th, 2018 at 7:45 am
According to google maps, the Gilmore museum is only 3 hours, 7 minutes from Kokomo, IN, where I usually spend summers. I need to go next summer.
October 26th, 2018 at 9:38 am
27) Definitely go Kit. The Gilmore is a very relaxing venue. You can spend the entire day there as it is so large. If you like them on FaceBook, you will get information on days that they offer classic car rides to visitors. It is one thing to see these classic cars, it is quite another to actually ride in them!
October 26th, 2018 at 9:46 am
28 Thanks for info.
October 26th, 2018 at 10:35 am
4 The Fake News Channel claims that most of the Tesla Model 3s have been bought by George Soros. Do you have any independent confirmation for this?
9 the backlog is enormous, despite the significant 90,000 or so cancellations. There are deposits for 455,000 Tesla 3s, and so far ALL the production has been delivered to US customers ONLY. Not one unit to the EV Champion China, or even to all of Europe (they will get theirs in early 2019). So EVEN at 20,000 units a month, the demand reaches as far as the eye can see.
9 very, very few of the 90,000 cancellations are ever hoped to result in Bolt, Leaf, or even BMW i3 Sales. These EVs just don’t have what it takes, period.
Stay tuned next Thursday for the October sales. Not so much for Tesla sales, which should be huge, but to see the PAIN they inflicted to their rivals, and especially the BMW 3 series.
The Germans will not have for sales serious Tesla rivals for years still. AND when they do (porsche) they will be so expensive, they will only compete with the “Ludicrous” tesla S.
October 26th, 2018 at 10:41 am
18 We aim to please. Let me know what you consider “Stellar” Tesla sales/profits for the next quarter and I will let Elon know.
19 Some Duesys were extremely expensive for their time. One was even named for its price, the “Twenty Grand”. $20,000 then was MILLIONS in today;s worthless dollars. Winston Churchill bought a new Rolls in the 1930s for a mere 2,000 Pounds. But the Pound was $8 then, so he paid about $16,000, less than the Duesy.
Packard was more of a direct competitor to Rolls then. Duesys were far sportier and had huge HP by comparison.
The Soviets had a license with Packard and also made their own luxury limos looking a lot like the Packards of the time. (However Lenin had an ancient Rolls Royce, as befits a man of the people and the working class.)
October 26th, 2018 at 10:45 am
30. As I posted in #7, the Tesla web site says you can order a car now, and get delivery in 6-10 weeks. Does that mean all, or most of those 455,000 depositors are waiting to buy the promised $35K Model 3?
October 26th, 2018 at 11:07 am
https://www.autoblog.com/2018/10/25/mazda-volvo-buick-consumer-reports/
John, you devoted a segment in this show to the problems of Tesla models shown in Consumer Reports, but I wonder if you took a look at the serious reliability issues of some of the rest of the industry.
In the above article in Autoblog, my frequent criticisms of Chinese owned (and for some models, Chinese made) Volvo unreliability are verified.
“Then there is Volvo, about which there is one word to sum up its woes: infotainment. Specifically, the new infotainment system shared by the XC60 and XC90 crossovers and S90 sedan. But with so much tied to the technology — it controls everything from heating and cooling, to navigation and entertainment — when it goes wrong, it can render the vehicle nearly unusable. Think of a car you can’t heat during the dead of winter, for instance. Owners of the XC90 also reported some issues with engine computer problems, exhaust leaks and harsh shifting from the transmission, Linkov said. “They have so many new systems that there’s a lot going on that they need to work out,” he said…”
But GM, despite all the clobbering (and even one bamnkruptcy) and market share loss it suffered since the 80s, mainly for making, to quote Mary Barra herself, “Crappy Cars”, continues to have BIG reliability issues. And they were not about the Chinese made Buick Envision SUV, but the North Am made Enclave. Says COnsumer Reports:
“…For Buick, the redesigned Enclave SUV earned a “Much Worse Than Average” rating after owners reported problems with the new nine-speed automatic transmission it shares with the Chevrolet Traverse as well as some issues with the climate system. There were issues with rough shifting, plus complaints about the torque converter that necessitated fixes to the computer or outright replacement. “Again, similar stuff that we saw with the Traverse: both first-year vehicles, similar powertrains,” LInkov said…”
October 26th, 2018 at 11:51 am
32 I have not seen any breakdown of the 455,000 waiting, but I’d give it less than 1% chance that ALL are waiting for the $35k version.
First of all, I don’t know how many of the 455,000 are US and how many are reservations in the many, substantial, EV markets in the rest of the world, but I know that Europeans will NOT see any Tesla 3s before January 2019, and the Chinese don’t even have a date I know if.
I know that at least until Jan 1, all Tesla 3 sold are sold to US depositors.
October 26th, 2018 at 12:10 pm
34 If a lot of those deposits are from outside the U.S., it might explain the ordering information on the web site. If the 6-10 week delivery claim can be considered real, anyone wanting a ~$50K Model 3 should just order it. They need a $2500 deposit. There is a long order agreement, and in most cases, the deposit would not be refundable, but if they actually build the car you want and get it to you in 6-10 weeks, you wouldn’t want a refund.
October 26th, 2018 at 12:15 pm
33 CR lists the trouble area for the Enclave as “transmission minor,” whatever that means. Hopefully, both for customers and GM, it is something software tweaking will fix. It is one of the transmissions jointly developed by GM and Ford.
October 31st, 2018 at 5:10 pm
OTR updates may not slow new car sales but as EVs age so will their battery. OTR may slow that degredation by improving efficiency with new software to control how the car works.
As to Tesla- its more than one quarter that will show if Tesla is profitable. Lies, damned lies and statistics with magic accounting are still too common.
Forget the Tesla big rig- Tesla can still make an impact with a Truck/Van and extra SUV to make cash from and fill in its product gaps.