AD #2584 – Tesla’s Retail Blunder, GM Earnings Upside Surprise, Daimler Finally Drops Smart in North America
April 30th, 2019 at 11:43am
Follow us on social media:
Runtime: 7:06
0:06 GM Earnings Upside Surprise
0:45 Daimler Finally Drops Smart in North America
1:18 Cadillac Says Bye-Bye to Its Best-Selling Car
1:57 April Sales Are Anyone’s Guess
2:46 Toyota Surrenders on DSRC
3:33 Earn Cryptocurrency Driving Your Jag
4:10 FCA Flies into The Cloud
5:12 Tesla’s Retail Blunder
Visit our sponsor to thank them for their support of Autoline Daily: Bridgestone.
This is Autoline Daily reporting on the global automotive industry.
GM EARNINGS UPSIDE SURPRISE
General Motors announced its first quarter earnings this morning and while the results are mixed, GM smashed through analyst’s expectations. Even though the company sold fewer vehicles, and brought in less revenue, it cut costs nearly 9% and dropped another billion dollars to the bottom line and more than doubled its profit. Wall Street was expecting GM to post $1.11 per share in earnings, but GM earned $1.41 per share. And that kind of upside surprise almost always pushes the stock up. So far this year, GM stock is already up 19%.
| GM EARNINGS Q1 2019 | ||
|---|---|---|
| Sales | 1.8 M | -10.4% |
| Revenue | $34.8 B | -3.4% |
| Operating Profit | $1.2 B | +135% |
| Net Profit | $2.1 B | +106% |
| Source: GM | ||
DAIMLER FINALLY DROPS SMART IN NORTH AMERICA
Daimler announced that it is pulling the smart brand out of the U.S. and Canadian markets. And all we can say is, what took you so long? The car has been a sales disaster from the first day it rolled off the assembly line. Last year smart sold fewer than 1,300 cars in the U.S. and so far this year they’ve only moved 230. Last month Daimler agreed to essentially hand the brand over to Geely, make it electric and move production to China.
CADILLAC SAYS BYE-BYE TO ITS BEST-SELLING CAR
Speaking of dropping models, Autoforecast Solutions reports that the Cadillac XTS, the best-selling passenger car in Cadillac’s lineup, will go out of production in September. Cadillac always felt the XTS was wrong for the brand because it brought in older buyers. But dealers wanted the car because it easily outsold the ATS, CTS, and CT6. But GM is closing the assembly plant in Oshawa that makes the XTS, so they’re giving it the heave-ho. The Chevrolet Impala will also go out of production then because it too is made in that plant.
APRIL SALES ARE ANYONE’S GUESS
Automakers in the US will announce their April sales tomorrow and the experts are a little bit mystified about what the results will be. Sales could be down, they could be flat or maybe they’ll be up. Here’s the problem. March sales came in far stronger than any analysts expected, so they’re not sure what the underlying demand really is. Ward’s is forecasting that automakers will sell 1.3 million vehicles, with the SAAR coming in at 16.9 million.
TOYOTA SURRENDERS ON DSRC
Last year, Toyota announced plans to equip its vehicles in the U.S. with Dedicated Short Range Communication or DSRC. The connected car technology was supposed to start in 2021. But now it’s ditching those plans, because more support is needed from other automakers and from the government to support the 5.9 GHz spectrum for DSRC. The rest of the industry is headed to 5G and cellular V2X technology. Here’s another issue. States, counties and municipalities would have to build up the DSRC infrastructure, while the Telco’s will pay for 5G and cellular because they can make money off that technology.
EARN CRYPTOCURRENCY DRIVING YOUR JAG
If you drive a Jaguar or Land Rover you can earn cryptocurrency while driving. JLR wants drivers to share info about road conditions, traffic jams or potholes, which will be automatically provided to navigation providers or local authorities with JLR’s “Smart Wallet” technology. Drivers will earn credits which can be used to automatically pay for tolls, parking or electric charging. With so much data being created by new vehicles, automakers are trying to find ways to monetize it, and it could be worth a fortune.
FCA FLIES INTO THE CLOUD
FCA is partnering with Google Technologies and HARMAN, which is a part of Samsung, to create a new connected vehicle ecosystem. FCA’s Uconnect infotainment system will use a new cloud-based platform from HARMAN to power connectivity and offer a number of services. Uconnect will also be powered by Android, which will provide new content with over-the-air updates. The new platform will offer 4G connectivity, is homologated for all regions and will integrate with any service provider around the world. The new platform launches the second half of this year and will be offered in all FCA vehicles worldwide by 2022.
Coming up next, I’ll give you 166 million reasons why Tesla’s retail model is flawed.
TESLA’S RETAIL BLUNDER
Tesla made a strategic blunder in by passing franchised dealers and selling directly to customers. As a result, twelve states banned sales of Tesla’s and nine other states greatly limited how many company stores Tesla can have, usually five or less. And there’s a bigger problem. Tesla has saturated the markets where it can sell cars. Anyone who lives in California or travels there will tell you the state is literally crawling with them. They’re everywhere. That’s why Tesla desperately needs to open up its market in those 20 states that have banned sales or limited how many stores it can have. Collectively those states have a population of 166 million people who buy more than 8 million new cars a year. That’s a huge chunk of the market that Tesla is largely missing. No doubt embracing the franchised dealer system would be a bitter pill for Elon Musk to swallow. He wants Tesla to be a disruptive and different kind of car company. But wouldn’t it be better to simply swallow your pride and double the size of your home market?
And don’t forget to join us for Autoline After Hours on Thursday afternoon. Gary Vasilash is hosting a who’s who roundtable of auto analysts, including Stephanie Brinley from IHS Markit, Brett Smith from the Center for Automotive Research and the one and only Autoextremist, Peter DeLorenzo. It should be a great show, so mark your calendars for 3PM eastern time this Thursday.
But that wraps up today’s report, thanks for watching and we’ll see you again tomorrow.
Thanks to our partner for embedding Autoline Daily on its website: WardsAuto.com
Share
Permalink
Comments (41)
April 30th, 2019 at 11:54 am
I fully agree with your comments about Tesla and the 166 million reasons its current success would continue for many years, if it was allowed to sell its cars in the 20 states you mention, where they are forbidden now.
However, this does not mean it has to surrender to the dealers. It is not just pride or ego either. It is obvious that Musk wants to run a very vertically integrated company, which makes almost everything itself, and does not just ASSEMBLE parts made by 1,000 suppliers, like GM and FOrd and FCA and many others do.
They even make their own SEATS!
So apparently Musk wants to get the last penny from these cars for Tesla and give as few of them as possible to suppliers, dealers, and other external entities.
So he could encourage his supporters to protest the unfair laws in these 20 states, or bribe the corrupt politicians who put them in place, or both.
April 30th, 2019 at 12:01 pm
New York City has alternate side of the street parking which means you have to go out and move your car every couple of days for a couple of hours. You sit in it for two hours and read The New York Times then you move the car back into its space once the street cleaning machine comes through. That’s what the SMART is really good at.
April 30th, 2019 at 12:05 pm
Here, here #1 Tesla should be able to sell cars wherever it wants to. What happened to the free trade and capitalism mantra of the country? I am not a fan of Elon he is a bit of a weird dude. But I do believe restraint of trade within the US is not a great idea.
April 30th, 2019 at 12:06 pm
2 If I lived in Manhattan I would sure not own a car. And the walks would keep me in better shape than here, where I only pay $80 per YEAR for a work parking sticker, which allows me to park in a commuter lot only a few hundred feet from my office building’s entrance. And as I am usually early to bed and early to rise, I always find the best parking spot at 6:30 AM when I typically arrive.
April 30th, 2019 at 12:17 pm
Well, sometimes you have to follow the rules. What Elon has the option (and opportunity) to do is to hire the best darn dealers he can find and can control (to his wishes on selling his car). He made the decision to exclude himself from those markets contested.
While the XTS, Impala and the Lacrosse weren’t setting the sales records on fire that they had hoped (full size family sedan sales have waned even more than the mid-sized sedans) they may have wanted to hang on to those high revenue vehicles (big mark up on an XTS) and soldiered on at least for another refresh. Plus, even though their target market was older, they seem to have the disposable income for these higher priced vehicles; plus, we ain’t dead yet.
April 30th, 2019 at 12:28 pm
When you say 20 states have banned the sale of Tesla’s does that just mean you can’t even register one in that state? Cause rather than see Elon conform I’d rather see him offer great online deals. If states have prevented the sale in their state doesn’t mean you can’t drive to a state that does sell them and buy it there. I feel like the sales tax should go to the state that sells them and not where they get registered. That would make states reconsider.
April 30th, 2019 at 12:31 pm
#1, Tesla has a huge number of suppliers. They do make their own batteries which probably helps with overall profitability, but they are nowhere near as vertically integrated as VW. I don’t disagree with Tesla direct sales, but there are some advantages for the manufacturer to the dealership system. Think about how much money Tesla has tied up in their inventory and sales and service outlets, not to mention the Superchargers. GM, Ford, etc. don’t have funds tied up in those items. They get paid when the dealer receives the car, not when the customer buys it. Its a much more capital-efficient system.
April 30th, 2019 at 12:34 pm
#1, Tesla has a huge number of suppliers. They do make their own batteries which probably helps with overall profitability, but they are nowhere near as vertically integrated as VW. I don’t disagree with Tesla direct sales, but there are some advantages for the manufacturer to the dealership system.
Think about how much money Tesla has tied up in their inventory and sales and service outlets, not to mention the Superchargers (yes, Tesla has inventory of Model 3′s sitting around). GM, Ford, etc. don’t have funds tied up in those items. They get paid when the dealer receives the car, not when the customer buys it. It’s a much more capital-efficient system.
April 30th, 2019 at 12:48 pm
5 The total sales of XTS plus LaCrosse plus Impala were about 90K for 2018. XTS sales were about flat, but the higher volume Impala and LaCrosse were both down about 30% from 2017. I suspect there just wasn’t enough volume to keep going for the volume involved. I’m hoping the CT5, or whatever they will call it, will be a viable replacement for the XTS. It will no doubt be a better car, dynamically, but XTS buyers aren’t looking for a “driver’s car.”
April 30th, 2019 at 12:48 pm
I loved the 2014 XTS Vsport 3.6TT and quite the beast with a ecu tune and 550 lb-ft of torque.
April 30th, 2019 at 12:52 pm
As for the April sales numbers, well, I did my part. And bittersweet it was. I’ll guess that sales come in flat to slightly down. The reason, I would argue, might simply be interest rates. I gambled…and lost…that the inevitable rate increase might not occur until later. Oh well, I never planned on dragging it out through the full term anyway.
April 30th, 2019 at 1:14 pm
I think you can register a Tesla in all states, but some states make it really inconvenient to buy one. Some states allow you to order a car on-line, and have it delivered to your home. Others, though, require you to take delivery outside the state.
A lot of people like convenience in car buying, especially older people, who have a car mainly as an “appliance.” I suspect that is why so many KIAs, and not many Fords and Chevys are showing up at my condo in Florida. The KIA dealer is about 4 miles away, with two stop lights on the way. The Chevy and Ford dealers are about 11 miles away, but the drive involves about 10-15 stop lights, and sometimes fairly bad traffic. The people buying KIAs because the dealer is conveniently located, would not be inclined to go 250 miles to another state to buy a Tesla.
April 30th, 2019 at 1:15 pm
In addition to front biased drive (four wheel available) on the XTS, the XTS was also sprung softer (for the traditional Cadillac buyer). The CT5 will certainly be more of a dynamic ride but Caddy drivers (quite a few) are lamenting the soft/cushy ride of yore. Could there be enough wanting this type of ride, well, Lexus currently provides same. Also lacking with the CT5 will most certainly be trunk space; the previously mentioned vehicles had huge trunk space at, in and around, 18 cubic feet. I’m not saying Cadillac is wrong, just that buyers will certainly look elsewhere and perhaps Caddy’s new entry isn’t going to be on the list.
April 30th, 2019 at 1:20 pm
Even in Texas at a Tesla Gallery, there, the salesperson takes you over to a computer, they have handy, so that the buyer can buy a Tesla car online, however New Mexico seems very aggressive about protecting their dealers, even hampers supercharger installations, but even there, one can order online. New York City is not for me I love my cars too much and driving them.
April 30th, 2019 at 1:22 pm
6 In MI Tesla is not allowed to sell its cars through a Tesla Store, but I assume you can register a Tesla bought in Cleveland, a 3 hour drive from Detroit, in MI. The repeat guest in AAH who is the auto critic for a Detroit paper, forget his name, did exactly that.
5 If I were Musk I would hire some good lawyers and attack these 20 states one by one, start with the most promising one (with a significant enough market) and challenge their laws.
5 In the US, esp in auto marketing but also in other fields, there is too damn much emphasis on younger demographics. In fact, the young have too little $, while the older consumers can afford the Caddy on their retirement or earlier. In addition, the fastest growing segments of the US population, despite the big influx of legal and illegal immigrants from the south, which typically are young and have lots of kids, is the over 65, and of these, the centenarians, over 100, are the fastest growing segment of all (although they have a preference for Lincoln Town Cars, with the 400 HP engine and sporty suspension, which they like to take to the track).
April 30th, 2019 at 1:23 pm
Tesla: Just shows that those free enterprise stealerships need protection from competition so they buy off their govt. aka corporate corruption.
April 30th, 2019 at 1:26 pm
10 I knew someone who never replaced his DTS, because he couldn’t get a bench seat in anything else. I think you could get a bench seat in a Toyota Avalon for the first few years, but not any longer.
Probably the closest to a “traditional American luxury car” now sold would be the Lincoln Continental, but it isn’t selling very well. For now, Americans want lifted wagons, not cars, and it seems that cars, no matter how good, are not going to sell very well.
April 30th, 2019 at 1:41 pm
14 Bench seats are a deal killer for the vast majority of people. Even if once in a blue moon you would want to sit 3 in front. Today with 3 row SUVs this is not a problem any more, and one does not need to be thrown on the other side of the car in every sharp turn if one needs to have a bench seat.
Also proper handling (as opposed to a ‘cushy ride’ is above all a Safety issue. I would never feel safe in a luxury barge (this is a term Top Gear misuses when it calls 7 series, who handle like they are on rails) that, instead the ones who justify the title, such as Lexus LS, Buicks and older Caddys).
April 30th, 2019 at 1:44 pm
12 Elon should probably start with Texas, for his law suits. You have to go hundreds of miles from some parts of the state, to get to a Tesla store. Texas has a few “galleries,” but the last I knew, you had to go to another state to actually take delivery of a car.
April 30th, 2019 at 1:52 pm
15 Bench seats have very limited appeal, which is why no one offers them. My friend liked them because he was tall, and had a bad right knee which he needed to lean to the right without hitting anything, like a console, to be comfortable. There are probably some CUVs, and maybe even cars that have no console, or one that is narrow enough that it wouldn’t bother him. My old van has no console, to get in the way of knees, but the gear shift of my 5-speed manual might.
April 30th, 2019 at 2:19 pm
17) You can get a bench seat in a F150 and it is a pretty popular option. Only up to their XLT trim, any higher trim has the bucket seats.
In Michigan the rules for dealers exist to stop people from setting up fly-by-night dealerships on every street corner in the state. That is how it was a few decades ago and it resulted in people getting massively ripped off, particularly the poor. Michigan can accomodate TESLA but it would move michigan back to the way it was where the poor were ripped off constantly.
OR…Tesla could just simply open a company owned dealership in the state and follow the rules established by the state which govern owning and operating a dealership. I have read every michigan law on it and there is nothing which prevents TESLA from doing this in Michigan. TESLA just simply doesn’t want to do it.
April 30th, 2019 at 2:37 pm
I love my xts because of its ride, that is why I traded in my cts for it. Everyone who gets in it for the first time comment on how good it rides. I travel a lot and need a car that rides good. NOT EVERYONE NEEDS A CAR THAT CAN SDO 0-60 IN FOUR SECONDS.
April 30th, 2019 at 2:52 pm
Seems like a very broad strokes analysis on Tesla, and most of your argument is unsubstantiated. For instance – I don’t agree that states like California are saturated with Teslas. Can you provide data or a rationale for that opinion other than the anecdote “they seem to be everywhere”?
You are also missing a lot of factors that are in play if Tesla decided to franchise. The big one is vehicle margins (dealers cut into your margins). Margin loses cut into any gains made through additional vehicle sales. Also, Tesla differentiates itself through the customer experience. Other OEMs know all too well the difficulty controlling and maintaining a consistent experience across franchise dealers.
April 30th, 2019 at 2:53 pm
As has been documented by Autoline, Automotive News and other press, Tesla has been challenging the dealership laws in nearly every state that prohibits manufacturers from owning dealerships. And that is what the dealer laws are designed for. To prevent a manufacturer from owning a dealership and competing unfairly with dealers holding franchises from that same manufacturer. The courts have already ruled in Tesla’s favor in several states, and some others have settled and agreed to allow Tesla to have a limited number of sales outlets.
April 30th, 2019 at 2:58 pm
17 I vividly recall an experience in a K-car’s front bench seat, my most uncomfortable and painful ride ever. For some reason, in the late 80s, a woman I knew gave me a ride in her K-car which had a bench seat that was not split, but moved forward or back as one unit. The trouble was that this woman was rather short, even for a woman, and liked to drive with her nose touching the windshield, which is actually a very stupid and unsafe way to drive, and either did not notice or did not care that my knees were literally crushed against the glovebox. Fortunately it was a short drive and I was glad not to ride in that god-awful junkmobile again, ever.
April 30th, 2019 at 3:03 pm
19 How does a CTS with magnetic ride control ride in the “soft” setting? Is it still stiff, or does it ride fairly well? I’ve only driven one recent CTS, a base car, which I thought rode pretty well, but then, I’m used to driving a Corvette and a Mini.
April 30th, 2019 at 3:04 pm
19 if you travel a lot, then you have a much higher risk of an accident, and many accidents are not caused by you the driver, but by other drivers who hit you!
Therefore, if your life has any value to you, you need a vehicle with the highest level of BOTH active AND passive safety.
And while the XTS with the allegedly great “ride” has plenty of the passive safety kind, it has next to nothing of active safety,
not only because its poor handling and accident avoidance ability if, all of a sudden, there is an accident site blocking your way just in front of you,
but even also in the vehicle’s performance and acceleration, which also can help avoid the accident.
I used to like most Caddilac’s exterior styling, from the 70s on. I also appreciated the Northstar V8, the only GM vehicles I enjoyed driving in the 90s were Seville and Eldorados with that V8 (I have never driven a Corvette, though). Their interiors were much inferior to their Import competition, and so was the steering, which had too much power assist, and felt like the car was wallowing all over the place instead of going straight as an arrow.
April 30th, 2019 at 3:08 pm
20 I suspect it would have been more comfortable for you in the back seat.
My once-ever pickup truck, a 1995 S10, had a split bench seat which, as I remember, was reasonably comfortable. The two sides could be adjusted separately.
April 30th, 2019 at 3:09 pm
18 this does not make any sense. Why would Tesla not want to open a dealership in MI when it has none, and it has a ton of them in places like CA (Tesla Stores)? It does have one “Tesla Gallery” in Troy, MI near Detroit, but that is not allowed to sell any cars.
April 30th, 2019 at 3:11 pm
23 if the back seat was more comfortable than the front, I’d have asked to sit there, although the woman would have bitched about it, I suspect. But it was very uncomfortable, just not as bad as the front seat with its solid bench crushing my knees against the glove box.
Still, there was no permanent damage, so it’s all forgiven (but hardly forgotten)
April 30th, 2019 at 3:27 pm
18,24 Michigan law doesn’t allow Tesla to have their own stores, but maybe they could work out a deal with Roger Penske to convert some closed Smart store to Tesla stores.
April 30th, 2019 at 5:31 pm
I applaud Elon Musk for NOT using franchise dealers. It’s been my experience that franchise dealers and no value what so ever and ruin the whole new car experience. I generally know more about a vehicle than the sales man, I despise the games you have to go through during the sales negotiations, then all the F&I garbage, markups over MSRP (which the manufactures discourage dealers from doing), and holdbacks and hidden incentives that you are not supposed to know about.
Service departments that have service writers that know nothing about the mechanicals of cars/trucks, repairs that do not solve the problem you brought the vehicle in for in the first place, and a bonus program for mechanics that encourages them to cut corners and race through the repair to get the bonus instead of doing the job correctly at the owners expense. I have even had a car that was hit while in the service department , the dealerships body shop had it where it was hit a second time, and the body repair was terrible.
So John, tell me again how franchise dealers add value to the car buying public? If I was a manufacture I would NOT want my name/brand posted on a big sign in front of a business that I can not control.
April 30th, 2019 at 6:12 pm
My best car buying experiences have been buying a GM car as an employee or retiree, with no trade. The price is set, and the dealer is allowed no more that $100 in add ons for title, or whatever else they might come up with.
April 30th, 2019 at 7:33 pm
33- I concur. I typically order my vehicles so when it is time, I drop off a printout of the configuration I want to the same salesman I’ve used for years. If I’m trading in a vehicle, he will give me a quote so I can decide if I want to try to sell the vehicle myself. He calls me when the new vehicle is in, and it takes about an hour to do the paperwork. Everything is fixed pricing and no hassle.
I think some dealers have tried fixed pricing, but have gotten greedy so you can often get a better price somewhere else, or they screw you over on the trade-in.
April 30th, 2019 at 8:40 pm
I add my opinion to 100% of the others. Dealerships should be a choice, not a legislated necessity. Laws can be made that protect incumbents but it’s plain lazy to just forbid a reasonable solution.
John, as ‘the voice of the automotive industry’ you have a bunch of dancing around to do on this one. Sorry.
April 30th, 2019 at 8:53 pm
Maybe Tesla could sell through Costco in those franchise-only states.
May 1st, 2019 at 6:22 am
32 Let me talk to my manager and I will get back to you. (that’s me, not John)
35 Dealers are middlemen, if they are eliminated Musk and the buyer can share the savings (the % Musk gets and that I get would depend on the softness (4elasticity) of the supply and the demand).
In general, by their own admission, official NADA data, dealers make by far the bulk of their profits from their service depts, then from selling used cars (much less) and last and least from selling new cars.
May 1st, 2019 at 8:52 am
https://www.topgear.com/car-reviews/model-3-saloon-2019/first-drive
This is different from the comparison test which was a video anyway, and used the Performance version Model 3 to beat the M3 3-1.
Here they use a LHD, Dutch-registered midprice Model 3.
In the UK the $35,000 will not translate to 25,000 pounds, prices will start in the high 30s, but probably include a hefty VAT tax (23%?)
May 1st, 2019 at 10:28 am
38. It looks like you need to periodically reboot the touch screen in all Model 3s. They mentioned that in this article, and also the video.
May 1st, 2019 at 10:48 am
37 Yes the bulk of their money is being made in the service dept NOW cause with the internet comparison shopping and research can be done at home and so the general consumer is better informed and prepared. So shifting their profits to service just distances them even further from a decent service center. The markups on parts has reached the level of the buying from the used car salesman. I’m still not sure what dealer prep entails. I think it’s removal of protective tape and plastic on some seats.
May 2nd, 2019 at 12:24 pm
Bought my new car in 1965. Dealer tried to screw me over.
( it was a Mustang which required a six to eight week wait for delivery. Lady came in and saw my special order Mustang but didn’t want to wait. For another so dealer offered her mine. )
Since then I’ve never had dealing with a new car dealer in which I thought I was not being screwed.
Your position that it is a mistake is a result of your association with dealers. When I buy a dog I don’t need the fleas.