AD #3438 – OEMs Prepare for Possible Recession; Foreign Automakers Uneasy in China; Jeep & Toyota SEMA Concepts
October 31st, 2022 at 12:00pm
Listen to “AD #3438 – OEMs Prepare for Possible Recession; Foreign Automakers Uneasy in China; Jeep and Toyota SEMA Concepts” on Spreaker.
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Runtime: 10:33
0:08 OEMs Prepare for Possible Recession
1:16 China Auto Industry Back to Boom Times
1:43 Foreign Automakers Uneasy in China
2:26 China Faces Possible EV Price War
3:56 Jeep & Ram Unleash SEMA Concepts
5:07 Toyota Pumps SEMA Performance into Supra, 86 & GR Corolla
6:15 Jeep Crowd-Sources New Name for New Jeep
7:42 Ford & GM Struggle to Meet IRA EV Incentives
8:39 Car Prices Start to Ease–Somewhat
9:28 Porsche Subscriptions Only Gets 2,000 Subscribers
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OEMS PREPARE FOR POSSIBLE RECESSION
Well it sure looks like the auto industry is starting to batten down the hatches to get ready to ride out a possible global recession. Automakers are looking for ways to slash costs and it’s starting with headcount reductions. Stellantis is offering buyouts to U.S. salaried employees who are over 55 years old. Ford is telling salaried employees that it considers underperformers that they have a choice. They can take a severance package and leave the company, or take a 4 to 6-week intensive training program to boost their performance. Meanwhile, in Germany, Audi wants its hourly employees to take a one-time lump sum payment instead of permanent wage increases. That way it doesn’t bake in higher costs. Last week Ford CFO John Lawler told Wall Street analysts that the company learned its lesson during the Great Recession of 2008 and 2009. Not only is it starting to cut costs before things get bad, it’s built up a war chest of $32 billion in cash and securities.
CHINA AUTO INDUSTRY BACK TO BOOM TIMES
China is a different story. The auto industry there is roaring ahead. LMC Automotive reports that last month the annual rate of sales hit nearly 31 million vehicles, which is impressively strong. And exports are showing explosive growth. That’s because China pretty much has ironed out problems with supply chains and automakers can get the chips and raw materials they need.
FOREIGN AUTOMAKERS UNEASY IN CHINA
But in the longer term, the Chinese car market could be problematic for foreign automakers. Stellantis is letting its joint venture with the Guangzhou Automobile Group go bankrupt. Stellantis CEO Carlos Tavares blamed political influence as the reason why they couldn’t negotiate a better deal. Now, he wants to export cars to China, not build them there. Foreign automakers are looking at how their operations in Russia collapsed after it invaded Ukraine. And they’re worried what could happen to their operations in China if it ever invaded Taiwan. That may be one reason why Tavares doesn’t want to build cars in China anymore.
CHINA FACES POSSIBLE EV PRICE WAR
And some analysts believe that an EV price war could break out in China. Last week Tesla chopped the price of the Model 3 and Model Y by $2,000 or more. And today Ford cut the price of the Mach E in China by up to $3,800. The Mach E competes with the Model Y, so Ford had to respond. And Toyota just introduced the bZ4x in China. The base model, with a 50-kilowatt hour battery, is priced at only $27,800. That’s $14,200 less than the base bZ4x sold in the US, although the US model comes with a 71-kilowatt hour battery. Even so, that means US customers are paying $676 per kilowatt hour more to get that bigger battery.
JEEP & RAM UNLEASH SEMA CONCEPTS
The SEMA show kicks off this week in Las Vegas and we’re getting some more sneak previews ahead of the event. Stellantis teased us with a few of its concepts a few weeks back and now we can start to fill in the details. First up is the CJ Surge. On top of the big off-road tires and suspension and Dana axles, this classic CJ is all-electric. It features a 400 volt, 200 kW electric drive module that’s bolted to the frame and is fed electricity by 24-battery modules. And all that power is fed through a two-speed transfer case for true rock crawling ability. But the best part is this is all a test bed for a future aftermarket kit for classic Jeeps. And it won’t end there. Ram took the TRX, its Hellcat powered truck, and turned it into the ultimate high-performance toy hauler, called the Gold Shot. While the Backcountry X Concept is a Ram 1500 that’s been fitted with a custom cover, which is meant to increase storage without compromising the functionality of the bed.
TOYOTA PUMPS SEMA PERFORMANCE INTO SUPRA, 86 & GR COROLLA
Speaking of vehicles for people who love going off the beaten path, Toyota is taking a version of its GR Corolla and turning it into a rally car inspired by the Yaris’ it races in competition. But it will also have a couple of vehicles that appeal to people who prefer a paved surface. One is a Toyota 86 that’s been transformed into a drift machine, but that can still be used as a daily driver. The others are twin drag racing versions of the Supra, which were originally used as pace cars for NASCAR. It says it’s trying to turn them into 10 second cars, a reference to Fast & Furious that anyone who has seen the movie will get. But kudos to Toyota because it’s trying to show customers how they can upgrade their performance and it’s trying to do it all for $10,000. Aftermarket pieces include a 20-30% bigger turbo, new software programing, HKS suspension and special wheels with drag tires. Engineers say initial tests have been promising.
JEEP CROWD-SOURCES NEW NAME FOR NEW JEEP
Jeep’s upcoming all-electric SUV, that debuted as the Wagoneer S Concept, is a little bit of a head scratcher. First, it wears the Wagoneer name, but it’s actually smaller than the Grand Cherokee. And second, Jeep had no real clear cut answer for what the ‘S’ stands for. It just used catchy words that started with an ‘S’ to describe it like ‘sleek’ and ‘speed.’ Well, it sounds like Jeep is stumped, so it’s looking for your help. Jeep CEO, Christian Meunier says it could crowdsource the name and the plan is to set up a voting system on social media. With reservations kicking off some time in 2023, Muniers says he’d like to settle on a name before the end of the year. So, let us know in the comments what you think it should be.
FORD & GM STRUGGLE TO MEET IRA EV INCENTIVES
It’s not just foreign automakers that will have a hard time qualifying for EV tax incentives under the new Inflation Reduction Act. So will General Motors and Ford. To receive the full credit, batteries must be manufactured in North America and they must use a certain percentage of minerals sourced in the U.S. or with free trade partners. And the amount rises each year until it hits 100% in 2030. And GM and Ford don’t meet those requirements yet. GM CEO Mary Barra revealed that it will take the company two to three years before it can receive the full $7,500 credit and will only qualify for half of it for the time being. Likewise, Ford CEO Jim Farley said that the Mach-E and Lightning will only qualify for up to $3,750 in credits starting next year.
CAR PRICES START TO EASE–SOMEWHAT
Prices for new and used vehicles are coming down but unfortunately car buyers can’t celebrate too much just yet. The average price for a new vehicle was down slightly in August but was still $11,000 above pre-pandemic levels. The average new car now costs $48,000. And it’s the same story for used vehicles. Prices were down 1% last month, but the average price is $31,000 or 50% above pre-pandemic levels. Analysts say prices aren’t likely to come down substantially anytime soon for new or used vehicles because inventory levels are low. That means demand will remain high and so will prices.
PORSCHE SUBSCRIPTIONS ONLY GETS 2,000 SUBSCRIBERS
Several years ago, a number of automakers launched subscription services, where customers pay a monthly fee for their vehicles. Most weren’t able to make it work and have canceled the programs but Porsche is celebrating the fifth anniversary of its subscription service. It’s now operating in 15 cities in the U.S. since it launched in Atlanta in 2017. However, not many people have signed up to use it. Only 2,000 customers have participated but Porsche says 80% of them are new to the brand, so it has helped bring in new customers.
But that’s it for today’s show, thanks for watching and have a Happy Halloween.
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Comments (22)
October 31st, 2022 at 12:17 pm
want a price war to break out in america, stop buying
October 31st, 2022 at 12:18 pm
I understand that US epa laws pretty much scuttle any engine mods these days. If this is true, what’s the point of Toyota showing us power mods if they are not street legal?
October 31st, 2022 at 12:44 pm
Not possible to lower prices but so much as the reckless spending and attack on energy Biden and cronies have done there is no way to lower prices of anything
October 31st, 2022 at 12:54 pm
The Jeep Sogladiator.
October 31st, 2022 at 1:23 pm
#2. OEMs can offer engine mods for off-road applications, such as racing. But automakers can offer on-road mods as long as they meed emission standards.
October 31st, 2022 at 2:14 pm
@3 Reckless spending:
Government Debt
Increase [BB $]
2017 $ 671
2018 $1,271
2019 $1,203
2020 $4,226
2021 $1,484
October 31st, 2022 at 2:21 pm
@6 unfortunately, reckless spending has been practiced and normalized by all administrations since 2000.
October 31st, 2022 at 2:37 pm
How about Wagoneer-ish?
Given the small drop in new and used car pricing, I’m thinking it could be due more to a slight change in the model sales mix rather than a real drop in price or increase in incentives.
October 31st, 2022 at 2:40 pm
Maybe Jeep’s calling that concept a Wagoneer was inspired by Land Rover’s calling the Ford Escape-like Evoque a Range Rover.
October 31st, 2022 at 3:08 pm
Since its a clean sheet design and looks nothing like the Wagoneers, its a really good opportunity to debut the next great Jeep model name or revive one from the past. How about Jeep Hurricane or Tornado after the long-running engine names? Or Dauntless, another engine name. Or convert the Overland trim level to a model name (as Chevy did with Silverado). Or Golden Eagle, a popular appearance package. Or Tuxedo Park, a long-running luxury package name. Or use Briarwood or Pioneer, two trim levels from the 80′s. And, of course, they could always bring back Honcho – which kind of indicates the model’s top dog status.
October 31st, 2022 at 3:31 pm
10) Don’t leave out the Wagoneer Super edition. That was the precursor to the Grand Wagoneer and is both a trim name that sticks with the S letter and is in the wagoneer lineage.
October 31st, 2022 at 3:40 pm
Only about 2000 Porsche suckers, er, customers, have signed up for subscription services? That’s about 2000 too many. This crap needs to be stopped NOW. I’m betting that Porsche will quietly close it as well. After all, who really thinks that someone wanders into a Porsche showroom thinking “Oh Boy, if I buy one of these I can pay monthly for heated seats!”
October 31st, 2022 at 3:49 pm
12 – You are thinking of a different subscription program, (and I completely agree with you on that!). The program they are referencing is one where you pay a monthly amount and can then pick the vehicle you want to drive from a selection of models. They have two price levels to choose from, which allows you to choose from their lower priced models, or their higher priced models. You can switch vehicles a pre-determined number of times per month or year. Its an interesting idea, but would seem to be very hard for Porsche to coordinate. A few other automakers announced similar programs and most have closed them down. Porsche may have the only one still active today.
October 31st, 2022 at 3:51 pm
11 – I almost included the Super Wagoneer, but I think they should get away from the Wagoneer name. Two versions is enough, in my book.
October 31st, 2022 at 4:01 pm
@12 Mike. why do you think it needs to stop? If people want to spend their %%, let them.
October 31st, 2022 at 4:23 pm
The Porsche subscription thing could be a money saver for some people. Instead of buying a 911, a Taycan, and a Cayenne, you could switch between them with one subscription.
November 1st, 2022 at 7:53 am
13,16 Yeah I would like to see the median income of those 2000 Porsche subscribers. I’m guessing they are very wealthy people that could likely afford to buy a couple exotics but maybe see the advantage of not having to service, store and insure multiple vehicles. Question is can Porsche really make any money with a service like this for only 2000 subscribers? Especially if they are spread out over a large area.
I believe Jeep and Ram are smart for working on a plug n play EV conversion kit. Especially for the Wrangler. With so many aftermarket parts available a person can essentially build a Jeep with purchased parts. Same goes for old mustangs. I could see the restoration shops really embracing a system like this as I’ve already watched a few Tesla powertrain swaps being done on classic muscle cars. I could certainly see someone planning to do a restomod considering the EV platform. Those vehicles dont typically see much driving and are often trailered to shows so a EV powertrain could be a good alternative. Not sure there will be much market for a Ram EV swap tho.
November 1st, 2022 at 8:06 am
17 Porsche has 15 US subscription locations, about half of them in California.
https://www.porsche.com/usa/accessoriesandservices/porschedrive/subscription/
From my experience with Porsche club events, I am at the “poor” end of Porsche owners in wealth. A lot of the people have multiple Porsches, many of them much more expensive than my Cayman. I’d think some of them would be prospects for the subscription thing, if available in the area.
November 1st, 2022 at 8:34 am
My take on subscription services are for wealthy people who are generally not car people but use vehicles as ‘appearance’ conveyances. They may appreciate cars but really don’t want them long term (as collectors) whether they can afford them or not.
November 1st, 2022 at 9:05 am
16) If I had the money, it would not be a bad thing for where I live. I could have a 911, cayman for the summer months and a Cayenne or Panamera AWD for the winter months. Would at least save me from storing a car in my garage all winter. Ultimately though it is a lot of money for these subscriptions so you would have to already be in that porsche ecosystem to make the numbers work.
November 1st, 2022 at 10:38 am
Seeing the prices, the Porsche subscription looks like a very expensive “convenience.” It’s $3600/month for the one where you can switch car models. I don’t know about Cayenne and Macan, but base Caymans like mine hold their value pretty well, as I think 911s do.
According to KBB, the trade-in value of my Cayman is close to what it cost new 4 years ago. If I sold it now, my cost of ownership would be ~$200/month, while a subscription for a Cayman is $2000/month.
November 1st, 2022 at 11:51 am
21) Yeah. It only really makes sense for those that would have leased a Porsche anyhow. Definitely not for someone that would keep it for a period of time. You can almost justify the added fee for the convenience of switching cars….Almost. I still couldn’t justify it. For the few that are taking Porsche up on their offer, I am happy it works out for them.