AD #4328 – Porsche Loses $4,400 On Every Car in China; Carvana Upsets Franchised Dealers; Ferrari Luce Sells Out in China

This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.

TOYOTA SALES DOWN GLOBALLY
It’s a tough market for car makers all around the world. Toyota says its sales fell last month in China, the Middle East, Europe and the U.S. They only fell fractionally in Europe and the U.S., but they fell 32% in China and 38% in the Middle East. Obviously, the Middle East sales are down because of the Iran war, but when the world’s largest automaker reports sales are falling in the major global markets that’s not a good sign for the industry. Honda and Nissan also reported their global sales were down last month.

CANADA TO GET FIRST CHINESE CARS
Canada is about to get its first shipment of Chinese cars. Geely announced it will start shipping Lotus EVs to Canada in July. BYD and Chery say they want to start shipping cars there, too. This is part of the deal that Canada cut with China to allow 49,000 EVs into the country with a 6.1% tariff, instead of 100%. In five years, that rises to 70,000 EVs. Canada is pivoting to China on a number of trade issues after the U.S. slapped tariffs on Canadian goods, including cars. Last year I talked with Colin Bird, Canada’s Counsel General in Detroit before President Trump imposed those tariffs. He told me that Canada did not want to play the China card, but that, and I’m paraphrasing here, ‘If your president is going to destroy the Canadian auto industry and Canadian autoworker jobs, then we don’t have much choice.’ And you know that that means. It means the next step will be for Canada to allow Chinese automakers to make cars there.

CANADA IS CHINA’S ‘PRACTICE RUN’ TO PREPARE FOR U.S.
Reuters reports that Chinese automakers will use the Canadian market as a practice run to get into the U.S. since the two markets are so similar. Chinese automakers would love to get into the U.S. market. Though the Chinese market is the biggest in the world, the U.S. market is the most profitable, by far.

TEXAS TO CATCH CALIFORNIA IN CAR SALES
Speaking of the U.S. market, it looks like Texas could catch California as the biggest car market in the nation. Even though California has around 8 million more residents than Texas, Texas is closing in on California in car sales. According to JD Power, Texas’ share of new retail vehicle sales is now at 10.8%, compared to 11.4% for California, or less than one percentage point. In 2019, the gap was more than 3 percentage points. Texas also passed California to become the leader in consumer spending on new vehicles, thanks to the popularity of pricey pickup trucks. Texas is also becoming an important automotive hub. Toyota and Tesla moved their headquarters from California to Texas. GM’s most profitable assembly plant is in Arlington and automotive manufacturing has grown 48% in the state since 2015.

FERRARI LUCE SELLS OUT IN CHINA
Ferrari’s first electric vehicle, the Luce, disappointed the tifosi because they weren’t at all happy with the way the car looks, both inside and out. But that didn’t seem to bother customers in China. Ferrari immediately sold out of the 88 models it made available for the market. Although the company is still accepting orders from Chinese customers, the average wait time for a Ferrari is typically one to three years. Chinese customers are also getting something of a bargain price. The Luce there has a starting price of $586,500 in China, compared to $626,000 in Europe and $640,000 in the U.S.

VW FACES LABOR FIGHT ON JOB CUTS
Last week we reported that Volkswagen is ramping up the job cuts it wants to make in Germany. At first the plan was to get rid of 50,000 employees. Now it wants to cut 100,000 and close 4 assembly plants in Germany. But Bloomberg reports VW never looped in labor representatives on those plans. And they are going to fight tooth and nail against those cuts, which will be a real problem for VW. Labor representatives currently hold a majority on the company’s supervisory board.

PORSCHE LOSES $4,400 ON EVERY CAR IN CHINA
Porsche, which is part of the VW Group, is going through its own agony. It’s closing almost half of its dealerships in China because sales have fallen so much. Porsche’s dealers in China are losing $4,400 on every car they sell. Porsche is also circling the wagons in Germany. It wants to move production of the Cayenne out of Slovakia to its plant in Leipzig, Germany. The automaker wants to boost capacity utilization at its German plants, but all that is contingent on the workers accepting a wage cut.

BOSCH’S CEO ABRUPTLY QUITS
And sticking with Germany for the moment, Bosch’s CEO, Stefan Hartung, abruptly and unexpectedly quit the company. Last October the Bosch board extended his contract for 5 years. He’s 60 years old, which is much younger than when most CEOs retire. His replacement, Christian Fischer, is 58. Bosch is in the process of getting rid of 18,500 jobs, a plan that was approved by Hartung. So with him stepping aside, that could take a bit of the heat off for Fischer when dealing with works councils over job cuts, because he can always blame his predecessor. And maybe that was the plan all along.

CARVANA UPSETS FRANCHISED DEALERS
Carvana is turning the dealership world on its head. The innovative retailer transformed the used car market and now it’s going after new cars after buying 7 Stellantis stores across the U.S. Here are some of the main changes it made. Car shoppers no longer have to deal with sales people. They can handle everything on their phones. Instead, there are concierge assistants who are not on commission, to answer any questions or arrange for test drives. There is no-haggle pricing, no document fees, you get same day delivery, and a money back guarantee for up to 7 days if you don’t like the car. And it offers lower prices. The Wall Street Journal reports that Carvana’s Stellantis store in Casa Grande, Arizona saw its sales shoot up tenfold. Automotive News reports that a store in Dallas is now the 5th biggest Stellantis dealership in the country. And this is likely going to force other franchise dealers to adopt the same practices.

A programming note here. Autoline Daily and Autoline After Hours will be off the air next week as the Autoline crew takes its summer break. And that wraps up today’s report. Thanks so much for tuning in.