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Runtime: 9:02
0:07 U.S. Sales Slip in July
0:27 Super Lux Segment Hits Headwinds
1:20 Tesla Cuts R&D, Capex
2:23 GM Wants EV Partners
2:48 MINI Could Exit Britain
3:42 OEMs Struggle to Make Profit on New Tech
5:17 Ford Beefs Up Power Stroke Diesel
6:39 VW Golf R Impressions
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This is Autoline Daily reporting on the global automotive industry.
U.S. SALES SLIP IN JULY
Sales in the US market in July continued to slip. Merrill Lynch reports that sales were down nearly 2% and the SAAR came in at 16.8 million units. Retail sales were down about 5%. Automakers are hoping that the interest rate cut from the Federal Reserve will lead to better sales in the second half of the year.
SUPER LUX SEGMENT HITS HEADWINDS
Meanwhile companies that make luxury cars for very wealthy customers are running into serious headwinds. Maserati is in deep trouble with sales plummeting 46%. Aston Martin is losing money and it’s cutting prices. Its stock dropped 12% on the news. Ferrari managed to raise its sales 8%, but that was far lower than analysts expected and its stock fell nearly 7%. Ferrari is running into trouble in China where sales fell 12%. One bright spot is with Rolls Royce, which sold 2,534 cars in the first 6 months of the year, up a whopping 42%. And that is thanks to its first-ever SUV, the Cullinan.
TESLA CUTS R&D, CAPEX
Tesla bulls say one reason why Tesla doesn’t make a profit is because it spends more on research and investment than other car companies. Well, that used to be true. Last year, on a percentage basis, Tesla was spending nearly twice as much on research as traditional car companies, and three times as much on capital investments. But now Tesla is under the gun to show it can make a profit, so it cut R&D by $62 million and capital expenditures by $360 million in the second quarter compared to a year earlier. Those are not huge cuts, but since Tesla’s revenue grew 58%, it’s now devoting far less of its revenue towards research and capital investment. As a result, Tesla is spending about the same percentage on these items as General Motors and Ford. Even with these cuts, Tesla still lost money in the second quarter. Elon Musk says the company hopes to be profitable in the fourth quarter.
| SPENDING AS A % OF SALES | |||
|---|---|---|---|
| Tesla | General Motors | Ford | |
| R&D | 5.1% | 5.2% | 5.1% |
| Capex | 3.9% | 5.9% | 4.8% |
GM WANTS EV PARTNERS
General Motors spent nearly $8 billion on R&D last year, and CEO Mary Barra would love to split that cost with someone. She told analysts that GM is open to partnering with other companies on developing electric vehicles. She pointed to its partnership with Honda and would welcome other automakers to join the party.
MINI COULD EXIT BRITAIN
This Brexit mess is going from bad to worse for the British motor industry. Now BMW says it may move some MINI production out of its plant in Oxford, England. If Britain doesn’t reach a trade deal with the European Union, BMW says it can build more MINI’s with contract manufacturer Nedcar at its plant in the Netherlands. We think Brexit means all major manufacturers will end up leaving Britain, while a handful of small niche manufacturers may be the only ones who survive.
OEMS STRUGGLE TO MAKE PROFIT ON NEW TECH
Automakers are pouring billions of dollars into connected, autonomous, shared and electric vehicles. However, AlixPartners says the industry is entering a “profit desert” because no one is making any money on it. Maybe alliances, like the one with VW and Ford can help. Mark Wakefield from AlixPartners joins us on Autoline This Week and here’s what he had to say.
(The ATW preview is only available in the video version of today’s show.)
You can watch that entire show right now on our website, Autoline.tv or you can find it on our YouTube channel.
FORD BEEFS UP POWER STROKE DIESEL
Ford first coined the Power Stroke name for its diesels back in 1994 and now it’s introducing the 3rd-generation 6.7L V8 for large trucks and vans. It’s similar to the previous engine with a 90-degree block and in-board exhaust, but features a number of upgrades to improve efficiency and durability. The fuel system was updated, the cylinder heads were beefed up and it now uses a variable displacement oil pump. The connecting rods were improved and it has a one-piece, forged piston, where the previous ones were made of aluminum castings. Customers are most likely to notice improvements with the turbocharger. It’s a more efficient, dual-access vane turbo from Garrett that is now electronically controlled. By being able to factor in other conditions, like ambient air temp, Ford says the engine provides much better performance, especially when the engine is cold. The 6.7L Power Stroke diesel comes standard with a very similar 10-speed transmission to the one we mentioned yesterday, but with minor changes to handle the extra torque.
VW GOLF R IMPRESSIONS
We have a lot of test cars coming in and out of the Autoline Garage every week. This week’s staff pick for Test Drive of the Week is the Volkswagen Golf R.
(The Golf R impressions are only available in the video version of today’s show.)
But that’s it for today, thanks for watching and have a great weekend.
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John McElroy is an influential thought leader in the automotive industry. He is a journalist, lecturer, commentator and entrepreneur. He created “Autoline Daily,” the first industry webcast of industry news and analysis.
