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Runtime: 9:05
0:00 Mercedes In Dangerous Downward Slide
0:50 Nissan Braces for $4 Billion Loss
1:14 Geely, BYD & VinFast Bid for Nissan-Mercedes Mexico Plant
2:00 BorgWarner Develops Turbine Generator for Data Centers
2:54 China Car Sales Plunge as EV Subsidies Vanish
4:05 VW ICEs Perform Well While Model Y Sales Crash in China
5:09 Price War: China Bans Selling Cars Below Cost
5:50 Honda Lends Team USA Its Wind Tunnel
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MERCEDES PROFITS CRUMBLE: NET INCOME PLUMMETS 49% AS MARGINS SLIDE
More bad news on the earnings front. Both Mercedes and Nissan posted their latest financial numbers and they don’t look good. Let’s start with Mercedes. It sold 1.8 million cars and vans last year, down 9%. Revenue also dropped 9%. Worse, its EBIT earnings and net profit fell off a cliff. EBIT was down 57%. And Net profits dropped almost 49%. Mercedes is in a dangerous downward slide. Reuters reports that the profit margin for its automotive group has fallen from 13% in 2021, to 5% last year and it could drop to only 3% this year.
NISSAN BRACES FOR $4 BILLION LOSS AS FISCAL YEAR “BLOOD BATH” LOOMS
Now let’s move over to Nissan. It posted extremely weak numbers for the last three quarters, including a loss of $1.6 billion. And the current quarter is going to be a blood bath. Nissan is projecting full-year losses over $4 billion, which means it’s getting ready to announce billions in write-offs when its fiscal year ends on March 31.
GEELY, BYD, OR VINFAST? STRUGGLING NISSAN-MERCEDES PLANT UP FOR SALE
And here’s where the Nissan and Mercedes stories blend together. Seven years ago they formed a joint venture to make cars in Mexico. They shared a plant that made the Mercedes A-Class and GLB and the Infiniti QX 50 and QX 55. But with both companies struggling, they shut down their joint venture and started looking for someone to buy the plant in Aguascalientes. Reuters reports that Chinese automakers Geely and BYD are two of the finalists, while Vinfast is the third. And that plant is huge. It has over 2 million square feet and is capable of making 230,000 cars a year. That could give a Chinese automaker a major foothold in the North American market.
NO BATTERIES: BORGWARNER MAKES TURBINE GENERATOR FOR DATA CENTER POWER
We’ve seen several EV battery makers pivot to making energy storage systems, a lot of which are going to data centers. But the supplier BorgWarner just landed a contract to supply TurboCell with a turbine generator to power its data centers. Borg has worked with TurboCell for the past three years to bring the generator to market. It is expected to meet future CARB emission standards and allow for multiple fuel types including natural gas, propane, diesel and hydrogen. Production of the generator is expected to kick off next year.
CHINA CAR SALES PLUNGE 14% AS EV SUBSIDIES VANISH IN JANUARY
Car sales took a big tumble in China last month. According to the China Passenger Car Association, retail sales of China-made vehicles hit 1.54 million units in January, down 14% from a year ago. Local brands contributed to that loss with sales slipping 18%, which led to a 3.5% decline in market share. Geely was number one in sales in January despite a 12% drop. It was followed by FAW-VW and BYD tumbled to third, thanks to a 53% plunge in sales. New energy vehicle sales also played a part in that drop. Sales of BEVs, PHEVs and EREVs, fell 20% to 596,000 units, while gas-powered cars were down 10% to 948,000 vehicles. NEVs likely slipped because sales subsidies were reduced at the beginning of the year. And automakers aren’t expected to get any relief this month either. Due to the Chinese New Year holiday, analysts expect February to have the lowest sales volumes of the year.
TESLA MODEL Y SALES CRASH IN CHINA WHILE VW ICE MODELS REBOUND
And there’s some interesting results when we look at the top models in China. The Xiaomi YU7 was #1 in January, selling nearly 38,000 units, followed by a couple of Geely vehicles. But our first surprise is Volkswagen, which has 5 models in the top 12. And what’s more, all of those are ICE-based vehicles. With those EV sales subsidies getting reduced, it will be interesting to watch the sales battle between ICE and electric in China this year. Tesla likely benefited from an EV pull-ahead at the end of last year and delivered nearly 66,000 Model Ys in China in December, making the #1 vehicle for the month. But in January the Y slipped to 20th place, delivering a little under 17,000 units, a staggering drop in just one month. However, we will note that Tesla’s China production volume was at a pretty normal level for January, so it relied more heavily on exports.
CHINA BANS SELLING CARS BELOW COST TO END BRUTAL PRICE WAR
And this likely won’t help car sales either. Earlier today, the Chinese government issued new rules banning automakers from selling vehicles below cost, as part of its crackdown on the price war. That includes the vehicle’s total cost of production as well as administrative, financial and sales expenses. The new rules also ban price fixing between automakers and suppliers. And companies are now prevented from forcing dealers into money-losing sales through punitive rebate programs. While China has tried stamping out the price war over the past year, automakers continue to cut prices.
HONDA WIND TUNNEL TECH FUELS U.S. BOBSLED TEAM’S OLYMPIC BID
BMW isn’t the only automaker trying to help Olympic athletes win gold. Honda partnered up with U.S. Bobsled and Skeleton and allowed the team to test at its wind tunnel in Ohio. While it’s typically used for cars, trucks, SUVs and the occasional race car, coaches and athletes were able to make tweaks to their equipment as well as seating and head position. And thanks to the precision equipment at Honda’s wind tunnel they were able to see if their tweaks had a positive impact or not. Some of the events for bobsledding and skeleton have already started with the medal rounds right around the corner, so we’ll know soon if the U.S. can make the podium.
Over anything else related to driving, headlight glare is now the number one complaint from drivers worldwide. Not only is it bad, it’s getting worse. But Gentex has a solution, and we’ve got Craig Piersma from Gentex coming on Autoline After Hours this afternoon to tell us all about it. Christie Schweinsberg will also be joining John and Gary when the show goes live at 3 pm eastern time today
But that’s a wrap for this show. Thanks for tuning in and I hope to see you later.
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On the sales front, I’m going to carefully watch Model Y sales in the USA in late 2026 and early 2027. Why? Because the Rivan R2 is looking like an out of the park home run. I posit that the only limit on how many Model Y sales Rivian can steal is the number of R2s Rivian can manufacture.
Is the R2 going to be price competitive with Model Y?
Kit,
The Model Y is $5K cheaper than the Rivian R2 in base trims. Hard to say what the price delta is in upper trim levels but knowing Rivian and their option pricing, a high spec R2 will quickly be way more expensive than the Model Y. It will be the EV version of the battle Ford had with the Hyundai Santa Cruz. The Hyundai had a nicer interior, arguably a nicer or equivalent exterior and was even faster. It was $5K more expensive than the Maverick when they launched. The end result is the Maverick is selling like hot cakes and the Hyundai, arguably the better design, languished and is now being cancelled.
Also, the Santa Cruz was even more a “lifestyle” vehicle than Maverick, with an even shorter box. Also, no hybrid.
One thing that is different in the comparisons between the Maverick and Santa Cruz and the R2 and the Model Y, the Mav and Cruz were introduced at nearly the same time, not so with the R2 and Y. While the Y has been updated, the R2 is brand new. While the Cruz presented with a life style focus, the Mav was introduced as an all around vehicle. Though the R2 has a clear offroad, life style demeanor, its not so far removed and not unrealistic that customers may get one and never go offroading with it! Though the base price may be more than the Y, Rivian has always carried itself as a premium/luxury offering, tp Tesla’s everyday, common man or woman. While it probably won’t sell as many as the Y, i wouldn’t be surprised to see the R2 be a sales success for the automaker.
What! Even in China car sales plunge as EV subsidies are pulled? That’s shocking that the cars don’t sell on their own merit after we’ve been told what a great product they are.
Again, I’m not against EVs I think they have their place and work quite well in those applications. But as a mass replacement for all ICEs? No, at least not yet. Anyone holding onto the 2035 end of ICEs is a fool. Won’t happen.
EV sales decreased in China when subsidies went away, just as in the U.S. People “bought ahead” to take advantage of the subsidies. I bought my Prius earlier than planned, to avoid the price increases brought on by the tariffs. So far, Toyota has mostly “eaten” the tariffs on Prius, but I’ve liked the car, and don’t regret buying it earlier than I might have.
Yes, not many people will drive the R2 off-road, even a lot fewer than the 10-15% of Jeep Wranglers that are driven off-road.
Lambo,
That was obvious in China not that long ago when they took away the incentives the first time. Sales of EVs evaporated overnight and the CCP was pressured to put them back. China has run out of money and cannot afford endless incentives so this pause is likely to be permanent.
Both China and the US have run out of money. Both are trillions in debt, China because of subsidizing companies, EV subsidies, un-needed infrastructure projects, etc., and the U.S. because the very rich have very low taxes. It will probably come home to roost in both cases.
Regarding Mercedes, maybe they should get back to their basics. The current E-Class is quiet and comfortable, as in the past, but it mostly replaces attractive trim with big screens. Worse, the controls are awful. Capacitive “sliders” replace what should be buttons and knobs. Even touch screen buttons would be better. I guess they want to be innovative, but as a daily driver, I’d rather have a somewhat slower, somewhat noisier Camry, even though it costs half as much. I hope Mercedes will figure that out. Yeah, I haven’t really checked out Mercedes SUVs, so I don’t know the virtues and downside of those, except price compared to the competition, but I suspect the operator interface is similarly bad.