2021 AutoTeam America BUY/SELL SUMMIT & FORUM
The AutoTeam America Buy/Sell Summit & Forum is usually held
in conjunction with the annual NADA Convention, this year it was
held virtually over four weeks. The topics each week were:
- Buy/Sell Update and Industry Trends
- Economic Outlook for the Automotive Retail Industry
- Dealership Merger & Acquisition and SPACs
- New Strategies in Automotive Retailing
One of the discussions that caught my attention was the impact
of developing trends on the dealership building of the future. Some
of points discussed included:
- The Amazon impact, buying from home at any time of day or
night
- The business models of Tesla and Carvanna, bringing the product
to the customer. One participant commented that 50% of his 2020
sales were to customers who did not visit the dealership. In
addition, the same Dealer revealed he had registered vehicles in
all 48 lower states.
- Older dealerships will face a challenge to have sufficient
electrical power to conduct business. The building not having the
wired capacity for multiple chargers, or super chargers. Building
not having the level of capacity needed due to local infrastructure
limitations.
- In the longer term service work will increase, due to the
increased weight of the vehicles and the impact on tires, brakes
and other parts and systems.
- The higher weights of Electric vehicles may strain elevated
parking areas or service hosts
- More money should be spent on service areas and less on
showrooms
For more information on this and other Forum & Summit topics
contact Crowe MacKay’s Lead Automotive Partner, Conven Tang ([email protected]). A recording of
each event is also available at autoteamamerica.com.
TESLA SET TO LOSE MAJOR REVENUE SOURCE THAT’S BEEN KEY TO
PROFITS
Sales of green credits and bitcoin earned Tesla more money than
the sales of cars, now, Tesla is about to lose a major part of its
green credit sales. For the first quarter of 2021, Tesla posted a
pre-tax income of $533 million. Of which, $518 million came from
the sale of green emissions credits to other manufacturers.
Needless to say, this rather unpublicized side of Tesla’s
business is instrumental to its survival as a company.
But now, Tesla is about to lose a significant part of its
regulatory credit revenue. Stellantis NV, formerly FCA, announced
earlier today that it would be exiting an emissions-credit
agreement with Tesla. In doing so, Stallantis will save roughly
$360 million. $240 million of which will have gone to Tesla,
Stellantis Chief Financial Officer Richard Palmer said.
“Stellantis will be in a position to achieve CO2 targets in
Europe for 2021 without open passenger-car pooling arrangements
with other automakers,” the company said in a written
statement.
I have long maintained that Tesla’s business model is not as
it appears on the surface. Simply building and selling the Model S,
X, 3, and Y has proven to be an unsustainable business model. As
such, Tesla has been steadily increasing its sales of green credits
to other manufacturers, credits which will eventually run out.
Regardless of whether or not automakers begin pulling out of their
agreements with Tesla.
Source: Drivetribe
CHIP SHORTAGE HAVING BIG IMPACTS
Global Chip Drought Hits Apple, BMW, Ford as Crisis
Worsens
The global chip shortage is going from bad to worse with
automakers on three continents joining tech giants Apple Inc. and
Samsung Electronics Co. in flagging production cuts and lost
revenue from the crisis. In a dizzying 12-hour stretch, Honda Motor
Co. said it will halt production at three plants in Japan for
around five to six days next month; BMW AG flagged it will pause
production at its plants in Germany and England; and Ford Motor Co.
reduced its full-year earnings forecast due to the debilitating
chip shortage, which it sees extending into next year. Automakers
are expected to lose tens of billions in revenue this year because
of the crisis.
Source: Bloomberg
BMW Finally Buckles Under the Strain of Global Chip
Shortage
BMW AG is giving way to the global shortage of semiconductors
after months of managing to maintain output in the latest
indication the auto industry’s supply-chain woes are only
getting worse. The automaker will pause Mini car production at its
Oxford, England, factory for three days starting April 30,
according to a spokeswoman. It’s also reducing shifts at its
plant in Regensburg, Germany, this week. BMW was one of the last
remaining major automakers unscathed by a shortage of chips
expected to cost the industry tens of billions of revenue this
year.
Source: Bloomberg
Hyundai’s Record April Aided by Chip Strategy, COO
Munoz Says
Hyundai Motor Co. and Toyota Motor Co. kept ordering
semiconductors last year even after the pandemic crushed auto
sales. Both were rewarded with record April deliveries. South
Korea’s Hyundai sold 77,523 units last month, up 128% from a
year ago. The Japanese auto giant’s U.S. sales grew 183% to
239,311 vehicles, including the Toyota and Lexus brands.
Source: Bloomberg
STELLANTIS MOBILITY SERVICE PLANS EXPANSION
Free2Move, Stellantis NV’s mobility services brand, said
Thursday it will expand its Car on Demand subscription service to
the United States, starting with six states this year. Amid the
COVID-19 pandemic, people have sought out more isolated forms of
transportation instead of mass transit. Car on Demand will offer
consumers a month-to-month rental option for a variety of vehicle
options. It’s pricier than a typical lease but includes
insurance and maintenance.
Source: The Detroit News
A BIT OF HISTORY (May 3)
103 years ago today, General Motors acquired Chevrolet in a
reverse-merger that began the process of GM’s becoming the
world’s largest automaker. It’s one hell of a weird story,
so if you haven’t heard it before, buckle up. Chevrolet was
founded in 1911 by Louis Chevrolet, Arthur Chevrolet, and William
Durant. Durant had also founded General Motors alongside Charles
Stewart Mott back in 1908—which meant these two companies
were strangely intermingled from the very start.
Source: Jalopnik
BMW AND FORD INVEST IN SOLID-STATE BATTERY STARTUP FOR FUTURE
EVS
The two automakers will use startup Solid Power’s battery
technology in upcoming electric vehicles that will arrive by
2030.
Ford and BMW are investing $130 million in solid-state battery
startup Solid Power in a push to reduce the cost and increase the
range of their future electric vehicles. Ford initially contributed
to an earlier investment round in 2019, and both automakers have
joint agreements to use the technology in upcoming electric
vehicles that will arrive by 2030.
Solid-state batteries, which are not yet being used in
mass-market cars, promise to offer greater energy density compared
to the lithium-ion batteries typically used in today’s electric
vehicles. Solid Power uses sulfide-based cells and promises that
its solid electrolyte is not flammable, and it says they deliver
more than 50 percent more energy density. The startup produces them
using a manufacturing infrastructure similar to that used for
lithium-ion battery production.
A BloombergNEF (New Energy Finance) report from December 2020
said that the production costs of manufacturing solid-state
batteries could be 40 percent that of current lithium-ion batteries
when they reach full-scale production. However, Ford’s chief
product platform and operations officer told CNBC that its
investment in solid-state batteries is currently
“significantly smaller” than for lithium-ion.
Solid Power will begin production of the automotive batteries
early next year, according to Doug Campbell, CEO and co-founder of
Solid Power. They’ll be used for the testing and development of
upcoming Ford and BMW vehicles starting then, too. Ford announced
last week that it’s opening a $185 million lab called
“Ford Ion Park” next year to develop new processes for
producing these solid-state battery packs in house.
Ford just launched the Mustang Mach-E electric crossover, of
which it has sold 6614 so far this year, and the electric F-150
Lightning will arrive next year. BMW currently has the electric i3
on sale in the U.S. and the i4 sedan and iX crossover will arrive
soon. It says that its new generation of electric vehicles will
launch in the middle of the decade. A prototype car with the
technology will be on the road by 2025, BMW says.
Source: Car and Driver
‘PEOPLE STILL WANT TO GO TO THE CAR DEALERSHIP’
Many car dealers now regularly home deliver newly purchased
vehicles to customers who ask for that service, but is a higher
next-level on the digital horizon? The issue comes up at a
Reuters’ online event at which moderator Tanya Gazdik of
MediaPost asks: “Will automakers be like Amazon Prime, where
you order a car and it shows up in your driveway a day or two
later?” Online retail giant Amazon is an example of a company
that offers great customer experiences, says panelist Laura Rathai,
a Hyundai marketing director. But she adds that most consumers
aren’t interested in completely bypassing the dealership
experience.
Source: WardsAuto
AUTO MAKERS RETREAT FROM 50 YEARS OF ‘JUST IN TIME’
MANUFACTURING
Toyota Motor Corp. is stockpiling up to four months of some
parts. Volkswagen AG is building six factories so it can get its
own batteries. And, in shades of Henry Ford, Tesla Inc. is trying
to lock up access to raw materials. The hyper efficient auto supply
chain symbolized by the words “just in time” is
undergoing its biggest transformation in more than half a century,
accelerated by the troubles car makers have suffered during the
pandemic. After sudden swings in demand, freak weather and a series
of accidents, they are reassessing their basic assumption that they
could always get the parts they needed when they needed them.
Source: The Wall Street Journal
CHIP SHORTAGE FORCES CARMAKERS TO LEAVE OUT SOME HIGH-END
FEATURES
When automakers were first hit with chip shortages at the end of
last year, they tried idling factories until the troubles blew
over. But with the crisis stretching into its fifth month and
getting worse, they’re getting creative to keep at least some
production moving forward. Nissan is leaving navigation systems out
of thousands of vehicles that typically would have them because of
the shortages. Ram no longer offers its 1500 pickups with a
standard “intelligent” rearview mirror that monitors for
blind spots.
Source: Bloomberg
ASTON MARTIN POSTS SMALLER LOSS AS SALES MORE THAN DOUBLE
Carmaker Aston Martin posted a smaller first quarter loss in
2021 of 42.2 million pounds ($59 million) and said it continued to
take steps towards profitability, as its sales to dealers more than
doubled. That compared with the 110.1 million pound loss the luxury
brand posted in the same period last year, when it brought in fresh
investment from billionaire Executive Chairman Lawrence Stroll to
shore up its finances.
Source: Reuters
GM TOPS PROFIT ESTIMATES, KEEPS 2021 FORECAST DESPITE CHIP
WOES
General Motors Co. reported stronger-than-expected profit growth
in the first quarter on robust vehicle demand in the U.S. and China
even as a shortage of semiconductors curtailed production. The
Detroit-based automaker posted adjusted profit of $2.25 a share
Wednesday, beating a consensus estimate of $1.08. GM attributed the
healthy performance to booming sales of full-size and higher-margin
sport utility vehicles and pickup trucks. GM left its full-year
earnings forecast unchanged despite the chip-procurement issues
bedeviling the industry. It now expects earnings to be “at the
higher end” of its earlier projection adjusted Ebit of $10
billion to $11 billion, or $4.50 to $5.25 per share.
Source: Bloomberg
It should be noted that Stellantis and Volkswagen have also
posted similar results. Higher margins and even with continued
exposure to chip shortages. The second quarter of 2021 will be
interesting.
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