May Sales Improve Marginally; Mexico Tariff Could Be ... · with Renault. The upside of the merger is FCA has two strong The upside of the merger is FCA has two strong brands in Jeep

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JUNE 2019 www.mediagrouponlineinc.com

Just as automakers and dealers struggle to experience their first 2019 YOY monthly increase, the industry was blindsided (and so was everyone) by the Trump Administration’s latest use of the tariff sledgehammer to pound another country into submission.

This time the administration proposed a 5% tariff on all Mexican imports by June 10 and to increase monthly to 25% by October 1. According to analysis from Deutsche Bank, the 25% tariff could cost General Motors $6.3 billion; Fiat Chrysler Automobiles (FCA), $4.8 billion; and Ford, $3.3 billion. All or most of which would result in significantly higher retail prices.

Despite this potentially devastating news, May light-vehicles “only” decreased 0.3%, a positive trend from April’s -2.3%. The SAAR (seasonally adjusted, annualized rate) substantially exceeded the estimate of 16.9 million, totaling 17.4 million, compared to 17.26 million for May 2018 and 16.41 million for April 2019.

The May winners were FCA, at +2.0%; Hyundai-Kia, +2.4%; Toyota, +3.2%; and Volkswagen, +7.5%. Ford and General Motors (based on Automotive News’ estimate) were in the red again, at -4.1% and -1.2%. Honda sales decreased -4.9%.

Truck and fleet sales were the categories that helped to put some companies in the green and kept others from deeper dives into the red.

May Sales Improve Marginally; Mexico Tariff Could Be Devastating

FCA Courts a Renewed Relationship with RenaultA late May newsflash that didn’t surprise everyone in the industry reported FCA’s interest in re-establishing its past relationship with Renault. The upside of the merger is FCA has two strong brands in Jeep and Ram and would become the biggest of the Big Three Detroit automakers.

FCA would also increase its presence in the global alliance that includes Nissan and Mitsubishi. The combination, which would be the largest in the world, could account for almost 9 million vehicles sold yearly. The other positive impact is Renault would be adding its leadership in developing electric vehicles, which hasn’t been FCA’s strong suit to date.

The downside of the merger is some trepidation among industry analysts and FCA dealers that it could end as disastrously as the attempted Daimler merger during 1998. Many are relying on FCA to have learned from that mistake and not repeat it with Renault.

Although FCA and Renault didn’t consult with Nissan prior to the announcement, the resulting merger could be good and bad for the Japanese automaker. The merged companies would own 43.3% of Nissan’s shares, but Nissan’s stake would be reduced to only 7.5%. Nissan would be bringing its much larger share of the Chinese auto market to the merger and also its advanced electric vehicle and semi-autonomous driving technologies. Only time will tell if the FCA-Renault merger would be good for all the affected automakers, dealers and consumers.

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MARKETING FORWARD

Although almost all Tesla sales are direct-to-consumers and the company utilizes very little traditional advertising media, it’s still important for you and your dealer clients to understand who is buying a Tesla.

Fortunately, Hedges & Company has some new research that reveals the Tesla buyer profile. First, the median age of a Model 3 owner is 46 years, 8 years older than the median age of the US population, which is 38.

Equally unsurprising is the overwhelming percentage of Model 3 owners who are men, 84%, with the other 16% women. Given the median age and gender of Model 3 owners, it follows their average household income is $128,140, compared to a median household income of $61,372

throughout the US during 2017. Model S owners earn even more, with an average household income of $153,313.

A surprise from the research, however, is just 56% of Model 3 owners own their home, which is substantially

less than Model S and X owners, and approximately 12 to 13 percentage points fewer than the national average of 64% to 67%. Hedges & Company concludes this may be because most Model 3 owners live in California, and some communities have more renters than homeowners.

Tesla Owners Are an Interesting Lot

Tough Choices for Consumers with Leases Ending During 2019The auto market has changed significantly since the 4.3 million Americans leased a vehicle during 2016. One of the biggest changes is the increasing unpopularity of sedans, which means those 2016 leased passenger cars will have much less value than their owners may have expected.

Vehicle prices and interest rates have also increased since 2016, so if those lessees want to lease the same vehicle, albeit the newest model year, they will be faced with more than $1,600 in additional lease payments during the life of the new lease.

An example from Edmunds research is the comparison of a Honda CR-V LX AWD and an Accord LX. During 2016, leasing the Honda SUV would have cost an average of an additional $1,746. To lease a new Honda SUV today would only cost an additional $37.

Edmunds advises consumers who are ending their lease to consider extending it by at least a month to have time to absorb these changes and decide how they want to obtain their next vehicle. Another option is to lease a different brand. Many dealers welcome these new customers with special offers to make the switch.

TOP AND BOTTOM 5 STATES FOR MODEL 3 OWNERSHIP, MARCH 2019

TOP 5 STATES BOTTOM 5 STATES

STATE TOTAL STATE TOTAL

California 30,000+ Wyoming <300

Washington 3,500–30,000 North Dakota <300

Florida 3,500–30,000 South Dakota <300

New York 3,500–30,000 Mississippi <300

Massachusetts 3,500–30,000 Vermont <300

Hedges & Company, June 2019

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A new study from MINI USA, based on an Engine International, Inc. survey, reported 63% of consumers consider an electric vehicle (EV) most useful for commuting and city driving. Another 73% said the battery range of as many as 75 miles would satisfy their daily driving needs.

Although more EV charging stations are being installed in shopping center parking lots and other convenient neighborhood locations, 74% of the surveyed consumers said they were unaware of the closest station. Among EV owners, the reason may be 80% of them are more likely to charge their vehicles at home.

The largest percentage of surveyed consumers, or 28%, didn’t know an acceptable amount of time to charge an EV while another 25% said 30 minutes.

Data from a separate TrendForce report seemed to indicate automakers are anxious to introduce EVs, as their YOY shipments are forecast to increase 28% as global shipments of “conventional” vehicles are projected to decrease 0.8% during 2019.

The kicker is the EV shipments are a miniscule amount compared to vehicles with internal combustion engines (ICE), or 5.15 million and 94.4 million, respectively. Exacerbating the trend is the Trump Administration’s many trade negotiations, especially with China, which is the world’s biggest ICE and EV market.

Automakers are eager to bring more EVs to the marketplace, as a goal of the US-Chinese trade negotiations is to designate EVs as a free-market commodities.

Electrification Anticipation

ROAD SIGNS

US Postal Service Tests Self-Driving TrucksGiven its operational deficit in the billions of dollars and incapable of funding its pension plan adequately, the US Postal Service (USPS) is doing all it can to reduce costs. Its latest, potential solution is the testing of self-driving trucks on the Interstate highways of Arizona, New Mexico and Dallas.

TuSimple, a startup in the autonomous-driving technology sector, is utilizing its self-driving trucks for the test runs between

Phoenix and Dallas, a round trip of more than 2,100 miles. A driver will still be sitting at the wheel and an engineer will be a passenger to monitor the test.

As with many transportation companies, the USPS is also having difficulty finding and hiring drivers and the cost of the hauling the mail continues to increase. USPS officials were quick to add that no taxpayer dollars were being used to fund the test.

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RANK AUTO BRAND MAY 2019% CHANGE FROM

MAY 20182019 YEAR TO DATE

% CHANGE FROM 2018 YEAR TO DATE

#1 Ford 222,403 -4.0% 970,617 -3.1%

#2 Toyota 197,637 +4.1% 837,068 -3.6%

#3 Honda 131,985 -5.9% 579,475 -0.6%

#4 Nissan 121,570 +1.1% 540,313 -5.9%

#5 Jeep 90,326 -7.2% 379,455 -7.0%

#6 Ram 67,117 +29.4% 257,941 +23.6%

#7 Hyundai 66,121 +1.8% 269,126 +1.7%

#8 Subaru 63,972 +6.4% 278,014 +5.7%

#9 Kia 60,062 +1.0% 248,043 +4.7%

#10 Dodge 47,759 +2.5% 189,538 -7.3%

#11 Volkswagen 35,702 +14.4% 152,883 +6.2%

#12 Mercedes-Benz* 29,942 -0.4% 134,220 -8.5%

#13 BMW 27,109 +1.7% 124,813 +0.7%

#14 Mazda 25,192 -16.0% 115,727 -15.5%

#15 Lexus 24,537 -3.4% 112,688 +1.3%

#16 Audi 18,892 -2.2% 82,031 -7.3%

#17 Acura 13,547 +5.7% 61,619 +6.0%

#18 Chrysler 10,903 -26.0% 51,481 -31.5%

#19 Infiniti 10,413 -10.4% 53,219 -13.4%

#20 Volvo 9,761 +4.5% 40,186 +6.4%

#21 Mitsubishi 9,750 -21.5% 58,780 +4.6%

#22 Lincoln 9,185 -5.8% 42,146 +3.5%

#23 Tesla† 9,000 +16.9% 45,000 +16.9%

#24 Land Rover 7,337 +3.3% 39,530 +4.6%

#25 Porsche 5,010 +0.1% 25,052 +2.1%

#26 Mini 2,822 -33.2% 14,348 -22.4%

#27 Genesis 2,313 +115.0% 8,120 +25.6%

#28 Jaguar 2,021 -14.6% 14,390 +15.7%

#29 Alfa Romeo 1,572 -33.9% 7,442 -25.7%

#30 Fiat 1,025 -28.9% 4,170 -39.2%

MONTHLY AUTOMOBILE SALES CHARTNOTE: General Motors and Ford have decided to announce light-vehicle sales quarterly instead of monthly. GM brands are not included in this month’s sales table, but Ford brands are, based on Automotive News estimates.

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Source: Automotive News, June 2019

* Includes Mercedes-Benz vans

(GM estimate based on Automotive News calculations)

† Includes Aston Martin, Ferrari and Lotus estimates

‡ Includes Audi, Bentley, Porsche and Volkswagen brands, but not Lamborghini

© 2019 Media Group Online, Inc. All rights reserved.

Sources:Automotive News Website:https://www.autonews.com/sales/us-sales-skid-hits-5-months-saar-rebounds-174mhttps://www.autonews.com/automakers-suppliers/trumps-tariff-mexican-imports-startles-industryhttps://www.autonews.com/dealers/fca-dealers-optimistic-prospects-renault-tie-especially-electrificationhttps://www.autonews.com/commentary/big-fca-renault-loserhttps://www.autonews.com/automakers-suppliers/renault-and-fca-didnt-say-so-nissan-could-shine

Hedges & Company Website:https://hedgescompany.com/blog/2019/03/tesla-model-3-demographics-income/

Edmunds Website:https://www.edmunds.com/industry/press/record-number-of-americans-with-car-leases-ending-in-2019-face-significant-price-hikes-according-to-edmunds.html

Aftermarket News Website:https://www.aftermarketnews.com/consumers-zeroing-in-on-exactly-how-they-want-to-use-an-electric-car-new-survey-from-mini-usa-finds/https://www.aftermarketnews.com/car-manufacturers-turn-to-electrification-to-turn-the-tide-in-2019-says-trendforce%EF%BB%BF/

Reuters Website:https://www.reuters.com/article/us-tusimple-autonomous-usps/self-driving-trucks-begin-mail-delivery-test-for-u-s-postal-service-idUSKCN1SR0YB?utm_source=applenews

Good Car Bad Car Website:http://www.goodcarbadcar.net/2019/06/u-s-auto-sales-brand-rankings-may-2019-ytd/

RANK AUTO BRAND APRIL 2019% CHANGE FROM

APRIL 20182019 YEAR TO DATE

% CHANGE FROM 2018 YEAR TO DATE

#31 Maserati 925 -2.6% 4,625 +0.3%

#32 Lamborghini 232 +85.6% 1,160 +85.6%

#33 McLaren 180 +51.3% 1,026 +81.9%

#34 Bentley 169 +2.4% 845 +3.4%

#35 Rolls-Royce 110 +1.9% 550 +2.0%

#36 Smart 106 -3.6% 422 -19.5%

#37 Other† 328 +2.2% 1,640 +2.2%

General Motors 260,300 -1.2% 1,157,841 -4.9%

Ford Motor Company 231,588 -4.1% 1,012,763 -2.8%

Toyota Motor Corporation

222,174 +3.2% 949,756 -3.1%

FCA/Chrysler Group 219,627 +2.0% 894,652 -2.5%

American Honda Motor Company

145,532 -4.9% 641,094 0.00%

Nissan Motor Company/Infiniti /

Mitsubishi 141,733 -1.7% 652,312 -5.7%

Hyundai-Kia Automotive Group

128,496 +2.4% 525,289 +3.4%

Volkswagen Group‡ 60,005 +7.5% 261,971 +1.4%

Daimler AG 30,048 -0.5% 134,642 -8.6%

BMW Group 29,930 -3.1% 139,160 -2.3%

Jaguar/Land Rover 9,358 -1.2% 53,920 +7.8%

TOTAL 1,587,335 -0.3% 6,905,544 -2.4%

Documents

May Sales Improve Marginally; Mexico Tariff Could Be ... · with Renault. The upside of the merger is FCA has two strong The upside of the merger is FCA has two strong brands in Jeep