Good morning! It’s Monday, July 31, 2023, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place.
1st Gear: Jeep
Jeeps have been going up in price for a few years now, an industry-wide trend, because a lesson automakers took from the pandemic and all of the supply-chain madness is what if we sold fewer cars but more expensive ones? That isn’t great for those of us who miss the days of almost affordable new cars, but those days are gone anyway, and for auto executives who have shareholders and boards to please the new reality is more comfortable.
That Jeep went down this road, too, with a car like the Grand Wagoneer — which currently starts at $91,140 and can easily get into six-figures with options — was only surprising in that Jeep is not a brand you’re supposed to spend a lot of money on.
Still, according to The Wall Street Journal on Monday, all of this had the unsurprising effect of weakening Jeep’s market share, since they weren’t chasing volume so explicitly. And also something-something about how they are bad at marketing:
Since mid-2018, Jeep has surrendered significant market share, falling from sixth to ninth in sales among top U.S. brands.
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Still, last week, Stellantis Chief Executive Carlos Tavares expressed concern over Jeep’s market-share slide and vowed to reverse it.
“We need to do a better job in Jeep, mostly Jeep in the U.S.,” Tavares said during a conference call discussing the Netherlands-based automaker’s results for the first half of 2023.
He said the brand slipped recently with ineffective marketing tactics and didn’t always have the right versions of popular models available at dealerships. The company intends to gain back market share in the coming year, he added.
“It is not rocket science,” Tavares said. “We just have to do it properly.”
Perhaps more interesting here is that part of the problem, too, is that Jeep’s customer base is struggling.
Jeep customers have historically skewed toward lower credit scores, analysts say, and many of those buyers have been pushed out of the current new-car market. At the end of May, Jeep buyers who took out a car loan had an average rate of 8.5%, higher than at competitors such as Ford and Toyota, according to Cox data.
“They had a high percentage of subprime buyers, and those have gone away,” said Michelle Krebs, a Cox analyst. Stellantis said it had no comment on its percentage of subprime customers.
Jeep, like every automaker, wants high profits, it wants a high market share, it wants to sell lots of shiny, expensive new things. Or more expensive and even shinier new things, until someone sends a memo about how it needs to go back to the strategy of a few years ago. Or a mix of the two, when someone else sends a memo saying that this is really all about achieving the right balance. This was all easier to understand when Jeep was just a Wrangler and Cherokee brand. We haven’t even talked about the Gladiator and what a weird car that has been.
2nd Gear: Lamborghini
The supercar and Urus maker Lamborghini said Monday that it could sell at least 10,000 cars in 2023, with an emphasis on could, because first-half sales were 5,341.
From Reuters:
Chairman and CEO Stephan Winkelmann said it was not easy to make forecasts due to market uncertainties, including with raw materials, but added that selling 10,000 cars this year was a “feasible goal”.
“It is not something we are obliged to achieve, but it’s important to show what the health of the company is and how big (clients’) willingness to buy our cars is,” Winkelmann said.
Supported by the success of its Urus SUV, which costs around 200,000 euros ($219,900) before tax, Lamborghini has in recent years expanded its output, relying on solid demand from wealthy car lovers. It delivered over 9,200 vehicles in 2022.
Ferrari sold more than 10,000 cars for the first time in 2019, a sad day for Ferrari purists everywhere who believe that Ferraris should be rare and only sold to people Ferrari has active contempt for. Something tells me that there won’t be so much angst if Lamborghini sells more than 10,000 this year.
3rd Gear: Toyota
Toyota — behind the eight ball when it comes to EVs, because it still believes that hydrogen is the future or something — has decided to place a bet on EVs in China, according to Reuters, in keeping with its global strategy of making plays on EVs just after markets decide they aren’t all that excited about them anymore.
From Reuters:
Toyota will strengthen development of electric vehicle technology in China, the automaker said on Monday, as it looks to catch up with increasingly tough domestic competition in the world’s largest auto market.
The move is the latest from the world’s top-selling carmaker to show a sharper pivot to electric vehicles. It recently detailed an ambitious new EV strategy that includes an overhaul of its supply chain and the development of long-range batteries.
China was once regarded by foreign automakers as an opportunity for almost boundless growth. Now they worry about diminishing market share thanks to the fast rise of local competitors and cut-throat prices.
Toyota is to accelerate powertrain development with suppliers Denso and Aisin as well as local design and development of “smart cockpits” that meet the needs of the Chinese market, it said in a statement.
Toyota will focus not just on battery-electric there, but also hybrids and hydrogen and plug-in hybrids, which is the kind of hedging you can do when you’re the biggest carmaker in the world.
4th Gear: Pour One Out For Dealers
Everyone’s favorite businesses in the car world saw profits drop in the second quarter, according to Automotive News, well, for at least five of the six dealership groups that are public companies.
Five of the six major publicly traded franchised dealership groups reported double-digit percentage declines on new-vehicle gross profits during the second quarter, as inventories grew and rising interest rates cut into shoppers’ buying power. That came as all of the publics except Asbury Automotive Group Inc. posted new-vehicle sales gains in the quarter.
The six publics — Penske Automotive Group Inc., Sonic Automotive Inc., Asbury, Group 1 Automotive Inc., Lithia Motors Inc. and AutoNation Inc. — collectively averaged about $5,000 in profit on each new vehicle sold during the second quarter, compared with about $2,000 in the second quarter of 2019, before COVID-19 disrupted the industry in 2020.
All of the publics except Sonic also experienced year-over-year drops in second-quarter gross profit per used vehicle, but the group’s combined average profit of about $2,000 was about $500 higher than the average in the second quarter of 2019.
Taking a more long-term view, then, the dealers are doing just fine.
Reverse: Fog Is No Joke
Neutral: How Are You?
I pulled a muscle in my back recently for the first time and, gotta say, no fun! It may not have been the first time I’ve pulled a back muscle, but it was certainly the first time I couldn’t get out of bed for days without searing pain. I’ve been on a steady diet of yoga ever since, if only to be able to get into a car again without much trouble. True old man stuff.