By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at https://wolfstreet.com/2017/10/09/the-big-amazon-subsidy-is-doomed/” rel=”nofollow”>Wolf Street
Carmageddon for Tesla, Fiat Chrysler, Hyundai, and Kia.
Tesla just reported its worst quarter ever, which means something. It lost $671 million and burned $1.4 billion in cash in the third quarter, on $2.98 billion in revenues. In the three quarters this year, it lost $1.47 billion and burned $3.2 billion in cash. The Model 3 isn’t happening in any appreciable numbers. Only a few hundred hand-fabricated units have been rolled out, with mass-production being woefully behind the company’s silly promises.
All this is OK for a young company trying to needle the giants. But its stock price isn’t OK. Though shares fell to $305 in late trading, down 21% from their peak earlier this year, they’re still giving Tesla a market capitalization of an inexplicable $54 billion.
In October, according to Audodata estimates, Tesla sold a total of 3,550 vehicles in the US, down 13.4% from a year ago. Tesla deliveries in the US, after a strong first half, have been declining since July on a year-over-year basis. Whatever happens to the Model 3, Tesla is losing ground in the US with its other models.
Tesla’s market share in the US in October was a minuscule 0.26% of the 1,354,875 total new vehicles sold in the month. Tesla was ahead only of Maserati and Ferrari – tiny niche brands. Beyond the Wall Street hype, when it comes down to real sales numbers in this vast industry, Tesla essentially gets lost as a rounding error.
Among all automakers, total new-vehicle sales in the US fell 1.3% in October to 1.355 million units (delivered by dealers to their customers, or delivered by automakers directly to large fleet customers).
On a year-to-date basis, total sales are down 1.7%, which puts the industry 250,000 vehicles behind last year at this time. Of the 10 months so far this year, nine experienced year-over-year sales declines, with September having been the exception.
October had one selling day less than last year, so the Seasonally Adjusted Annual Rate (SAAR) of retail sales, which adjusts for seasonal and selling-day differences, was 18.09 million units, weaker than September, but the second highest so far this year. Harvey did push some buttons:
Trucks, trucks, trucks — Texas needs them.
- Overall truck sales – pickups, vans, SUVs, and small SUVs (“crossovers” because they’re often based on a car chassis) – rose 3.6% to 876,140 units compared to October last year, and are up 4.3% year-to-date.
- Trucks sales accounted for 64.6% of total sales. Pickup trucks were in high demand.
- Ford F-Series sales surged 15.9%, their best October since 2004. The average F-series price jumped by $4,000 from a year ago to $47,300! These are high-margin units; Americans don’t mind paying extra for a truck.
- GM’s Chevrolet Silverado sales rose 6.8%; GMC Sierra sales jumped 25.5%.
- Fiat Chrysler’s Ram pickup sales rose 1%, producing its best October ever.
- Nissan’s Titan truck sales surged 29%.
- Toyota’s Tundra truck sales rose 5.1%.
But car sales sucked.
Sales of cars fell 9.1% year-over-year to 478,735 units. The relentless decline continues. Americans are shifting from cars to trucks – as the industry defines “trucks,” which includes crossovers, the cool successor to the station wagon.The industry considers them “trucks” most likely for marketing reasons. Year-to-date, car sales are down 10.4%.
Here are new-vehicle sales by automaker, sorted by sales in October. The automakers with declining sales in October are marked in red. Note Tesla’s position near the very bottom of this list:
The biggest losers in terms of October sales were:
- FCA sales plunged 13%, with car sales down 17% and truck sales down 13%.
- Hyundai sales plunged 15%, as truck sales rose 12% but car sales plummeted 27%, by far the worst of any automaker.
- Kia sales plunged 9%
- Oh, and Tesla sales, plunged 13%.
Incentives, according to auto industry consultants J.D. Power and LMC Automotive, were once again over 10% of MSRP and have exceeded 10% in 15 of the past 16 months. GM’s discounts amounted to 13.5% of MSRP.
Sales at dealers in the hurricane-affected areas of Texas are booming. This will continue in November. But so far this year, the industry is 250,000 units behind. That’s a big nut to crack in two months, especially since December last year had been very strong, with automakers having pulled all levers to make a go of another record year. So, despite the replacement demand surge, 2017 full-year sales will likely remain behind 2016 sales. Then the replacement demand from Harvey will fade and the underlying issues will creep back to the surface.
Overcapacity is hounding GM’s car plants. But other automakers do just fine with cars. Read… GM to Lay Off 1,500 More Workers, as its Car Sales Plunge Twice as Fast as Rest of Industry
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…as states introduce taxes based upon mileage driven, rather than gas tax, in response to electric vehicles…Paris car show this year featured zero gas or diesel powered vehicles, and only electric allowed in Paris during normal day hours during work week…
..while admitting “our” U.S. rural denizens love our silverado 1500’s-extended cabs…
It all depends on the definitions of ‘urban’ and ‘rural.’
See: https://www.citylab.com/equity/2012/03/us-urban-population-what-does-urban-really-mean/1589/
This is after the 2010 census. The trend is steady.
The ‘rurals’ will tend to have beaten up, ‘working’ trucks. Your ‘urbans’ will have the dreamboats focused on in the piece. Disposable credit value is the key. Now, everything is disposable.
My son lived in a small rural town in Maine where most of the residents seemed to drive either a Ford Focus or Chevy Sonic. I live in a major urban area and my next door neighbor owns a toyota Tundra and a giant SUV.
Subarus are also popular in Maine. They handle off road driving well.
…Washington State economy, being best remaining in U.S., finds (San Francisco like) Middle-Class chased out of Seattle Metro area by home prices…largest disparity in U.S., between average earnings and housing costs.
Well, well at this rate the Tesla ponzi model will give Wall Street a dirty name. Now that is some achievement. How are those battery sales/installation thingy going to the South Australian government? remember that deal:- on time or free. Now that was clever! and come to think about it the new high speed people link system and the amazing space exploration vehicle and and…. This is the attention deficit demon at work.
Ponzi prang pending.
The big ‘gotcha’ in the room is fuel efficiency. Trucks are allowed lower miles per gallon by the ‘regulators.” Cars were considered the ‘basic’ automobile platform, so received the lions share of the fuel efficiency mandates. When the price of oil goes back up, tesla and the other electric and hybrid vehicles will come back into vogue.
Anecdotally, we’ve been noticing a significant increase in second hand big pickups at the smaller used car lots. Without some sort of kamikaze style lending method, a lot of those big rigs wouldn’t even leave the dealers lots. I foresee a tsunami of write downs as the leased trucks are returned to the dealers due to the customers inability to continue paying after the initial sale lease ends. Something like a balloon payments scheme is at work here.
This will not end well.
I am not sure if it still true, but at one point in time, trucks also didn’t need to meet the same emissions standards as cars. That made them cheaper to produce.
I bought a VW Sportwagon last year, one of very few small wagons available. Replaced a Malibu Maxx, which was fine. Does 36 mpg on any modest run. Accepts 10 foot long pvc pipes, 8 foot long planks. Who needs a pickup as a Joe Blow?
I still don’t understand why anyone buys new cars when used ones – especially from a few years back, before every single thing was computerized and DRM-ed – are so cheap, available and high quality. Whats this obsession with a brand new vehicle?
“No on ever went broke underestimating the intelligence of the American people,” or something like that. SX (sex) sells. Advertising pays. FREEEEE-DOMMM is a Brand New F-250 with lifts and 27″ hot rims, and (Korean) tires at $2,000 apiece… http://www.motortrend.com/cars/ford/f-250/2017/2017-ford-f-250-super-duty-king-ranch-arrival-review/
I’d say most of us USians, in our hearts of hearts, know we are circling the drain as a “nation” and more important, as a species — big-ass trucks are like trophy wives for old guys: a middle finger to incipient death, a claim that they still matter… What are a redneck’s last words? “Hold mah beeer, and watch this!”
Wait a minute aren’t you describing the American dream.
“Bye-Bye, Miss American Pie”!!!!
Its the financing model. You can get into a new car for nothing down and at a low rate. Basically the whole new sales process is geared toward the monthly payment, not the amount being borrowed. Used cars usually require a down payment of 20% or more and you have to go through a tougher qualification process. Of course the best way (price wise) is to buy a car from a private individual, but that requires you to obtain your own financing (unless you can pay cash).
I suspect a lot of people have been tormented by surprise quality problems in used cars, and are reluctant to repeat that fate (if they can afford a new car, of course).
That’s one reason why we bought a new car 4 years ago, too many years of “dreaded prior owner” issues on cheap used cars. Living near the ocean also means a higher rate of corrosion (I found some rust starting near the windshield the other day — I’d hoped new vehicles would be more corrosion resistant but it doesn’t seem to be the case) so if you get a used car that already has X years of it in place it goes downhill even sooner.
Unless the paint is any better or there is any coating, new cars are unlikely to be any more resistant.
Quality of metal also plays a role. I have not heard of any car maker dramatically changing that. One trend that is growing is aluminum is being used more often. The upside is that it is lighter. The downside is that the repair bills will be expensive and many body shops are not familiar with working with aluminum.
New cars do have one drawback. The sheer volume of electronics on board is another point of failure and electronics don’t like moisture.
Disclosure: I worked at one of the big 3 US automotive makers and still work in the industry
Of course, but in a used car, the problem has already had several years to develop, whereas in the new car, the problem hasn’t started yet.
…new cars have another “problem” = “direct injection” shortens life of vehicle motor, unless diesel, though miles per gallon is improved…
We have two Volvos, a 19 year old S70 and a 15 year old V70. Each car has over 150,000 miles. Neither has been garaged and both have been exposed to the New York climate, including hot summers and road salt in the winter. There is no body rust on these cars because the body metal is zinc coated under the paint, and the paint is of high quality.
Volvos are costly to maintain, but they are safe, solid, and they don’t rust.
> surprise quality problems in used cars
A lemon market.
“I still don’t understand why anyone buys new cars…” @Corbin Dallas
It’s called status, fake it till you make it.
I used to agree. However, I bought a new 2006 Prius for the technology which was unavailable in a used car. Next year we’ll buy a new plug-in Prius for the same reason.
Eat at Sheetz. And get gas.
The first people to be attacked in the Pitchfork Populist Revolt will be Tesla drivers.
The cars are now subject to physical harassment when parked.
Back in the early 1990s, a young friend from a working class background told me that BMW stood for Break My Windows.
And, you know what? I’ve seen exactly one Tesla on the streets of Tucson. Unlike the Jag, Maserati, or Ferrari, its design was nothing special. If I didn’t read the brand name placard, I would have thought it was a Hyundai or a Toyota.
4 of us were driving to a wedding last weekend in L.A. and we were stopped momentarily behind a white Maserati at a stop light and then it fled ahead of us, and I mentioned that w/o the name on the back, I would have never guessed it was a Maserati, as it looked like every other make of car, and the other 3 all had thought the same thought in their heads, after seeing it.
Here’s the car in question:
http://st.motortrend.com/uploads/sites/10/2015/11/2015-maserati-ghibli-sedan-doors.png
> now subject to physical harassment when parked
Evidence?
The industry doesn’t call crossovers trucks for marketing reasons. They design in specific features that make them legally trucks and not cars because trucks have easier to meet regulations for safety and fuel economy. I thought this was long well known. (Correction appreciated if this is out of date or some kind of myth.)
It is baffling to see people in San Francisco buying giant SUVs/trucks that largely can’t be legally parked in residential areas because they are too long. There are cars that are too long to fit in many of the street parking spaces, add in a couple extra feet for the trucks and they’ll hang over into the driveway curb-cuts at both ends. My Mazda CX5 small cross-over is a tight squeeze in many spots and it is on the compact side of the scale for a modern car.
Longer lower wider may be great for marketing but it sucks if you need to park in the city.
Up across the Colombia River from Portland the sort of Darth Vader pickup is the preferred style. Black, expensive looking black wheels, lifted 4×4, huge global warming nozzels, diesel of course. This in an area where a 15 minute drive will get you to National Forest roads that would require 4wd. But the trucks are always spotless and shiney.
Are people just hanging onto their cars longer as cars are made more durable? My mother has a 2006 Corolla that runs great, why get rid of it?
Pitiful article! when every indication of national transportation need; is for mass transit instead of personal transportation!
Ego centric car owners encouraged daily by constant advertising glorifying “self ” is not in the public interest!
No mater how energy efficient they might be …mass transit saves billions of tons of carbon emissions and thousands of lives ! The era of personal voluntary mass murder and pollution must end now !
All transportation must be curtailed to mass transit and society adjusted to that rythem as we move to guaranteed annual wage