Tag Archives: Charlie Chesbrough

Start of an EV Price War?

Posted on by
Reply

By Gary S. Vasilash

Last month Tesla did something that OEMs almost never do. (And in its history, Tesla has done lots of things that traditional OEMs almost never do, so at least in this regard it is being consistent.)

It cut the price of its vehicles in China, Germany, and the U.S.

These weren’t slight, either. In the U.S., for example, the Model Y Performance was cut by 19% and the Long Range version by 20%.

There were all manner of assessments as to why this happened. Some suggested that Elon Musk’s Twitter distraction was causing the company to lose sales. Others were pointing out that there is increased competition from some of the traditional OEMs. (Who, to be frank, are bigger on rhetoric about their electric scale today and tomorrow than they are in putting EVs in customer’s driveways.)

Tesla has some 2/3 of the U.S. EV market.

Mustang Mach-E: When does a popular vehicle–and it is popular–get a price reduction? (Image: Ford)

Consider: while the Ford F Series seems like a force of nature when it comes to sales, in 2022 there were 653,957 of those trucks sold—and GM sold 764,771 Silverados and Sierras combined, so it isn’t like either of the primary players have anything near 2/3. Yet a company that wasn’t taken all that seriously 10 years ago now dominates a category.

Shortly after Tesla made its announced cuts, the folks at Ford joined in on reducing the prices of its 2023 Mustang Mach-E models. The reductions ranged from $600 on the Select eAWD Standard Range model to $5,900 for the GT Extended Range.

Ford clearly wants to move metal. What’s curious, though, is that in 2022 it sold 39,458 Mach-Es, which is a 45.4% increase over the number it sold in 2021. It’s not like things were lagging. (Ford execs may have noticed that in July of last year GM cut the prices of the Bolt EV and Bolt EUV by $5,900 and $6,300, respectively, and those vehicles ended the year at 38,120 deliveries, not only close to that Mach-E number, but a 53.5% increase over 2021–greater than the Mach-E rise. Although it is hard to imagine the vehicles being cross-shopped..)

Everyone knows that EVs are more expensive than vehicles with internal combustion engines for a wide array of reasons. And while the overall percentage of EVs sold in the U.S. is still small—5.8%–it is growing, not declining.

So why were the cuts to prices made and will other OEMs follow suit?

Those are the primary questions raised and discussed on this edition of “Autoline After Hours.” Charlie Chesbrough, Cox Automotive Senior Economist, and Joe White, Reuters Global Automotive Correspondent, join “Autoline’s” John McElroy and me to talk about those topics and more.

And you can see the show here.

Something to Think About Regarding Vehicle Prices

Posted on by
Reply

By Gary S. Vasilash

Here are some interesting observations from Charlie Chesbrough, senior economist and senior director of Industry Insights at Cox Automotive.

Chesbrough, during a presentation at the Federal Reserve of Chicago’s 28th Annual Automotive Insights Symposium, pointed out that new vehicle inventory at the end of 2021 was 63% below what it was in 2020.

Not a whole lot of inventory on those dealers’ lots.

He said the day supply of vehicles is about 35 days, and that when vehicles show up on dealer lots they get bought up just as quickly as they are dropped off.

What’s more, the average price of a vehicle is MSRP plus something.

In other words, that sticker is a suggestion. The price goes up from there.

What’s more, people are paying more than ever—average transactions at $47,077, according to Kelley Blue Book—and dealers and OEMs are racking up the rewards.

“This is a tight supply situation and I don’t know that the industry is in much of a hurry to change it.”

Why would they?

Not A December to Remember: At Least If You’re Shopping

Posted on by
Reply

By Gary S. Vasilash

Cox Automotive reports that there are two things going on in the new vehicle market right now that certainly aren’t particularly beneficial if you’re looking for something new to put in your driveway.

On the one hand, average transaction prices (ATPs) are continuing to climb. In November the ATP was $46,329, a record, and while the December number has yet to be calculated, Cox notes, “A new record in December would not be surprising.”

Then on the other hand, there are incentive programs, which are continuing to disappear.

Cox points out that in 2019 new-vehicle incentive programs reached an all-time high. This year, incentive programs have decreased month after month such that in the fourth quarter it was at the lowest point in five years.

Of course, all of this matters only if vehicles can be found.

Charlie Chesbrough, senior economist at Cox, says, “While sales in the first half of 2021 were relatively strong, the industry ran out of vehicles, and sales stalled in the second half.

“Total sales in the second-half of 2021 were the slowest in a decade. Demand is healthy, but supply and production disruptions kept the industry in check. You can’t sell what you don’t have.”

Nor can you buy what you can’t get.

So if you can, you might want to wait until next year.

Chesbrough: “Heading into 2022, we believe the supply situation will improve but it will take time to restock the shelves at dealerships.  We expect modest gains in new-vehicle sales in the first quarter, and by the second half of the year a much more robust market should emerge.”

This, of course, is dependent on things like the semiconductor issue to be solved, to say nothing of improvement in the logistics situation (i.e., shipping and trucking).

But the numbers for 2021 are improved over ’20, so. . . .

Thinking About Buying a New Vehicle? Think Hard

Posted on by
Reply

. . .because (a) you’re going to be spending more than you might think and (b) you may be buying something that you aren’t necessarily considering

By Gary S. Vasilash

If you’re thinking about buying a new car, ute or truck—and “new” may mean “new to you,” as in “used”—then you ought to hear what Charlie Chesbrough, senor economist and senior director of industry insights for Cox Automotive has to say about the current market conditions.

As Cox Automotive encompasses a variety of businesses that know more than a little something about, as they say, the conditions on the ground—as in Kelley Blue Book and Manheim Actions—Chesbrough’s observations and understanding are grounded in what’s really happening, not some theoretically calculations.

The fundamental thing is this: Although it might seem that COVID is behind us, that everything, with a few hitches here and there, is getting back to normal, that is far from being the case with regard to the availability of some things. Things like motor vehicles.

This is because COVID helped cause a semiconductor chip shortage. In part this came from everyone working or playing from home, which led to a sudden demand for PCs and PlayStations, both of which use silicon.

Because the auto companies faced shutdowns of their factories last year, they canceled their orders with the semiconductor providers, who then readily found anxious customers who were making things like PCs and PlayStations.

So the vehicle manufacturers had to go to the end of the line.

It is also worth noting that some of the chips that go into vehicles don’t have the types of margins that chips that go into other products do, so the semiconductor manufacturers realized that they’d do well by just serving the non-automotive customers fulsomely while providing the auto manufacturers—who are famously thrifty when it comes to paying suppliers—with a reduced number of chips.

This has led to two things, Chesbrough notes:

  1. Overall reduced number of available vehicles
  2. Overall increases in the prices being charged for vehicles—new and used

While the first part of the year seemed to be improving when it came to the availability of vehicles (relatively speaking—2020 was a horrible year for sales and 2021 was an improvement on that), things have gone south since then.

Chesbrough suggests that things won’t get back to what may be considered “normal” until sometime next year (if at all).

At present, OEMs are concentrating on putting chips in vehicles that are high-ticket items, which is good for returns, but which put many consumers in a bind (unless they are high-end buyers).

There are some companies, like Ford, which are recommending that people order vehicles, something common in Europe but not a practice that is at the basis of the auto market as it has developed in the U.S., which is all about moving the metal.

Chesbrough talks to Keith Naughton of Bloomberg, Joe White of Reuters and me on the show.

In addition to which, Naughton, White and I talk about Ford’s massive investments in electric vehicle/battery manufacturing capacity in Kentucky and Tennessee—and how Michigan didn’t even make a proposal for the investments, as well as about GM’s Investor Day presentations, which were clearly designed to make Wall Street look at GM more as a “tech company” with a wide range of product in the pipeline and technology and capacity that will make money sooner rather than later.

And you can see it all

.