Automakers Aren’t Terribly Happy With The Senate’s New EV Credit Deal

Morning Dump Volkswagen Id.4 Senate Deal Ev Credit

Automakers push back against the new Senate EV credit deal, China might sell six million EVs this year, Mercedes-Benz taps Unity for new infotainment system. All this and more in today’s issue of The Morning Dump.

Welcome to The Morning Dump, bite-sized stories corralled into a single article for your morning perusal. If your morning coffee’s working a little too well, pull up a throne and have a gander at the best of the rest of yesterday.

Carmakers Don’t Like The Senate’s New EV Credit Proposal

The Hyundai Ioniq 5 would be ineligible for EV credit under the Senate proposal
Photo credit: Hyundai

If the Senate’s new EV tax credit deal leaves a bad taste in your mouth, you’re not the only one. Reuters reports that a group representing major automakers has some serious concerns regarding the EV tax credit structure put forth by the Senate.

“Unfortunately, the EV tax credit requirements will make most vehicles immediately ineligible for the incentive,” said the Alliance for Automotive Innovation’s chief executive, John Bozzella, adding the bill “will also jeopardize our collective target of 40-50% electric vehicle sales by 2030.”

The group had warned Friday that most EV models would not qualify for a $7,500 tax credit for U.S. buyers under the bill.

To be eligible for the credit, vehicles must be assembled in North America, which would make some current EVs ineligible as soon as the bill takes effect.

The Senate bill imposes other restrictions to deter automakers from using Chinese-made materials by phasing in required percentages of North American-sourced battery components. After 2023, vehicles with batteries that have Chinese components could not receive the credit, while critical minerals also face limitations on sourcing.

I can see what automakers aren’t pleased with this new EV credit proposal. It all stinks a bit of “we’re not happy until you’re not happy.” The protectionist nature of requiring U.S.-sourced battery components seems anti-competitive and not great for consumers looking for an EV that fits their budget. If you’re looking to learn more about this new EV credit proposal, our own Mercedes Streeter has an awesome run-down on the new Senate deal that’s definitely worth checking out.

Markups Hurt Brand Loyalty: Report

Car Dealership
Photo credit: “Row of Cars at a Car Dealership” by everycar_listed_photos is marked with CC BY-SA 2.0.

It shouldn’t be a huge surprise that forcing markups upon customers is a great way to discourage repeat sales. Automotive News reports that Growth from Knowledge AutoMobility (is someone just randomizing buzzwords out here?) has been able to quantify exactly how markups are hurting brand loyalty.

“It’s been widely publicized in the industry that a lot of people are paying over MSRP. We know that prices have been escalating and continue to reach near record highs virtually every month,” said Julie Kenar, senior vice president at GfK AutoMobility. “This notion of paying sticker and even above sticker is absolutely something that’s come really over the past 18 months.”

In May and June, 80 percent of car buyers paid at or above the sticker price, the research showed. In addition, 31 percent of buyers who paid above sticker said they would tell others not to go to the dealership they used, and 27 percent said they would not return to the dealership for service.

Twenty-seven percent of respondents said they would not buy from the same brand if they were charged more than the sticker price, and 23 percent said it negatively impacted their opinion of the brand. As a result, automakers have had to manage the negative criticism they face because of dealerships’ prices, Kenar said.

It’s crazy how dealers can see repeat customers just by not being awful. It’s definitely possible to extract a lot of money from one customer through marking up a new car right now, but it’s very much a short-term gain that will bring long-term pain for greedy dealerships and the manufacturers they represent. Throwing away 27 percent of new service clients is huge and generally not a great business practice. Needless to say, it’ll be interesting watching the long-term effects of markup-happy dealerships both on the dealerships themselves and on manufacturers.

China Expected To Buy Six Million EVs This Year

Wuling Hongguang Mini Ev
Photo credit: SAIC-GM

We may be experiencing a global new vehicle shortage, but that doesn’t seem to be slowing down electric vehicle sales in China. Bloomberg reports that Chinese market sales are so strong that six million new EVs are expected to find homes in Chinese driveways this year.

The China Passenger Car Association raised its estimate from 5.5 million, after releasing data showing deliveries of new-energy vehicles more than doubled in July to around 486,000 units — accounting for 26.7% of the new auto market. Overall passenger vehicle sales rose 20% from a year earlier to 1.84 million units, the PCA said Tuesday.

The increased forecast represents a doubling from last year’s 2.99 million NEV sales, underscoring the dramatic growth in demand for cleaner cars in China, and the challenge for legacy automakers to adapt in a market that is rapidly going green.

The increased forecast of 6 million is still “relatively cautious,” the PCA in a statement, adding it could be further increased at the start of the fourth quarter.

Six million is a seriously impressive number and I’d be really interested in seeing sales broken down by segment. China has some really impressive entry-level EVs on offer that are price-competitive with combustion cars, albeit at the expense of range. The Wuling Hongguang Mini EV immediately comes to mind. Beyond infrastructure, I expect price to be the biggest driver of new EV sales as not everyone can afford to drop $40,000 on a compact EV crossover. GM’s aggressive pricing on the Bolt is a good start, but we still have a long ways to go for affordable EVs in America.

Mercedes Moves To Unity For Next-Gen Infotainment OS

Mercedes Benz Concept Eqg Mercedes Benz Concept Eqg
Photo credit: Mercedes-Benz

Will Cuphead, Pokemon Go, Kerbal Space Program, and Mercedes-Benz soon have something in common? Fundamentally, yes. Automotive News reports that the German automaker will develop its next-generation infotainment system on the Unity engine, further blurring the lines between information and entertainment.

The infotainment domain is an essential component of the German automaker’s plan to broaden its digital offerings. Mercedes’ current infotainment platform, MBUX, was co-developed by Daimler and Luxoft, a unit of DXC Technology.

The new Mercedes-Benz Operating System, or MB.OS, will debut in 2024 model-year vehicles and enhance four central domains — infotainment, automated driving, body and comfort, and powertrain, the automaker said Monday.

“With our own operating system, we want to achieve three key things: to shape the user interface according to a luxury brand, to create a bidirectional communication with the customer and to integrate the digital lifestyle of the customer into the vehicle domain,” Magnus Östberg, chief software officer for Mercedes-Benz, told Automotive News in an email.

That may sound like marketing drivel, but don’t worry, I can explain most of it. Mercedes wants their new interface to be slick and fully-featured, let the owner talk to the system and vice-versa, and add more peripheral apps to its next-generation infotainment system. As for what that last desire could look like, picture how Teslas let owners play games or watch movies while charging their EVs. Future Mercedes customers will be spending a lot of time waiting around at charging stations, so stuff to do is always welcome. In any case, here’s to hoping that MB.OS is more intuitive than the current MBUX infotainment system.

The Flush

Whelp, time to drop the lid on today’s edition of The Morning Dump. It’s an overcast Tuesday here in Toronto and I’ve been pondering a strange question. New cars are so easy to judge on merit because they all roll out of factories unravaged by deferred maintenance and parking lot knocks. However, used cars are much more difficult to judge because they’re all treated differently. Given the choice, would you rather have a terrible example of a great car or a great example of a terrible car?

Lead photo credit: Volkswagen

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37 Responses

  1. There is no good reason why American taxpayers should be subsidizing factories in other countries. The law is correct to restrict the subsidy only to vehicles manufactured in the United States.

      1. Yep. Truth be told there’s several cars I’d prefer over the 57S, but to my knowledge every remaining 57S is already accounted for and restored, which isn’t the case for the others. Hard to explain to people that the ugly old frame rails in your garage are technically a very beautiful car.

  2. No doubt the current administration is still pushing people in the direction of EVs, but they are doing it in a sort of a prison guard way. Getting shoved down the line, bouncing between guards. Guard Gassman shoves us from behind into Guard Vehicle-Price and then from Guard Vehicle-Price into Guard Electricity-Price, then into Guard Inflation. All the while yelling at the Manufactures saying, “We don’t really want to beat Prisoner Consumer, but you leave us little choice. You could prevent this if you just sell EVs at below cost.”

  3. It depends on what is classified as “terrible”. And how good the aftermarket might be for said terrible car. Otherwise, I’ll take the awful example of the great car, because the potential for greatness is still there. Unless it’s a basket case, because then it’d probably be too expensive to resurrect it.

  4. “It’s crazy how dealers can see repeat customers just by not being awful. “

    And this is why I have a Buick-GMC guy and have for years now. It’s a smaller, family owned dealership that refuses to sell to the monopolistic scum that have taken over most dealers, and gleefully bragged about massively increased profits by charging way over sticker and manipulating used car prices.
    And that dealer, even now? Here’s the window sticker. That’s the minimum we’ll accept. The various upsell stuff isn’t on the sticker, period. Absolutely they will try to sell you on the paint protection and the extended warranty, but it’s never on the sticker. Out of state buyer? Fully refundable deposit if you want them to hold it. Otherwise, if it’s on the lot, it’s up for grabs at the price on the sticker for anyone. No big decals plastered over the rear window or even small stickers, just an entirely optional license plate frame. And don’t go anywhere, the owner likes to personally thank every buyer. (No upsell, just a handshake, a full tank of gas, and a genuine thank you.)
    And they even check in after the sale to make sure everything’s good. Any problems with the infotainment, sure, we’d be glad to help you – no charge. Annoying squeak? Absolutely bring it in. Everything still good after a year? If not, we’ll make it right. (Not: “WE WANNA BUY YOUR CAR.” Just ‘you spent a bunch of money on this, we want to make sure you’re happy with it.’)

    Not surprisingly, they can’t keep cars on the lot. And more than half their customer base is repeat customers – now from all 50 states.

    “Twenty-seven percent of respondents said they would not buy from the same brand if they were charged more than the sticker price, and 23 percent said it negatively impacted their opinion of the brand.”

    Oh cry me a goddamn river. One, you have an increasingly monopolistic dealership system thanks to the likes of AutoNation and Penske. Two, the manufacturers already have contractual levers they can pull to prohibit dealers from selling above MSRP.
    What, you bought their lies that they can’t control dealer pricing? Yeah. No. That was always bullshit. Dealers can charge anything they want, but if that dealer’s behavior is causing ‘reputational harm’ to the manufacturer or putting the manufacturer in a negative light? Contractually they can reduce or even halt deliveries of cars. They can tell dealers that cars sold above MSRP will be counted against any floor plan, finance incentives, etc. Sell the car $10k above sticker, that’s $10k of rebates your customers can’t have, $10k of lease makeup gone, forcing the dealer to eat more warranty cost, etc. There’s dozens of ways their very smart lawyers can find to stop this without violating any contractual terms.

    So they can fuck off with their ‘poor us, it’s all the dealer’s fault.’ They want happy dealers, and a dealer raking in record profit off the back of outright price gouging is a very happy dealer.

    “The new Mercedes-Benz Operating System, or MB.OS, will debut in 2024 model-year vehicles and enhance four central domains — infotainment, automated driving, body and comfort, and powertrain, the automaker said Monday.”

    Say it with me now, folks: SOFTWARE IS HARD, EMBEDDED SOFTWARE DOUBLY SO. (Which is why I’ve repeatedly told folks I am not interested in a job doing automotive development in C for a living at any price.) And of course, we all know how manufacturers are so eager to diagnose bugs in infotainment and provide patches and fixes at no cost to the custo-nope, couldn’t say it with a straight face.
    Which is to say, this is going to be a shitshow for at least several model years. And of course, customers will pay the price – doubly so. Because these kind of ‘tightly integrated’ designs are specifically designed to make repair impossible and force you into buying a new car more frequently. Manufacturers hate that the average age of cars is going up, because that’s less new car sales.
    So how to fix it? Make any sort of aftermarket electronics next to or just outright impossible through a mix of proprietary bullshit and DMCA threats, integrate everything so tightly that any single component can essentially render the car bricked, charge so much for repairs that they’re never economical, and just wait for the new sales to roll in.
    And every one of these cars will be chock full of first, second, fifth, sixth year bugs where the only ‘fix’ Mercedes will offer is ‘buy a new car, we promise the 2028 infotainment fixes the bugs of the 2027 one.’ And don’t claim that they don’t do that. Every manufacturer has been doing that shit for years. GM across the entire line said ‘oh, yeah, the next model year with the same hardware now supports Android Auto. What? Of course we won’t be offering an upgrade. If you want it, you’ll have to buy a new car.’

    1. Let’s be honest idiots who pay over MSRP now threatening to not buy from the same dealer later is like a crackhead threatening to quit buying and doing crack because the dealer requires him/her/it/neutral sex/ both sex to payoff the money they owe. They talk big in survey Karen but ultimately they can’t defer gratification. Also dealer says hey it may have cost more but I got it for you when noone else could. Frigging Internet Warriors.

      1. I have no doubt there are some people who need a car today. Their current car is a POS, they get into an accident, etc. So I guess you find what you like and surrender to the idea you are being ripped off by the dealer in this environment.

        But most people aren’t in that situation. They can wait. They can refuse to pay over MSRP. But they don’t. So I’m sure they’ll be more than happy to get what they want at the same dealership that ripped them off today and get ripped off again in 4 years.

  5. If I had to choose only one car and it was a choice between a great car that needs a lot of work or a shitty car in perfect shape, I’d take the terrible car, probably. If this is in addition to my daily driver, I’d take the great car.
    But a lot of factors go into that. Is the great car mechanically more reliable normally? Probably worth fixing, even if I am without a car for a few days. Is the poor shape mostly cosmetic? I’ll take a beat to crap car that is otherwise amazing over perfect panels for sure.
    Given the mentions of dings and scrapes, I’ll take the great car and assume we are talking about cosmetic shape.

  6. Great example of a terrible car, I guess? I’m picturing a boring-ass base model 90s Chevy Lumina but it’s been well maintained and the PO even has a folder full of all of the receipts for every service ever performed on it.

  7. I’m interpreting the flush question as whether I’d rather spend $20k on a new Kia/Mitsubishi/Fiat or on a clapped out S65 AMG, and I have to say that since I wouldn’t be relying on it as a daily driver, it’s pretty obvious I’d be choosing the latter. Hey, maybe I can even fix some of the stuff that’s wrong with it.

  8. “Given the choice, would you rather have a terrible example of a great car or a great example of a terrible car?”

    Depends on in what way the great car is a terrible example… or in what way the great example of the terrible car is terrible.

    For the first case… if it’s a great car that has hail/cosmetic damage, then I would go with the great car.
    But if the great car is completely rusted out, then I’d be more inclined to go with the terrible car in great condition.

    And conversely, it also depends why the terrible car is ‘terrible’. Some people consider a Prius is “terrible” because it’s “boring”. But I would buy a Prius any day over many more exciting vehicles.

    But if the vehicle is ‘terrible’ in the way that British Leyand crap from the 1970s was Terrible, then I’d be more inclined to go with the great car that needs a ton of work.

  9. If $7500 comes between you and a new car, then you should find a car that costs $7500 less. Taxpayers, most of whom can’t afford an EV, should not help you buy a new car. Pick up the shattered pieces of your life and move on.

    1. That doesn’t actually make sense. The tax credit isn’t to encourage people to buy cars, it’s an attempt to offset the increased cost of new technology because there is a societal benefit to not burning gas. You could have a discussion about if it does that or if there’s a better way to achieve the same outcome (removing fossil fuel subsidies, for instance), but let’s not make this out to be some sort of moral panic

  10. How many of that Chinese EV count are vehicles that are barely more than golf carts? What would the US EV count be if we included golf carts?

    There is no long-term thinking in dealership sales when everybody on the sales staff will be gone by the time the customer comes back for another car. The very definition of “not my problem.” The only people who can stop this is the ownership and they are too busy raking in money for nothing.

  11. I reckon I’d take a terrible example of a great car. I wouldn’t mind having to jerry-rig, shim and duct-tape a 930 with mismatched carburetors and ebay coilovers to make it run in the evening so I can go to a walmart parking lot meet and park next to similarly clapped out Miatas where we can talk about our hilarious repairs than hop in a pristine Cimarron on a Saturday morning and uneventfully drive to the cars and coffee to part next to similarly pristine cars of actually desirable models and talk about only their car because mine has neither issues nor virtues.

  12. Depends on what counts as a terrible car. If the choice was available from cars that are often seen as terrible because there’s better options, than I’d go with an excellent example of a terrible car. A mint condition Saturn SW2, Ford Escort ZX2, 8th-gen Chevy Impala, or a 5th-gen Pontiac Grand Prix with low mileage and full history all sound more enticing than yet another basket-case Toyota Camry or Honda Accord.

  13. The tax credit is going to ultimately have no effect on EV prices. Having local sourcing will reduce transportation costs. But those workers will be making more than the Chinese workers who would have mined the lithium. Same with those chip fabs going up. Less transportation cost but more worker pay.

    1. So you would rather have the product made in China by slave labor so that the price can remain the same or you would rather it made by Americans and have them make a living wage. Cause the argument that the price is brought down on luxury goods by being made overseas is bullshit. The company just prices it the same and makes more profit.

      1. The same people who say “china sucks” are the same people who voted for the very people who businesses have in their pocket, so that their businesses will be able to move jobs offshore.

        It’s too late for Americans to actually buy American.

    2. I think we’re talking two drivable vehicles, one of them is in perfect shape but is a car you don’t like and wouldn’t want (think an 80s midsize front wheel drive 3-speed automatic carbureted single-cam 4-cylinder sedan), and the other is something you do like but in rough shape (say, a rusty M3 with lots

  14. As Colonel Kurtz might have said: The EV act is brought by an errand boy, sent by grocery clerks, to collect a bill.”

    Talking to a car: I shall not. Even it goes by the name
    Hey Mercedes. Not Colonel Kurtz, me.

  15. The EV tax credit policy is trying to do a number of things with one set of incentives, and parts of it – many of the parts specifically disliked most by the automakers’ lobby – are for straight-up national security reasons. It’s also one part of a much larger and more complicated piece of legislation due to only being allowed one “reconciliation” bill per year due to the blanket filibuster of everydamnthing.

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