The long-running assumption has been that wealthy car buyers are less sensitive to price swings caused by tariffs, which is true, but the swings also feel a lot bigger. If you’re buying a $400,000 car and it’s now $50,000 more expensive, you’re going to notice. Registration data does indeed show a slowdown for certain luxury and exotic brands.
It’s also bad times for Porsche, due to both the tariffs and what’s going on in China right now. The Morning Dump isn’t going to be all politics, because that’s not fun, but the United States is about to put huge duties on Chinese graphite imports, which could cause some issues for battery makers who rely on the stuff.
Here’s something fun: Škoda has new colors for its Octavia vRS. That’s a great way to end the week.
‘It’s Incredibly Frustrating,’ Says Luxury And Exotic Car Dealer
My suspicion is that some of you may not be extremely sympathetic to someone who can afford a $300,000 exotic car, but car people are car people, and buying an exotic can sometimes be a long process. In many cases, a buyer might wait more than a year to finally get their car, and it’s an unpleasant surprise to find that the $300,000 you expected to spend is now $360,000.
With tariffs, luxury and exotic car companies are in a weird position. On one hand, if you have $700,000 to spend on a car, you probably have $840,000 for a car. On the other hand, just because you have that money doesn’t mean you necessarily want to part with it. One way to get $840,000 is by not wasting your money.
Also, most luxury and exotic car companies build those cars in Europe. That’s the appeal. When you buy a Ferrari, you’re buying a car built in Italy. And Italy is in the EU, and the EU is currently being targeted with automotive tariffs. This is causing problems for luxury car customers and dealers, as luxury and exotic dealer Robert DiStanislao tells Automotive News:
“It’s incredibly frustrating,” DiStanislao said. “Because of the uncertainty, people are canceling orders and don’t know how to proceed. It’s ruining confidence on a multitude of levels. Every market is offset by this. Everything we sell is not a necessity. It’s a luxury. It’s daunting.”
New-vehicle sales are down overall at DiStanislao’s stores, partly because automakers have reduced output, he said.
[…]
“We have to convince them to stay in,” DiStanislao said. “They’re seeing their 401(k)s go up and down. By and large, we’ve kept most of them together. But it doesn’t take much to where the bloom is off the rose. We can’t take the fun out of it.”
The numbers support what DiStanislao is sensing from customers. S&P Global Mobility registration data shows Aston Martin sales down 16%, Maserati down 41%, Ineos down 12%, and even Ferrari down 2.5%. On the flipside, the new Lamborghini Revulto is getting to customers, so sales were up 15%.
Right now, English companies that build cars in England are subject to a lower tariff and should be fine. There are always more Ferrari buyers than Ferrari cars, so I doubt they’re sweating it in Maranello. Ineos is an interesting case as it’s ostensibly a British truck, but it’s built in France and is thus subject to EU tariffs (the company’s CEO apparently supported Brexit, so…).
If the EU gets a deal close to the UK’s 10% tariff, then this shouldn’t be much of an issue long-term, but that’s a massive IF.
Conditions Have ‘Deteriorated Massively’ At Porsche, Says CEO
Oliver Blume is both the CEO of Volkswagen Group and Porsche. Historically, I’d say that being CEO of Porsche is more fun than being on top of VW. These days? I’m less sure. Porsche is being hit by three simultaneous existential threats:
- Chinese consumers aren’t as obsessed with the Porsche brand as they used to be. Instead, they’re into companies like Xiaomi.
- The company invested heavily in electrification, but the market hasn’t exactly rewarded that investment either in the United States or China.
- The company faces a tariff threat in the United States and, also, the ongoing risk of China putting tariffs on European cars with larger engines.
Or, here’s how Blumer put it in a letter to employees, via Manager Magazin:
Blume, who is also Volkswagen CEO, wrote: “In the negotiations on a second package of measures, the Board of Management and the Works Council will develop solutions together.” An important basis for this is that this happens respectfully, confidentially and behind closed doors.
The business model that has sustained the company for many decades no longer functions in the same way, Blume continues. “Our framework conditions have deteriorated massively in a short period of time.” Furthermore, electromobility is developing much more slowly in many markets than the automaker and many experts had expected years ago. “All of this is hitting us hard. Harder than many other automakers. We are facing a ‘crisis of the framework conditions.'”
Clearly there is only one answer: Bring back the 912 and build it in Tennessee.
Chinese Graphite Getting Hit With 93.5% Anti-Dumping Levy
Most of the time when I talk about batteries, I’m talking about cathode chemistry. Will a battery use NCM, or LFP, or some other exotic mix of the above? What I don’t talk much about is anode chemistry, because almost all those batteries use graphite for the anode. As anyone who has used a pencil knows, graphite isn’t hard to come by. The problem is, China got great at making graphite that’s good enough to be used in batteries, so few other countries even tried.
Can you see where this is going?
Per Bloomberg, a proposed tariff of 93.5% on Chinese graphite is going to have a big hit on some battery makers, especially because that’ll end up being a 160% tariff when combined with existing levies:
The tariff would be a blow to manufacturers, said Sam Adham, head of battery materials at consultancy CRU Group. A 160% tariff equates to $7 per kilowatt-hour added cost to an average EV battery cell, or one fifth of the manufacturing tax credits that originated in the Inflation Reduction Act and survived President Donald Trump’s budget bill, he said.
“That basically wipes out profits for one or two entire quarters for the Korean battery makers,” Adham said.
Tesla Inc. and its key battery supplier, Japan’s Panasonic Inc., were among companies pushing to block the new tariffs, arguing that they rely on Chinese graphite imports because the domestic industry hasn’t developed enough to meet the quality standards and volume that the carmaker requires. Tesla shares fell as much as 0.7% Thursday.
I’m sure the President will jump in to save Tesla.
You Can Now Get Your Škoda In Fun New Colors
Well, this is fun. I’m a huge fan of the Škoda Octavia vRS, which is the hotted-up version of the Czech automaker’s sedan/wagon combo. While it only has around 270 horsepower, that’s plenty for the mean streets of Prague.
The company had a competition to see what the next car colors should be, and Space Violet and Water World Green were victorious. I think there should be more green and purple cars, so I’m supportive. The colors can be had for an extra 855 quid if you’re in the market.
Also, if anyone buys one of these in a fun color, I’ll send you an Autopian grille badge… for free! This only applies to the first couple of owners in case 100 of you were thinking about buying an Octavia this month.
What I’m Listening To While Writing TMD
I was going to do the new one from The Last Dinner Party or Wet Leg this morning, but for some reason, I’ve decided to cheat on my British ladies with some British gents. Please enjoy Coldplay’s “Spies.” You know David will.
The Big Question
Which exotic or luxury car do you think is most likely to get cancelled?
Top photo: Aston Martin
My prediction?
Smart exotic brand dealers will set up arrangements with the manufacturers to deliver their “I want to cancel because tariffs” cars at the factory and/or other dealers around the world. Better to split the commission than get none at all.
Because wealthy folks are already avoiding/leaving the US in droves – seeking residency and second passports abroad.
Might as well get that Ferrari or Bentley delivered to Ireland, Australia, Switzerland, Malta or Portugal (among others) instead.
I’m nowhere near rich but I can understand tariffs causing the people who can afford those vehicles to hold off.Realistically most of us still have to budget what we have and an extra 20% is hard to swallow no matter if it’s a Mitsubishi or a Porsche.
Regardless of it being in the UK and not in the EU (somebody should tell our president), I’ll go with Jaguaren’t going to make it.
Maserati is also probably cooked.
For both, it’s the same reason: tariffs on top of less than optimal products = very tough market conditions.
Porsche will probably survive, but it will likely have to ditch all EV efforts for a while, and will come out the other side a much smaller company. There will have to be fewer versions of the 911, and some of them will have to move down market, to replace the current baby Porsches that will get the ax.
I hope I’m wrong, but that’s what the tea leaves are telling me.
Those Skoda colors look really good and I know we shouldn’t complain because any color is good color these days but I wish they were 15% brighter.
I rented an Octavia wagon for a tour of Ireland with my in-laws last month and it seemed like a really good car. It was a diesel so it had good torque which helped me out a few times because driving an unfamiliar car on unfamiliar roads on the wrong side meant I wasn’t always in the right gear for the situation.
I get why people aren’t buying. Imagine paying the $840K in the example for a car and then the Orange Menace drops the tariffs completely or by a lot. If they are completely dropped(not likely) your car becomes instantly worth only 700K without depreciation because it can now be bought without the tariffs. Also, most self-made wealthy people became that way by not wasting money and making good investments, rather than frivolously spending money. Sure, they may buy a luxury or super car but they are atill aware of the resale value and often pay the premium because they know the car will hold it’s value, or even increase.
To answer your question, Tesla is the obvious answer, regardless of where it’s made. Aside from that, Jaaag if they don’t rollout an actual great new production model. And it’s a damn shame!
It’s not just the price increase on the exotics, it’s that it’s an increase with no value added and with Epstein’s buddy, Dementia Don bouncing around on what he’s going to do from one diaper change to the next, it’s entirely possible that the would-be buyer could end up paying a tariff that gets repealed a month later. Not only is that essentially a massive depreciation hit, but it’s not always just about the money, it’s the principal of it and feeling like you got screwed over. Thinking of myself, if my only car had a list price $2k higher, I’d have paid it without any further thought, but if that $2k was a dealer markup, I’d have refused on principal and I was in less of a position to do so than someone adding a 10th toy car to their collection.
“As anyone who has used a pencil knows, graphite isn’t hard to come by.”
I do not really think that the clay and graphite mix in a pencil is the same as the 99.95% purity graphite required for a battery anode that has gone through a heat treatment process to make the graphite into little spheres.
The US has plenty of natural gas to make synthetic graphite from.
While that may be factually true the manufacturing capacity is nowhere near what’s necessary to even begin supplying the domestic market.
A sane country would do targeted incentives and partnerships to build capacity. Ours is … not that. Flipping tariffs up and down like a light switch is making it impossible to plan.
I seriously wish Volkswagen would decide to sell Skoda in the US. We could use some interesting and affordable vehicles.
This hitting the high end of the market makes a lot of sense because while the wealthy may be easily able to afford the exotic car, including tariffs, much more easily than a poor or middle-class person can afford a regular car, they do not need the exotic car.
And rich people are smart enough to know that whatever cheeto Jesus is telling his rubes, tariffs are a sales tax. And rich people hate paying taxes on principle.
So while the poor and middle class are hit hard with the largest tax increase on the poor and middle class in history, the rich person will go to a foreign country, buy a nice watch, and wear it back undeclared instead of getting the exotic car.
On their private jet that is 100% a write off so long as they pick up that watch while on “business”.
Your suspicions are correct; cry me a river.
I wonder if McLaren is in any trouble.
I’m not an expert, but I’ve heard that some of their new stuff isn’t as well received as the previous models.
Importantly, they also have refused to sell out and build an SUV, which might sound admirable, but also leaves them no backup plan if the traditional sports car buyer decides to save their money or buy elsewhere.
Sometimes “refusing to sellout” is like being the captain of the Titanic, but actually being warned about the iceberg ahead and still refusing to turn the ship. If your options are “sell chump products” to have enough money to make the good stuff, or close up shop, I’d probably consider the chump products.
Hell, is it all that different from Enzo Ferrari only selling cars at all to fund his racing?
Yeah don’t mistake my comment for an endorsement.
Something that often seems lost on the people complaining about Ferrari SUVs and such is that you don’t actually *have* to buy one! Others may wish to, which can only affect the availability of your preferred sports cars positively.
My response does have a tone like I interpreted you to be saying they should not sell out. But that wasn’t what I understood you to mean. I meant to support your statements.
No offense taken and my reply should have been more explicitly directed at the larger audience than you specifically.
So it begins. Warnings did no good. People didn’t listen. Now we pay the price.
Funny – I just read how the guy from Coldplay jokingly called out 2 cheating married people the other day.
Proves that listening to Coldplay is asking for trouble.
The Ineos Grenadier.
Maserati is selling packages that are in an extremely niche market, and their offerings do not meet the needs of the buyers who might actually want that package.
Yes, they have some crossovers, but they’re not very competitive, which matters a lot more at the prices they’re trying to get for them.
It’s like the MC20/MCPura — second name is dumb by the way. It’s a boosty powertrain where its buyers don’t want that boostiness, it’s a GT with no cargo space, and it’s a sparse interior where the whole car is LOOK AT ME. Then doesn’t command more attention be heaped upon it because of a powertrain that sounds far too muted.
Best looking car on sale? Without question. But completely fails its mission.
Then go through the rest of the lineup and it’s too much money for what you get in nearly every dimension but exterior styling.
Jaguar.
You jest, but for real, though, a four-cylinder 911 priced in non-Z06 C8 territory would be far from the dumbest idea they’ve ever had.
But to answer the question, I think the EV Cayman is going to be DoA. I can’t see there being any demand. My guess is they’ll have to pull a Dodge and do an emergency ICE version, though that may be easier said than done if the new platform was only ever designed to work with EV powertrains. It’s highly possible Porsche is cooked, and I never thought I’d say that.
During the 981/991 generation, Boxsters/Caymans were legitimately about 80-85% 911 by parts count. So the initial 718s (982) were turbo-4 2-seater “mostly” 911s.
And they were DOA because they didn’t “sound like a Porsche.”
If by “DOA” you mean two year waitlist to order one. Porsche is in trouble now because they’re addicted to massive demand for the brand leading to massive margins on their mediocre SUVs and CUVs. Having another “peoples sports car” you can actually walk into a dealer and buy would be absolutely game changing for them. I’m obviously biased but I think it was a huge mistake trying to chase a fickle market by becoming a luxury brand first and a performance car manufacturer second.