GM Is Seeing ‘Shrinking’ In The SUV And High-End Pickup Market Happening Faster As Fuel Prices Hit Harder Than Ever Before

The War in Iran seems to be coming to a close, one hopes, although that isn’t likely to bring down energy prices to pre-conflict prices anytime soon. Conventional wisdom seems to be that it takes six months for fuel prices to truly get a customer to change segments. This time, according to a GM exec, that change is happening much faster. What’s going on here?

You don’t have to be a regular reader of The Morning Dump to know that consumers face a lot of other pressures, and my guess is that it’s making buyers more sensitive. This is a big deal for automakers, especially GM and Ford, which need the big margins from trucks and SUVs to keep profits up. Have we finally found the straw that breaks the consumer’s back?

While Rivian might be in a great spot to take up demand from consumers worried about fuel prices, it’s not stopping the company from laying off part of its workforce as it tries to become something approaching profitable. Higher labor costs in the United States aren’t a bug, but a feature of having a good economy and a high standard of living. China doesn’t quite have this problem (yet), so it’s not a big surprise that Chinese EVs are cheaper. Canada is importing a small number of Chinese cars and, while the current White House is saying this is a bad thing, it sounds like President Trump is interested in the concept? Gulp.

And, finally, Jeremy Clarkson has been diagnosed with an aggressive cancer.

GM Is Watching Demand Shifts ‘Really, Really Closely’

In some ways, the success of streaming platforms has both imperiled and also reinforced the idea of a monoculture. Nearly everyone gets a Seinfeld joke or reference to The Office. If you don’t get the topshot on this post, well, I hope you’re enjoying reading Middlemarch or whatever you’re doing.

GM’s timing is always interesting, and I find it slightly amusing that it’s out crowing about the return of the 350 V8 in its 2027 Chevy Silverado while also being honest about how quickly fuel prices are changing behavior. Believe it or not, this is something relatively new. People incorrectly assume that during times of elevated fuel prices that people run out and get hybrids, and that when fuel prices go down people run out and get big trucks. That’s not what’s happening and it’s generally logical.

Since the late 2010s, some vehicles have gotten way more efficient (though fuel economy improvements tailed off a lot, which I think is ironically because of EVs), so consumers have been able to upgrade from, for example a Ford Taurus to a Explorer to a three-row one and actually see an improvement in fuel economy.

Just remember that when someone talks about how everyone is driving inefficient SUVs these days.

This has also been good for automakers, who have been able to push consumers into more expensive and, even better, higher margin vehicles. You could argue it’s good for consumers that they can get a bigger vehicle and use less fuel, though I’d just say that it’s best when an automaker has a range of vehicles that can meet consumers where they are, including at a similar (or even smaller) size.

Is GM such an automaker? It certainly wants to be, because it’s realizing that the Iran conflict is moving consumer behavior faster. As GM North American President Duncan Aldred told a Center for Automotive Research conference, via Automotive News, people are changing preferences in ways not seen in a long time:

‘[W]e are seeing somewhat of a shrinking of pickup trucks, full-size utilities and some of the heavier [vehicles] and an increase in the more affordable segments of the industry.”

While that conforms to what you might expect, large truck and SUV buyers are a little less elastic in their demand historically. Is that changing?

“Historically, there’s normally at least a six-month lag between gas prices spiking like they have and then a real shift in segmentation,” he said. “But if I’m honest, what we’ve seen over the last 12 weeks or so is there has been a shift.”

I wrote back in April that one reason why the Average Transaction Price (ATP) is growing is that people are opting for larger vehicles, even if those larger vehicles tend to be more of the Grand Highlander variety than, say, a Suburban. This is creating a bit of a K-Shaped market, where people at the higher end of the income spectrum are less price-sensitive, less worried about fuel prices, and able to get better financing. At the other end, people are stretched about as far as they can go and any little move on any part of car ownership (insurance, fuel, whatever) can change behavior.

But not all pickup and large SUV buyers are wealthy, they’ve just been able to make the higher costs work because of longer payment terms. The 84-month buyer, maybe, can’t make it work. Certainly the 96-month buyer is going to have an issue. The market may have finally found the point at which the combination of factors just makes it hard to get people into the largest vehicles, at least for now.

As Aldred said, it’s something they’re watching “really, really closely” and I am as well.

Rivian Cuts Workforce After Rivian R2 Launch

Last week, the big news about the Rivian R2 was that we got to drive it, this week the news is that the company is cutting back its employees as The Wall Street Journal reports:

“Electric vehicle automaker Rivian laid off hundreds of employees Tuesday, a move to make the business profitable as it launches a key new model.
The cuts represent less than 2% of Rivian’s workforce, a spokesperson said. The company had about 15,200 employees at the end of last year.
“We recently restructured a handful of teams within Rivian as we work to profitably scale our business,” the company said.
The layoffs, effective Tuesday, impacted employees in Rivian’s service and customer organization, which handles sales and marketing. The changes were made to ensure the company can scale efficiently, the company said. ”

The company has never been profitable for a full year, though it believes that it can achieve operating profitability through the sale of the higher volume R2.

Does President Trump Really Like China’s EV Quota Deal?

Canada’s first Chinese-built EV to be sold under the country’s new quota system is the Lotus Eletre that Thomas reviewed. The first of many, presumably, of the 49,000 that’ll be let in over a 12-month period at a tariff rate of 6%. Canadian consumers seem curious about it while, at the same time, the White House has been negative about the program.

The one member of the Trump Administration who might not mind, apparently, is President Trump himself.

Per Bloomberg:

“He likes the structure, actually,” Carney told reporters at the Group of Seven leaders summit in Evian, France, on Wednesday. “We had a follow-up conversation.”

A hot mic captured Carney talking to Trump on Tuesday about the China deal and explaining how it capped the number of imported cars. “I thought you’d actually like that,” Carney was heard saying. Trump appeared to agree, saying “that’s good.”

Asked Wednesday about the interaction, Carney said the topic came up because Trump inquired about it.

My guess is that automakers and certain members of Congress would absolutely lose their mind if this was proposed, even if it was in exchange for a giant factory, but you never know.

Jeremy Clarkson Has ‘Aggressive Cancer’

 

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TV presenter, adequate farmer, and above adequate TV presenter Jeremy Clarkson went on Instagram to tell his many fans that the last two episodes of the series Clarkson’s Farm would be unusually somber. Now we know why. Clarkson has been diagnosed with an aggressive form of prostate cancer. LBC has the details:

Jeremy, 66, revealed that he has been grappling with the diagnosis to his co-stars Charlie and Kaleb Cooper in the Amazon Prime series.

As he discussed the harvest during the series, the much-loved TV host leant back in his seat before saying: “I’ve got cancer.”

Kaleb, who is visibly shocked in the emotional scenes, asked Jeremy: “No, you haven’t. Where?”

Jeremy responded: “Where it is of no concern of anybody. I’ve known since May.

What I’m Listening To While Writing TMD

I’ve been thinking a lot about the last scene of Blade Runner and the song “Tears in Rain” by Vangelis. I wonder what that means?

The Big Question

What’s your favorite Jeremy Clarkson line/face/bit?

Top photo: Seinfeld/GM