You know what’s great about Twitter? Not much these days, and yet I spend all my time there. (Editor’s Note: That’s a choice, Matt. Elon buying the platform and making me use it far less was the best thing that’s ever happened to my mental health. -PG) To make matters worse, an entire industry has cropped up there full of people whose job it is to take small amounts of data and make these huge prognostications about the car market. I’m going to address the most egregious version of this now and dash everyone’s hopes for suddenly cheaper cars.
Also, hey, let’s look at what’s going on at Aston Martin, Tesla, and Daimler. Happy Friday from lovely Chicago, Illinois.
Here’s Why You Shouldn’t Believe Random People Tweeting About The Car Market On Twitter
I am a (semi) random person on the internet so, you know, take everything I say with a grain of salt as well. The car market has been somewhat unpredictable lately and we’re dealing with numerous conflicting signals on the macroeconomic level. What will happen? Who knows.
The best I can say is, yeah, this probably isn’t happening anytime soon:
Car prices are about to drop, an oversupply of vehicles will lead to manufacturers slashing prices. There are too many cars and not enough buyers.
— Andrew Lokenauth (@FluentInFinance) June 27, 2023
UBS reports that the production of cars is outpacing sales by 6%, this leaves about 5 million cars just sitting around, unsold. To…
This tweet has been getting passed around and I think it’s based on some faulty assumptions and is, as often happens on that platform, extrapolating a small amount of data way too far. I’m not sure why this particular tweet took off, but it seems to create hope for diminishing prices in a way that I don’t think is warranted.
Let me be clear: new car prices for all models are not going to crater anytime soon. It’s unclear how much demand there is in the market, but there are at least enough car buyers to keep prices for much of the market pretty high for a while, depending on what you are buying. To be clear, I don’t think Mr. Lokenauth is entirely wrong, but the premise seems pretty far off and the data he’s drawing from I think doesn’t paint a clear picture.
First, there are not 5 million new cars just sitting around dealer lots. The best estimate comes from Cox Automotive, which shows the number is less than half, at about 1.96 million cars. This is a big improvement over the last two years but, historically, it’s still low. In May 2020, there were nearly 3 million new cars waiting to sell. What if you add in used cars? Depending on estimates there are 4.7 million new and used cars for sale. Again, not a historically large number, and used car prices are going up!
Second, this is a tweet in June and it’s using outdated info. The sources he cites are from early March and early April. It’s old, cherry-picked data trying to prove a point. He also misinterprets or misrepresents the data. According to The Telegraph story he links to, UBS isn’t saying there are 5 million cars sitting around, waiting to get sold, it says that automakers will overproduce by about 6%, which means about 5 million cars across the entire year will need to be marked down, and most of that will be later in the year.
Third, there’s a good reason for automakers to be producing more cars right now:
- The car market is still historically behind where it needs to be in terms of inventory.
- The summer selling season is important for automakers and they need cars on the lots.
- The big union contracts are coming up and some automakers want to build inventory ahead of potential strikes.
The only way for prices to dramatically drop across the board is for there to be a cratering of demand, which could happen if the economy collapses and we see a rise in unemployment OR vehicle financing gets difficult (or some mix of both). The lending environment is tough right now, but demand seems fine. Here’s what S&P Global Mobility thinks is happening this summer:
S&P Global Mobility projects new light vehicle sales volume in June 2023 to reach 1.38 million units, up 17% year over year, and representing the 11th consecutive month in which volume has improved from the year-prior level. This volume would translate to an estimated sales pace of 15.9 million units (seasonally adjusted annual rate: SAAR), pressing the 16.0-million-unit level for the second time in the quarter.
“For the second consecutive month, auto sales volumes will be supported by month-end holiday programs,” said Chris Hopson, principal analyst at S&P Global Mobility. “That automakers have the ability to offer holiday clearance incentives is a positive sign. It also indicates that some of the concerns regarding new vehicle affordability, low inventories, macroeconomic uncertainty, rising interest rates, and tighter credit conditions are not causing retrenchment by consumers still in the market for a new vehicle.”
Basically, all the headwinds in the car market aren’t yet causing enough people to sit on the sidelines to create a price war.
Will there be more incentives? Sure. But it’s going to depend a lot on what you want. In the market for a Jeep Renegade? Here come the incentives. There are now a ton more electric cars for sale, so there may be some movement there as well, plus Elon Musk’s price war is working. A new pickup truck or crossover? Maybe not. A cheap, affordable sedan? Start praying.
Right now automakers are contending with the aftershocks of supply chain issues and so their product mixes aren’t always right so, inevitably, there will be cars that are less popular with deals to be had.
Still, without some sort of massive economic downturn, I don’t think this is an accurate or particularly well-informed take. It seems like another random finance dude on Twitter trying to pump his newsletter subs by tweeting out a bunch of thin analysis. If you want real data from people who have subject area expertise, follow people like CarDealership Guy or Jessica Caldwell. Or just read The Autopian.
Tesla Probably Sold A Crapton Of Cars Last Quarter
You know where you can get a really good deal on a car? Your local Tesla store and/or ordering website.
Tesla (TSLA.O) is set to report record vehicle deliveries, after the top electric vehicle maker increased discounts and other incentives to boost sales in the face of economic uncertainty and rising competition.
Tesla is expected as early as this weekend to report global deliveries of 445,000 vehicles in April to June, according to the average estimates of nine analysts by Refinitiv. That would be an increase of 5% from 422,875 the preceding quarter.
That’s a lot of cars. What Elon Musk is doing here, actually, is quite smart. His product line is old, he has a ton of competition, he’s willing to take a potential hit to profits to protect his market share and keep Chinese competition at bay. He’s been building the same cars for so long that the production costs, theoretically, should be going down.
Aston Martin + Lucid (-Mercedes) Makes A Lot Of Sense
There’s an analyst in the supercar market who runs a gossipy site called Karenable that I think is supposed to be Car-Enabled, but I always read as Karen-Able. Or Karen-Enabled. I can forgive a little cattyness because I enjoy someone who digs into the financials. The premise of his most recent article is that the Mercedes-Aston Martin relationship isn’t working out the way many expected, and the Saudi Public Investment Fund (invested in both Lucid and Aston Martin) doesn’t know quite what to do with Lucid, and so Aston Martin + Lucid is a nice inevitability.
Remember, Aston Martin said it would switch to Mercedes-Benz engines for its future internal combustion needs, but that’s of little future consequence and the Formula 1 relationship seems to be faltering as well.
Back in Q3 2022, PIF invested an estimated £174 million in AML. Between the value of the shares that AML is issuing and the £104 million in cash payments, that AML will be giving to PIF controlled Lucid, PIF will be getting a very large amount of their initial AML investment back. To top it off, even after this PIF will still have a 18% shareholding in AML. Just to make things even a bit more interesting, Stroll’s privately owned AMF1 Team, counts the Saudi state oil company Amamco as its “Strategic Partner” and Saudi Airlines as a “Global Partner”. What these two are paying at AMF1 in sponsorship fees is unknown but rumored to be at least $30-40 million. The level of incest between all these related parties would make the old Habsburg Dynasty proud.
In many ways Lucid is the perfect partner for AML. Lucid missed their Q1 2023 numbers badly and burned through over $800 mil. in cash. Its stock price is also down 75% in the past year. Tying AML closer to PIF/Lucid also makes a lot of strategic sense for Stroll as it creates a second possible buyer to Geely now that Mercedes-Benz is clearly not interested
Chinese automaker Geely also has a big stake in both Daimler and Aston Martin. And Stroll, who seems a little cranky if you watch that Netflix show about angry Austrian dudes, isn’t dumb. Having multiple people who could buy his brand makes more sense than just one single partner.
Also, I’ve got a Lucid Air Grand Touring this week and the range is impressive. I’ve got some other gripes with the car, but the EV tech is sound and the charging is pretty fast.
Electrify America Will Install Tesla Stations
If you want more proof that Tesla’s NACS standard is the future of charging in North America, Volkswagen-owned Electrify America is going to offer Tesla charging in the near future.
From Bloomberg via Automotive News:
Electrify America becomes the latest large EV player to adopt the Tesla charging standard. Other charging networks that have also adopted NACS include ChargePoint Holdings Inc., Blink Charging Co., EVgo and Wallbox NV. Volkswagen said in a statement Thursday that it’s “currently evaluating the implementation” of Tesla’s technology.
This is one of the last big dominoes to fall. It’s not over for CCS, but it’s on life support.
The Big Flush
I’m in Chicago for the NASCAR race (come to our meetup tonight!) and I’m curious if anyone here planned on watching the first-ever NASCAR street race this weekend. Is anyone going?
CCS is on life support? I thought so too till I realized that the NAplug only supports one AC connection (instead of 3 that the CCS2 supports). Since that one is the best for preserving battery life, it’s not quite unimportant. That’s the one you have at home. Charging on 3 AC (3-phased, 6 connections) takes about 7 hours from about 0 to 90% on an M3.So one full day on NACS… NACS should charge on AC at 48A to have the same charging speed as a standard slow charger. On the other hand, using a CCS2, especially in the winter, is not easy, since you need to use a lot of upper body strength to insert it the right way, so it’s obviously not great. I think both standards are not great, in the end. NACS is sleek but technologically inferior while CCS is bulky but technically better balanced. CCS2 already supports DC 800V so going to NACS’ 1000V won’t make a big difference.
Yeah, CCS2 is going nowhere.
CCS1, on the other hand… at least in the US, is basically a dead connector walking at this point. It’s even bulkier than CCS2, and also doesn’t offer 3-phase. And some of the reliability issues are due to the latch being on the plug, not the socket, and getting damaged. (And CCS2, while it is now a standard in the US through SAE J3068 AC6DC8, in practice doesn’t exist here.)
For why CCS2 isn’t a thing here… in the US, residential 3-phase is basically not a thing outside of dense urban areas, and then it’s 120/208, not the 230/400 common in Europe or the 277/480 common in industrial applications in the US. (And Type 2 doesn’t support 277/480 unless it’s J3068 anyway.) Instead, we have higher current (and slightly higher nominal voltage), with 240 V 80 A being the upper end of what we’ll send through a J1772 or NACS connector for AC charging. New construction in the US often has 240 V 200-400 A split-phase service, and even old construction often has 100-200 A – my understanding is it’s not uncommon for European residences to have 230/400 32 A 3-phase, or sometimes even less current (or fewer phases).
re: Karenable—turns out Matt’s pronunciation could also be right, even though the header is definitely Kar-enable. From its front page:
PG’s note about using Twitter way less is a real one. Then again, managing social media also helped wean me off of posting all the time. Much respect to Peter over here, but never again for me. Never. Again.
People are so damn angry on the birdsite now. I posted one often said, long-in-the-tooth take the other day (“the Mach-E is not a Mustang,” if you’re curious, in response to a tweet asking what the boomers get right) and had weird mad nerds come out of the woodwork to @ me about it. Even more so than usual, like the site’s just an angry hornet’s nest waiting for a boot, or the algorithm’s been tweaked to maximize outrage and therefore boost any engagement at all costs. (IDK if that’s the case, but it’s a theory. Fortunately, the site is such an unreliable pile that, like, whatever. It is no longer my job to care about such specifics.)
Also, like, chill folks. You can own a car that’s not a Mustang and enjoy it, and that’s fine. You can also disagree with a [correct] opinion on something that matters very little in the grand scheme of things without getting weirdly defensive or mad about it. Go outside, touch grass and live your lives. Besides, you’ve gotta figure out something else to occupy your time when Twitter breaks down again.
Have I mentioned that I’m super glad not to be working primarily on social media anymore? Wheeew. Peter deserves hazard pay.
I’ve been really enjoying Bluesky lately for the less hostile tone taken on pretty much everything over there. I know there’s drama elsewhere, but I largely stay out of it for mental health reasons and mainly use it to put my silly little takes into the feed. (This may change as it opens up, but there does seem to be an overwhelming attitude of “let’s not take on Twitter’s worst instincts” there that I like.) Mastodon’s really solid for following tech and science coverage, too, and has a solid group of weird car posters. It, too, has its own drama that I largely stay out of. Just let me post silly little takes on silly cars, cheeses and Puffalumps.
Also, to note the obvious, the fact that you’ve got someone attempting financial advice who sees fit to give a perpetually busted, less-than-secure website $8 a month tells you everything to know about the quality of that financial advice.
Good luck dealing with the inevitable hack, Andrew! Hopefully the hacker who ends up with your card data doesn’t have a thing for the Ferrari accessories catalog.
Twitter is so toxic, everyone’s mental condition improves from just not browsing it. I really look forward to social media as we know it imploding and people going back to interest-based forums.
How is it possible for ~$15m new vehicles to sell every year in the US? That’s one for every 20-25 persons, including babes in arms, paleolithic people who have stopped driving, and New Yorkers.
I don’t get it at all.
Do the math in the other direction. One new car each year for every 20-25 people means that people get a new car once every 20-25 years on average.
Take out all the non-drivers and you still see the average years between new cars in the high teens. Now consider all the people who lease new cars every three years and the average Joe is looking pretty frugal, actually.
I think there is a big split in the new car market in the US – people either buy a LOT of new cars, or very rarely to never buy a new car. Speaking for myself, I bought a new car every other year for 14 years before the market stopped offering anything I wanted. If not for that, I am sure I would have continued to do so. I bought my last new car in 2019.
I wonder if a new player on the market could buy a plant and production rights to a quality PHEV Sedan from Ford, who no longer does Sedans and relaunch a basic PHEV with no R&D costs an ecoboost or other efficient motor and sell decent new cars at $20,000 all day long?
Unless Electrify America etc solve their reliability issues, adding NACS plugs to their stations will be just a case of putting lipstick on a pig.
Is EA like Chargepoint, EVGo, etc where they are the installer and network but not the owner? Chargepoint may add or change the NACS plug on the stations they own, but many are owned by the site, they are adding the NACS plug as an option when a customer contracts them to build a new charger, all plug options will still be available for customers to choose from.
EA and EVgo both own nearly all their stations. The only large exception for EVgo currently is their Pilot Flying J’s.
“His product line is old”
So I keep seeing this over and over. No, Tesla has never completely redone a model. No, they’re not really going to. This has been on the internet for a long time, guys. The idea here is a Henry Ford-style “roads haven’t changed, people haven’t changed, why should the cars change?” Tesla also uses a Henry Ford-style lack of model year designations.
They’re not going to make a second generation Model 3 or Model S, at least not more than they have(did you know that basically everything under the skin has been overhauled at least once?)
So journalists, stop using “aging lineup” as a slur and realize that Teslas lineup is old on purpose.
Well that was entertaining to read. Thanks for the laugh!
Model 3 is indeed getting a refresh in the coming months, according to many reports, leaked images, etc. (I think codenamed “Highland” if you feel the need to google it.) Model Y will likely follow, since it’s based on Model 3’s architecture.
The Model 3 refresh is less sensors, cheaper materials, reduced options, and more inconsistent panel gaps.
It’s getting an entire new look exterior and interior, as well as supposed new tech (motor, battery, cooling architecture, fsd hardware, if I recall).
I dont think properly fitting body parts and auto parts replacing plumbing parts is necessarily a new model.
Yea but attack stellantis about it?
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“A few people are saying something untrue on Twitter. You didn’t know because only journalists and trolls are on Twitter.”
If journalists would get off Twitter we could all just carry on with our lives and forget it existed.
With Twitter shutting off access to anyone who isn’t logged in and constantly having API issues even for those shelling out thousands for it, being forgotten almost seems like its goal.
You give him grief about cherry-picking data, then pick a month that is smack dab in the height of the pandemic when almost nobody was buying cars, yet there was still a lot of inventory because the effects on manufacturing hadn’t really been felt yet? Pot, meet Kettle.
If you don’t understand why he picked that date or it’s context this whole article is probably well over your head.
Word of advice: Condescension is almost always a bad look.
Meh, I’m not concerned about my looks. I’ve always been ugly.
That’s not really cherry-picking data. For example, in May 2019 it was 3.81 million new cars, which makes his point look even more egregious. I picked May 2020 to be somewhat fairer.
That’s super-useful context that would have been good to include in the article. 😉
Any stats from the pandemic era are a big red flag, but if it was actually better than a year before then fair play.