One great feature of this website is that there’s been precious little news of the presidential election, except perhaps when a certain candidate called out Ford Motor Company for moving American jobs to Mexico. [Spoiler Alert: Ford is moving small car production from its Michigan Assembly Plant in Wayne, Michigan, to Mexico, but the plant will be tasked with building with more-profitable Ranger and Bronco instead. At this point, no Michigan workers will be laid off.]
Well, at last, our long national nightmare is over, which means its time for the 2020 presidential election campaigning to start. What’s been happening in the auto biz while everybody else has been pre-occupied with the choosing of our 45th president? Here’s a little recap of some news you may have missed…
Dieselgate II: True, this is hardly a light diversion from politics, and it’s a misnomer, as it doesn’t involve just diesels. California’s environmental authorities now are investigating carbon dioxide emissions in the Audi A6, A8 and Q5, whether equipped with 3.0-liter diesel or gasoline engines. The California Air Resources Board is looking into whether these Audi models used “cheater software” to improve the fuel economy numbers in order to meet CO2 emission standards.
While automakers often try to “game” EPA estimates with aggressive automatic transmission upshifts, for example, the allegations against Audi are different. CARB alleges that, like the Volkswagen/Audi A3 2.0-liter diesels, the emissions-limiting software is based on steering wheel input. When the wheel is turned more than 15-degrees, which means it’s not on a test dynamometer, fuel efficiency goes down and CO2 emissions go up. German prosecutors last weekend extended their investigation of the cheater software scandals to include Volkswagen Group Chairman Hans Dieter Poetsch.
What does this mean for us? Potentially, it takes some pressure off of diesel engines in general in the U.S., and places it on the already beleaguered VW Group. Until now, Dieselgate hadn’t affected Audi much in the U.S. This should make it easier for Chevrolet to market its Cruze and Equinox diesels early next year in the U.S., though ultimately the implication for Audi gas and diesel engines gives CARB more fuel (sorry) to further its zero-emission, battery-electric vehicle agenda. Following last weekend’s Bild story, CARB “promised … to use its expanded testing procedures to crack down on automakers that use so-called defeat devices,” Bloomberg reports.
Tesla’s Superchargers: Speaking of electric cars, Tesla Motors, which posted a surprise gross profit of $21.9 million for the third quarter of this year, even when using Generally Accepted Accounting Principles, now says it will start charging its customers for using the Supercharger stations. Tesla says the cost to consumers will be less than what they would pay to fill up a similar gasoline-powered car at refueling stations. I gather that means perhaps less than the $50 or so it would take to refuel a Mercedes-Benz S-Class in Michigan today. Will it be higher in California or Hawaii? Tesla won’t charge current owners, only those buying cars after next January 1, so that includes the roughly 400,000 customers who have deposited $1,000 to get in line to buy a $35,000+ Model 3s. Tesla promises to start production of the 3 some time in the second half of 2017.
Tesla also reported that its automotive gross margin, excluding the California Zero Emissions Vehicle credit, rose from 23.2 percent in Q3 of ’15 to a flat 25 percent in Q3 of ’16. A reader noted these high margins to me after a recent column in which I touted better business prospects for the Chevrolet Bolt than the Tesla Model 3. But 25 percent? That’s gas-powered pickup truck territory, not low-volume battery-electric luxury car territory. The reader helpfully included a link to a two-year-old Motley Fool analysis that figured a 25 percent automotive gross profit margin for Wall Street’s darling tech-automaker. Tesla’s figure wasn’t overblown, the Fool explained, because it makes a second big profit on each car when it re-sells it after a lease. I’d love to see General Motors or Ford Motor try that.
So I’m going to go out on a limb and guess that even though Tesla says it won’t make a profit on its Supercharger charges, it will subtract the net-zero as a fixed cost when determining Model 3 profit margins.
U.S. auto sales heading downward? In my November 4 column on October’s auto sales, I described the declines at most automakers as a leveling off from the record 2015 pace. But now “down” might become the new “even.” Both Toyota Motor and Nissan have just revised their forecasts downward for the U.S. market. Toyota posted a global net profit of $4.7 billion for the recently completed second quarter of its current fiscal year, but that’s down 43 percent compared with the previous year’s second quarter.
Toyota says demand for passenger cars like its Camry and Corolla bestsellers continues to decline, while it tries to keep up with sport/utility demand (I didn’t realize that Toyota and Lexus were lacking in these segments). Toyota has cut its forecast for U.S. sales between now and March 31, 2017, the end of its fiscal year, by 60,000 units, which is a fairly significant number for a company that sold nearly 2.5-million vehicles in the U.S. in calendar year 2015. And that new forecast came a day before Toyota, or any of us, knew the outcome of the November 8 election.
What will become of the Chrysler 300? As I’ve reported here before, it was pretty obvious from FiatChrysler’s last Five Year Plan outline that the big Chrysler sedan would join a Chrysler-branded crossover (a Buick Enclave competitor) on the new, front-drive, transverse-engine Pacifica platform. Now that project, if it ever became a full-blown project, is delayed and the rear-wheel-drive Chrysler 300 will soldier on to 2020 or so.
The big question is whether we’ll ever see a new Dodge Charger and Challenger (or Barracuda) off the Alfa Romeo Giulia’s Georgio midsize rear-wheel-drive platform. FiatChrysler has been dialing back on its big, expensive plans to move Alfa up into BMW territory, which has hurt the Dodges’ prospects as well, and CEO Sergio Marchionne has lately engaged in a wholesale retreat from passenger cars in favor of the more lucrative sport/utility and truck markets.
My hope is that when the dust settles, FiatChrysler has enough money to spend on a rational expansion of the Alfa lineup, with costs shared with a Challenger replacement, and that perhaps the corporation can gin up a new, cost-effective RWD platform to replace the Mercedes-Benz parts that underpin the Jeep Grand Cherokee, as well as the Dodge Charger and Challenger and Chrysler 300.
A Chrysler brand lineup consisting of only a minivan and a semi-premium RWD sedan makes sense when most dealership showrooms are filled with Jeeps, anyway. And to bring this back to politics: Remember, Barack Obama owned a RWD Chrysler 300 before he was elected president.