Automotive brand loyalty is taking a hit because of the onslaught of new electric vehicles, Tesla shares continue to dive as Chinese demand worries increase, and Toyota had a really good November that it should enjoy because another shortage is around the corner. All those stories and more are in The Morning Shift for Wednesday, December 28, 2022.
1st Gear: These Customers Ain’t Loyal
Brand loyalty seems to be taking a big hit as more and more customers give new electric vehicles from legacy automakers and startups alike a try. From The Wall Street Journal:
Nearly 80% of people who bought Kia Corp.’s EV6 electric crossover since it went on sale early this year traded in something other than a Kia, according to research site Edmunds, compared with 61% for all its models. More than two-thirds of Ford Mustang Mach-E electric sport-utility buyers had non-Ford trade-ins, compared with Ford’s 42% brand-wide average, according to the Edmunds data.
Startup truck-maker Rivian Automotive Inc. says its customers are coming from such a wide spectrum of car buyers that purchasers of its trucks and SUVs—which start around $70,000—are about as likely to own a $30,000 Subaru Outback station wagon as they are a $100,000 Porsche 911 sports car.
Those insights underscore what is at stake as traditional auto makers and startups vie for early adopters in an EV market now dominated by Tesla Inc. With limited EV supplies, people who want one are shopping multiple brands.
Tougher emission rules and pressure from investors are forcing automakers to quickly introduce new electric vehicles. WSJ reports that strong demand for many early models (with some waitlists that can be years long) have accelerated that push even further.
This non-brand loyalty trend may not last forever, though. Doug Betts, the president of automotive at J.D. Power, says that even though there is an influx of new EVs heading to showrooms, it’s still a narrow section of all the cars on sale today. It means buyers don’t have too much of a choice but to switch up brands.
“It’s a bit unnatural right now with the market not filled in,” Mr. Betts said. There are 53 EV models either on the market or soon to be rolled out, according to J.D. Power, compared with 625 separate vehicle models sold overall in the U.S. in 2022.
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The report says that historically, automakers have counted on customer loyalty to protect market share.
On average, about half of the people who own a certain vehicle brand return to buy another one, according to research firm S&P Global Mobility.
2nd Gear: Tesla – How Low Can You Go?
Tesla stock has continued its quick downward trend into this week as reports have come to light that the automaker is having a demand problem in China. The company will be reducing production at its Shanghai plant in January because of it.
The stock itself has lost over half of its value since the start of October because investors are worried that CEO Elon Musk is spending way too much time at Twitter.
Those cuts and demand issues in China have been further exacerbated by the rising number of Covid cases in the country. From Reuters:
Tesla Inc (TSLA.O) shares fell 11.4% on Tuesday after a Reuters report that Tesla was planning to run a reduced production schedule in January at its Shanghai plant sparked worries of a drop in demand in the world’s biggest car market.
The stock, which fell to its lowest in more than two years and had its worst day in eight months, was the biggest drag on the benchmark S&P 500 index (.SPX) and the tech-heavy Nasdaq index (.IXIC).
To add insult to injury, Reuters analysis shows that the price of used Teslas is falling faster than other cars in the market. That, in turn, is hurting demand for new cars that are rolling off the assembly line.
3rd Gear: Toyota is Having a Good Time
Toyota said its global output hit a record for November because of strong customer demand, but the party may not last forever. The company warned of an uncertain outlook because of the — you guessed it — semiconductor shortage and a Covid spike in China.
The world’s largest automaker produced 833,104 vehicles in November. That’s a 1.5 percent increase from a year earlier. Sales are up too. The Japanese company sold 796,484 cars in that time period, up 2.9 percent from last year. From Bloomberg:
The output for vehicles reflects solid demand in areas such as North America, and a rebound from a year earlier when Covid infections in Southeast Asia disrupted supply chains. The auto industry is still dogged by shortages of chips and other car parts, while it will also face challenges stemming from the rapid spread of Covid cases across China.
In early November, Toyota cut its global production target for the fiscal year through March while sticking with a conservative profit outlook because of chip shortages.
Toyota’s domestic output for November declined 3.3% from a year earlier to 266,174 units, while overseas output was up 3.8% to 566,930 units, according to the statement.
Including vehicles assembled by subsidiaries Daihatsu Motor Co. and Hino Motors Ltd., output and sales totaled 982,552 units and 884,112 units, respectively.
Compared to its peers, Toyota did rather well in November. Nissan’s global output declined 23 percent from last year to 248,961 vehicles, and sales slide 26 percent. Honda’s global production also fell 12 percent to 325,996 units.
4th Gear: Russia’s AvtoVAZ Gets a Big Investment
The board of directors of Russian automaker AvtoVAZ approved an investment program for the country’s top car maker. The investment program is set at just under 40 billion roubles – or about $585 million. From Reuters:
Renault sold its majority stake in Avtovaz to the Russian state for reportedly just one rouble ($0.0165) earlier this year, but with a six-year option to buy it back. The same state institution snapped up Nissan’s (7201.T) assets this month for one euro.
In the months following the start of the Russian invasion in Ukraine in February, AvtoVAZ has cut production and was offering some workers voluntary redundancy due to lack of components.
Earlier in December, Russia’s Ministry of Industry and Trade of the Russian Federation reported that the board of directors of AvtoVAZ approved the company’s production plan for 2023 at the level of 401,000 vehicles, RIA said.
Reuters reports the automaker has produced about 200,000 vehicles so far this year, according to a statement from the company’s website.
5th Gear: That’s a Lot of Planes
Aircraft leasing company BOC Aviation announced it had ordered 40 Boeing 737 MAX aircraft that are set to be delivered in 2027 and 2028. It comes just in time for a year-end boost to the manufacturer’s books. From Reuters:
The Singapore-based lessor said it also amended its existing purchase agreement with Boeing as part of the deal, resulting in it having 80 737 MAX jets on order in total, to be delivered from 2023 to 2028.
Boeing’s total aircraft orders net of cancellations for the year reached 571 in the 11 months ended November, while rival Airbus SE reported 825 net orders in the same period.
The two airplane manufacturers are soon expected to receive large orders from Air India. The airline is currently negotiating a major fleet renewal and expansion under its new owner, Tata Group. Reuters reports that, according to industry sources, the expansion could involve nearly 500 planes.
Reverse: We Love Labor
Neutral: The Electric City
Photo: Andy Kalmowitz
The famous “Scranton Welcomes You” sign is actually in a near-dead mall because people kept fucking with it on the side of the road. I love it.
On The Radio: Guy Lombardo – ‘Auld Land Syne’
AULD LANG SYNE ~ GUY LOMBARDO ~ 1947 Version
It’s the last TMS of the year, and what a year it has been.