Good morning! It’s Wednesday, August 10, 2023, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are all the important stories you need to know today.
1st Gear: EVerything Is Fine, Honestly
It’s all change in the world of car sales right now, as dealers rush to fill their lots with electric vehicles, governments around the world unveil incentives to help people buy EVs and buyers flock to see what all the fuss is about, before driving a shiny new electric car off the lot. At least, that’s what should be happening. But, like everything, it’s not that simple.
Instead of automakers building cars and then quickly finding their way into the hands of new owners, some EVs are piling up on dealer lots – leading many to ask if the bubble is bursting? But now, a new report from Automotive News has argued that, actually, everything is fine.
For the past few months, dealers around the U.S. have reported that EVs are spending way more time on the lot, waiting for a buyer compared with gas-powered cars. In some cases, models can be waiting for up to 180 days before a buyer takes them home. But Automotive News says this is all to be expected as the industry grows, and doesn’t reflect a dip in consumer interest. According to the site:
The current EV narrative has nearly 91,000 cars piling up at dealerships as consumer enthusiasm for the new technology dwindles. At some dealerships, that’s true. Cox Automotive data shows EV supply of more than 100 days on dealership lots, more than double the number of gasoline vehicles.
Still, that data is complicated by the nature of EV sales. EVs are an expanding slice of the overall market but until recently were hindered by short supply. Now, the EV sales share is outpacing the inventory share, said Tyson Jominy, vice president of data and analytics at J.D. Power.
Despite all these scary figures of cars spending months waiting to find a buyer, Automotive News reports that EVs actually made up just 6.7 percent of dealer inventory across the U.S., while accounting for 8.6 percent of retail sales.
What’s more, it’s been the case for the past 18 months that retail sales have outpaced the growing inventory of EVs across the supply chain.
2nd Gear: Carvana Might Be Recovering
Everyone’s favorite troubled online car retailer is back in the news, and for once it isn’t about it fighting for its right to sell cars, or for pissing off yet more customers across the U.S.
After mounting losses and heaps of legislative issues last year, Carvana appears to be making a better deal of things in 2023, as it’s just seen its shares jump after announcing that its profit for the third quarter would be much higher than expected. According to Reuters:
Used-car retailer Carvana expects its third-quarter adjusted core profit to be above $75 mln from its prior forecast of “positive adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)“, sending its shares up about 4% in morning trade on Wednesday.
Carvana, in an attempt to strengthen its balance sheet and attain positive cash flow, has been trimming inventory and slashing advertising expenses.
Despite gaining popularity during the Covid-19 pandemic as it allowed customers to buy cars online, Carvana has faced a raft of problems over the past two years. It’s struggled with rising costs of used cars to fill its vending machines with, and faced losses of half a billion dollars during Q3 last year.
3rd Gear: BYD Wants To Takeover Ford’s Brazil Plant
In 2021, Ford announced that it was ceasing its manufacturing operations in Brazil and closing its facilities at Camaçari, Taubaté and Troller. Instead, the Blue Oval said that it would source cars built in Argentina and Uruguay to sell across the country.
Now, Chinese automaker BYD is preparing to swoop in and save one of Ford’s Brazilian auto plants as it looks to expand its global production network. The automaker, which already has sites in Shenzhen, China, is reportedly “wrapping up negotiations” to take over Ford’s shuttered factory in Camaçari.
According to Automotive News, BYD is hoping to open its “most extensive EV operation outside Asia,” when the site goes online later this year. The site reports:
The resurrection of the former Ford plant represents the grand industrial ambitions of President Luiz Inácio Lula da Silva, widely known as Lula. Much like U.S. President Joe Biden, Lula dreams of spurring a manufacturing renaissance. Both leaders are eager to provide blue-collar jobs that can support middle-class lives, fulfilling campaign promises. But there’s an essential—and, for the U.S., vexing—difference: Biden aims to maintain an advantage over China in key technologies. Lula, a leftist who took office in January, is looking to China as the country’s benefactor.
And it isn’t just the old factory that BYD will work to update, the company also has big plans for the surrounding areas as well. According to Automotive News, the Chinese firm is working to replace an efficient bus fleet with new EVs to ferry people around town, and a monorail is even in the works to transport workers to the facility, which is about 30 miles north of Salvador, the state capital of Bahia.
4th Gear: EV Sales Are About To Face Yet Another Challenge
Whether it’s gas-powered or electric, new cars are expensive – right now, the cheapest car in America is the Mitsubishi Mirage at $17,650 and the cheapest EV is the Chevrolet Bolt, which starts at $26,500. It’s for this reason that a lot of people turn to the second hand market when buying a car.
But in the case of EVs, there hasn’t been much of a used market in recent years as there haven’t been all too many EVs out there on the road to rack up miles and warrant selling on. Now, as fleet operators begin switching to electric models, questions are raising about what this could mean for a future second hand EV market.
In a new report from British outlet Autocar, experts warned that fleet operators unloading their EVs en masse when they reach the end of their terms could flood the market with used models. The site reports:
Car finance companies are already ringing alarm bells about the weak residual values of some EVs. Startline Motor Finance CEO Paul Burgess said: “The last year has been a turbulent one for the used EV market and many dealers have been bruised by the reductions in values of stock.
Very few seem to be concerned about the huge numbers of ex-company car EVs that will soon arrive in comparatively large quantities.
There will need to be a corresponding increase in demand if values aren’t to suffer further.” However, Cap HPI, which has been at the forefront of tracking used EV values, believes their prospects aren’t as bleak as some would believe.
According to the site, values of used EVs are already seven percent lower than expected, thanks to “weak consumer confidence [and] heavy depreciation.” However, that’s all while the used EV market remains relatively small. Imagine what this could mean for used prices as the market grows.