Don't Expect Used Car Prices to Collapse Anytime Soon
Photo: Mario Tama (Getty Images)
Used vehicle prices probably aren’t going to be coming down anytime soon, CEO Elon Musk is taking the stand in his $56 billion Tesla pay trial, and Jaguar-Land Rover’s CEO says he is resigning at the end of the year. All of those stories and more in The Morning Shift for Wednesday, November 16, 2022.
1st Gear: Used Car Prices Probably Aren’t Going to Tank
Sorry to be the bearer of bad news, but used-car prices are unlikely to dramatically drop in the next few months. J.D. Power says that’s because of continued strong demand for new vehicles.
J.D. Power says the only way to get used vehicle prices to come down and “clear this [backlog of sales] quite quickly” is if automakers could start producing vehicles at 2018 levels. That’s a big ask given everything going on in the world right now. From Automotive News:
[Tyson Jominy, vice president of data and analytics at J.D. Power] said one reason he is optimistic that retail used-vehicle prices will be durable — more so than 2021, when they kept rising — is because the number of vehicles flowing back into the market remains fairly limited, and there’s no getting around that.
[…]
“Vehicles — there’s far fewer of them coming back every year, based on other metrics that we’ve seen,” [the person] said.
Leased vehicles between one and three years old, in particular, are going to be “very difficult to find” through 2025, he added.
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In terms of wholesale prices, they are now hovering around the $25,000 mark. That’s down about three grand from their peak around this time last year. However, that’s still a huge jump from the ~$15,000 price they were at in the lead-up to that peak.
2nd Gear: Musk Takes the Stand in $56 Billion Tesla Trial
Tesla CEO Elon Musk is taking the stand Wednesday in a Delaware court in an effort to defend his $56 billion pay package, based on certain performance targets.
In 2018, a Tesla shareholder sued Musk and the board. Richard Tornetta now hopes to prove that the CEO used his influence over the board to create the terms of the package. It reportedly didn’t require him to work at Tesla full-time. From Reuters:
Tornetta has asked the court to rescind the 2018 package, which Tornetta’s attorney Greg Varallo said was $20 billion larger than the annual gross domestic product of the state of Delaware.
The legal team for Musk and the Tesla directors, who are also defendants, have cast the pay package as a set of audacious goals that worked by driving 10-fold growth in Tesla’s stock value, to more than $600 billion from around $50 billion.
They have argued the plan was developed by independent board members, advised by outside professionals and with input from large shareholders.
On Monday and Tuesday, the court got a taste of Musk’s testimony through short clips from his 2021 deposition in the litigation. In one clip, Musk dismissed the idea that the board should have discussed requiring that he spend more time with Tesla.
[…]
The disputed Tesla package allows Musk to buy 1% of Tesla’s stock at a deep discount each time escalating performance and financial targets are met. Otherwise, Musk gets nothing.
Tesla has hit 11 of the 12 targets, according to court papers.
This, of course, is all happening with his chaotic takeover of Twitter happening in the background. He reportedly said earlier this week that he will remain at Twitter’s San Francisco headquarters 24/7 in an effort to fix issues within that company.
3rd Gear: Jaguar-Land Rover CEO Calls it Quits
Thierry Bolleore, CEO of Jaguar-Land Rover is reportedly resigning for personal reasons. The move will take effect on December 31st, according to a statement from parent company Tata.
The company’s CFO, Adrian Mardell, will take over as interim CEO after that. He’s been working at JLR for over 30 years and currently serves as a member of its executive board. From Automotive News:
JLR hired former Renault boss Bollore as CEO in 2020 to return Britain’s biggest carmaker to profit after it took a big hit from the COVID-19 pandemic. Almost a year earlier, Bollore had been ousted as Renault CEO amid the fallout from the Carlos Ghosn scandal.
Bollore has been revamping JLR’s business model in an electric-focused strategy plan called “Reimagine.”
[…]
Bollore’s exit comes as JLR struggles to ramp up production amid industrywide supply chain issues, as well as making meaningful headway on electrification.
“The company’s transformation and acceleration towards a sustainable, profitable future as a modern luxury business is underway at great pace,” Bollore said in a statement.
[…]
Back in February 2021, Bollore announced plans for Jaguar to ditch combustion engines completely by 2025, and for Land Rover to introduce electrified variants beginning a year earlier.
Like much of the automotive industry, it’s been a bit of a rough year for Jaguar-Land Rover. Sales in the U.S. took a 37 percent dive to just 44,100 vehicles through the first three-quarters of this year.
4th Gear: Mercedes-Benz Cuts Chinese EV Pricing
Mercedes-Benz is slashing prices on two electric vehicles in China by up to $33,000 in an effort to boost sales in the country.
The German automaker said it was lowering prices on the EQE and EQS electric sedans. The company will also provide subsidies for people who recently bought their cars before the discounts were announced. From Bloomberg:
The cuts seemed to be immediate, with the EQE priced at 478,000 yuan ($67,675) on Mercedes’ Chinese website Wednesday morning, compared to 528,000 yuan as recently as Tuesday. The EQS luxury edition model was listed at 956,000 yuan on Wednesday, down from 1.19 million yuan on Tuesday, equivalent to a reduction of around $33,000.
Mercedes is making the cuts because sales have been disappointing in China, according to people familiar with the company’s plans, who asked not to be identified because the information is private.
Some dealers have already been carrying out promotions to try and boost sales, with EQS deliveries at times dropping to as low as 100 a month, the people said.
[…]
In a statement to Bloomberg News, Mercedes said the top-end EV segment in China is still evolving, especially for cars priced above 1 million yuan.
“Mercedes-Benz continually observes and analyzes dynamic market developments, including the current positioning of other manufacturers in the luxury segment. Based on that, Mercedes-Benz is repositioning certain EQ models in China,” it said.
Bloomberg reports that foreign brands are losing out in market share to domestic Chinese car companies. Those CDM brands have made up nearly 80 percent of all EV sales in the first seven months of this year.
Mercedes is said to have sold 8,800 electric vehicles in China during the first half of 2022. Meanwhile, Chinese EV brand BYD sold about 220,000 EVs in the month of October alone.
5th Gear: Ford CEO Says Company Must Bring Jobs In-House
Ford CEO Jim Farley said the automaker is going to need to build more of its own electric vehicle components in its own factories to make sure “everyone has a role” in the future.
Electric vehicles will require 40 percent less labor to build that current combustion vehicles, according to Farley. From Reuters:
Farley told reporters on the sidelines of the conference that Ford was “going back..to our Model A,” when the company built many of the components for vehicles itself at the Rouge manufacturing complex in Dearborn, Michigan.
Bringing production of electric vehicle motors, batteries and other components in-house was necessary to preserve jobs and to be competitive, Farley said.
According to Reuters, Tesla builds much of their hardware (including batteries) in-house. Farley wants to follow suit with some of that.
Ford has begun building an electric vehicle manufacturing complex in Western Tennessee called Blue Oval City. Farley said he “would be thrilled” if workers hired there decide to join a union. But that decision is up to the workers.
Ford and Detroit rivals General Motors Co (GM.N) and Stellantis NV begin contract talks with the United Auto Workers next year. The changes driven by the shift to electrification will be central to those negotiations. The UAW’s President, Ray Curry, has said he wants workers at new U.S. EV operations, including joint venture battery plants, to be organized without the process of secret ballot votes.
Farley has reportedly brought in a number of executives from other industries to help lead the electrification and software charge. However, he does admit that Ford needs to do a better job of developing managers from within.
Reverse: J.K. Rowling is Unfortunately Cemented in our World Forever
Neutral: I was Harry Potter Three Times
I dressed up as Harry Potter no fewer than three times as a child. I really loved that shit. It’s a shame J.K. Rowling absolutely sucks. Imagine being a billionaire and not leaving well enough alone. Perhaps that’s where Elon Musk learned it.
On The Radio: James – “Laid”
James – Laid (Version 3)
