There Is Some Drama With Hyundai, Rimac, And Porsche

Photo: Hyundai

Jeep says that Jeep showrooms are great, it’s also a great time to be a car dealer in America, and Rimac. All that and more in The Morning Shift for May 2, 2022.

1st Gear: Hyundai, Porsche, Rimac

Hyundai seemed very excited in 2019 when it announced that it was partnering with Rimac to make Cars Of The Future. I was excited, too, because I like both Rimac and Hyundai, because Rimac does cool shit in general and Hyundai is an underdog who took on an industry and won. Except now, according to Automotive News, that has all mostly gone to shit because Rimac has gotten more in bed with Porsche.

Hyundai reportedly owns about 12 percent of Rimac, though Porsche owns more.

Hyundai’s relationship with Rimac soured as the Croatian company became more closely linked to Porsche, according to one source.

Last year Porsche increased its stake in Rimac to 24 percent, up from 10 percent.

At same time, Rimac formed a 55-45 joint venture with Porsche to take over Volkswagen Group’s Bugatti hypercar brand.

Hyundai will finish the electric sports car project started in collaboration with Rimac in-house, one of the sources said. The vehicle’s expected launch date is early 2023.

Joint work on the fuel cell project, previewed by the Hyundai Vision FK concept shown last year, won’t continue, the sources said.

“We have two active high-level projects ongoing [with Hyundai], one completed and several future projects under discussion,” a Rimac spokeswoman said in an email reply to questions from Automotive News Europe.

The company didn’t say whether the completed project was the electric sports car.

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Hyundai taking its toys and going home is Hyundai’s prerogative, though maybe it’s not the worst idea to disentangle yourself from the flavor of the month. I’m also not sure what Hyundai was expecting, because a European car startup was likely always going to favor one of the Germans, if one of the Germans ever came calling. And Porsche is from the very highest rank of German carmakers.

2nd Gear: Jeep Says Jeep Is Good

Automotive News had a talk with Christian Meunier, the CEO of Jeep, who says that having a Jeep showroom is a good thing for dealers. I mean of course Meunier would say this, but I actually believe him, because many (most?) Jeep buyers are children at heart, if not in body.

Jeep CEO Christian Meunier says more than 300 dealerships will be adding Jeep showrooms in the next two years. In that span, stores will have to make room for entries such as the extended Wagoneer L and Grand Wagoneer L SUVs coming this year and Jeep’s first battery-electric crossover due in 2023.

Although Jeep has a healthy product pipeline, Meunier admits that some dealers aren’t completely sold on making the investment to build a specialized showroom.

“Some don’t realize the potential that exists,” Meunier said in an interview at the New York auto show in April. “I think very soon they will see their peers being very successful.”

Meunier hopes seeing that success could motivate more dealers to make the leap, but he feels Jeep can do more to sell them on its vision.

“Because of the product plan and the growth opportunity for Jeep in North America in the next five years, the dealers are going to be, I think, very much engaged,” Meunier told Automotive News. “So we need to show the dealers our future a little bit more so that they can have that vision more well defined. We have some work to do to convince them a little bit more about that, but this is the future.”

I do enjoy this dealer pretending like Jeep is different somehow:

A vintage Wagoneer is on display as a nod to the lineage of the hulking new models that now roam the streets. The SUV, which belongs to LaFontaine Automotive Group founder Mike LaFontaine, is an icebreaker for shoppers who may be hesitant about the sales experience when they first walk in, said Paul Jordan, the store’s general manager.

“The customers automatically walk to it because it’s so unique and different,” Jordan said. “Their conversation with the sales consultant starts off on, ‘My dad had one of these.’ ‘My grandpa drove this car.’ Instead of, ‘Folks, what are you here for, you need a new car today? Let me sell you a new car.’ It’s the icebreaker instead of the sales pitch.”

I’m not here to rain on anyone’s Jeep parade, they are fine cars even if modern Jeep is a bit too dependent on its rich heritage. It’s interesting, in a way, that Jeep is able to leverage its history and a brand like Cadillac seems to find that impossible, so much so that it is completely turning the page.

3rd Gear: Daimler Buses Expects Business to Be Bad

The Financial Times says that the world’s biggest coach and bus maker — which is Daimler Buses, if you weren’t aware (I totally knew that for sure) — expects demand years to be bad. Bad in the next three years, to be precise. This is despite travel coming back with COVID-19 restrictions easing.

Till Oberwörder, head of Daimler Buses, acknowledged that “there is a sense that [coach travel] is coming back” but added that while customers reported that school trips and tourism bookings were rising, coach orders in Europe would not fully recover “to the levels we have seen” until the middle of the decade.

The group’s sales of more than 9,200 buses and coaches in Europe in 2019 slumped to roughly 6,400 last year. The decline was sharpest in sales of coaches, which are largely bought by private companies. Orders declined here by more than 50 per cent in 2021 compared with pre-pandemic levels.

Daimler Buses, which is a division of Daimler Truck, also had to shut its coach factory in Ulm, Germany, on March 17 2020, and the site remained mostly closed for almost a year and a half, hitting production.

An interesting twist is that school trips and regular tourism is coming back but not, it seems, business travel.

One market where demand has not really returned is coach travel for business exhibitions and conferences. Oberwörder said it “remains to be seen” whether this type of travel would recover to 2019 levels.

I totally believe that the pandemic has made a lot of businesses rethink whether various trips are worth it, and I thought that automakers would rethink whether junkets for journalists to drive new cars were worth it, too. But I could not have been more wrong about the latter; they simply couldn’t wait.

4th Gear: Sadly, Some Dealership News, Featuring Penske

Penske Automotive Group, owner of hundreds of dealers globally, said that its results continue to be strong, The Wall Street Journal reported Monday, so much so that it would continue to buy back shares.

Profit at Penske more than doubled during the first quarter from a year earlier, to $367.9 million. Revenue jumped 21%, to about $7 billion. Cash and equivalents on the balance sheet increased to $170.3 million, up from $100.7 million at the end of 2021.

The company, as well as other dealership chains, are benefiting from a combination of factors, including a shortage of vehicles due to chip-supply problems, steady consumer demand and high sticker prices. Other vehicle retailers, including Lithia Motors Inc., AutoNation Inc., and Asbury Automotive Group Inc., also reported stronger first-quarter earnings.

“It’s just a great time to be an auto dealer,” said Ali Faghri, an analyst with investment firm Guggenheim Securities. Other dealership chains are also using their additional cash for buybacks and acquisitions, he added.

At Penske, gross profit per vehicle for new cars increased 68% from a year earlier, to $6,840, while the same metric for used cars rose 26%, to $2,284.

In addition to retail car sales, Penske also sells commercial trucks and operates a vehicle distribution business. As of March 31, the company’s retail auto business, which includes services and parts, accounted for 84% of revenue, while its truck dealership division accounted for 12%, according to [Shelley Hulgrave, Penske’s chief financial officer]. Its distribution business made up the rest, she said. The company’s dealerships are located in the U.S., U.K., Canada, Germany, Italy and Japan.

I’m still sad Penske didn’t buy Saturn and have a go at that.

5th Gear: Sadly, More Dealership News

Asbury Automotive Group, which is the fifth-biggest dealer in the U.S., according to Automotive News, keeps getting bigger, owing to a wave of consolidations among dealerships. Asbury has spent the last couple years on a buying spree, and may, in fact, be bigger than fifth now.

“Our goal isn’t to grow quickly,” [CEO David Hult] said. “Our goal is to grow thoughtfully and be great capital allocators for our shareholders.”

Asbury’s plan would have it adding 75 or so more dealerships with annual new-vehicle sales rising significantly.

[…]

Sales in the first quarter of 2022 provide a clearer picture.

Asbury last week said it sold 39,174 new vehicles during that three-month period, up 44 percent from a year earlier. That was higher than the 29,498 new vehicles reported sold in the U.S. by Group 1 Automotive Inc., No. 4 on the Automotive News list.

It also likely was higher than U.S. new-vehicle sales by No. 3 Penske Automotive Group Inc. Penske doesn’t break out U.S.-only figures but said generally 65 percent of its new-vehicle sales come from the U.S. Given that, Automotive News estimated that Penske sold about 30,000 new vehicles in the U.S. during the first quarter.

AutoNation Inc., No. 1 based on 2021 sales, reported selling 56,442 new vehicles in the U.S. during the first quarter, while fast-growing Lithia, No. 2 based on 2021 results, reported new-vehicle sales of 64,942 for the period, including a small but undisclosed number sold in Canada.

I’m not sure what this dealer consolidation means for consumers, but I’m sure it isn’t good, given that dealers already don’t have much incentive to treat consumers well.

Reverse: GM

The auto industry is a history of men with egos, for better or worse. Elon Musk, of course, is the modern paragon, though a hundred years ago it was the same old shit with Billy Durant, who founded GM.

Still the owner of a considerable portion of GM stock, Durant began to purchase more shares in the company as his profits from Chevrolet allowed. In a final move to regain control, Durant offered GM stockholders five shares of Chevrolet stock for every one share of GM stock. Though GM stock prices were exorbitantly high, the market interest in Chevrolet made the five-for-one trade irresistible to GM shareholders. With the sale, concluded on May 2, 1918, Durant regained control of GM. Just two years later, however, he was pushed out for good by Pierre S. DuPont, whose family’s powerful chemical company had begun investing in the fledgling auto industry by buying GM stock in 1914. Pierre DuPont subsequently rose to the chairmanship of GM’s board and became president in 1920. In an agreement made that same year, DuPont paid off all of Durant’s debt; in exchange, the controversial founder left the company.

Durant refused to bow out of the automotive industry, however, founding Durant Motors in 1921 and producing a line of cars for the next decade. The onset of the Great Depression in the early 1930s put an end to Durant’s career in cars, and he threw his entrepreneurial energy behind a string of bowling alleys located near the Buick complex in Flint, Michigan. When this venture failed as well, Durant faded from the public eye. He died on March 18, 1947, at the age of 85, just weeks before the passing of another automotive pioneer: Henry Ford.

Starting a bunch of failed bowling alleys around Tesla’s Fremont plant would be a fitting end to Elon’s career, too.

Neutral: How Are You?

I was making coffee this morning and there was a great white flash and I thought, for a moment, that I was finally going insane. Nah, just spring’s first thunderstorm. A second bolt a few minutes later shook the apartment and set off car alarms. The storm was all over ten minutes later. I hope no cars were harmed.