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The Used Market Is Finally Starting To Cool

Illustration for article titled The Used Market Is Finally Starting To Cool

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The used market is finally showing signs that it’s cooling, the former chairman of Mitsubishi is dead, and mayflies. All that and more in The Morning Shift for August 31, 2020.

has been setting records all summer in the midst of the pandemic, as production shutdowns resulted in new-car scarcity and consumers turned to used vehicles because of economic uncertainty.

The boom is beginning to cool off, though, according to Automotive News:

For the week ended Aug. 23, wholesale auction prices dipped by an average of 0.7 percent, according to J.D. Power. That marked the first material decline since the week ended April 23 and the second consecutive week that wholesale prices were flat or down, the company said.

“Used prices have been just insanely strong, white hot, since May, after bottoming out in the middle part of April,” said Larry Dixon, J.D. Power’s senior director of valuation services. “They rose week in, week out, really until just two weeks ago.”

J.D. Power is forecasting wholesale prices will continue to move lower into September as pent-up demand cools and headwinds related to the coronavirus pandemic grow. The company expects prices at year-end to be slightly higher than pre-virus levels.

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I have contemplated more than once selling my 12-year-old Honda Fit because the local dealer keeps calling to offer to buy it. I’m pretty sure I could get a decent price for a well-maintained small Honda in the New York City era right now — and yet I can’t bring myself to let go.

the Financial Times:

Data compiled by consultancy Oliver Wyman for the Financial Times found that while the total cost of manufacturing a compact emissions-free vehicle will fall by more than a fifth by 2030, to €16,000, this will still represent a 9 percent gap when compared with petrol or diesel models.

The findings highlight the threat to the profit margins of groups including Germany’s Volkswagen and France’s PSA, even as the price of electric car batteries — their most expensive component — is set to almost halve over the next few years.

European carmakers, faced with a sharp decline in overall demand for their legacy products in the wake of the Covid-19 crisis, are set to unveil dozens of new electric cars over the next few years.

“There can be money made from electric vehicles, but it will be lower than [petrol and diesel models] historically,” said Simon Schnurrer, an automotive partner at Oliver Wyman.

Automotive News:

GM believes the insects, also known as fishflies, are responsible for stubborn black residue dotting more than 2,600 Chevrolet Tahoes and GMC Yukons that were built in Arlington, Texas, and waiting to be shipped to dealerships.

The mess has delayed shipments of the redesigned 2021 SUVs to dealerships already coping with tight inventory levels. Some stores have spent hours working to carefully remove the substance without harming the paint.

One Tahoe that arrived at Pete Eischen Chevrolet in Fairview, Okla., last week — three months after it was built — has been hit so hard that the hood has to be painted, Sales Associate George Eischen said. The chrome accents, painted panels, windows and wheels also were spattered.

“We were told all would be cleaned before delivery. We waited three months for nothing,” he said.

That all seems sort of believable — insects are a gross necessity to our natural environment as it is currently constituted — until you get to the part in which an expert says, “Hmm.”

The SUVs were being stored near a lake after leaving the Arlington plant. High populations of mayflies are common around lakes, said Molly Keck, an entomologist and specialist with the Integrated Pest Management Program at Texas A&M AgriLife in San Antonio. The emergence of a big population “may not happen every single year, but it definitely happens,” she said.

[…]

Mayflies “don’t really make a stain,” Keck said. “When they emerge from the lake, they’re not feeding. So there’s nothing in their gut for them to be able to excrete out.”

Regardless, it’s an unlucky hiccup in a year when GM and its dealers and everyone else could’ve used a break.

earlier this month because of his health. The company said he died on Friday. Masuko’s tenure at the head of Mitsu wasn’t exactly a huge success.

Per Reuters:

Masuko was at the helm of Mitsubishi during a 2016 scandal in which the automaker was found to have overstated the mileage on its vehicles. An investigation uncovered slack governance and pressure on resource-starved engineers as chronic issues at the company.

The scandal – Mitsubishi’s third in two decades – pummeled profits and further tarnished the automaker’ s brand. At the height of the furore, Nissan lent its smaller rival a lifeline, offering it $2.2 billion for a 34% controlling stake.

The deal was agreed between Masuko and then Nissan CEO Ghosn, and brought Mitsubishi in as a junior partner in the Nissan-Renault automotive alliance.

Masuko later denounced his ties with Ghosn following the latter’s 2018 arrest in Japan over suspected financial misconduct.

Mitsubishi Motors just keeps on keeping on despite making mediocre products and not really trying at all for years. It’s a model for all of us, really.

Automotive News:

Hau Thai-Tang, Ford’s head of product development and purchasing, said this month on an analyst call that Ford would need to produce 100,000 to 150,000 EVs annually for its own battery plant to make sense.

“We don’t have that volume initially to justify that capital expenditure,” he said, adding that local content requirements in North America and China further complicate the issue. “There’s insufficient scale for any one OEM, other than somebody who’s a full-line battery-electric manufacturer like Tesla, to justify that spending.”

[…]

“It gives us the ability to access the latest technology and innovation across multiple suppliers,” Thai-Tang said. “So I know exactly what the state of the art is from the Korean suppliers, the Japanese suppliers, the Chinese suppliers, and I’m able to compare notes across them maybe better than they can. And then, of course, we have the competitive tension with dealing with multiple suppliers, which allows us to drive the cost down.”

Despite its insistence that the supply base is prepared, Ford has said tight battery supplies would limit the upcoming Mustang Mach-E to 50,000 vehicles globally in its first year of production.

Automotive News quotes an analyst as calling this strategic decision a “crapshoot,” and that feels right. The EV market is interesting right now insofar as companies are laying down billion-dollar bets and no one really knows how any of those will pan out just yet. Not even Tesla, despite its recent surge.

Reverse: Solar Cars

This will probably never be a thing in my lifetime but sheesh we have been trying for awhile.

Neutral: How Are You?

I went to the Museum of Modern Art yesterday, drove into midtown Manhattan with little traffic and street-parked the Fit quite easily a block away from the museum. I hope the tourists and rich people and Manhattanites below 59th Street who have fled for the exurbs never come back.

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