(MBN was on hand Wednesday and recorded nine interviews while at CAR MBS #59, watch for those to publish in upcoming days)
UPDATES AND HIGHLIGHTS FROM CAR MBS IN TRAVERSE CITY, MI.
GM's Mark Reuss: ICE Is Powering EV Growth
General Motors, like every other U.S. automaker but Tesla, is losing money on every battery-electric vehicle it sells, and current margins are substantially negative. But GM expects that as its SUV and crossover BEVs gain awareness in the market, it could start making money on the vehicles by the end of 2025.
It's a slog through the transformation to electrification, but GM President Mark Reuss, speaking at the Center for Auto Research's Management Briefing Seminars here, is enthusiastic about GM's electric future.
The mass market has been largely left out of the EV market so far, but vehicles like the new Chevy Equinox EV, which I drove all winter, are priced in the heart of the market of what people want. We've got to offer people what they want in a car, whether it is an internal-combustion-engine model or EV says Reuss.
GM has had delays with its BEV launches, but now has the Equinox and Blazer EVs, as well as the Cadillac Lyriq and the new Chevy Silverado EV shipping to dealers. The company reported record profits last year, driven by sales of ICE vehicles, especially trucks and SUVs. We know how to make cars and trucks, but we ve had to learn how make cells (for GM s EVs), and that is a lot tougher, Reuss admits.
Meanwhile, the company is also launching new ICE vehicles and even has a new V-8 engine. We've got to keep investing in ICE vehicles to help fund the investments in electrification, says Reuss, who mentioned the Buick Envista as a big winner for GM since it launched in 2023. The ICE-only Envista is priced below $30,000. Young people are really liking it.
GM, unlike Ford, has not reorganized the company with an ICE side and an EV side. That makes following GM's finances regarding EVs more challenging and perhaps more difficult for investors to value. But the GM president, who is the son of former GM President Lloyd Reuss and has spent his entire career at GM, says he prefers the cultural dynamic of blending ICE vehicle teams and engineers with EV teams and engineers. If you are working on ICE vehicles at GM, we tell our people, You are holding the keys to unlock the door of the future of EVs.
GM's BEV losses narrowed from $3.3 billion in 2022 to $2.5 billion in 2023. The company believes it will start making money on BEVs in 2025 as higher-margin models arrive and battery prices come down as expected. It also posted record profits of more than $14 billion in 2022 and a healthy $12.4 billion last year, driven by sales of high-margin ICE trucks and SUVs.
GM, like other U.S. automakers, has an eye on Chinese EV makers looking to sell in the U.S., especially BYD, which has already begun selling in Mexico and plans to expand into Canada. So far, the U.S. government seems intent on using trade policy and legislation to keep Chinese automakers out while U.S. companies further develop a supply chain that is much less dependent on China for battery cells and rare earth metals.
There are critics of U.S. protectionist policy, but Reuss says strengthening the U.S. auto industry is an element of national security.
I take a lot of pride in the country and what we have done, and do, to make this country. We are in this to win. At the end of the day, GM is a very American company and we have got to win globally for our country and our national security, and that means having a supply base, operations and products that lead the world, says Reuss.
J.D. Power: EV Cost to Own Reaching Parity With ICE Vehicles
The share of new-car sales that are EVs rose through the first half of this year to 8.3%, according to J.D. Power, a slower growth rate than the industry saw last year. But, presenting at the Center for Auto Research's Management Briefing Seminars here, Elizabeth Krear, vice president of EV Practice at the market research firm, says consumer interest and willingness to buy EVs are rising as product choices in the most popular segments namely SUVs and CUVs expand, and more products are offered below $50,000.
Key models to affect consideration this year and into next, says Krear, are the Honda Prologue, Chevrolet Equinox EV, Chevrolet Blazer EV (lower trim), Jeep Wagoneer S and Ram 1500 S.
Krear also notes that as prices continue to come down on some models, like EV pickups (transaction prices are falling with discounting to move excess inventory), the industry is reaching cost parity with ICE vehicles when the purchase price and operating costs are factored in along with the cost of charging overnight (as most EV owners do), versus the cost of gasoline.
J.D. Power's research shows that Tesla Model Y reached cost parity over a year ago, in May 2023. The Ford F-Series Lightning reached cost parity last November, and became cheaper to own than a comparable ICE F-Series in June of this year as transaction prices dropped after discounts.
Among demographic groups, says Krear, Generation Y, or millennials, have the highest current consideration of EVs at 36%, compared with 31% for Gen Z, 24% for Gen X, 17% for Baby Boomers and 8% for post-Boomers.
Income-wise, EV consideration is highest among consumers with a household income above $150,000 at 43%, and 40% among households earning between $100,000-$150,000. Because of the price of EVs, current consideration diminishes the lower the income is, based on J.D. Power's monthly surveys.
And in this election year, with EV mandates being a political football, Krear says 35% of Democrats say they are very likely to consider an EV for their next vehicle purchase, compared with 22% of Republicans and 19% of independents.
U.S. Light-Vehicle Sales in July Remain Stuck in a Rut
Despite steadily rising inventory, sales have been stuck at roughly the same level for more than a year, including in July. July's seasonally adjusted annual rate of 15.8 million units was not much better than the 15.6 million averaged per month since April 2023. While there is year-over-year volume growth in calendar year-to-date 2024, the 12-month trailing sales total has been stuck at 15.7 million units since March. Overarching reasons to what's stopping sales from breaking that pattern appear to be the lack of more-affordable vehicles on dealer lots, as well as a dearth of updated mainstream products.
U.S. light-vehicle sales disappointed in July, falling below expectations by totaling a 15.8 million-unit seasonally adjusted annual rate, an improvement on June's five-month-low 15.3 million but below like-2023 s 15.9 million.
The kicker is that the month did not see the rebound expected after June's SAAR fell to a 5-month-low 15.3 million units, in part due to some sales not consummated because of a cyberattack on software some dealers use to complete transactions, among other functions.
After posting a 14.9 million-unit SAAR in January, sales over the next four months averaged a total of 15.7 million. Instead of rebounding even higher above June's total to at least even out the past two months with the February-May average, July's results were nearly flat with that 4-month period. July's total also is further indication that the cyberattack did not have as much of a negative impact on June's results as initially thought.
However, another part of the lackluster bounce-back is a drop in fleet deliveries in July, estimated by Wards Intelligence to have declined 11% year-over-year, while retail volume was relatively flat. After increasing in four of the first five months of 2024, fleet volume has declined two consecutive months, with July's decline being by far the biggest.
With inventory rising steadily, a lack of affordable vehicles and fresh mainstream products on dealer lots appear to be what's keeping sales from elevating to a new level. July s SAAR was not much better than the 15.7 million units averaged over the prior 12 months through June. Also, 12-month trailing sales volume has been stuck at 15.7 million units since March including through July.
Furthermore, as it relates to the mix of affordable vs. pricier vehicles, most of the pent-up demand built up since 2020 with the start of the pandemic/supply-chain disruptions is in lower-priced segments. Not only has there been a decline in the number of entry-priced vehicles offered in the market over the past four years, but because automakers skewed limited production capacity in the 2021-2022 timeframe of the semiconductor shortage toward profitable, higher-priced vehicles, more demand was satiated for those vehicles relative to lower cost models.
Raw volume in July totaled 1.273 million units, 2.0% below like-2023 s 1.300 million. The daily selling rate was 50,925, down from the year-ago total of 51,971 25 selling days both periods.
July was the second straight month volume fell from the same year-ago period. Prior to June, raw volume had increased each month in 2024, while the DSR last declined in January.
Calendar year-to-date sales through July totaled 9.08 million units, 1.4% above like-2023 s 8.95 million. The year-to-date SAAR through July totaled 15.6 million units, slightly above like-2023 s 15.5 million.
July's total includes estimates for Audi, BMW, Lucid, Jaguar Land Rover, Mercedes, Mitsubishi, Porsche, Rivian, Tesla and Volvo roughly 13% of total volume. Volvo (except Polestar) will be revised with actuals later this month, while the others will be updated with final revisions by the time they report third-quarter totals in October.
Among the automakers that reported July numbers to Wards Intelligence, only Honda, Mazda, Nissan, Subaru and the Volkswagen brand of the VW Group reported year-over-year gains. Among those that reported declines, Toyota's 5.1% downturn was all or mostly due to its stop-sale on the Toyota Grand Highlander and Lexus TX that began in June, caused by a safety recall.
For access to the data behind this analysis, or to discover how Wards Intelligence's unparalleled expertise can guide your decisions in the ever-changing automotive landscape, connect with their team at: [pages.wardsintelligence.informa.com/Subscribe-To-WI-CAR-MBS.?elqTrackId=F1ADAF0FDFD147CEA8674B10AAEE6FED&elqTrack=true]pages.wardsintelligence.informa.com/Subscribe-To-WI-CAR-MBS.
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