AAH #767 - Post-Q3: What’s Next for the Auto Industry?

TOPIC: Car Sales PANEL: Charlie Chesbrough, Cox Automotive; Joe White, High Speed Rodeo; Brett Smith, Industry Expert; Gary Vasilash, shinymetalboxes.net

Episode Transcript

Speaker 1 (00:01):
Out online.

Speaker 2 (00:01):
After Hours is brought to you by bridge Stone Tires
Solutions for your journey.

Speaker 3 (00:10):
Hey, everybody, thanks for joining us for another edition of
Autoline After Hours.

Speaker 4 (00:14):
So those who have been watching the show for.

Speaker 3 (00:16):
A while know that we've been, you know, gas bagging
about what's going to happen after the EV credits go away,
and you know, it's just like we make up stuff.
So this this show, we're going to get some real
real insight on that because we have Charlie Chesbrow, senior
economists from Cox Automotive who he knows the stuff, unlike
you know, John and I would just say stuff. And

(00:38):
joining us also is Joe White, who is the author
of a highly recommended Substack high speed rodeo.

Speaker 4 (00:47):
You go there, you.

Speaker 3 (00:48):
Got to see it. Jonah's a magnificent job. Yeah, good
to be here, so thank you. And we've got Brett Smith,
independent researcher and.

Speaker 5 (00:58):
Good to be back Gary. And does that mean since
Charley always tells the truth through Joe and I also.

Speaker 6 (01:04):
We'll try to tell the let's try to tell the truth.
We have fact based opinions, if that is such a thing.

Speaker 3 (01:10):
Excellent, excellent, So Charlie, you know I'm going to quote
you from earlier this week, and you said, as more
tariff products replaced non tariff inventory, prices are tracking higher,
which would lead to lower sales.

Speaker 4 (01:28):
Through the remainder of the year.

Speaker 3 (01:30):
Okay, now you're saying this in light of what we
just saw in terms of October sales. What did we
see in terms of October sales? What does it look
like after the other shoe drops.

Speaker 7 (01:44):
Well, October came in pretty much where it was it
was expected to come in, but it was down significantly
from the pace that we've been running the last few months.
We've been running in the mid sixteen million range for
a seasonally adjusted rate for the months of July, August, September,
and then we had thembers come out for October and
it was a fifteen point three million pace, so down
quite a bit. And what we think happened out there

(02:06):
is that a lot of the pull ahead activity that
we saw of people going out there buying battery electrics,
plug in hybrids while that seventy five hundred dollars tax
credit was still viable till September thirtieth, a whole bunch
of folks the last couple of months, really since July fourth,
when they announced that this was going to go away.
Have been rushing out to buy these evs and plugins
and in a sense kind of borrowed some sales from October,

(02:29):
pulled it all forward, and so we're seeing the sales
have come down. So the market was down about four
percent for the month on a year over year basis,
and it was pretty much where it was expected. But
it really does kind of leaven uncertainty of well where
do we go from here. The expectation is is that
battery electrics and plug in sales are probably dead through
the fourth quarter, that anybody who was even thinking about

(02:51):
buying probably pulled the trigger, at least the vast majority
of those folks. So that's going to be a big
headwind to not actually have those sales. The industry has
been leasing plug ins and battery electrics the last couple
of years, actually since the fall of twenty twenty two
when they passed the Inflation Reduction Act at over a
fifty percent rate. I mean, it's a monster amount of

(03:13):
leases that we've been doing.

Speaker 6 (03:14):
I was wondering about that because because you could get
to seventy five hundred even if your income was higher
than the limit.

Speaker 1 (03:20):
That's right.

Speaker 7 (03:21):
IRS decided that you could lease these things and have
it quie.

Speaker 6 (03:24):
I just wanted to make sure that was my understanding.
But anyway, go ahead, because yeah, so a lot of
that and that's gone.

Speaker 7 (03:30):
So that's all going to come collapsing down, and you know,
we may still see them trying to lease at high
rates these plugins, but certainly not.

Speaker 1 (03:36):
Going to do the volumes that they had done before.

Speaker 7 (03:38):
And so that's one of the big questions we have
for the industry going forward, is that we talk about
higher prices, the lack of that low cost offer out
there of these subvened lease rates for these battery electrics,
it means a huge chunk of the market's going to
get that much more expensive. And leasing of traditional hybrids
is around fourteen percent, so it's much smaller share, and

(04:01):
leasing of ice vehicles is around twenty. So unless the
industry is going to step up and really get more
aggressive of the other lease offers on products that people
would be interested in, we're going to see leasing come
crashing down along with the battery electrics and plug in hybrids,
and that's a low cost option for many in the market.
That's going to be going away.

Speaker 4 (04:20):
All right.

Speaker 3 (04:20):
So you use a term there that I need you
to define for me, subvened lease rate.

Speaker 4 (04:25):
So what does that mean.

Speaker 7 (04:27):
Well, it just means sort of the capital cost reduction.
So the seventy five hundred dollars that the Feds we're
going to give on a battery electric you can put
that on.

Speaker 1 (04:35):
A capital cost reduction.

Speaker 7 (04:36):
So you're only paying a lease on a forty two
five hundred dollars vehicles.

Speaker 1 (04:41):
So it's a rebate by any other name, another name.

Speaker 6 (04:44):
Yeah, you know, And this is really interesting because just
one thought as you're talking about this, so you know,
in the past, automakers could look at kind of a
cyclical sales slump, you know, and say, okay, fine, we'll
throw another thousand bucks or two thousand bucks, or we'll
go do low cost you know, zero percent financing or
something like that. That and you know, spend some money

(05:06):
to get the revenue to come in the door and
keep people working at the union represented plants and all
that good stuff and.

Speaker 1 (05:11):
All all the plants.

Speaker 6 (05:13):
The money that they might have used for that sort
of thing is being sent to the government in form
of tariffs, right, I mean five billion dollars or so
at gm I for you know, two billion or whatever
it is at four it on and on. So it
seems like the the word I want the flexibility, financial
flexibility to kind of juice the market and encounter a
downturn that a normal.

Speaker 1 (05:35):
Consumer is not. There's not as much of that or
maybe none.

Speaker 7 (05:39):
Well, certainly the teriffshire squeezing manufacturer margins, and as we've
seen thus far, they haven't really passed these costs onto consumers,
even though we know that they're substantial. I mean, for all,
the tariffs are in place, tariffs are not in place
that we've had over the last few months stealing aluminum
terraffs have been in place since the end of March,
and that's anywhere six seven eight hundred dollars average cost

(06:00):
per vehicle. They're paying that cost and a half for
some time. These cost pressures are only growing, and our
expectation is is that as the new model year twenty
six has become more and more a larger portion of
the existing inventory. Right now it's about little underd fifty percent,
it just means that they're going to have to These
costs can't be absorbed for much longer, and they're going

(06:21):
to have to start passing them on because there isn't
a lot of money left.

Speaker 1 (06:23):
Over to tweak the pot there and make the deal. Yeah,
just quick.

Speaker 6 (06:27):
I was at the conference by my former employer, Royer's
this past last week and a couple of them executives
were there and they were asked about this and the
gist of what they had to say was, we aren't
going to be able to eat this for much longer.
I'm in paraphrasing, but that was the gist. Yeah, it's
like you're going to see somehow or another, right these
things come through.

Speaker 5 (06:47):
You know, Joe, you mentioned this idea that the cash
flow is an issue. So many people have talked about
how much was invested in battery plants and switch over
to and they've GM announce they're going to have to
raise them that often intended, But the other part is
they're not getting revenue from those products going forward, so
they're not building on that base to create with any

(07:09):
more money. Yeah, it creates an even bigger challenge for you.

Speaker 6 (07:11):
And they're laying people off, especially GM.

Speaker 5 (07:14):
So you're starting to see so you're starting to see
this big issue of oh my gosh, we are getting
to a cash short spot.

Speaker 1 (07:21):
It looks like it. Well.

Speaker 7 (07:22):
And the other big issue with battery electric that hasn't
really been discussed is now that we're sort of backing
off of this push towards electrification for the country, a
lot of the assumptions to get to the high levels
of penetration of battery electrics was the battery cost was
going to come down, and it was going to come
down because of scale. There's going to be so many
of these things selling that the cost per batter is
going to come down. Well, now that's all out the window.

(07:43):
We're not going to have that skin. So what happens
to these battery costs? It just seems like it's going
to be that much more difficult to really make this transition.

Speaker 1 (07:49):
Well, and can I just pick up on another thing.
I think it's adjacent.

Speaker 6 (07:54):
So you said October was fifteen point three, Yes, and
then what's where where's Cox Automotive at for the full year?
What's the that's the number?

Speaker 7 (08:04):
Well, our forecast for the full year is around sixteen
point one million for the year. We're currently running that
a pace of about sixteen point two million, So it works
back in the fourth quarter to be a little bit
slower than the third quarter, and that kind of exist.

Speaker 6 (08:17):
Okay, And here's the point I want to make about that.
And again this is more of an industry perspective than
a consumer perspective, although I think consumer perspective.

Speaker 1 (08:23):
Is good to talk about here.

Speaker 6 (08:24):
Right, from an industry perspective, that's a million plus vehicles
per year. I'm looking at you because you know, numbers
better than me. Million plus fewer vehicles per year than
we had we were going when we were tracking pre pandemic.
And so I again, it's speaking factory. So you look
at this, you say, okay, if this is the level

(08:46):
and evs aren't going to be the novel product that
boosted above the you know, sixteen ish million, there's a
million vehicles worth of factory we don't need in this country.
And that's a problem. So I just throw that out there.
It's kind one way to look at it.

Speaker 7 (09:04):
Well, I think it's an excellent point, and I think
the industry has you know, we've moved a much higher
price points in the marketplace and they sort of are
abandoning the less than thirty thousand dollars price point.

Speaker 1 (09:14):
That really could be a lot of capacity there.

Speaker 7 (09:17):
They could be building a lot of low cost vehicles,
but I don't think the industry is that interested in
meeting that demand necessarily. That they're pretty happy with the
price points where they're at, right.

Speaker 3 (09:26):
You know, And to your point, Joe, I mean, I
was looking at a chart yesterday from Auto Forecast Solutions
of capacity utilization, and you know, Toyota is up here,
Honda's here, and then everybody else is down here. I mean,
and so you know, and this is over a period.

Speaker 6 (09:43):
Of time, right, Yeah, it's been consistent.

Speaker 3 (09:45):
So you have this question of Okay, if you have
all of this capacity that's.

Speaker 4 (09:50):
Going unused, that's costing you money.

Speaker 3 (09:53):
Sure, And you know, so it's like invisible to most people,
right because you don't see the factory that's not working,
but it's there.

Speaker 4 (10:02):
Yeah, it's full of equipment that they have to pay for.

Speaker 3 (10:06):
And you know they got lights and water and yeahsurance.

Speaker 6 (10:10):
Well, full of equipment, Brett, go ahead, I'm sorry, and
back to the earlier point.

Speaker 5 (10:14):
And you're not getting product coming out of there. That
only is it sitting idle, but you're not getting revenue
from anything.

Speaker 1 (10:20):
Yeah.

Speaker 6 (10:20):
The CEO of US CEO of fan at the big
industrial robot company again was at this conference I was
at and chatted with him briefly, and he was saying,
and I said, well, what's you know, what's happened was
the result of the ev you know kind of wave
going away? He said, well, you know, yeah, we sold
a lot of you know, panic machinery and robots which

(10:41):
is sitting in factories. And now the question is can
can we are in the customer you know, rework those
robots put new tools on the ends of the arms
to build ice vehicles, and so that's like they put
them in, they installed them, they tooled them up to
do a certain type of thing. Now they're going to
have to redo them, reprogram and do it just money time.

Speaker 5 (11:03):
BMW get beat up a lot four or five years
ago because they were doing very flexible platforms when others
were going to very dedicated facilities. Maybe later we'll talk
about BMW and but that ability to be flexible is
so critical in an uncertain time.

Speaker 6 (11:21):
Charlie, can I ask you so another thing that I've
been seeing a lot about and I think it's a
complex subject and maybe you can so what is the
impact on the auto market, but maybe both new and
used of what seems to be a fair amount of
trouble for consumers who you know, subprime or you know,

(11:43):
the middle class, not really affluent, not affluent, but middle
class people who are getting in trouble on credit, getting
in trouble on loans. What's happening with those folks and
are they just out of the market or what.

Speaker 7 (11:56):
Well, we're certainly seeing a lot of delinquencies or sort
of record highs right now, and the concern is is
that going to switch you over into defaults? And defaults
have been high, but they've actually come down a little
bit over the last year. And one of the reasons
that there's all this concern out there is that there
are a lot of delinquencies, a lot of people are
getting behind on these payments. There's talk about this k economy.

(12:18):
The upper part of the economy is doing great, the
bottom part of the lower income folks are doing terrible,
and people in the middle are getting squeezed. You know,
all of that is going on, But.

Speaker 1 (12:29):
It seems to me that the.

Speaker 7 (12:32):
The direction of all of this is that the market
is going to well I kind of lost my train
of thought on this one.

Speaker 1 (12:38):
Well, I mean, it.

Speaker 6 (12:39):
Does it because does the new car market really just
become a market for people who have six figure incomes
at the very least.

Speaker 7 (12:46):
Well, it does seem like we're transitioning to a market
where anybody who's buying new is luxury, because if you
can afford a new car payment and the new car insurance,
it kind of defines you as sort of a luxury
type person in today's economy.

Speaker 5 (12:59):
I heard last week that fifteen to eighteen percent of
new car buyers loans are monthly notes. They're paying a
thousand bucks a month for a car. That's not a
middle class wheelhouse, is it.

Speaker 1 (13:17):
No?

Speaker 7 (13:17):
But I think we have to abandon the idea that
the new car market is for a typical American.

Speaker 1 (13:23):
It's just it hasn't been for a long time.

Speaker 6 (13:25):
Yeah, the metaphor of the model TS is over right,
that's not.

Speaker 7 (13:29):
That's been has been that way for quite a while,
and it's only getting worse. But the reality is there
are affordable products in the new vehicle marketplaces. You know,
we've got Chevy Bold, We've got a lot of compact
SUVs out there, but that's not what people want to buy.

Speaker 1 (13:44):
People want the bigger vehicles. They'll settle if.

Speaker 7 (13:46):
They can only afford a small vehicle. They'll take it,
but they want bigger, they want better.

Speaker 5 (13:51):
Back to Joe's point, then Americans seem interested in buying
lots of technology under vehicles. They like the bigger vehicle.
Do they afford that? And do we end up in
another situation where we have a lot of defaults or
how do we resolve that?

Speaker 1 (14:08):
Seeming the conflict, Well, one way you resolve it is
you sell a million.

Speaker 7 (14:11):
Less vehicles, right, so you have fewer people that can
buy these things, so they don't have as big a market.
And I think that's kind of the direction we're going,
is that we're going to stay lean and mean that
we're not going to try and overseell this market and
have massive incentives and try to get us back to
the seventeen.

Speaker 5 (14:26):
Million, or your finance department really push the envelope on
getting loans, which creates a problem.

Speaker 7 (14:34):
Well it does, but this is more people that are
that are sort of their own finances and whether they
made correct financial decisions.

Speaker 3 (14:41):
So this, this, this, this, this, this, this will be
good news for the auto industry. I was reading the
FICO score Credit Highlights report because you because you do
that things like that, so we don't have to the
FYCO payment hierarchy is number one, Auto, number two, mortgage
number three, personal loan number four, bank card number five,

(15:02):
student loan okay, Meaning when it comes to paying bills,
Auto gets the bill paid first. So this is their explanation,
and I just thought this is fabulous. Auto and mortgage
are secured products associated with tangible assets essential to ones
quality of life, so they are higher in the payment hierarchy.
One reason auto is higher than mortgage is monthly payments

(15:23):
are generally lower for auto than mortgage.

Speaker 4 (15:26):
Generally.

Speaker 3 (15:27):
Additionally, while the mortgage foreclosure process takes longer and there
are more legal protections for homeowners, autos can be repossessed
with little notice.

Speaker 1 (15:36):
Yeah, it's brought.

Speaker 3 (15:37):
To mind the famous Repo Man movie.

Speaker 6 (15:39):
Yeah right, somebody, I think. I can't remember. I can't
remember which media outlet that I consume. It might have
been the New York Times just did an article, you know,
because I've done them myself in my career. The perennial
or the quadrennial repo man article or porter follows the
repo guys, he's picking up people's you know.

Speaker 1 (15:58):
Unpaid vehicles. Yeah, no, I I do.

Speaker 6 (16:03):
I do think that I was going to say that
I was. I read transcripts of some of the Q
three calls. They didn't actually listen to the calls themselves
and read the transcripts, and certainly in the in the
GM and and I'm I didn't look forward but looked
at GM. They were asked about this, and it sounded
like they were saying, we're not in trouble on subprime

(16:25):
because we don't really lend do a lot of subprime lending.
And you know, in general, motors of any company we
think would know that lesson because they got burned really
badly during the financial crisis a lot of subprime both
mortgage and I think car loans too. So I don't
think they're not trying to expand the volume with subprime
loans like they did before. Is that right, because that's

(16:45):
sort of what that's what they say.

Speaker 7 (16:47):
Gotten a much smaller share of the market today than
it was back during certainly much less than I was
during the Great Recession.

Speaker 6 (16:52):
Yeah yeah, and I yeah, but rates for rates for
used car vehicles, used car loans, those are pretty high, still.

Speaker 1 (17:00):
Feel very high.

Speaker 7 (17:01):
In fact, the treasury ten your treasuries have kind of
been coming down a little bit, but car loans.

Speaker 1 (17:04):
Still remain quite high.

Speaker 7 (17:05):
And I think we're sort of seeing the financial marketplace
reflecting their concern about our people borrowing too much on
these vehicles, and they're not quite ready to lower.

Speaker 1 (17:14):
Those rates, so they're pricing the risk. I think they're
pricing the risk. Yeah.

Speaker 7 (17:18):
But the other thing we saw I think, you know,
if we look back at during COVID, is the world's
falling apart. Nobody knows what's going on. And what do
people do When they got these checks, they ran out
and bought cars. People wanted personal transportation. They wanted the mobility.
I have to get the heck out of town. I
want that, and certainly if I have to, I have
to keep going to my job, I need that transportation.

(17:40):
So people do pay those car loans. And I think
that's why we don't see and certainly didn't see this
during the Great Recession either. You just didn't see the
default rate on car loans like we saw in bank
cards and other assets.

Speaker 3 (17:50):
Like, Yeah, you don't want to open the door in
the morning and see your cars not in the driveway.

Speaker 1 (17:54):
Right, Well, then you can't get to work and you're
really in trouble.

Speaker 3 (17:56):
But Okay, So, Charlie, one of the things that I
know you guys do is that you when you look
at the numbers in terms of sales, you know, you
look at individual companies and see how they're doing. So,
I mean, what companies did pretty well in October and
what companies did not so well well?

Speaker 7 (18:12):
I think we'd have to say probably the big winner
for October was Toyota. Their sales were up big. I
think eleven percent was what it was. I looked at
the numbers before it came here. Compared to last year.
They gained two full points of market share in the
same month from a year ago, so that's that's a
big move in the marketplace. So I think they're doing
quite well. And what we can see that selling is

(18:33):
it looks like their hybrids are really just on fire. Yeah,
and if you look at the market this year in fact,
you know, overall we're up about four percent year today.
But what is selling out there is really quite varied.
Battery electrics are up a little bit more than that,
maybe five six percent. Plug in hybrids were actually down
a little bit, Ice vehicles were down about one percent,

(18:53):
and traditional hybrids or achivs up fifty percent plus year
over year, huge increase in hybrid sales, and so that's Toyota.
They've really moved into that category kind of you know,
they kind of own it at this point, along with
Honda a little bit.

Speaker 1 (19:06):
They're doing some themselves.

Speaker 7 (19:07):
I think that's really been a big plus for them
in terms of who had a tough October. I think
we can look at Nissan. Their numbers were down that
we got there, down double digits. Part of it is
we can see they're pulling back on fleet. A lot
of rental fleet activity pulled back this month as well
as last month. I don't know if they're getting a
little bit more disciplined over there and not wanting to

(19:28):
do as much fleet as they had done historically. They're
always kind of known to be a fleet rental fleet
type of company, so maybe they're changing their strategy on that.
But they've had a tough October and Tesla. We saw
Tesla numbers in October looked like they had come down,
so as we would expect with the fire sale over

(19:48):
there with the seventy five hundred dollars credit.

Speaker 6 (19:51):
Yeah, Toyota really really did call the hybrid thing, at
least for certainly for this market, right. And the head
of folks like in North America again was at the
same Royer's comp Princeton, and he was asked about, you know, hybrid's.

Speaker 1 (20:02):
Electric because they were going to they were one of
the we're all in on.

Speaker 6 (20:05):
Electric companies, right, Yeah, and and and I think his
name is Cal Gruner, and he said, you know, we
thought we could leap broad hybrids.

Speaker 1 (20:14):
We can't.

Speaker 6 (20:15):
Just like and well he's new in his job too,
I think it's important to say so he's he gets
a little bit of a clean sheet, but he basically said, nope,
we you know, we cannot. We're going to And they're
building or they're developing hybrids. I think I think you
said for the Atlas and the tig One maybe maybe
others as well. So they're doing I don't know if
it's a U turn, but it's a ninety degree turn
on hybrids and trying to bring them in, uh to
this market.

Speaker 1 (20:36):
Yeah.

Speaker 7 (20:37):
For the longest time, we all thought, oh, Toyota is
they're they're falling behind, they're not doing much on electric vehicles.
And they turns out they that against Toyota, Charlie.

Speaker 5 (20:48):
And so looking back, you described some of what's happened,
maybe look forward a little bit and given the government shutdown,
what kind of data, how do you look forward over
the next couple of months to figure out what's going
to happen volume wise, sales wise and such. There doesn't
seem to be any real trustworthy data because of the government.

Speaker 1 (21:10):
There's really not.

Speaker 7 (21:11):
I'm glad I'm just an automotive analyst and not a
FED chairman because I don't know how they make decisions
on these interest rates not having any information. You know,
we're everyone's kind of flying blind right now. But certainly
the trends we're suggesting a very troublesome environment for the economy.
Consumer confidence is definitely at recessionary levels. We had seen that,
you know, the job creation monthly job creation was definitely

(21:34):
trending towards zero before we started getting any numbers, So,
you know, I think everyone's kind of taking a cautious approach.
We're all kind of waiting for the tariffs to finally
hit the fan and we start to suffer the ramifications
of these things. And that's our expectation as well, is
that we're going to see starting in the fourth quarter,
as we've saw in the first month that things are

(21:55):
going to slow a little bit.

Speaker 3 (21:56):
So do you think this will be evident to a
consumer on the sticker or will the auto companies do
things to sort of disguise it, like.

Speaker 1 (22:06):
And this is where it gets tricky.

Speaker 7 (22:07):
Yeah, So, you know, I don't think anyone's coming out
and saying we're raising prices.

Speaker 6 (22:11):
You know, I think it's going to be because of
because of the President's terror policy.

Speaker 1 (22:15):
I don't think we're gonna hear that. I don't think
we're going to hear that.

Speaker 7 (22:18):
And I'm sure they're all reluctant to be a first
mover and be the one because you know what the
President's going to say if you're raising your prices. Uh,
you don't want to be on uh you know, getting
a shout out from him about that. So uh No,
I think what we're seeing out there is we had
expectations what they were going to cut back on incentives,
that they were going to you know, they were going
to get a little bit leaner and sort of keep
some of the money to boost their margins. We haven't

(22:41):
seen that yet. Incentives have actually stayed relatively stable. They
haven't pulled that lever.

Speaker 5 (22:45):
Uh.

Speaker 7 (22:45):
So what we think is probably going to go on
as they're just eating it right now, as we've seen
from their quarterly earnings reports. But they're going to start
to slowly roll those into prices with you know, the
new model you're coming in. You always kind of have
price changes in it's kind of easy to hide it.
There maybe a little bit higher destination charges, you know,
to get that vehicle delivered and then the other one.
And we're actually internally trying to figure out how do

(23:06):
we measure this? But is shrink flation? Are we going
to start to see the manufacturers say, oh, here's that vehicle,
same price as last year, doesn't have the cruise control
this time, but the same vehicle, you know, and they
start pulling back some of the features that they had
been throwing into these vehicles in order to keep back.

Speaker 4 (23:23):
So the options that will then.

Speaker 6 (23:27):
Yeah, and I remember I remember when I, you know,
in years past, when I paid much closer attention to
pricing for the purposes of writing about it. They did that,
and then they did the reverse, which was they would
it would eliminate like the stripper model in any model line, uppackaged,
you know, package up everything so well here you know,
now standard is X, y Z, and then they would

(23:49):
price up. But you know, say, well, look but like
for like you're getting the same content, but you're not right.
I mean, the content is obviously much costs them a
lot less than they're charging you. Yeah, that's what that's
that's what I expect they'll do. But let's not I
mean again, and come back something I said earlier. The
other constituency. That's that's that's suffering or taking the brunt

(24:11):
or the impact of tariffs. Are the are the employees
and the workforces, and I think also capital budgets. I mean,
picking on GM just because I'm kind of familiar with
what they said about this. You know, you see the layoffs,
you see you know, you see lots of you know,
action to cut costs and consolidate within that organization. Uh

(24:32):
you see you know, production shutdowns. You know, there's they're
doing a lot within their organizations to basically take out
cost And they've talked about it with Wall Street. I
mean they've said, look, we think we know term they
use a GM is self help. Uh So they figure
they can take a little price, they can do this,
they can do that. They're very grateful to the President

(24:53):
for the relief that you know, they kind of tweaked
the tariffs, so they get some relief, which is definitely
worth something, and they get regulatory relief on missions and
EV quotas, which is definitely worth something. But there's a
there's a there's a there's a gap there, and right
now it looks to me like they're taking it out
on the capitol budgets and the employees to try to

(25:14):
narrow it. So how long that goes on, you know,
is another I know, Sean, I didn't maybe someone I know,
Sean Fain was on Facebook last night given h E
Double L and he was talking about, you know, these
cuts and you know, obviously concerned as he should be,
that's his job, but I do think that's something to watch.

Speaker 4 (25:35):
Well, Charlie, are you guys?

Speaker 3 (25:37):
I mean, you know we've established from from Brett's question,
I mean, we don't know what the future is going
to be because there's not you know, economic data that
usually gets generated. But I mean, as Cox's out, a
motive looks to twenty six. I mean, do you see
it being pretty stable or do you anticipate there could
be some growth?

Speaker 4 (25:58):
Well?

Speaker 7 (25:58):
This is so this is where it gets key trying
to forecast in this environment because there's so much uncertainty
with these tariffs and it was the Supreme Court going
to throw.

Speaker 1 (26:06):
Them out or you know, lots we don't know.

Speaker 7 (26:09):
But one of the things that we've calculated is so
we're certainly concerned about higher prices from the tariffs, and
that's going to be a headwind, and we think consumers
are going to be seeing those higher prices in the
market next year. But one of the things that we
also have calculated recently is the big beautiful bill is
going to change people's tax returns. Come January and February

(26:30):
when people are getting their tax returns. We're estimating that
people are going to get a big bonus, a big
surprise that they're not expecting. And that is because of
all the the little nuggets that were in the bill
of you know, senior citizens deduction and higher assault a
state and local tax deductions, higher deductions for everybody's standard deduction,

(26:50):
the tips, well yeah that's a whole earthly but no
tax on tips, no tax on overtime, a lot of things.
But they made it all retroactive to January, so people's
withholdings have all been based on the old tax rates
and not the new tax rates. The new track packs
rates are more favorable. So the way you've calculated it

(27:12):
that the average packs return of about three thousand dollars
come February when people get them, is actually going to
be about thirty seven hundred and fifty dollars, So seven
hundred and fifty dollars more almost, you know, twenty percent
more than probably what they're even expecting. Gosh, Land, Well,
it certainly may not do much for the new vehicle market,
but if they used market.

Speaker 6 (27:29):
It could be it would be ac and just by
coincidence landing in the midterm election here, Yeah, well, complete coincidence,
I mean, is everything?

Speaker 5 (27:38):
Yeah, to build on that positive we talked a lot
of the negative here.

Speaker 1 (27:42):
What are other.

Speaker 5 (27:42):
Positive trends you see for the possible market growth or
for some kind of solid future given you can't see
you half the data anyways.

Speaker 7 (27:51):
Yeah, well, certainly you know a couple of things in
the bill auto loan deduction. I think that that will
help a little bit for the new vehicle side, not
a lot, because it phases out after one hundred thousand dollars,
and that many folks are buying vehicles that don't make
it at least that, but I do think the other
one we saw is one hundred percent depreciation bonus depreciation
on commercial vehicles. That could be really so six thousand

(28:13):
to fourteen thousand pound vehicles. You can deduct the entire
amount right off the right out of the gate. So
you can buy one hundred thousand dollars a big truck,
write it right off of your profit you know, your
profit margins, and you know, pay no tax that year,
and normally it was about a five year depreciation allowance.

Speaker 3 (28:29):
Okay, but wait, you says some very important there quickly
when you said you have to write it off your
profit margins.

Speaker 1 (28:34):
Or whatever your tax return that comes off of your.

Speaker 4 (28:36):
Yeah, but you have to make my So not everybody's
gon go a whole way.

Speaker 1 (28:39):
Crap your company. It's not going to help.

Speaker 6 (28:42):
So so with my sub stack, I'm not I'm not
going to be able to go out and buy an
F two fifty and write it off.

Speaker 1 (28:48):
Yeah, right of all tempting, but it might not pad all. Yeah,
it's not for personal, it's only for commercial. Uh you
know business.

Speaker 6 (28:55):
Well, I've seen a whole lot of large SUVs with you.

Speaker 5 (29:02):
I'm not going to help people with that, pulling a
lot of the snowmobiles up north on the weekends.

Speaker 7 (29:06):
Yeah yeah, yeah, yeah, it's a work truck truck, yeah yeah,
so that could help. But certainly the tax return itself
we see is being a big plus for the used
market come the first quarter. Uh and kind of in
a similar situation when people got that surprise check, you know,
back in the wake of twenty twenty in COVID, people
could be getting a surprise amount of income. But what

(29:27):
we don't know, so normally, yes, that would be a
big plus for the vehicle market. We're going to have
a hot Q one. But what we don't know is
what are finances and households and are people not getting
their snap benefits or people having a hard time paying
other loans. Is that seven hundred and fifty dollars extra
already spent so that they're not going to be able
to use it?

Speaker 1 (29:45):
That that's the part we don't know.

Speaker 5 (29:47):
For the used car market, EV resale value is really low.
It talk to tell me about how that there are
a lot of evs already sold out there to build
a huge but there are you look at some of
these high end luxury vehicles coming back on the market for.

Speaker 1 (30:11):
Of their original Yeah.

Speaker 7 (30:13):
There's some there's some eyeball that we're too expensive at
the get go, I think, and there you know, that's
coming home to rust. But when we try to analyze
residual value now, residual values, it is a little tough
because there's really only sort of Nissan leaf that you've
got a long history, you know, Chevy Bolt and then
maybe the Model three. We're starting to get enough data
now for the Model why because it's been a few years.
But even then it's it's not like you've got hundreds

(30:35):
of vehicles to monitors you can't really look at. But
you know, depreciation has been a real challenge for electric vehicles.
They do depreciate faster in general than ice vehicles. But
I think the pullback on the seventy five hundred dollars
tax credit will help support residual values down the line
because we're not discounting them as much upfront. But one
of the interesting things is because that we've been leasing

(30:57):
at such a high rate of these plug in hybrids
and electrics, we got a whole bunch of these things
coming back off lease starting later this year. But they
really get into high volume next year and into twenty
twenty seven, and in fact, by twenty twenty seven, we
estimate there's going to be about a half million battery
electric vehicles coming back off lease, and that's a huge
chunk of volume that's going to be coming to the used.

Speaker 1 (31:17):
Car market if you want to bargain.

Speaker 7 (31:20):
And interestingly, a lot of these are going to be
Model three and Model wid.

Speaker 6 (31:23):
Yeah, well, so who's behind Tesla's leases Because if they
wrote those leases, assuming you know, I'll make it up
fifty percent and it's actually going to be thirty that's
a pretty big sandwich and someone's got to eat well.

Speaker 7 (31:37):
So that we're going to see I don't know who
wrote all those where the what finance company they worked with,
but that's going to put a lot of pressure on
their new vehicle sales as well. That if they're going
to be trying to sell a new vehicle that you
got a competitor out there for half the price, that
that's going to.

Speaker 1 (31:51):
Be a real challenge for them.

Speaker 7 (31:53):
So there's a lot of moving parts of electric vehicles
in the new market. But what we do know with
some certainty is there's going to be a whole lot
of whole lot of these things in the used market.

Speaker 4 (32:01):
It was interesting because I figured that we would talk
about this.

Speaker 3 (32:04):
So I looked at the websites of a couple of
dealers in the Detroit area and looked at their used evs,
because I would imagine that there would be some concern
when buying an EV about the battery state. And so
two separate dealers, you know, just very competitive, and there

(32:28):
was no information on the state of the batteries that
you'd buy fill in the blank EV for. So, I mean,
if you're going to buy you know, you're buying a
used offer that you use CenTra, you know, you don't
worry about like, oh, you know, if the battery goes
as twelve old battery, you know you get it replaced well.

Speaker 6 (32:50):
And yeah, and there's this, you know, century old body
of knowledge of how to take a used combustion vehicle
and determine whether or not the engines you know, you
know needs a ring job or whatever. I mean, then
a lot you know, I don't know all those things,
but there are people who do, and you can hire
them and it we'll be fine.

Speaker 1 (33:06):
But but what does COX do I mean, do you
get we do?

Speaker 7 (33:09):
We do do a battery health score now at our
auctions with battery electrics, so when they're going through and
they're getting a score on sort of the condition a
condition report of the vehicle, we do have a score
for the battery as well. But yeah, it's very difficult
out there. And you know, some of these electric vehicles,
the battery you can't get to it. It's going to

(33:29):
be near impossible to fix it or replace it. But
other manufacturers, they're products. You can repair these things. So
you know you're gonna have to do a lot of
homework if you're going to get into a used EV
I think make a wise purchase.

Speaker 3 (33:40):
All right, we got to take our break. Now we're
going to come back and talk about lots of things.
Joe's got this collapse China market information and you brought
with them. I'm not the only one who.

Speaker 4 (33:48):
Does this service silly stuff.

Speaker 3 (33:50):
So we're to hear from our sponsor, Bridgestone, whom we
greatly appreciate.

Speaker 1 (33:58):
Making the life full of memories, one road trick at
a time.

Speaker 5 (34:02):
That's what really matters, rich down whether Pete tires with.

Speaker 2 (34:06):
A seventy thousand mile womited warranty.

Speaker 4 (34:11):
And we are back so you guys want to quiz.

Speaker 3 (34:13):
Do you want to sure, we'll be trying to do this. Okay,
So this is a famous automotive executive. Was born on
November sixth, eighteen ninety three. For those who are watching live,
this is of course November sixth, so it's appropriate. So okay.

(34:33):
He sponsored Admiral Richard Byrd flying over the North Pole
in nineteen twenty six. He has a section of an
interstate named after him. And you guys all know who
this person is. And I dare say that most people,

(34:54):
even if they have very little interest in the auto industry,
recognize this guy. Is given name as well as his surname.

Speaker 6 (35:05):
That's all Ford and so forward.

Speaker 1 (35:07):
You got it.

Speaker 3 (35:08):
Wow, okay, it was the Admiral bird part right.

Speaker 1 (35:14):
No, that that didn't help me at all.

Speaker 4 (35:16):
The freeway, it was like okay, and I was like.

Speaker 1 (35:18):
Wait a minute.

Speaker 6 (35:19):
You know, so in Detroit there's a section of young
and yeah, okay, yeah.

Speaker 3 (35:24):
Section section of a freeway in Detroit is Ford Freeway
named after him, not after.

Speaker 1 (35:29):
His well, happy birthday, that's yeah. Yeah.

Speaker 3 (35:33):
And the the famous Diego Rivera murals in the Detroit
Institute of Arts.

Speaker 6 (35:38):
He caused those cast.

Speaker 1 (35:42):
What does Joe Windmill?

Speaker 6 (35:49):
Okay, I get to come back sometime. Yes, anyway, all.

Speaker 3 (35:53):
Right, So, so, so you you've discovered that there are
some companies in China that aren't doing so well.

Speaker 6 (35:57):
Well, I didn't discover it. I mean, this is but again,
you know, this has been this is earning season, and
especially the three major German automakers BMW, well maybe four
or five, but BMW, Bookswagon, Mercedes. You know, we're talking
about their their their their results. And the thing overhanging

(36:19):
all of them or this is that in China they're
you know, these are brands that were super strong in China.
They've made billions in China over the last twenty plus years. China,
I think, at various times, has been the largest single
market for their vehicles, right, and and that.

Speaker 4 (36:37):
Is is rapidly becoming not the case.

Speaker 6 (36:40):
They're all they're all struggling. They're all dealing with double
digit declines. This is I looked this up and again
I'm going to cite my my my colleagues at Reuters.
If you look at Volkswagen in twenty twenty, they were
selling three point seven million vehicles a year in China.
In twenty twenty four two point eight eight, you know,

(37:01):
so almost a million vehicles fewer, and frankly, they're doing
great compared to General Motors, which twenty twenty was selling
one point four million vehicles. In twenty twenty four five
hundred and twenty eight thousand, I mean, their sales have
collapsed by more than more than half, but all the
German automakers are really struggling. Porsche came out and basically said,

(37:25):
you know, they made I think they made four hundred
million a year ago in the third quarter or for
a million euro four hundred million euros or something like that.
This time it was, this quarter was, last quarter was
forty and they're basically the new CEO of Porsche is
basically talking about, you know, strategic reboot. They also did
the you know, we're all in on EV. I think

(37:47):
they switched a couple of their the ma Con, which
I think is one of their well, I know, it's
one of their most highest volume products, very important.

Speaker 1 (37:55):
Product, very important product globally.

Speaker 6 (37:57):
They were going to go all electrically that and in
this market, I think that turn was pretty much rejected
by the customer. And in the China market that their
evs weren't were deemed not up to scratch compared to
the local competition.

Speaker 1 (38:13):
So yeah, it's it's it's been.

Speaker 6 (38:15):
It's it's a tough go for the for these brands
that you know, not that long ago, four or five,
six years ago, really seemed like they had it knocked
there this great market in China. They were, you know
Charlie's points earlier. I mean, they were in position very
well for a market that was aimed increasingly at affluent buyers.
And now it's just like we.

Speaker 1 (38:34):
Got a reboot. We got a reboot, and it's it's
gonna be gonna be a rough ride.

Speaker 3 (38:37):
Well, to be fair for to Portie for it's one
point one billion dollar loss for.

Speaker 4 (38:41):
That third quarter.

Speaker 3 (38:44):
They say that seven hundred million euro caused by caraffs.

Speaker 6 (38:50):
Well, right, yeah, I think the forty million was I think,
you know, so you know, ernies before bad stuff kind
of a number. But even though it was minimal relative
to the past. And yes, and they took these big charges,
and and yes, all three of them obviously are getting
are getting whacked by tariffs. And uh, I mean Porsche
unlike BMW Mercedes and and Folkswagen Porsche of the Porsche

(39:14):
brand has no US manufacturing. So the other three, the
ones that do have some cushion and you know, some
not total Porsche has none.

Speaker 1 (39:26):
And yeah, so that's and and I.

Speaker 6 (39:29):
Guess even Porsche can't raise their prices sufficient to cover that,
even with their customer base, like yeah, yeah, there's some limbs.

Speaker 1 (39:36):
So yeah, I think it's.

Speaker 6 (39:37):
It's it's they're in a tough spot, and I think
they're looking at some really tough tough decisions right going forward.

Speaker 3 (39:43):
So Charlie, I mean, okay, when you look at but
let's call.

Speaker 4 (39:46):
Them specialty brands.

Speaker 3 (39:47):
I mean, Porsche is certainly not a mainstream brand.

Speaker 4 (39:54):
Do they have.

Speaker 3 (39:56):
A runway ahead of them that that they can take
advantag job or is here in the US.

Speaker 8 (40:01):
Market to put the death kne just I mean, if
you if you look at it, you know, Ferrari, Maserati,
I mean, they all have very very small portions of
the market in the United States, and you know, at
some point that has to become economically infeasible.

Speaker 7 (40:22):
Well, it seems to me they've always had sort of
a little niche place. So if they've made it work
this far, you know, I don't know that their circumstances
have really changed.

Speaker 5 (40:30):
Uh.

Speaker 7 (40:31):
I will say I think in China, I think one
of the problems a lot of manufacturers are facing is, well,
it's just massively competitive. There's what two hundred OEM's there
right now, and a whole bunch of name plates and
a whole bunch of really just electric golf carts. Really,
I don't even know if you could call them, we
wouldn't call them. I don't think vehicles here in the
market here, but they are selling, you know, millions of
these things, and it's kind of eating away at the

(40:52):
whole low end. So any sort of you know, real
manufacturers are all competing with each other for that type
that customer that looking for a you know, a real
electric vehicle, and that sort of this golf court cart version.

Speaker 1 (41:05):
I think it's a really even a bigger challenge.

Speaker 5 (41:07):
I think a longer term strategic opportunity challenge. Interesting thing.
The Chinese government is notorious or renowned for doing these
five year plans. Evs have been a fundamental part of
that for thirty years. If they've recently, my understanding as
I read it, mk ED is they're de emphasizing it.
It's no longer a strategic goal because they look around

(41:30):
and say, well, geez, everyone can do it. We'll let
the strong survive and we'll figure out how to will
winnow away. The others are those companies you mentioned the
strong or they how to.

Speaker 6 (41:41):
Well in the foreign companies, the non you know, the
foreign companies or certainly you know the Western companies and
by what Western sort of includes the Japanese companies and
some Korean companies as well, but they are not the
strong currently, they are not the strong. And and you know,
Charlie Wright, I mean it's so it's a at the
you know, the sort of the load to middle of

(42:02):
the Chinese market is going toward, is going toward these
very inexpensive domestic cars and especially B I D. But
you know, many others as well, the high end of
the market. And again I'm borrowing, uh, borrowing ideas of
my my podcast partner, uh at to Lee, who's an
expert on this stuff. But you have brands like you know,

(42:24):
relatively new brands like Neo or sha Shaomi, which is
a phone company five years ago it still is with us.
They got into making cars, uh, the upper end of
B Y D Uh. Several other brands they have Now
they're now offering vehicles that are point for point, what
you know, a Porsche or a BMW or Mercedes are offering.

(42:46):
Chinese consumers might say better, they're electric, which is you know,
obviously still kind of which with nuts is an advantage
in this market. And and so I think you're seeing
a lot of younger Chinese consumers saying, well, these cars,
these brands have the tech that I expect, they have
the oh and a price point that's I don't know what,
it's less depending, it's a lot less. So I think

(43:08):
that the Western brands, even the luxury brands, are are
not They're not measuring up in terms of the important
product attributes, and they're too expensive. And that seems I mean,
I mean, and that seems to be the problem. And
and you know, again I haven't been to China in
a while, so I can't tell you. You know, is

(43:30):
there sort of a national pride aspect to this? Is like,
you know, why are we buying these German or American
brands when we have you know, homegrown Chinese brands that
we should be supporting. I suppose there's something it is,
you know, it is here right in the reverse.

Speaker 1 (43:43):
But I don't know.

Speaker 6 (43:43):
It does seems like it does seem like the customers
are saying, you know, especially younger customers are saying, there's
stuff domestic stuff's better by that.

Speaker 1 (43:53):
Yeah.

Speaker 7 (43:54):
Well, and I think one of the things we have
to think about in the US market is we can't
make low cost vehicles profits here in the United States.
You know, subcompact SUVs, compact cars are generally made off shore,
and we and we bring them in with all these tariffs,
it just means that the low end of the market's
just going to get that much more expensive. In fact,
our own calculations are that it's the lowest product segments

(44:16):
that are going to look at the highest percentage cost
increases as a result of these tariffs because they're all
made off shore the vast majority. But the Chinese could
be they could kind of fill that void if we
allowed them into the US market. They especially sort of
like all the other you know, the Japanese did it
in the seventies, the Koreans in the nineties. They could
kind of come in at that low end and offer

(44:37):
a low cost vehicle.

Speaker 5 (44:38):
To stick again slate the new Ford truck maybe those
or not, but that attempt to try to fill that market.
I go back to with those products. They're fabulous ideas,
they're really interest the skunk Works at Ford is School,
Slate's a fantastic story, but American consumers historic traditionally, recently

(45:01):
I've bought more technology, more technology, more technology like that,
are showing an interest in that.

Speaker 1 (45:06):
Yeah.

Speaker 5 (45:07):
I don't know if people get to a point where
they just can't afford the new technology and say, I'll
plug my phone in with Slate and I'll be happy.
But there's this really interesting opportunity coming maybe.

Speaker 6 (45:19):
Yeah, I mean one of the things that's interesting. And
again I'm just kind of getting my head around this,
but I do think that the problem or challenge that
again coming back to the German brands, But it's not
just the German brands. I mean, the more people study
what Chinese, what the best of the Chinese automakers is doing,
not not all of them, but the best of them,
what they're doing, they're starting to realize that the best

(45:42):
of the Chinese automakers have done, have kind of have
done what Tesla did, but are now kind of ahead
of Tesla, which is they've designed a car from the
ground up to basically be a smartphone on wheels, taken
a lot of the cost out. I mean, you know
the softore defined vehicle where everybody talks about software defined

(46:02):
vehicle and they talk about it in terms of well
you can update it over the air and that kind
of thing. Well, what it really seems to be about, uh,
is that if you do it right, you can build
you know, you can produce the vehicle, engineer the vehicle,
produce the vehicle for thousands of dollars a vehicle less
than a conventional vehicle.

Speaker 1 (46:18):
Right.

Speaker 6 (46:18):
It's it's it's a Toyota production system applied to the
architecture of the vehicle. And and now so they're playing
a different game cost wise, right, that seems to be
the problem.

Speaker 1 (46:30):
And and again, I.

Speaker 6 (46:31):
Mean you hear these you know, these you know, especially
the German company CEOs because they've been in a way,
the German company has been on the front line of
this collision, right, and they're they're they're tearing upon these
Chinese cars and saying well and realizing, oh, oh they're
they're doing it, they're doing it different.

Speaker 4 (46:49):
But but but isn't it the case?

Speaker 3 (46:50):
I mean that they have the problem because they like
went full on and said, geez, look at this, this
is this is great for us. We're going to have
a huge part of this market because people in China
are beginning to get money. They're going to want to
buy our deluxe products. You know, we've we've got pedigree.
You know, you're going to buy a Mercedes. Oh that's
you know, this is really special and you know, and

(47:12):
now you have the situation where people, you know, came
back to Earth and realized, well, you know, maybe we
can buy something from Leap Motor that isn't going to
be as as pedigreed as a Mercedes or a BMW
or an Audi, but it's something that's got the stuff.

Speaker 4 (47:32):
And there is something to be said for nationalism.

Speaker 6 (47:36):
Yeah, no, I mean it does right, and it does
look that way. And again, you know, I mean, if
you're again, I'm gonna borrow from my friend too.

Speaker 1 (47:45):
Lee.

Speaker 6 (47:46):
The Chinese car buyer buy and large, is a much
younger car buyer than the average in the West and
certainly in the United States. So right, pedigree may not man,
it matters as much to you know, some thirty year
old you know, successful Chinese, you know, tech worker, you

(48:07):
know somebody who's who's who's doing well in the in
the Chinese economy, that pedigree may not matter, I mean
as compared to you know, other attributes and other things.

Speaker 7 (48:18):
Well, and I wonder whether it's sort of in our
own market here, you know, what defines luxury in the
US market anymore? What used to be you had all
the latest and greatest features. Well now you can get
the latest and greatest features and all kinds.

Speaker 1 (48:30):
Of vehicles right different place points.

Speaker 7 (48:32):
And I just wonder if in China, you know, the
foreign brands, they were the ones they had all the
cutting edge technology, but now you can get that technology.

Speaker 6 (48:39):
I think that's I think that's right. I mean, that's
that's what seems to be happening. I mean, you know,
it's been a while since leather seats were you know,
a defining distinctive feature. But they certainly aren't. I mean,
that isn't what people care about. And the other thing
that that that and this again was spoken of a lot,
and I've heard a lot of people talk about this
so the last few months. You know, in Western markets,

(48:59):
you know, things like horse power, you know, we're like
defining features. You know, if you had four hundred horsepower,
you know you you were it, you were like and
in the Chinese market, you know, and I certainly know
this from being in If any of you've been in
any big Chinese cities, you're not going very fast and
horse power is irrelevant. It's can you, you know, can
you sit in your car and watch a movie while

(49:20):
you're stuck in traffic and or receive you know, kind
of streaming content at kind of exactly what you want.
And again that seems to be what the best of
the Chinese brands are doing very well.

Speaker 3 (49:30):
So so bringing it back to this market, I was
looking at the sales numbers for Lincoln, okay, which storied
American manufacturing, but I think even and so Ford had
something to do.

Speaker 1 (49:43):
With the existence of Lincoln a man of the hour.

Speaker 3 (49:45):
Well it's just coming home, so okay, So Lincoln sales
in October Coarsair down eighteen point three percent, Nautilus down
twenty eight point five percent, Aviator down fourteen point eight percent,
and the only one that was in positive territory was
a Navigator, which is up thirty seven point six percent. Okay,

(50:05):
Now we go back to you know, Coursair for the
year down two percent, not less down three percent Aviator
down seven percent, Navigator up forty seven percent. Okay, one
car out of four.

Speaker 4 (50:20):
Is evidently keeping the lights on there?

Speaker 3 (50:23):
How does a company like that exist?

Speaker 5 (50:25):
That car does create a lot of profit, though, So
if you're going to sell one car more than that's
a good one to sell. Yeah. I go back to
the question we often hear is what is the reason
for Lincoln from the customer's point of view? We know
what it is from Ford's point of view, but what
did the customers look at and think this is why
Lincoln is here? And I think for most of my life,

(50:48):
which is getting pretty long, it's struggled with Lincoln. And
I think they still struggle with that.

Speaker 1 (50:52):
Yeah, no, I agree.

Speaker 6 (50:54):
I mean again, this is that those are US sales numbers, right, correct, Yeah,
but I mean to some extent, I mean the US
mar it's obviously very different, but I mean to a
little bit of an extent, you're maybe seeing an analog
to the issues that I was talking about with China.
I mean, you know, you're right, I mean you know,
I mean the Navigator. I mean, right, the Navigator. First
of all, they make a lot of money. If they
only sold that, they would probably make more money in

(51:14):
the division and then trying to sell the rest of
them and that So that's number one. Number two. I mean,
it's it's like the negative image, the bizarro world image
of what's going on in the Chinese market. In the
US market, you're having kind.

Speaker 1 (51:28):
Of a.

Speaker 6 (51:30):
Resurgence of these gigantic ice vehicles combustion vehicles like the Navigator.
You know, the thing is gigantic. It's basically a truck
and it is a truck, you know, body on frame
V eight in the front truck and that's that's what's
floating the boat and that's where that makes all the
money at Ford Motor Company.

Speaker 3 (51:49):
So so I mean, but isn't it the case then
that escalades make all the money for Cadillac and Tahoes
and uk Hans and Silverados and yeah and si Eras
and yes, absolutely, And.

Speaker 1 (52:06):
That's that is that is the problem.

Speaker 6 (52:08):
I mean, well, that's that's the challenge, right because again,
if you look at the Chinese market, it's kind of
like you know, the the as a proxy for what's
not a proxy for US. It's bigger market than the
European market and the US market put together. So if
you look at the Chinese markets as as as the future,
like what is the market, the auto market of the
future going to look like. And the Chinese market, you know,

(52:30):
biggest market in the world by far there, what is
it fifty plus percent electric? I think as of the
last couple of months and reporting periods with all the
stuff that I was saying earlier about sort of the
primacy of kind of digital tech and a different way
of putting together a vehicle that's significantly lower cost. Fine,
And then you know, the United States market, second biggest

(52:50):
market is basically making money the same way the US
market has made money since nineteen fifty six. And the
eight body on frame and.

Speaker 5 (53:02):
And I would go to it was kind of I
think naive for people to think that would change quickly.
We like big trucks, We like guessing in.

Speaker 1 (53:13):
Like big trucks.

Speaker 6 (53:13):
We cannot lie, forget.

Speaker 5 (53:17):
Forget the environmental that's okay. The idea that people were
waving their hands and saying we're going to be fifty
percent electric by then this decade or early next decade,
I think was either naive. It was naive because it's yeah,
and I'm not going to go because American consumers don't

(53:37):
view them as a better vehicle right now. Over time
they may and they may be much better vehicles. Whether
they are now doesn't matter. They are not viewed as such.
And for the Americans, American selling in the US to say, well,
what we're going to be one hundred percent EV by
twenty thirty was just.

Speaker 6 (53:58):
Not logical and yeah, and it didn't fly politically right
because the current administration in part entirely but in part
owes its success at the polls to you know, arguing
exactly what when you said the look, you know, this
is this, these EB mandates are the wrong idea. That's
not the way to do it. You know, it's you know,

(54:20):
for the you know.

Speaker 1 (54:21):
Zero percent of our listeners don't know this, but I'll
say it anyway.

Speaker 6 (54:25):
The Chinese government, on the other hand, years has operated
on a very different principle, which is, you darn well
will buy what we tell you to buy, and we're
going to set up the economy or these massive license
fees in Shanghai and Beijing to try to buy a
combustion vehicle. We're doing all sorts of things to push
the market toward fifty percent EV and uh and you know,

(54:48):
end of meeting, that's what we're doing in this country.
That's how it works.

Speaker 3 (54:53):
Yeah, Well, to be fair, I mean, European countries are
still incentivizing the purchase of ebs too, So this is
just simply a Chinese phenomenon.

Speaker 6 (55:02):
No, but I think politically, and again, you know, you
think I'm in trouble talking about China, Wait till we
talk about European politics.

Speaker 1 (55:09):
But I do.

Speaker 6 (55:10):
I do think, and I think it's been covered. I mean,
back to my friends the German automakers. You hear, you know,
they're getting traction in Europe with arguments that the twenty
I think it's twenty thirty five is not viable and yeah,
and the fact that they don't have China subsidize their

(55:30):
operations back in Europe or don't have the same level
of sales and jobs in Europe are threatened as well
as jobs in the United States.

Speaker 1 (55:41):
I think that that's another but that that helps with that.

Speaker 7 (55:43):
But it seems to me in the danger for the
US industry though, is is we make the big pickup trucks,
we make the big SUVs. We're great at it, no
one can be u at making those products, but they
don't sell in the rest of the world, and these
Chinese electrics that are really inexpensive are going to be
selling everywhere, and it just seems like we're giving the
world to China to.

Speaker 3 (56:02):
Way, but I mean it isn't in some ways. I mean,
nobody ever talks about this. But I mean, isn't the
possibility that the future is really Chinese e revs rather
than than full electric vehicles?

Speaker 4 (56:15):
And what's an EREV besides a plug in hybrid?

Speaker 1 (56:19):
Right? Just a version of that?

Speaker 3 (56:21):
Yeah, And so you know, well, but Americans have shown
I think that, Yeah, if you're gonna give me seven
hundred and fifty bucks to buy something, I think I
might buy it.

Speaker 6 (56:31):
Well, but even there, But even there though, and I
mean you're right, I mean, the Chinese market is not
just electric, and it does. There's other sort of technologies,
an era of technology. But if you're a Chinese manufacturer
and you're able to scale a technology in the domestic,
the Chinese domestic market, when you take that elsewhere, it

(56:55):
seems like you'd have a pretty big running head start
in terms of cost and refinement of the tech, whatever
technology it is that you've scaled at home, Whereas in
this country, I mean, I know this, I think scout
Right is talking about has an e REV, and I
think there's others, but they're they're not scaling, and they've
got more orders for the e REV than they do
for the pure ev.

Speaker 3 (57:16):
And I just wonder about companies like Rivian.

Speaker 4 (57:18):
How's Ribbon going to.

Speaker 3 (57:19):
Exist in a world where the American consumer is basically
not all that interested in evs.

Speaker 4 (57:27):
And I know that you are saying, all you're wrong.

Speaker 1 (57:30):
But yes, R J. Sconge, if you were here, would
say you were wrong.

Speaker 4 (57:33):
But yes, I'll do it for him.

Speaker 3 (57:34):
But the thing is is that they've they've got no alternative.
I mean, that's all Rivian hands is electric vehicles.

Speaker 6 (57:43):
Well, okay, so I've spent unusual amount of time with
the Ribbean executives in the past month because they've they've
been kind of they've been getting out more both our
J Scringe and also their CFO, Claire McDonough. And I
think that the Ribbean take and I think their hope
and their bet.

Speaker 1 (58:02):
Is that.

Speaker 6 (58:04):
There is a market for evs. You know, it's not
one hundred percent, as said, but you know it's it's
going to be large enough they believe to sustain you know,
over three hundred thousands of sales and sort of the
medium term and be larger than that in the longer

(58:25):
term because they're putting two factories where they're expanding the
factory they have to roughly three hundred thousand if I
did my math right, and then they've got a factory
in Georgia that they're still going ahead with, even though
we all ask them, why are you doing that? You know,
they're still so they so I guess their view is
there will be a market for pure electric vehicles aim
as their products are at a at a you know,

(58:48):
an affluent.

Speaker 4 (58:49):
Plus seventy thousand dollars.

Speaker 6 (58:51):
Yeah, and well the cheaper one is going to be
forty some thousands. That's still some thousands. It's still a
car that you have to have some money to buy.
But but I mean, and I'm this is this is
not anything they said what I'm about to say, But
I think they're looking at themselves as kind of like, look,
BMW is a great business. They don't sell three million

(59:12):
vehicles a year in the United States, but they have
a great business here.

Speaker 1 (59:16):
And we can do this.

Speaker 6 (59:17):
You know, again I am paraphrasing, but to just is
we're going to We're going to be a great thing
to some people, not everything to all people.

Speaker 7 (59:27):
I was just going to say, And I think Americans
are still concerned about fuel economy. I mean, it's not
a hot topic right now. But if you know, the
worst point in terms of consumer satisfaction that we've had
in the last fifty years was in June of twenty
twenty two, when we hit the lowest point ever and
we had nine percent inflation across the country, had five
dollars gasoline average price around the country, nine dollars out

(59:49):
in California. I think that sent shockwaves and people and
we look at why are hybrid selling fifty percent of
you know, fifty percent growth this year. People are still
interested in fuel economy. They're not willing to go while
in on EV's because they don't think the infrastructure is
ready for it. They don't have a home charger, all
of that. But they're still concerned about being exposed to
gas prices because they've gone on a whack and they

(01:00:10):
know they'll go out of whack again at some point
in the future.

Speaker 1 (01:00:13):
Oh no, I have a truck.

Speaker 5 (01:00:15):
Well, I want again highbread. But you could not find
a highbread truck in this market in that segment. Go
back to your point about this, I think it's I
want to don't want to come across the same EV's
are bad to r J's. There's some really fabulous attributes,
amazingly great attributes, and there are niches for it. The

(01:00:38):
question is how big and how long before they've grow
into something more. And I think that naivete of the
bubble of the last five years really cost a lot
of investment, a lot of money, put people in a
really bad place, and it's curious that a lot of
the executives aren't taking.

Speaker 4 (01:00:57):
Heat for it.

Speaker 6 (01:00:58):
Yeah, I mean I think, I think, you know, Yes,
I think you're right. I think and I think r J.
You know, RJ is in a somewhat different position from
that last bit, the part about making a bad bet.
You know, he's making a bet he's gotten. You know,
he's he's got investors who I think are a little
nervous for him. But you know, we'll see how that
plays out. I mean, he's he's, he's he's definitely got
a vision for kind of how they can succeed. But

(01:01:21):
you're right, I mean, General Motors Ford uh stillantis you
know I've seen interviews with former Stillanti's.

Speaker 1 (01:01:28):
CEO Carlos Tavaris.

Speaker 8 (01:01:29):
Uh.

Speaker 6 (01:01:30):
I certainly miss him as a reporter on the beat
because he was still quotable, and he's still quotable. I mean,
but they all right, they all over were you know,
overcalled evs or were pushed into overcalling it by the
former administration in this country. I think, and and Wall
Street and Wall Street and now right, I mean it's
all like, well, you know, it's like spinal tap helpfully

(01:01:53):
like our new direction. It's like, wait a minute, he
just he just wrote off a billion points at one
point six billion dollars.

Speaker 1 (01:02:01):
Isn't that hurt? Yeah? It hurts?

Speaker 3 (01:02:03):
No, all right, all right, So so final topic. Then
we're gonna wrap this up.

Speaker 4 (01:02:09):
As as we sit here right now.

Speaker 3 (01:02:11):
The board meeting is to start with Tesla and they're
going to be considering the one trillion dollar package for
Elon one trillion dollar.

Speaker 4 (01:02:23):
So I asked you three, is he going to get it?

Speaker 6 (01:02:27):
I'm gonta do a lot of talking, go go elsewhere.

Speaker 1 (01:02:30):
I think he's going to get it.

Speaker 5 (01:02:32):
I think if you've got to pay a guy a
trillion dollars, you get a serious problem. But I think
he's going to get it.

Speaker 6 (01:02:41):
Yeah, I'm with Brett on this one. I mean, and
I you know, for a period of my career, I
tried to become smart, or smart's the wrong word.

Speaker 1 (01:02:50):
I tried to educate.

Speaker 6 (01:02:51):
Myself about corporate governance because it was relevant, you know,
to a bunch of the companies on the autobeat, and
it's relevant now. It's very relevant now with Tesla. Yeah,
I mean, you know, history tells us that he'll probably
get it. It will be interesting to see what the
share of no votes is because normally, you know, most
corporate votes right shareholder votes. It's minimal opposition too. And

(01:03:14):
I'm not sure what the right threshold is if it's
ten percent, fifteen or twenty percent, but if it's a
double digit percent, this is me and I could be
wrong about this, but I think if you see a
double digit percentage of no.

Speaker 1 (01:03:25):
Votes, if I were on their board, I would.

Speaker 6 (01:03:28):
Take that as a as a wake up call around
some corporate governance stuff that Tesla is doing or failing
to do that really ought to get fixed. Number One,
you have any idea who could be the CEO of
Tesla if Elon quits to go run his AI company.

Speaker 5 (01:03:47):
If you're paying someone a trillion dollars, you have no.

Speaker 6 (01:03:49):
One else, well right, exactly, they have no one else.
So they're basically have said to their shareholders. Without this guy,
our stock you know, becomes you know, goes to buckus.
We get value a car company, which is various. People
will pointed out as you know, a very small percentage
of one point four trillion dollars, as if they're number two.

(01:04:10):
If I were on their board, I would I would
figure out a way.

Speaker 1 (01:04:14):
And they I don't think they've done it. Maybe they have.

Speaker 6 (01:04:17):
I would figure out a way to demonstrate to the
shareholders that you want is actually spending a lot, you know,
a significant amount of his time on Tesla. I mean
I read these articles where he's like sleeping under the
desk now at his AI company because he's you know,
so it's stuff like that. You know, SpaceX is a
real business. Somebody's what's he doing there? So I think

(01:04:38):
that's those are the things that I'd be interested to
see what they I.

Speaker 7 (01:04:41):
Think he has to deliver on economous too, I mean,
I think full self driving is yeah.

Speaker 6 (01:04:46):
I mean, and he was just and he was and
he was apparently just on Joe Rogan the other day talking,
you know, you know, signifying in some way that they're
gonna have a flying car version.

Speaker 4 (01:04:57):
Of his roaster, which we haven't had the roadster yet.

Speaker 3 (01:05:02):
I mean, isn't the board like, isn't it their fiduciary
responsibility to have a succession plan?

Speaker 1 (01:05:09):
Yes? Absolutely?

Speaker 4 (01:05:10):
And right, so aren't they.

Speaker 5 (01:05:15):
Go back to the dude is incredibly unique. There are
very few people in the history of industry that are creative, intelligent,
all of those things. I don't know if there's a.

Speaker 1 (01:05:30):
Right you know that's worth and he's delivered. I mean,
he's got well success.

Speaker 6 (01:05:35):
Yeah, I mean, I but but many companies have CEOs
who are extraordinarily talented. I mean a lot of companies
have CEOs of ordinary human beings. But there are I mean,
but but you know Apple, right, I mean, had it
turned out, I didn't know what it was at the time,
but it turned out they did have a succession plan

(01:05:56):
for Steve Jobs, right, who's every bit as extraordinary as
Elon Musk. And they'd had a succession plan. And you
know Tim Cook has has done it's the CEOO he
moved yeah, right, I mean, there was he was you know,
he and and by the way, he's added more shareholder
value in his term as CEO than Jobs you know
ever ever did is brilliant and as amazing as Steve

(01:06:16):
Jobs was. And yeah, I mean, I mean it seems
to me that some that you know, and again I
don't not party to any of this, right, but if
if you see shareholders like the Norwegian Wealth Sovereign Wealth Fund,
which was a big, you know, kind of public, very
engaged shareholder, saying we don't want this, they're probably not

(01:06:38):
going to carry the day. I wonder though if they're
if they're if the head of that organization, who again
has been quite outspoken and has got no say whatever
the heck he wants, won't be saying to the board, look, fine,
you got your thing, but we need to see succession plan.
We need to see demonstration of time on task. I

(01:07:01):
don't know, see we need well, yeah, we need to
see the stuff that you're promising, that it's going to
drive the growth the army.

Speaker 4 (01:07:09):
Of robots that he's concerned with.

Speaker 7 (01:07:11):
That if he's not in charge, he's still selling it.
He says, a couple hundred thousand next year are going
to be in production.

Speaker 3 (01:07:16):
So we're still waiting for the Tesla semi by the way,
I think that.

Speaker 6 (01:07:22):
Yeah, and I mean right, yeah, I mean and you know,
you look at it right now. I mean if you,
if you just if you put aside all of the
stuff that he says is coming. You know what is Tesla.
It's basically a one car or one one platform two
model company.

Speaker 1 (01:07:44):
Three and Y.

Speaker 6 (01:07:44):
They don't sell hardly anything else of anything else, right,
everything else is minimal. It's models three and Y. And
you know, we could do a whole nother show about
why the three and Y are not going to be enough?

Speaker 5 (01:07:59):
Right m I'm gonna say we're running out of time,
I'm sure, But I have a theory on this twel overtime.

Speaker 4 (01:08:05):
Yeah, I have a theory on.

Speaker 5 (01:08:06):
The truck that would take a whole nother discussion.

Speaker 3 (01:08:08):
All right, all right, so thank you all for bearing
with us. We could go a longer, but think Sean
wants to go home. So Joe White again, High Speed
Rodeo Substack Get What.

Speaker 1 (01:08:24):
The Wheel podcast with Tulee.

Speaker 3 (01:08:26):
Okay, Charlie chessbro Cox Automotive really really.

Speaker 1 (01:08:31):
Appreciate your your insights.

Speaker 3 (01:08:32):
As I said at the top of the show, we
just make stuff up, you got the real stuff and
Brett Smith thanks, thanks for being back again and we'll
see you all next week.

Speaker 2 (01:08:46):
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