AAH #658 - Forget Styling, Car Buyers Want Glitz and Gimmicks

I'll do online after hours. It brought to you by Bridge Doone Tires Solutions

for your Journey and by Borg Warner. Hey there, Gary, John,

how are you doing okay? Doing okay? You're joining the summer Hope this

goes on as long as it possibly can. I agree with you, and

um for those who reviewing, I got my power back, which is why I'm here, and John is there, Um so so John, before we get into the show. It can be a good show, as we always

do. But sixteen years ago today, Daimler Chrysler sold eighty percent of Chrysler

to Cerberus. And I know that you know a whole lot about that,

that whole thing that was going on back there back then, and just just give us some of the insights that you know you remember from that whole period of time. Oh my gosh, what a disaster. I mean, the

Daimler Chrysler merger of equals, remember, turned out to be nothing that they promised to be. In fact, everything they said it would be. It

was exactly the opposite. Essentially, Daimler Mercedes Benz stole Chrysler. That's essentially

what happened. And Chrysler at the time had a bunch of money in the

bank. I can't remember billions in the bank. And the first thing that

that Daimler Chrystler did is they they shook out the piggy bank at Chrysler and they dumped all the money into Daimler Chrysler, and the Chrysler executives, the very top ones that made a bunch of money. I mean, you know,

I want to say, what's made like twenty four million dollars off the deal? Publicly, Bob Eaton, the then CEO, made sixty four million

bucks. I was letting told by other people on it was way more than

that, was over one hundred million dollars. And then you know, they

were they were supposed to put it together because you know, Mercedes great technology, great quality, and Chrysler phenomenal design, and it was very nimble, very quick on its feet, you know, its product development process was so good. But instead of putting the best of both companies together, Uh,

the Germans just decided they were going to run things the way they wanted to run them. And then they started starving Chrysler. Remember they sent Deeter Zetscha

and Wolfgang Barnard over from Germany to come run Chrysler and you know, let's face it, they ran it into the ground. They ran it into the

ground. Deeter went on to become CEO of Daimler and when he realized,

you know, hey, I got a mess on my hands. The easiest

way for me to all of this mess is just get rid of the company.

And that's exactly what happened. And then Cerberus, you know, bunch

of macho you know investment types, you know from Wall Street and Carlisle Group, thought they were going to come in and show these Midwestern hicks how to run a car company, and they destroyed what was left. And you know,

when the credit markets froze up in two thousand and eight, Chrysler and General Motors went bankrupt. And the only thing that saved him is the automotive

or the Obama administration went around looking for a savior. Is there any white

knight in shining armor? And Sergio Marshawn at Fiance said hey, yeah,

I'll take the company, just give it to me. And he got it

for essentially free. And I said at the time, you watch if he

turns this thing around, Chrysler is going to save Fiat. And that's exactly

what happened fend and then, uh, you know, there's there's sort of tacit recognition in the industry that unless you make and sell five to six million vehicles a year, you're not going to have the scale to really be competitive.

And you know, everybody's sort of new at that time, and there's this electric car thing coming and so, uh, you know, that's when PSA Pougeot started talking with a Yellie family, which is the family that owns Fiat and some would say most of Italy, and they decided, yeah, let's put these two companies together. And since then, you know, they

hired Carlos Tavares to to run the whole thing. He is doing a bang

up job with that company. I mean, Stellantis is now bigger than General

Motors are Ford, it's making more money than the making more money than just about anybody. And so that's that's my recollection of how the thing run.

And then Gary it took to back it all off. I blame Leaiya Coca

for all of it. And before we get into that, let's bring in

our guests, because I think at this and we've got thank Camp from Auto Pacific, and then Alexa Saint John from Insider, and great to have you guys here. Thanks for having me, so so, ed so ed alexas

a veteran of after hours, it's been a while, but she's a vet.

So why don't you start off by by giving us a little um, you know, elevator pitch on what Auto Pacific is and what you guys do for those India. Yeah familiar with you? Yeah sure sure, um so

well, first of all, thank you so much for having me on the show, um, you know, to be honest, it's been kind of a bucket list dot and for me as an automotive analyst to be invited here and here, I am so thank you so much. Um so Yeah.

Auto Pacific is a automotive market research and consulting firm. We service exclusively the

auto industry, and we've been in business since nineteen eighty six, when George Peterson, who I believe both you both you know, um founded the company, um you know, all those years ago, ran it beautifully for thirty six years, and then upon retirement or as he was getting kind of close to designed to retire, he and I talked and I had actually been at Auto Pacific since ninety eight um so I am a long long time veteran of

the company, and so I bought the company from George at the at the very beginning of January of twenty two, and uh yeah, we've been having a ton of funders since. So yeah. Basically, Auto pacificum Is is

a company that we kind of think of as being in sort of two separate buckets. The first is market research. We do a lot of market research

for the automakers for suppliers. We do both custom research like you know,

focus groups and clinics, but we also have a lot of syndicated research products as well, basically off the shelf products, off the shelf research products that automakers and suppliers can purchase. The other the other half of Auto Pacific is

our industry analysis activities, and that consists of our competitive intelligence which is which we call our Auto Pacific Competitive Battleground. Basically, that is a look at

the entire US market all the way down to the model level, and it contains intel about basically every model line that you could care to imagine. If

there's an intel about it, we report on it. And we also,

very closely related to that, have our sales forecast service which is a model level and powertring level sales forecast. We forecast out five years. We have

a very very strong record of accuracy and we're certainly one of the forecasting eventchmarks out there. So yeah, that's the elevator pitch. That's what we do.

So so Alexa, he's speaking about consumers. Uh, that's that's one

of your beats, looking at autoword of consumers and and you did a story UM today about people will continue to buy Tesla's um So, so okay, I'm looking at this investigation that NITZ is open on the steering situation. I

mean, is talk to us about Tesla? Is it? Is it going

to continue to be bulletproof? Bulletproof is a strong word, but I will

say, you know, we saw a lot of results from a Bloomberg study just a few days ago, and it was looking at, you know, where where Tesla buyers stand right now. I'm sure you've seen it. A

lot of folks in the industry, we're talking about it. And it revisited

a study that they did of these owners of Tesla vehicles a few years back.

UM. And one of the things I was really curious about was sentiment

of Elon Musk and the impact of that on uh, you know, Tesla market share and what the future of this brand will will look like. And

one of the things I think is just interesting in general is right our sometimes our ideologies don't always align maybe with our buying behaviors. You know, we

say, oh, I'd never buy from that brand, but then the price is right. And I just think that that's what Tesla has working for it,

especially right now when we see the relatively high on average prices of evs in the market. Of course, and I mentioned this in the article,

there are affordable evs out there. The automakers say they're working on more of

those thirty thousand dollars evs. But the whole that Tesla has in terms of

pricing right now, as well as you look at the other advantages longstanding, the charging network, that's a whole other conversation, all of these things together.

You know, in some ways the company has been on fasable. You

know, Elon Musk has has said a lot of things that folks don't necessarily agree with, rubbing shoulders with various gears, Twitter should call it X.

I guess all of these things combined, but for the most part. You

know, a lot of people have been pretty confident in their in their cars, and I think the next wave of EV buyers maybe they'll be a little bit more opinionated one way or another in terms of sentiment. But you can't

help but consider them at least, John, what do you think, Um, Look, you know the people who have bought Tesla so far, they're enamored by the company, and you know, the four of us, we're totally into what's going on in the industry. Right We follow all the news,

we're reporting on the news, We're we're breaking the news ourselves in many cases, and the general public doesn't see that. I mean, okay,

you know Tesla faces a potential recall on the steering issue. Well, you

know how many hundreds of thousands of cars has forward recalled? You know how

many have all the other automakers. I mean, we don't even report on

recalls anymore because it's not news. It's literally every single week recalls are happening.

And so I doubt very much that most of the people in the market shopping for a new car right now are aware of any of the issues that Tesla is facing. Elon must that's a different story. You know, everybody's

aware of what Elon has said, and it's your point, you're and I think you're spot on, Alexa is a lot of people don't like Elon, but they love Tesla so and then there's people who love Elon and love a Tesla. So I think Tesla is going to continue to grow and they're going

to add the Cybertruck. At some point, the roadster is going to come

out. Elon shocked about a low cost car, He's talked about something else

beyond that. I mean, look at the success that it's achieved so far

with only four models, you know, as they start to round out the lineup. To me, it's only blue skies for years to come for Tesla.

So so, you know, Alexa mentioned the thirty thousand dollars car that everyone keeps talking about, and it seems to be like this is finding unicorns.

So this week pricing for the first Blazer EV came out and it's starts at sixty two hundred and fifteen dollars. And last year when Chevy was talking

about bringing out a Blazer EV, it was going to be more like forty five. Okay, So yes, I'm sure at some point in time,

there'll be a forty five thousand dollars vehicle that you can buy. But but

ed our companies really going after the development of less expensive evs or have they found that people are willing to pay more and that works to their advantage because car companies are not making a whole lot of money off of evs on lesser tesla. Now, that's a great question. I think that, um,

you know right now, it's in fact, it's it's it's been pretty common practice across you know, virtually, you know, every automaker I can think of of, you know, doing doing evs to uh introduce the highly contented, more expensive versions first, um and then you know, then they'll roll out the lower price versions later. And you know, this has been the

case, I think for a couple of reasons. First, first of all,

you know, we're you know, the last three years there have obviously there have obviously been a lot of supply chain issues, which meant that automakers really wanted to focus on if they're going to have to build less equals because because of supply issues, then they were going to focus on better equipped versions that have more margin in them, um, to help make ups for the produced volume. Um. But all so, I think, you know,

that's a that's a fairly common practice nowadays. But I do think that yes,

automakers do understand and realize that in order to get ebs really out into the mainstream and get you know, get past early adopters who up to this point have been the primary customers at ebs, you've got to get the pricing down, you have to get consumers, you have to make them affordable to consumers. And in fact, one of our one of our syndicated syndicated research

products is called the Future Attribute Demand Study, and one of the insights that came out of that study is that consideration for when we ask people who say that they are rejecting an EV they're not going to buy an EV, well, not surprisingly, the number one reason why they're saying they're not going to get at vas price. And then the next part of the question is all

right, well, you know, at what price would ease then say, all right, I'll consider an EV. Now, well, consideration goes up

drastically when you get below thirty five thousand dollars. So, uh, it

kind of seems like that, you know, thirty five and under seems to be at least according to our data, that magic uh, that magic range where all of a sudden consideration goes way up. And right now there's not

a whole lot of evs uh in that sub thirty five thousand dollars price point.

I mean, we've got the bolt, but that's going away, sadly, and no it's not well yeah, for a while, it's it's going away. Um. Uh, you know, the departure of that car.

And it's always this kind of unfortunate at this time because you know, we're we're we are observing in our own data that um that obviously consumer consideration for evs is growing pretty rapidly. Um. But you know, affordability is of

course, it's one of those huge issues. And uh, you know we're

taking app we're taking away one of the uh, you know, most compelling affordable ev products at least for some time out of the marketplace. And what

do you think's going on at General Motors with their evs. You know,

they're eliminating the base models that we're going to be the price leaders. They're

tacking on thousands of dollars on to the prices of what they previously previously announced.

They were going to do. I mean, you know, people have

been complaining about raw material prices going up, but everything I read now says they're coming way down. We're seeing others chop the prices of their cars.

Why is GM right raising prices right now? Well, you know, even

even among even among you know, different battery suppliers and different battery types and all that sort of stuff. I mean, you know, there's there's still

a lot of variants in prices of the raw materials that go into those.

So you know, I can't say definitively, uh you know what the costs are for the specific minerals that go into ultium battery packs and so on.

But um, you know that that may have something to do with it.

But I also but I also do think that um, you know wild Wild GM has previously announced uh, you know, starting prices of you know, some of their future EV's, like you know, they you know, they have talked about silverado EV you know, being at about the forty starting at around the forty thousand dollars price point once upon a time, you know obviously talk about Blazer EV starting at around forty five. Um, this goes back

to what I was saying earlier, where uh when they roll out, when they launch these products into the marketplace, Uh, they tend to be uh better equipped, higher margin versions of those vehicles. Uh. Like Garry said,

I do think that there will eventually be a base model Blazer EV as they had previously announced. It's just not going to be there at launch.

Uh. You know, same goes to the Silverado EV. Um. You

know, effectively that's what a eighty thousand dollars you know truck, you know base you know, for the for the for the work truck model. But

eventually you know there will be h you know, smaller battery versions, you know, two wheel dride versions that will cost signal it can le less.

So but as far as but John to your point though, Um, you know, while I understand, while I think I understand what's going on there from a messaging perspective, yes, it doesn't look good. Um, you

know, I understand what's happening. But from the general consumer's point of view,

all they see is, Hey, these Tesla's are you know, really affordable? Why are you know, you know, why is a Blazer Eed

sixty thousand dollars when I can get a model? Why for forty eight.

Why would I do that? So, you know, the consumer only sees,

you know, doesn't see all the things that we in our industry receive.

They are focused on price and value and what they get for their hard earned dollars and um, you know, I think I think GM could possibly do um a better job of the messaging. I understand what's happening, but

perhaps it can message a little better. So somebody ask all of you this.

Okay, So when I saw the price for the Blazer, I went to Chevrolet dot Com and I went to the gasoline powered Blazer. Okay,

so a Blazer Premiere with a three point six leader V six nine speed automatic, the most expensive paint, and every package I could put in it.

I just added this thing up, added this thing up, added this thing up. The MSRP for the car that you know you can't add anything else

to was fifty eight thirty five bucks. Now, what is the likelihood that

a consumer is going to say, wow, I can get everything for less than the price of an EV that they say, oh no, but I think I'll get an EV. Well, Gary, that's a that's a great

point because the one thing I want to say about that is you know, It's one thing I found kind of interesting is that various different automakers have different strategies for EV naming. Um general motors is using the same is using uh

uh, the same model names across EV and ICE vehicles. So you know,

there's the there's the Ice Blazer that you just talked about, which is on you know, one platform, the KAI platform, all icy platform, and then there's the Blazer EV, which is you know, all electric and on a completely different architecture, but they're still using the same name. Now,

on one hand, you know, that does help the consumer understand where that vehicle sits in the lineup. But on the other hand, because an

EV is inherently so much more expensive than an ICE vehicle, the problem, the potential problem you get there, and I think that's what's happening here, is that there's a you know, to the consumer that just makes an EV seem that much more expensive. In my head, when I think a Blazer,

I think of a nice, relatively affordable, uh you know, nice midsized crossover SEV that you know, in my head, that's about of you know, forty forty five thousand dollars vehicle. Now you have this uh,

you know, electric Blaze using the same name. Totally different vehicle, toy,

different technology, but it's using the same name, and I think that may set up the expectation in the consumer's mind that it should cost less than what it does. So I'll like to ask ad something where John and I

are dominating this so to get in there. Oh gosh, so much to

ask ed. So I call them most weeks these about my stories. What

do you make of I guess maybe a little bit different conversation, but everything going on and charging right now, it's I'm trying to make sense of this myself, and I guess relating this back to the conversation how it influences perceptions of going electric in mid twenty twenty three, because obviously charging, in addition to affordability is a huge barrier, a huge part of the consideration. Now

a lot of automakers are making so much noise about switching and Tesla charging tech or or banning together to make this charging network. Is that helping with these

perceptions is about, you know, how an EV would fit into the average consumer's lifestyle. I mean, I think, you know, potentially, potentially

and hopefully yes, um, but there's still you know so much that we don't know about the actual implementation of how you know, all this is going to work as far as uh, you know, similar to the industry switching over to a Tesla's charging standard. UM. You know. Obviously, up

to this point, one of the hugest reasons for Tesla's success and EVS has been their supercharger network. I mean, you know, i've I've I've used

it myself. Uh. It works, it's reliable, they're everywhere. I

mean, it's everything that Electrify America or EVgo should be but aren't. So.

UM. You know, if you buy a Tesla, you know,

you're basically also buying into this really really great charging infrastructure. UM. You

know. Fast forwarding a couple of years from now, you know, as

NAX is opened up to other automakers, UM and other automakers adopt that standard, it's still an unknown UM as to how well it's actually gonna work.

The reason it works so well on Tesla, you know, for Tesla's is because it's a closed ecosystem. UM. Much like an Apple product. You

know, you know, an Apple product is just going to work. But

that's because um, it's a relatively closed ecosystem Apple, you know, Apple designs at all much as Tesla. You know, Tesla has designed the supercharger

network specifically to Interfacebook Teslas. So when you have that kind of control over

the infrastructure and the product, yeah, it's probably gonna work pretty good.

Um. Is it going to work as well when you try to, you

know, plug your Blazer EV into a supercharger? I don't know. I

mean hopefully. I mean, we all hope it does, and we hope

that it, um, you know, for you know, uh, you know, makes the makes the charting experience overall for you know, all at consumers, not just Tesla consumers. Hopefully it improves that experienced drastically. UM.

But I would say, you know that there's still a lot of unknowns as to how as to you know, how the execution is actually going to be. And that's really the big question at this point. I think does

it does it? Does it minimize the exclusivity that Tesla has though? Okay,

so if somebody's a Tesla buyer and says, okay, I have access to the supercharger network and now they see a Mocke and a Ford Lightning UM and the Blaze I mean all in front of them in line, and suddenly they're gonna I bought this Tesla because why well, yeah, I think that I think certainly that is a that is a risk for Tesla. Um.

Certainly, you know, like I said, you know, a huge reason behind the success of Tesla is the strength of the charging network. Um.

Yeah, I mean I do think. I do think that. You know,

there's gonna be some pushback from Tesla owners who have really enjoyed, at me that exclusivity. Um. You know, you look at something message boards

out there, and uh, you know, there are already Tesla owners out there, you know, waiting with pitchforks and you know, not particularly excited about the propect of having to share their super charters with everybody else. Um.

But you know, thinking thinking way back though, Um, you know, Elon Musk said, you know, has said for years that um uh, you know that he's communicated a lot about his willingness to share the Tesla charging standard with the rest of the industry. And now we have a lot

of automakers who are now you know, raising their hands and say okay, yeah I want in on that. So um, you know it's it's going

to happen um, you know, the one thing that Tesla owners may depending on how all this goes, the one thing that Tesla owners you know, may still have UM that others don't. Uh. You know, if if

Tessa super charters still end up being most reliable on Tesla products UH, and they don't interface quite as well as UH as well on competitive products, well, then the Tesla owners may still have an advantagement. But it's hard to

say. It's hard to say at this point. So you know, as

you mentioned, here's all these other automakers that are going to license nacs.

But Alexa ed uh Elon also said somebody's going to license full self driving FSD.

Any guesses, Alexa, you want to start on that, and he guesses as to who that might be. Oh gosh, that's that's a little

about that page, right, I don't know. I follow that with a

little none of us don't no, none of us know any guesses ed No.

I couldn't even begin to guess. Um, I guess uh, I

guess. The only comment I would have there would be, you know,

if another automaker does pick this, you know, pick this up UM and license uh license uh Tesla's full self driving. UH. You know, you

know, perhaps uh, you know, perhaps that automaker will have a little bit more rigor than Tesla does in terms of stuff in terms of yeah, I agree. I agree with Randy, who's comment just popped up there.

My guess is it's going to work to be forward. Oh okay, that's

a that's an interesting how you Randy? Okay, but but you know,

when Consumer Reports looked at the systems, Ford's Blue Cruise ranked number one, So I would I would make the argument that Ford's got some pretty good internal chops in terms of we'll be able to do that, but need to well, you're gear. I agree with you. Um, the one, the

one, the one cautionary note I have that I have to mention about that Consumer Reports uh test of all the various aid as systems, it was it was it was really it was really well done. But um, I remember

reading in the in the article that one of the reasons they really gave top marks to Blue Cruise was because it seemed to uh, it seemed it seemed to be pretty aggressive about getting the driver back, you know, back into control, like it would give up relatively easily and say no, driver, you're taking over. And Consumer Reports really liked that. Now, I think

for a lot of consumers who want a hands free drive, hands free highway driver assistant are actually looking for the opposite, which is, you know, I want that system to you know, just be you know, rigorous and reliable enough that it doesn't need me to interview and the and Consumer Reports liked Blue Cruise because it forced the driver to keep on intervening and they thought that was a good thing for safety. You remember, Consumer Reports is very very

safety focused and um, you know, so so the way that the way that they were rating those systems was on a little bit different on a little bit different metric than you or I might uh rate these systems on. But

but but to your point though, um, you know, you know Blue Cruise. You know, Ford's been doing great, you know, great work

on Blue Cruise. Um. You know, in fact, it's amazing to

me just how much progress they've made on Blue Crewise since it launched. Uh.

You know, I recently drove the latest version of Blue Cruise. I

think it's about version one point two. Uh. It added auto lane changes

but all but also added some really cool things like, uh, the ability it's smart enough now to know that if you're traveling next to a really large vehicle like an AT wheeler, you probably don't want to drive right in the center of the link. That's going to feel uncomfortably close to that big raak.

So it does a little bit off center to give you a little more distance. I mean, it's smart enough now to um, you know,

do those sorts of things. And I found it to be a market improvement,

um over um. The blue crews that I had driven just a year

prior so, they're making some really good progress on that. And I've got

to believe that some of the people from argo Ai goer to Ford. So

you know what, why why would why would they want to pay another licensing fee to Tesla. I just don't see it. H Well, here,

I think I think i'm a client. Agree with you there, I forgot

about that argo AI connection. That's yeah, that's significant. Yeah, yeah,

thanks. Things most so fast in this industry now we forget about these

like major things Volkswagon and Ford put together than at a company. It's just

like bath that's right. Hey, hey, look, let's take a quick

commercial break right now for our sponsors. We'll be back. There's a lot

more I'd like to get into how do you bridge the entire stop shorter on what roads? Is there hydrotrack technology? But you don't have to know how

the science works, just where the brain is. What really matters is they're

bridged out, all right, and we're back so ed. You know,

now there's all this talk that sales of evs are slowing down? Is that

the day? How do you see it? I mean, I'm sure you're

looking at these numbers pretty closely. Yeah, definitely, we're looking at those

numbers very closely. And um, you know, you know, for you

for years, you know we had auto Pacific. I've known that you know,

there would be growing paints as evs are, you know, coming into the market place. I mean, you know, consumers, consumers, consumers

aren't gonna you know, just flip a switch and as all of a sudden, you know, the entire market you know, is ready for evs.

This is going to be a grand le process. Um, you know,

right now we are in you know, we are in such a critical phase of of EV proliferation where there are you know, numerous models coming into the marketplace. Uh, there's you know, there is some meaningful work being done

in the you know, universe of charging, infrastructure development and you know, so there's there's there's all kinds of things happening. But um, you know,

to you know, to the average consumer, and as a car person, it pains me to say this, but you know, many consumers view cars in the same way that they view a washing machine or a refrigerator.

You know, they just they don't want to think about it. They just

needed to work. They don't want to have to learn something new. Um.

And um, you know, the inertia of the status quo is very strong, you know, for for for many many people. So UM,

so you know we're in this we're in this place right now where there's a lot of product coming out and um, you know we've known for years that you know it's gonna it's it's gonna be a little bit of a rocky road as EB sales grow. And so you know this is to me, this

isn't unexpected. Actually it's very very expected. Um. But I think also

you know, automakers being under pressure from uh you know, from you know, from you know, everyone from investors to you know, um, you know, EB advocate consumers and all and all and and everything. Um,

you know, there's been a lot of pressure for them to uh, you know, really step up and deliver a lot of new ev product. Well,

we may be at a place right now where where you know, the where so many consumers are still very focused on Hey, if I want, I'm going to get an eb I'm going to get a Tesla. And now

it's you know, it's incumbent upon all the other automakers that are they're trying to you know, get a piece of the EB pie, uh you know, to you know, essentially take you know, take market share away from Tesla and you know, as Alexa was you know, uh aslet As has written about extensively. Man, that's that's a hard thing to do. That's

very hard to do. Um So I think, I think And the other

thing I want to say too, is that, particularly in the realm of electric pickups, um, I kind of feel that's sort of a bubble and uh um you know, I I'm of the opinion that there may be too many, too many electric pickup products on the way of for the market to support at this particular point in time. Now, ten years from now a

different story. But um, you know, as as everyone started over the

last few years, as everyone started talking about, you know, getting serious about evs and we're going to start building a lot more evs. Now,

well, everyone decided we're gonna do electric pickups because of course, you know, Americans love pickups at the heart of the US market, and we need to be in that space. And now we're in a situation where it seems

like every automaker practically u has announced plans to have an EB pickup in the next few years. And there maybe too many of them, uh for the

market to support. Um, you know, by mid decade. Again,

ten years from now a different story. But for now I think there may

be too many. Yeah, but ed what you're saying, this could be

a disaster. I mean, you know, look how much money Forward's putting

into Blue Oval City. Look at you know, GM's tooling up two plants,

count them two to build pickups rams on the way next year. You

know, cybertruck is going to hit the market and volume, you know, sometimes mid next year. Uh. And then you know Scout's going to show

up at some point. It wants to be part of the party with a

pickup. Yeah, Key is going to get into party. H Yeah.

I mean this is this is shaping up to be a disaster what you're saying.

But okay, but don't don't always see that. Last week when when

when Farley made the announcement that basically it seems to me that now they're sort of slow walking and saying, well, you know what, we've got that F one fifty hybrid and that's a that's a pretty good truck. And oh,

by the way, everybody's buying out our Maverick hybrid and that's pretty good.

So so will continue to begin to provide these things. I mean,

I almost got this sense that they're saying, you know, we're even backing off on the EV trucks. Yeah, but which is basically that you know,

it doesn't matter if they build more hybrids, and you know, I wish them all the luck in the marketplace there, but you know, they've just tripled production of the F one fifty Lightning. They're building those brand new

greenfield massive bigger than the Rouge plant facility to build pickups and you know, and you guys know you've got to get to eighty percent capacity utilization rule of thumb in the industry before you start making money on a product. If you

don't get there, boy, you just bleed red ink. And that's why

if you if you don't think that the market's going to absorb these, this is going to be a disaster for those off makers. Well I think I

think it's definitely gonna be challenging. Now as far as you know, Ford

and GM and and everyone else you know, building all this electric truck capacity, well, they are eventually going to need it. You know, it

may not happen overnight. Um. And you know it's true that you know,

they may be they may be rushing a little too quickly right now to build that capacity possibly, but eventually they're gonna need it. Um. So

you know, it's it's not like their efforts to you know, build all this capacity is all for not it's it's it's gonna get used, just perhaps not as quickly as they would like. But I do think that hybrids,

uh, you know, do have the important role um uh in uh you know in this transition from you know, pure ice to evs. You know,

I think even though most even though hybrids unless we're talking plug in hybrids, which is the whole other thing, but for non plug and highybrids, uh, you know, I think they have an important role in um, gently showing the consumer, uh, some of the benefits of electrification without forcing you to go all away. UH. So you know, once you've owned

a hybrid too, well, then you may be have the mindset that, hey, now I'm ready to go fully electric. Um. You know,

if if you think about recall that. UM. You know, when the

when the Tesla Model three came out, a huge portion of those early buyers were ex Prius owners, you know, who had been living with hybrids.

They saw firsthand, they experienced firsthand the benefits of electrification, and you know, it was the you know, owning a Prius, owning a hybrid was sort of a nice transition into going fully electric. And I think that'll be

the case. That'll be the same case, um, you know, on

a much larger scale in the coming years with hybrids. And you know,

as we've seen, you know, you know, for me, their announcement about hybrids. You know, Toyota has for years and uh, you know,

greatly increasing their hybrid mixed hondas in the process of doing the same.

UM. And yeah, I think I think I think those are those represent

important steps towards getting consumers into a full plug in eventually. I think there's

some sort of Sorry, I think there's some sort of perception around hybrid as kind of a transition vehicle right between going ice to fully electric U. You

know, eye toy on dealership websites all the time. You can't get a

RAM for hybrid right now. You can't get a hybrid right right now.

People want those, and they're desperate to get them now, while they have this idea that they think they can get them now before all of these evs come, so they can get sort of their feet wet, get a little bit of a trial period in with something that's not quite the full commitment.

So, you know, I think that is a huge challenge. I think

a year or two ago, you know, a lot of folks in the industry were surprised that some automake we're essentially skipping that phase entirely and going all in, you know, to Ed's points earlier. It makes sense why they're

doing this. There are a lot of you know, demands, there's a

lot of momentum. There's so many folks talking about you know, sustainability and

climate and all avid stuff. Of course there's there's pressure on the OEMs.

But at the same time, looking at what the consumers want. They need

this middle ground, and I wanted to say one thing on the pickup truck conversation as well. My colleagues and I have been covering that pretty extensively.

I think there's a unique aspect there, maybe even more so with the rest of the evs, in that, you know, folks put in a reservation for one hundred dollars or a thousand dollars whatever it was for Lightning Anna Silverado and a cyber truck and a Ribvian And I don't have the lists in front of me with the names, but I guarantee you there's quite a bit of overlap. And you know, we talked with folks who said, hey,

whichever one lands first, whoever calls me first and says your truck's available, that's the one else take. And guess what that, you know, uh,

knocks off the reservations for how many other trucks. So there were sort

of these inflated numbers in a sense, I think here in the past year and a half of all of this demand for electric trucks at that time, and now right you know, not everyone is picking up their truck once it makes it way its way to the dealership and then if it's sitting there, you know, inventory is kind of kind of not getting picked up as quickly as it was last year again with all of that demand and hype and excitement.

Yeah, so um, maybe not as slowing as much as the normal progression of things and kind of a stabilization from from this this kind of madness we saw. Yeah, that's that's a that's a fantastic point because I mean,

you know, and I think and I think you know, we as an industry, uh, you know, to your point, we have to be careful about equating uh you know, number of reservations with actual demand.

You know, UM's your point. Yeah, I mean they're people, there

are people putting down the posits on multiple electric pickups, and yes, to your point, Um, you know, if this one is ready first, they'll get that one and they're not going to get the trip you know, the electric pickup that you know, the other three electric pickups that they put down the posits on. So um, yeah, I totally agree. Do

you think then the race is on whoever gets their electric pickouts out in volume are going to be is going to be the winner? Well? I mean,

oh go ahead, yeah, Well you know, I think if it offers, it depends on what it offers, right, you know, I mean some folks they have the reservation in for the cyber truck just to have it in, right, and they are not serious about taking that vehicle home.

It's same could go for any of the other trucks. Maybe they you

know, have their their heart set on the cyber truck, but hey, I'll throw one in for the ribban. So um, I think it depends

on both the timing but also the vehicle offering to some extent. Maybe we've

got to keep an eye on Lightning then, because presumably, you know, if it is truly tripled production capacity, it should be able to get them out there. And I got to keep a very close eye on those lightning

sales and day's inventory too, right right, And you know, I remember the you know, Lightning is about to get a lower cost battery pack from they licensed the CETL battery stuff, and you know that's supposedly lower cost.

Now it also means that it also means that the lightning is no longer eligible, will no longer be eliable for the full tax credit because there's some Chinese technology well well god, because I want to explore that with you. Ed.

I heard that, and I don't know if it's EPA or Treasury or who's rule done this, that they're looking at the fleet average of a company in terms of battery materials, you know, because Tesla is getting the full seventy five hundred dollars on the Model three and why And yet my understanding is there's Chinese technology in there. But I've also heard and but I've heard this,

I haven't seen an official site or citing reference of it that what the government's looking at is your your combined fleet average of US or non Chinese batteries or materials in it. So do you know more about that? Because I'm

wondering if if Ford's still going to be able to get the full seventy five hundred dollars on the LFC batteries. You know that, you know that that's

a great that's a great question. And um, you know the way these

laws are written and the sort of they're still complicated. So yeah, right,

there's got to be a lawyer. Yeah, So, I'm afraid I

don't know more about it than you do. Um. I had heard anecdotally

from from from from some people that it would no longer qualify, but I don't I mean, I don't know that that may or may not be true.

So but what I had heard would be what I had heard from from from some people. It would be eligible for thirty seven fifty, but not

the full seventy five hundred. But I don't know. We'll see. But

well, speaking of money, so we're talking about these incredibly expensive pickup trucks.

I mean, all of them across the boarder a pretty dary expensive.

And so you recently wrote a piece about the difficulty of people being able to get car loans, and you know, with interest rates going up, I mean, it's these things are becoming even more unobtainable. I mean, so

what is your reporting show on that. Yes, we saw about fourteen percent

of car loan applicants are getting rejected right now or I think that was June, so about a month or so ago. That's pretty substantial number. When

you look at the interest rates and the average I think monthly payments seven hundred, there's a substantial percent of folks who are paying well over a thousand dollars for their monthly payment. I mean, it's just it's just not accessible and

so you have folks, you know, really not knowing what to do.

They are holding out to their vehicles for longer. We know that averaging twelve

years now on the road. I'm one of them, and that's no good

for the used market. So that's going to stay a mass for some time.

And then on the new side, it just all signs do not necessarily point to buying that sixty thousand dollars plus electric truck or electric vehicle or really a lot of things. I mean, even a brand new ice vehicle.

They're averaging what forty eight nearly fifty now. Yeah, So I mean one

of the things that I wondered about is Okay, so you know, we were talking at the top about how you know, supply chain had had made it difficult to get vehicles. Now we've come out of that, there's the

availability of more and more vehicles. People are back working, and you know,

we're seeing inventories build on dealer lots, and you know, are we going to get to a situation where there's going to be a whole bunch of vehicles being built no one affording you know, very few people being able to afford to buy them, which will then cause the carmakers to say, hey, we've got to put some some cash on the hoods of these things, whether they're electric or ice. And couldn't the industry find itself in in a

a mess once again? What do you think, um, incentives are the

drug that the industry can't seem to wean themselves off of. And and uh

yeah, I do see the scenario that you're suggesting as being a very real possibility. Um. You know, obviously obviously uh, you know, supply

coming back. Um. You know, it's it's in the interest of automakers

to you know, really resume you know, the rate of production and uh and all that. So um, and a lot of automakers, uh,

you know they're they're you know, they're they're really um, you know, not obsessed, but you know they're really focused on, you know, capacitization and all that stuff. And you know what that what that can mean is

you know, to your point, uh, there may be more inventory than what the natural what the market is naturally willing to absorb. And you know

the way you fix that is through is through uh uh um incentives. So

yeah, that that is that is possible. I do see a comment on

the on the screen there about inventories or building compared for strikes. Well,

yeah, maybe you know that that that may be h that may be true as well. So you know, that's certainly something else that is looming on

the horizon for us. Uh. You know, hopefully it won't come to

that. Um, but you know that doesn't mean a very real possibility,

I will say quickly. You know, the dealers I've spoken with aren't too

happy about this, right because they're coming off to and a half almost three years of very low inventory eye prices you know, well over MSRP, no incentives all of a sudden, and you you have, on top of those interest rates and the broader macro dynamics that we've been talking about, they're paying so much more to have these cars sit on their lots for how much longer?

You know, that's a feeling coming coming down from you know, the COVID media that we had, oh absolutely and in fact, you know our we we bought a car uh last like middle of last year, so you know, you know, right in the middle of all the supply issues and all that stuff, and uh, the dealer, the dealer had all of seven cars on their lot and um, you know, basically the you know, their their owner had told them, Um, look, you can't let

any of these seven cards go over anything less than five thousand over MSRP just is a simple supply demand. Um. You know, now we'll let you

a car for MSRP if you order, if you special order it. And

that's what we ended up doing. But but but the but the point is

the point is that you know, from that dealer's perspective, uh, you know, the sales the sales guy was actually pretty candid and it was like, you know what, this situation does not suck for us. It's not

you know, this isn't all bad. Um, you know that you know

there there are there are fewer sales staff to pay, there's you know, you know, floor plan costs or you know, drastically lower. Uh you

know, this isn't you know. And and then and then look at all

the margin that we're getting on the cars that we do sell. So um,

you know a lot of dealers were actually pretty okay with with that.

What was happening. First they were read they were making all time record prices.

Oh, absolutely records, And I'll say it bluntly and outlawed by screwing their customers. I mean, that's what it was. What happened over the

last three years is the best argument for getting rid of the franchise system.

You know. I used to believe. I used to believe that they all

competed against each other and that lowered the price and that was the best thing for the consumer. I don't believe that anymore. They showed their true face

over the last three years. And I can tell you the automakers would love

to have a different system. They want your dealers. I'm not saying they

want to get rid of them. Of course, you're a great source of

service, you know, and even if you have a direct sales model, you've got to strip the car someplace. It's so much set on them.

To one point, I e a dealership. But man, I I lost

so much respect for dealers. And I know a lot of them, and

I know a lot of them who are very, very good. But what

happened over the last three years is inexcusable. Of what they did to the

customer base. Well, you know, I certainly think that they're you know,

for better for worse. I'm going to discount for the worst, you

know, the you know, the dealer lobby. You know, it's so

powerful and is in such a position to dictate, uh, dictate terms in terms in terms of you know, law and um, you know and a lot of as we all know, you know, many automakers really kind of have their hands tied to a large degree in terms of you know, how much you know, how much of they can dictate, uh, you know, uh, the retail environment that their customers experience. Named one other franchise

system any and there's all kinds you know, from McDonald to you know, you name it that can dictate the price to the customer and uh and can charge well above what the factory would like to see, you know, in the factory studies, here's the right price. This is what it should be.

And you know, look, I I don't want to cut too much slack for the automakers. They raise their prices as well. But you know,

you guys saw it, and I know firsthand people who are being quoted twenty thousand dollars over the MSR for a Corvette. I know of one incident

here in the Detroit area one hundred and fifty thousand dollars over MSRP for a Mercedes G Wagon, which caused a hundred and fifty thousand, you know, and they wouldn't budge it was just you know, someone's going to pay it, and we're just going to sit here until it happens. And you know,

we need legislators who are looking out for the good of the consumer, not looking out for the good of car companies and dealers to line their pockets.

Well, that's a there's a long road to go, let's just put it that way. So so I d okay, so so sort of on

the subject, but slightly off the subject. You guys do a lot of

research in terms of what features people want in cars. Yeah, and we

all know that that features end up adding to the price, right, I mean that's to ching ch ching, ch ching chi ching. Um. Do

you see in your research any signs that there may be people who want to get less stuff in their car rather than more stuff in their car? Not

really, I mean the you know, the simple, the simple truth these days seems to be. And this is, you know, whether we're talking

automotive or any you know, pretty much any other industry. Um, Once

a consumer experiences you know, some you know, new technology or some new gadget or whatever, there is an expectation in the consumer's mind that you know, over you know, over period of time, and I think now the expectation these days is over relatively short period of time, the price of this feature is going to drop significantly and it will be really affordable and I can happen. Um, So there is Um the last few years, we've seen

so much technology come to vehicles. Um, you know, you know,

every you know, all kinds of safety technologies, all kinds of infotainment technologies, and you know, by and large, most of them are you know, pretty you know, you know, pretty valuable and useful features. Um.

You know, I know that there's always a pretty vocal contention of enthusiasts, um, you know who are kind of you know, who are crying up for you know, take you know, take off all this aidas stuff, giving a manual transmission. That's what I want, well, and I

can certainly relate to that. I've got a manual transmission car with no aid

ass fature. That's what I drive daily. But you know, the the

mainstream consumer you know, aren't isn't necessarily an enthusiast, and a mainstream consumer, uh, you know, often sees the value in these new technologies and once they've experienced to them, uh, you know, they're generally not willing to go back and you know, go back to car without those features after having experience to them. So, um, you know, Um, in

our future actuate demand study, the feature study that I mentioned earlier. UM,

yeah, now over, we've been doing that stuff. We've been doing

the study since I think nineteen ninety four, and UM, we've never we've never observed in our data any point in time where people start backing off feature demand and saying one less, it doesn't doesn't really happen. But ed we

hear two stories of people who say, oh, I got so much technology in my car, I don't even use half of it. I don't even

know how it works. Have we gotten to the point of technological saturation?

Well, I don't know about saturation, because I mean there's there's always going to be a new technology, there's always going to be a new gadget, there's always going to be you know, you know, some new innovation.

Um, you know, and of course you know, not all of these you know, not all of these innovations you know end up sticking, you know, for the long term. But you know, a lot of them,

A lot of them do. UM. In our research, we have

consistently found that, UM, if if a feature is marketed as as something that benefits safety, people will raise their hands for it. All right,

yeah, I want that, UM. You know, so line keeping assists,

well, obviously that's that's a technology that is designed you know, that is designed to enhance your safety. It's something that our data show consistently your

people want that feature. People want you know, you know, or collisional

or you know, automatic emergency breaking. These are all features that that are

designed and marketed as being safety enhancers. So UM, you know, if

you market something as enhancing safety, people are generally gonna want that, UM, especially if they can, if they can, if these features can be you know, prict affordable enough. And as we've seen with Toyota, I

mean they've made you know, you know, years ago they made their Toyota Safety Suite standard in every car. So like you know, even your Chiefest

based Corolla has you know, the full complement of beatas features you know, for up twenty two thousand dollars. And you know, and and and I

think I think the key the key to that is UM. The key to

those features popularity is that they're pretty unobtrusive in how they work. You don't

have to learn how to use link keeping assist. It just does it in

the background. You're unrelated, it will put you back, you don't have

to be trained on how to use it. So, you know, I

think the technologies that really resonate, Like I said, safety is a huge one, but you know, some technologies that are unobtrusive and don't force the consumer to have to kind of relearn things, but just really you know, provide you know, provide tangible benefits to their daily you know, experience on the road. Well, yeah, those are the sort of technologies that people

want and are going to continue to want. So do you think, God,

what's driving sales more styling or features that people really like? M Well,

um, start, you know, styling is a huge one. I

mean, you know style. I mean, you know, if you've if

you've dropped a bunch of cash on a vehicle, well you know it's a significant purchase and you know one of you know, one of the tangible things that helps you feel all right. I spent a lot of money, but

I got something cool out of it. Was it is you know, something

that looks really good. UM. In that same uh future Active Demand study.

UM. One of the one interesting insight that we that that we found

was that uh, people who are intended to get a family three row suv UM actually place a higher importance on styling design something that they want compared to uh uh uh intenders of other vehicles segments. And the reason we think that's

the case is because, well, if you're if you're in that family life stage, um, you know, very oftentimes, you know, you kind of feel like you're losing a little bit of your identity. You know,

I used to be cool. Now I'm you know, now I'm at soccer

practice every saturday. Um and so and I think you know, we saw

it back in twenty nineteen when the key it tell I came out. That

really struck a nerve with families because here, you know, by that point, most three row subs had become kind of these, you know, all sort of jelly bean shaped anonymous uh you know, you know family mobiles, you know, not particularly exciting. And then all of a Suden Tellor I

comes along that looks a little more rugged and a little more fun, and people just went nuts for it. And I think, uh, you know,

automakers took that, took that lesson of heart pretty quickly, and you know, all of a sudden now, I mean, I feel like there's not a single THROEO sub out there that doesn't have some optional off road appearance package, you know, to make it look more rugged and have a more exciting personality. Uh. So you know it does, it does, really,

it does really show that, you know it particularly in certain segments, including some segments where where priority for design and style might be kind of a surprise. Uh, you know that it's there. We wouldn't have expected intenders

of free row subs to value that so highly, but what they do, and that that's an opportunity for automatings. Yeah, we got the comment there

the Lexus and BMW gave up on styling. Of course, Alexa said BMW

would not agree with that, but man, Yaw's on, they've got to the polar extremes with their style, like that's for sure, and I think BMW and alexas Sales would argue against that point as well, especially good point true. True. Hey, look, we got to wrap this up now,

but I want to thank you for being on here, Alexa. Good

to see you again. Great, great having you back on After Hours and

Ed great having you on the show as well. Yeah, thanks for having

me. Thank you and Gary. We'll do it again next week, Okay,

I'll Donline. After Hours is brought to you by Bridgetone Tires, Solutions

for Your Journey, and by Borg Warner. If you liked this program would

like to learn more about the automotive industry, check out our website at auto line dot tv, or look for us on YouTube on the auto Line channel.

AAH #658 - Forget Styling, Car Buyers Want Glitz and Gimmicks

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