Tariffs are extra taxes that countries put on things they buy from other countries. This makes those things more expensive. Honda says these taxes are making their cars cost more.
A write down means a company says something they own is worth less than they thought, so they lower its value in their records. Honda is doing this because their electric cars are costing more than expected.
Battery electric vehicles run only on electricity stored in big batteries, so they don't use gas or make smoke. You charge them like a phone, and they help keep the air cleaner.
Hybrids use both gas engines and electric motors to help save fuel and pollute less. They can use one or both to move the car depending on what's best.
Solid state batteries are a new kind of battery that use solid materials inside instead of liquids. They could let electric cars go farther and charge faster without getting too hot or catching fire.
The Honda CR-V is a small SUV made by Honda. It is designed to carry people and cargo comfortably and has a hybrid version that uses both gas and electricity to save fuel. Many people like it because it is easy to drive and good on gas.
K cars are tiny cars mostly sold in Japan that are small and cheap to run. Because they're so small, companies don't make much money from selling them.
The Subaru Forester is a small SUV that is good for driving in all kinds of weather because it has all-wheel drive. It's popular and sometimes gets special deals to help sell more.
BMW is a company that makes fancy cars that many people like because they are fun to drive and have cool features. They sell cars all over the world, including in China and the U.S.
If a car company sells fewer cars in a big country like China, it can hurt how much money they make everywhere else too, because China is a very important place for selling cars.
Car companies want to keep making money when they sell cars, so if things get harder, they might stop giving discounts or change prices to earn more on each car.
The Subaru strategy means selling more cars even if the company makes less money on each one. They try to make up for smaller profits per car by selling lots more cars.
In the 1970s, there was a big problem where there wasn't enough gas for cars, so people had to take turns buying gas depending on their license plate numbers. This made people want cars that used less gas.
LIVE
It's noon here in Venture City, New Jersey, and our nation's capital, our snowy nation's capital,
Washington, D.C., and this is Carage Live for Thursday, March 12th with your hosts, me, Ray,
here in Venture City, where it's overcast in about the rain, and Zach sitting warmly in his
apartment, where it is snowing in Washington, D.C., after a high in the eighties yesterday.
Welcome to Spring Almost. How are you today, Hanson?
I'm doing well, Dad. Glad to spend some time with you today. Thanks everyone so much for
tuning in. Today's show is brought to you by CarEdge.com. For those of you that are unfamiliar,
me and my dad, six years ago, started this company. And for those of you that are unaware,
CarEdge provides car buying services. We take care of vehicle research, dealer outreach,
and even negotiation. We learn what matters to you. Contact dealers, compare real offers,
and help you get the best deal without the stress. You can learn more back at CarEdge.com.
Then we have our continued beta for a new version of CarEdge. This is all work and process,
so please take it with a grain of salt, but CarEdge.com slash beta. Encourage folks to go
check that out and share their feedback in the chat and in the comments. Dad, great story this
morning. We talked about it a couple weeks ago, maybe even just a week ago. Hanson, feeling some
desperation. But dad, that desperation seems to have dialed up significantly this morning.
Honda cancels three EVs for the United States and is warning of up to a almost $16 billion loss
as EV pain deepens. Let's talk all things Honda this morning, pops. What the heck is going on there?
Yeah, it seems like about two or three weeks ago, Honda said, you know, things aren't quite as good
as we had hoped they would be. And, you know, the tariffs are costing us money. And so, you know,
we might actually lose a little money this year. Okay, okay, we get it. You know, and they announced
they have write down for some EV losses back then. And then three weeks later, they come out,
oh my God, you'll never guess what we just discovered. It's worse than we thought.
Well, you know, how could that be? I mean, were they just trying to give it to us in little bits
and pieces so it wouldn't seem as bad? But we're talking about they're expecting write downs and
write offs for their EV division and cancelling three vehicles all together that they were going
to produce for the US. So they're expecting between 5.2 billion and upwards of 15.8 billion
in loss write downs. It is, that's an astronomical number for Japan's number two
auto manufacturer. But here's the thing, it's an independent manufacturer. They're one of the few
remaining independent manufacturers of any significance. And they are in a real cash crunch
now because of this. This is, that's a lot of money. It's a lot of money, Dad. And it represents
almost 40% of their annual revenue. And to your point, Dad, they did a fundamental review of
their whole strategy, aka panic vote. The alarm went off over at Honda. Makes me wonder a little
that we won't go too far down this path, but it makes me wonder if all those Nissan M&A conversations
actually fell through because Honda realized they couldn't afford or it didn't make sense to take on
another struggling automaker. And that is the key word here. Honda is a struggling automaker. That
is something that I don't think many of us anticipated ever saying or believing. But Dad,
in many ways, Honda right now is a struggling automaker. They are. And the reason behind it,
the reason they are, is none of the Japanese automakers bought into battery electric EVs
quite as heavily as Honda did. We know that Toyota, everybody was complaining about Toyota because
they weren't jumping on the EV bandwagon, you know, like three, four years ago. Oh, Toyota's behind,
there is. Guess what? You know, they took the approach that we think the future for the time
being is hybrids, not necessarily battery electric vehicles. And maybe it'll be battery electric
vehicles when we finally are able to produce the type of solid state batteries that we think would
be necessary for EVs to be successful. So Toyota took this measured approach where they weren't
jumping into battery electric vehicles with two feet. They were only dipping their toes into it.
Honda, on the other hand, decided, okay, we're going to jump in with both feet. And now that's
coming back to bite them. The reality that different administrations can have different
sets of guidelines for automobile manufacturers has played a part in this. And so like a lot
of others, they bet wrong. And now, you know, they have to pay the piper for betting wrong.
So let's talk about that a little bit, Dad. How desperate are Honda dealers? Again,
we've talked about this over the past couple of weeks. There were Op-Ed articles and opinion
articles and automotive news talking about how Honda doesn't want to increase their incentives
and really spend a lot of money more like the Subaru's of the world to try and move volume.
They're actually cutting back on incentives. So what does this mean for those who are in our
community who watch this video and they say, okay, I was thinking about getting a CRV, a hybrid,
maybe a hybrid, you know, a cord? Like, what do I do now with this information? Or does it not
actually change the name of the game for any reason? For Honda dealers in the United States,
it doesn't mean a thing. And for Honda customers in the United States, it doesn't mean a thing.
And the reason I say that is Honda's having a tough time maintaining a sizable inventory in
this country, sort of like Toyota, just not, you know, theirs isn't as on time inventory as Toyota
is. But there seems to be no real shortage of customers for the Honda.
Their sales are flat year over year, Dad, where their competitors have actually grown. So I don't
know if I entirely agree. You know, sales are sort of kind of, but then again, we expect sales to
be flat this year. You know, there's... Honda dealers have come out and been frustrated that
they're not offering more aggressive incentives. I mean, we... We can afford to, but I think there's
enough Honda customer loyalty and there's still enough customers out there who want Hondas that
I don't think this means that much. What I think the big issue is for Honda at the moment was that
second article that I sent you and that this was something that I didn't realize. But in Japan,
you know, Honda has built their whole future around those little K cars. They're little cars
that have little profit margin and they have lost market share because the larger cars,
the more profitable cars aren't selling. And now they're thinking that they have to
start importing some of those larger vehicles to allow for a wider gamut of potential customers.
That's one of the reasons that they're going to be importing the Passport Trail Sport from the
States to Japan and why they're going to import the RS, the Acura RSX or Acura Integra Type S.
But the problem with that is that the ones that are importing are left hand drive and in, well,
in Japan, it's right wheel drive or right hand drive. So they'll be limited as to how many they
can import and how many they can sell. But their deep struggles beyond just lost sales in China,
which was I think their second biggest worry. And then having this write down for EV losses
is the fact that they're struggling in their home market because they don't have the right
vehicles. They went so heavy. If I remember correctly, I think 57% of everything they sell
are those tiny little K cars that have tiny little profits built into them. And you can't
sustain a large independent company like Honda if all you're pushing is stuff that has very little
margin in it. Now, dad, they're not the only automaker to get caught up in some of these headwinds
and challenges. I appreciate and hear your point. You don't think this is going to have too much of
an impact on negotiability here in the United States? I would simply say Subaru and Honda have
taken different approaches in terms of how they're going to attack the United States. One, Subaru is
going to give incentives, incentives, incentives. Honda, the other is going to pull incentives away,
away, away. I think if Subaru's playbook starts to work, which for what it's worth, it seems like
maybe in the month of February it did for the Forester, then maybe Honda has to step up to the
plate and bring some of those big incentives to the table as well. So we will stay tuned on that.
But if Honda continues to struggle, I wouldn't be surprised if some of that desperation trickles
over into how they approach incentives here in the US. Yeah, I just think when three weeks after
the fact, you say, okay, things are bad, and then you go, oh my God, they're worse than dad.
Okay, they're worse than what we envisioned. You have to believe that they are going to be in
let's save some cash mode until they can find new profit centers. So I would think that as
it will take quite a bit to force Honda to really up their incentive gain. They're still,
for the most part, doesn't seem to be a real drag on Honda sales. Yes,
Acura sales were up substantially. Honda sales were down like a half a point.
But I think... And globally they're struggling, but that's a theme across many automakers. We're
about to talk here for a second about BMW. And if I may, dad, BMW sales are plunging,
but in China. And for Honda sales are struggling in China, which impacts them globally.
Well, yeah, because everybody bet on China, and for quite some time that was a really good bet.
Honda sold like 680,000 Honda's in China last year. Sounds like a lot of Honda's,
except it was down like 20% from the year before, 24% from the year before, where they sold well
in excess of 800,000 units. So yes, if your second largest market is suddenly in decline mode, and
has been for, I don't know, the last 18 to 24 months, and that seems to be the case for most
manufacturers at the moment, because VW is struggling in China, BMW is struggling in China,
Honda's struggling, everybody's struggling in China. So if that's the case, yes, it turns the
whole thing into a much more of a global situation. And if your brands had been heavily on EVs, and
now you're going in a different direction, I mean, because Honda's saying this turnaround won't happen
until 2028, that's two years from now. Okay, because you can say we're done with those EVs,
but the pivot to hybrids doesn't happen overnight. Overnight is two years, that's overnight in the
car business. And so it's very difficult for these manufacturers, Honda and others, to pivot more
quickly than what they're doing, trying to stave off the problems that they're having because of
lost sales in China. Yeah, man, and they're not the only ones. BMW is the other automaker I
wanted to talk about this morning, as well as maybe we'll spend some time on it, a great article called
Chrysler has been completely squandered, but we'll keep our attention here focused
for a second on BMW. Dad, BMW is anticipating 5% to 10% decline in their profits this year as well.
So it's another example, it's happening both on the luxury side as well as obviously
with Honda on the more economical side. And it's the same impacts, the same reasons for their
challenges. They lean too heavily into electric vehicles, tariffs are costing them money,
and then they're losing market share in China. It does make me wonder how those global impacts
will impact domestically here in the United States. Will they look to try and preserve more
profit margin in the US? So to your point, maybe it's less incentives because they can't afford
them. Or do they try and make it up in volume, which I am now for this year at least going to
affectionately refer to as the Subaru strategy, make it up in volume, sell more cars, make less per
car but sell more cars. BMW yet another automaker caught up in all this. They are, and it's like
every one of the major manufacturers is caught up in this. Mercedes is caught up in it.
Audi's quite, they're all caught up in it. It is this bet that didn't play out quite as well
as all the manufacturers had hoped it would. So I think we're going to continue to see
all these brands struggle to a certain degree. And we know for a fact that
that every pundit out there is predicting that for this year in the United States,
sales are going to be flat or decline two and a half to three percent from last year. And last
year, they sold 16.2 million new cars. So don't be surprised if it's 15.7 million or 15.8 million
this year. Now, every manufacturer is talking about how well we need to increase and we expect to
and we want to increase market share. And we're expecting a 10 percent increase in sales this
year. Well, that ain't happening. We know it's not happening. You know, I'm expecting to grow,
as you like to say, I'm expecting to grow to six foot. I'm five, six on a good day. You know,
I'm not going to find, I'm not finding six inches anywhere. Okay, it's just not happening. And so
for a lot of the manufacturers to say, well, we expect sales to grow 10 percent this year,
when everybody in the industry is saying sales will be flat or down two and a half to three percent,
that's just PRBS. So, so you have a certain point, every one of these manufacturers
is going to become cash conscious. And what do I mean by that? They're going to want to keep cash
you on hand, you know, because they're going to have to, they're going to need that cash for the,
for the right offs and the right downs that they're having while they're trying to pivot
their business to something else. Now, having said all that, okay, with the price of oil going up
again dramatically today, how is that, and here, how is that going to impact hybrid and EV sales?
If, if the cost of gasoline continues to go up dramatically, will people suddenly turn to more
hybrids and EVs? Will that create a little bit of a greater demand for EVs? This, the whole thing
is so fluid, it's, it's kind of ridiculous. It turns on a dime on a day. It is a little ridiculous
and Rich E was heading, heading this way. We're going to go to the chat here in just a moment.
I bet Honda sees a big sales boom if gas prices stay high. That is one of the aspects of all of
this. Yeah. If, if that is the case, then this pivot that they did to electric vehicles five
years ago, six years ago, four years ago, will actually look pretty smart. And maybe Toyota
ends up behind the eight ball. You know where that data is going to manifest itself that?
And our fastest and slowest selling cars list. I will be so curious if some of the EVs like
Volkswagen ID4s, Ford Mustang Machis, if they are no longer on our slowest selling list next
month, that's an indication. They'll still be on the slowest selling list next month.
But I will say this, I, I, I was having some conversation with Justin on our team yesterday.
And believe it or not, since the, since the start of the conflict with a RAM,
we have seen on the car edge, car search website, a 20% spike in people looking at EVs, new and used.
So that, that just gives you some indication through the first 10 or 11 or 12 days of this,
how it's already impacting what people are searching for and what people are thinking about
when it comes to a car. But I agree with Rich. Anything that, that is, it's really good gas
mileage, whether it be hybrid or just a nice engine. Yeah, people are going to gravitate
towards those as gas prices go up. They always do. So yeah, I, that, that could be a boon
for Honda and, and others. And if that is the case, then it won't, it won't require
incentives to any great degree to get people to come in other than Exxon and Mobile, Mobile and,
and, and all the other gas purveyors out there raising their prices dramatically.
They're doing it for Honda and everybody else. I hear you, but I wouldn't be surprised that people
see a Ford Mustang Mach-E with $10,000 off, $15,000 off. That might become a really attractive option
as well. Yeah, I could see a pretty, we should actually do some analysis about
vehicles that are oversupplied right now that also get good fuel economy. Stay tuned. We'll
actually prepare some of that data. I think that'd be tremendous because we will see consumer
demand turn that way. We already are seeing that and it could be a safety route, a safety route,
a safety route, excuse me. Yes. And a little bit of an off switch here for some of the pain that
Honda and other like BMW automakers who went deep on electric vehicles are starting to feel.
Let's stay here down on the chat from Mad Matt 1964 Fly. Thanks for the kind contribution. Would
it be a good idea to buy an older V8 Lexus or Toyota seeing as they are the most reliable
and that gas prices will eventually come down? What's your take on this, Pops?
Well, if you can afford even an older V8 Lexus or Toyota, you're not as concerned about gas prices
whether they be high at the moment or will they come back down. I have lived through this
so many times. I remember in the 70s when there was a real gas crisis where the days you were
allowed to fill up your car were based on the last number of your license plate. If the last
number was an even day, you were allowed to get gas on even days. If it was an odd number, you were
allowed to get gas on odd number days. Lines at gas stations were miles long trying to get there.
Were people concerned about gas mileage? Yes. Were people concerned about gas mileage? Other
times I've lived through this. Yes, there's up and down. When I was a kid, because it's always
was 19 cents a gallon, 25 cents a gallon. Then it went up and then it came back down again and
it went up. Today on a good day, when gas prices are low, it's still like 250 a gallon and right now
we're over 360 a gallon for regular gasoline on a national basis. Will they ever go back down to
where they had been? Probably never. Just like new car prices that skyrocketed during COVID and
everybody's going, well, they'll come back down again. They'll normalize. No, they didn't and they
have it and they won't. If you want that V8 Lexus or Toyota, that older one, buy the damn thing and
don't worry about what the cost of gas is. Just enjoy it. Dad, we had from Matthew as well before
we continue on here. Yes, on the retro V8 Lexus, 400,000 mile car. Zach, you show Ray the Porsche
Threads I sent. Did you tell him about the marathon we signed him up for? We did not sign you up for
a marathon. Yeah, perhaps Matthew has some incredible photos. I'll share a few and no, Matthew. I
obviously will not share the link or your image here, but dad, look at how beautiful this car is.
I mean, it's just like gorgeous. Yeah, well, may I say this? I don't know Matthew personally.
Yeah, not at all, Mr. Just a great member of our community. My God, he's got good taste in cars.
I will say that. He has excellent taste in cars. It's kind of hard to go wrong with a Porsche.
Definitely, you have to go wrong with a Porsche. We have here, dad, a really interesting comment
from Father Sarducci. I was at my local Dodge Jeep dealer yesterday, early evening, and it was pretty
slow inside the showroom. I stood there for 10 minutes and I left because nobody asked if I needed
anything. This is just a friendly reminder. We've got deal school coming out next week. Friendly
reminder, you can do pretty much 99% of buying a car and in some cases 100% of buying a car entirely
without stepping foot in the dealership. This is a bummer to hear and see.
And this is a prime example of how at many dealerships, the sales staff becomes hearing
and sighted impaired when customers actually either come onto the lot or come into the dealership.
It's like the salespeople have been sitting around all day saying, my God, we need somebody to come
in here. And then when somebody does, oh, I got to go to the bathroom. Oh, I need a cigarette.
And they don't see these people. They can't hear these people. And it is unfortunate because if
anybody went to their local Dodge Jeep dealer, early evening, you bet your ass you need to
greet that person. I mean, who in the right mind is going to that store unless they might?
They might have a desire to relieve you of one of those vehicles from your inventory if you play
your cards right. That's just a sales manager. I can't help it. Do it online. Please do it online.
Use our car buying service or do it online from the tubular bill. And then we'll keep going here.
And they still are not offering good incentives for their basic product. The dealers around me
are so full of themselves that they think they can sell everything at least or above. I think
this is back in regards to Honda debt, which again, this will be the thing that we're watching out for.
Are you taking the Subaru strategy? We're moving the volume. We're trying to be aggressive on
incentives. Or are you taking right now the Honda strategy, which is fewer incentives,
no good lease deals, things like that. Just figure it out, dealers. Figure it out. Try and
try and get customers in anyway. I don't see how that pans out well for Honda, but we shall see.
I don't think there is nearly as much a shortage of Honda customers as you'd like to believe at the
moment. I think Honda always has been and always will continue to be the second most popular
Japanese brand of automobiles in this country. They still have a great reputation. They have a
strong following. Have they seen some ups and downs? Yes, but I don't think the downs are
as low down as some other brands. And so I think if you were to pull most Honda dealers,
they're not complaining. Are there a handful that are? Yes, sure, because maybe they don't
know how to market the product or maybe they don't know how to compete in their marketplace.
But I think for the most part, most Honda dealers are probably pretty pleased with the inventory
situation and the sales situation at the moment. That's just me. But I think on a corporate level,
Honda's troubles are much deeper than just having the right incentives or the right
inventory mix for the United States. They need to figure out how to gain more market share in
China again and start selling some profitable vehicles in their home market. So that's a much
deeper issue for Honda corporate than what I think your Honda dealers in the States would
complain about. If you're in the market to buy a car, whether it be a Honda or otherwise, we have
car edge dealer ratings and reviews. You can just Google search car edge dealer ratings or reviews
and it'll pop right up the search bar, dad. Yes. And type in Honda. So let's shop for Honda dealers.
We've got 309 dealers that we've scored. If you include single quote dealers, we're up to 555.
From here, you can sort by grade or you can sort by who's got the highest dock fee,
who's got the lowest dock fee. Oh man, we've got an F-rated Honda dealer. Let's take a peek at this
dad, Coral Springs Honda. This might be a dealership that you want to potentially, I don't know,
avoid. What's nice about car edge dealer ratings and reviews is that all of the data you see,
it's not subjective, excuse me, it's objective. You can actually come in here and view the original
quotes from the dealership to see the data that they sent to car edge customers so you
don't have to go waste your time with dealers who do stuff. Scroll back. The processing fee,
dock fee is $1,566 and the government fee of $450 for a new tag.
Where? What state charges $450 for a license plate?
This is why we built the car edge dealer transparency index is also what we're calling it.
I encourage everyone to give this a try. The data on here is incredible and I don't know anywhere
else you can find it. We also added dad now a quick drop down here so you can find a rated
dealers super easily or if you're for whatever reason looking for those BCD or F dealers,
you can also break it down by state super quickly as well now. So just encourage everyone,
spend some time, all sorts of good information here back on caredge.com and if you Google search
car edge dealer reviews and dealer ratings. All right dad, let's call it a show for today.
We're back with more car edge live tomorrow. We have a guest joining us. We actually have
one of the dealers that has a great grade on the dealer transparency index, Jared Glover from
Jim Glover joining us tomorrow. So tune in for that discussion interestingly dad. He is actually on
the what's it called the Oklahoma dealer council and commission and he's going to share so much
interesting information with us about that work and what they're trying to do to clean up and
police essentially bad actors in the auto industry. So please tune in, please spend some time with us
tomorrow. We look forward to seeing you here. Yeah, absolutely. Thank you everybody for being here.
Thank you Zach for keeping me someone on the rails again today and look forward to seeing
everybody back here tomorrow at noon for more, well, car edge live. If you liked the show,
please take a moment to rate, review and subscribe. It really does help the show to grow.
Thank you for listening.
About this episode
Honda is facing significant financial challenges, including canceling three EV models for the U.S. market and anticipating up to $16 billion in losses related to their EV strategy. Unlike Toyota’s cautious approach to electrification, Honda aggressively pursued battery electric vehicles, which has backfired amid shifting regulations and market conditions. Dealers are frustrated by limited incentives despite flat sales, and Honda struggles with low-margin small cars dominating their home market. The podcast also touches on broader industry struggles, including BMW’s profit declines and challenges in China, highlighting a tough environment for automakers globally.
Today on CarEdge Live, Ray and Zach discuss the latest news from Honda. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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