The Curbing Cars Newsletter, 6/28/2020
All the ways we get around and their intersection with the earth
The Toyota Yaris Dies, Ford Launches A New F-150, And Yes, They’re Related
Last week, Toyota confirmed that is officially discontinuing the Yaris. Production is ending this month, and the 2020 model will be the last. It’s been sold in the U.S. since 2007.
Now, you may not have paid a whole lot of attention to the Yaris. In fact, you might have forgotten that Toyota even sold it.
But back when the Yaris arrived, the industry was awash in predictions that Americans would want more fuel efficient cars. Remember, oil prices spiked to $147 in summer, 2008, and people in some parts of the country were paying $4 an up per gallon of unleaded.
That caused flurry around vehicles like the Chevrolet Volt, which was supposed to be the car that would save General Motors. They even claimed this in testimony before a Congressional committee, as I wrote for the New York Times.
Of course, subcompact sales have never been all that strong in the United States. You’re more likely to see them in rental car fleets than in peoples’ driveways.
Still, back in 2007, Toyota sold about 100,000 Yaris cars. Over the years, it had lots of competition, from cars like the Honda Fit, the Kia Rio, the Hyundai Accent and the Nissan Versa.
But in the years since then, the auto industry went through a devastating recession. And when it came out of it, the car companies concentrated on the vehicles that were the most profitable.
That means pickup trucks and SUVs. It wasn’t that they didn’t sell small cars, but they didn’t emphasize their small cars. And when something doesn’t get attention, it’s hard for consumers to remember that it’s there.
Sales of the Yaris started to fade away. In 2018, it sold about 27,000 in the U.S. and in 2019, it sold about 22,000. That’s not enough to justify keeping it in the line up.
And because of COVID-19, Toyota and all the car companies are facing supply chain issues. And that’s becoming a key factor in deciding what they want to keep selling.
Right now, the American economy is in tatters. This past week, another one and a half million people filed for unemployment insurance. Nearly 50 million people have sought jobless benefits during the pandemic.
So, if they’re buying cars at all, they’re looking for bargains.
Used cars are in demand
I thought I’d share an email I got last week from Lloyd Dunning, at Dunning Toyota here in Ann Arbor.
Now, if you’d listened to this podcast, you know that I own a 2008 Toyota Prius, which I bought at Dunning Toyota. It’s long since paid for. It runs great although it’s a little banged up. And I get about 45 to 50 miles per gallon. The only expense that I have is insurance and a repair once in a while.
But I’ll admit, I’ve wondered whether this wouldn’t be a good time to get a new car. Lloyd certainly seems to think so, because here’s what he wrote.
“I just wanted to drop you a quick note and let you that now is the perfect time to trade in your Toyota. We are heading towards a substantial used vehicle shortage and need to acquire inventory quickly.
This means that right now we can offer you a trade or purchase value on your vehicle that is likely higher than the normal book value. In some instances, significantly higher!
Plus, we have absolutely phenomenal incentives on something new including 0% APR on many of our new models (and some certified pre-owned vehicles), huge rebates, and awesome leases. If you are in a lease and in the final year, we should be able to get you out and into something new as well!”
I’m still thinking about it, Lloyd.
If you watch TV, and haven’t cut your cable cord, you’ve probably seen all kinds of ads lately from the car companies – both national ads and for local dealers, too.
Some of the ads are truly inspirational.And some of them are trying to convince you that you should feel comfortable buying a car right now.
They are promising to make it as easy as they can for you to purchase a new car.
Things like “buy it on line, and we’ll deliver it to your house. No need to come into the showroom.”
But there’s a lot of uncertainty around the economy right now, as COVID cases spike in some of the most populated states in the union.
A second series of shutdowns across the country are already starting and more are likely during the next weeks and month. Millions of people are able to work from home for the foreseeable future, which means they are barely driving their cars at all.
There are three elements that economists look at when they assess auto sales. One is unemployment. The next is housing. And the third is consumer confidence.
You can’t say that any of them look all that great right now.
But the car companies do have some backup help.
Help for carmakers overseas
Remember that original rescue plan this spring? Parts of the auto industry got help, including dealers and some smaller parts companies.
But General Motors and Ford did not, even though there was plenty of talk that they would get bailouts.
Overseas, it was a different story
Just this week, Italy guaranteed a $7.1 billion loan for Fiat Chrysler, which is the single-biggest assistance to a European car company. And that puts Chrysler in the position of being the only U.S. carmaker to get a bailout.
Here’s a look at some of the deals elsewhere.
France put together an 8.8 billion rescue plan, which mainly included incentives for consumers to buy new vehicles. We talked about this in the Curbing Cars newsletter last month. France also introduced a bicycle incentive plan, so however you want to get around on wheels, you can get some cash back.
Renault finally got the 5 billion euro loan that it wanted earlier this month, but it’s still planning to cut about 15,000 jobs world wide.
British car companies definitely want assistance, but essentially, they’ve been told to get in line for now.
Japan itself hasn’t provided aid to its car companies, but Japan’s powerful business associations set up a fund back in April to help its struggling auto companies. The carmakers are supposed to pay the money back out of their profits.
China also provided incentives to car buyers to jump start its auto market. And while China really took a beating early in the COVID-19 emergency, its auto sales seem to have made something of a comeback since then.
So. Should GM and Ford push for federal help? Remember, Ford didn’t file for a government directed bankruptcy decade ago. It got some help that was available to all the car companies.
But General Motors got about $50 billion in bailout money, most of which was repaid.
One thing that PPP program has shown, however, is that there’s nothing uniform in the way that companies have gotten money. You might remember the fuss that happened when the Ruth’s Chris Steakhouse chain got money, and hundreds of small restaurants were left high and dry.
The car companies are going to have to make a compelling case for why they need assistance – and at the same time, they also have to convince car buyers that the world has returned to normal.
Ford was trying to do that just this week. On Thursday night, it put up a live stream so that people could watch the introduction of the 10th edition of the F-150 pickup truck.
For the car companies, nothing is certain. At least they have that in common with the rest of us.
Some stories worth your time
Siberia is roasting. If you feel like this has already been a warm summer, imagine how it feels in Siberia. Verkhoyansk, more than 400 miles farther north than Anchorage, Alaska, topped 100 degrees Fahrenheit last Saturday, possibly the hottest temperature ever recorded above the Arctic Circle. Addressing the damage to Russian buildings and infrastructure caused by thawing permafrost alone could total more than $100 billion by 2050, scientists estimated last year.
Velib is recording some amazing business. This article is in French, but here are some highlights. The Paris bicycle sharing company Velib is recording 150,000 uses per day, far more than Citibike or Boris Bikes have experienced in New York City and London. On June 17, Velib had 182,000 users. There are 19,300 bikes in use, so that means each bicycle was ridden nearly 10 times during the day. We’ve told you plenty about Paris’ enthusiastic embrace of bike lanes during the COVID emergency, but these numbers show how much it’s taking hold.
American Airlines is shifting back to full capacity. Starting on Wednesday, American says it will begin selling all the seats on its planes. It’s abandoning the caps that were supposed to encourage social distancing. This move worries us, because it comes as states across the South are instituting shutdown orders once more. Customers will still be notified if their flights will be full and can move their reservations at no cost. Starting this week, passengers are supposed to tell the airline if they’ve exhibited any COVID symptoms. But come on: if you’re flying right now, are you going to tell them the truth?
Open Streets is a flop in Little Village. We’ve written a lot about efforts to close roadways to allow pedestrians and bicyclists to use then. But business owners in Chicago’s Little Village have opted out of the program. They fear that business in the mainly Latino stretch of 26th Street will dry up even further when cars aren’t allowed on the road. Instead, local leaders say that they will work to get more sidewalk cafe permits, and to encourage use of delivery services.
The auto show that wasn’t. If 2020 had gone as planned, the Detroit Auto Show would have taken place this month. It was shifted from January to June in order to encourage more attendance. Instead, the pandemic meant there was no show at all. Meanwhile, organizers are at work designing the 2021 show with more social distancing in mind. Who knows where we’ll be a year from now?
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