Nutson's Weekly Automotive News Digest May 1-7, 2017: Sales Down; Gas Taxes Up; China Loves Cadillac; Porsche Recall; Demon Un-Demonized By Keith Crain
AUTO CENTRAL CHICAGO, May 7, 2017; Every Sunday Larry Nutson, Senior Editor and Chicago Car Guy along with fellow senior editors Steve Purdy and Thom Cannell from The Auto Channel Michigan Bureau, give you TACH's "take" on this past week's automotive news in easy to digest mega-tweet sized nuggets.
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Nutson's Nuggets: May 7, 2017
* April new vehicle sales dropped 4.7 percent to 1.43 million, an annual rate of 16.92 million. Car sales fell 11 percent while SUV/truck sales fell 0.1 percent. With the Detroit - 3 and the big-Asians all down, VW and Subaru were up as were a number of luxury brands. Incentives are high but many buyers are balking due to sticker shock. All this is not a surprise. The auto industry knew 2017 sales would flatten.
* On the other hand, America's love for trucks and SUVs is driving up automaker profits. GM made record profit and revenue in the first quarter, with net income up 34 percent to $2.6 billion. Ford and FCA are doing the same, surpassing analysts estimates. The profit story is more compelling and more important than the sales volume story.
* The University of Michigan Transportation Research Institute's latest report from Michael Sivak and Brandon Schoettle says the average fuel economy (window-sticker value) of new vehicles sold in the U.S. in April was 25.3 mpg—up 0.1 mpg from the value for March. The value for April is up 5.2 mpg since October 2007 (the first month of their monitoring), bin August 2014.ut down 0.2 mpg from the peak of 25.5 mpg reached
* Meanwhile, President Trump is talking about raising gasoline and diesel fuel taxes to support infrastructure rebuilding. This happens to be a good idea. The federal fuel tax of18.4 cents per gallon for gasoline and 24.4 cents for diesel, intended to pay to fix and expand the country’s roads and transit systems, has not increased since 1993. We think it's about time and so have many states who are raising their fuel tax.
* California governor Jerry Brown signed into law this week a substantial gasoline tax increase - from 28 cents per gallon to 40 cents. Diesel fuel gets a 20 cent increase and electric car owners will pay $100 per year since they don’t use any fuel. The resulting revenue is expected to raise around $52 billion for bridges and highways. Republican opponents to the tax say it will cost motorists $10 per month extra in transportation costs. The new tax dollars are restricted to transportation uses only. We expect other states to follow this general pattern.
* China became Cadillac’s largest market during the first quarter of 2017 selling close to 40,000 units during this quarter. Cadillac brand VP, Andreas Schaaf, noted that the average age of a Cadillac buyer in China is 32 and 40% are first time car buyers. About a third of Cadillac sales are the locally built XT5 mid-size crossover selling for an equivalent of about $52,000. GM’s Buick brand has sold more cars in China than the U.S. for some years now.
* In a reflection on its heritage, General Motors opened the restored Durant-Dort Factory One in Flint, Michigan, considered to be the company’s birthplace and epicenter of the global auto industry. Once home to the Flint Road Cart Co., established in 1886 by William Crapo “Billy” Durant and business partner Josiah Dallas Dort, the factory first built carriages before Mr. Durant acquired Buick, then Chevrolet and other companies that became GM. Factory One includes event space and a modern archive where future generations can learn about the innovators and risk takers who reinvented personal transportation. GM executive vice president Mark Reuss championed the project. The building was about to fade from existence when restoration began and it now houses the extensive vehicle manufacturing archives of Kettering University (formerly General Motors Institute).
* A week ago a war of words took place on social media over an editorial published by Automotive News saying that the 840HP Dodge Challenger Demon was unsafe for public roads and should be banned. A week later Automotive News Editor-in-chief Keith Crain, acknowledging that the editorial had slipped by him, wrote that Automotive News was misinformed and wrong in what it said about the Demon. Crain applauded and encouraged the creativity of automotive engineers. We say: “Welcome to the brotherhood of muscle.”
* Porsche is issuing a voluntary recall on 51,497 Macan, Macan S, Macan GTS, and Macan Turbo models in the U.S. manufactured between March 4, 2014, and April 14, 2017. Porsche determined that fine hairline cracks could appear, after an extended period of use, on the filter flange of the fuel pump on the affected vehicles.
* Toyota's Land Cruiser has the new title of "World's Fastest SUV" thanks to a record speed of over 230 mph, attained by the custom 2,000-horsepower Land Speed Cruiser. With former Toyota NASCAR driver Carl Edwards at the helm, the understated Land Speed Cruiser shattered the previous "World's Fastest SUV" record by more than 19 mph, reaching a GPS-verified and video-documented 230.02 mph before running out of usable pavement.
* Toyota increased its R&D footprint in Michigan with the opening this week of a $154 million expansion of their facility in York Township west of Detroit. Jim Lentz, CEO, Toyota Motor North America touted the investment as part of the company’s “long-standing commitment to invest in America.” The building itself features state-of-the-art design and materials including low-flow faucets, LED lighting, high-efficiency building shells and indigenous planting for landscaping.
* Hagerty’s classic and collector car auction report for early 2017 shows strength primarily in “entry-level” cars with more expensive cars called a “tough sell.” The sell-though rate at the huge Kissimmee sale remained the same as last year at about 76% but total sales went down in spite of a couple hundred more cars for sale. The average sale price fell by around 12% to just under $90,000. Multiple auction companies held sales in Arizona and Amelia Island with sales lower there as well. Vintage trucks were listed as one of the hottest segments of the market.