Car Ownership Is Too Expensive For Americans Because What Are You Gonna Do, Not Have A Car?

Happy Tuesday! It’s January 30, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

1st Gear: Driving Is Just Too Expensive

Every year, the average transaction prices for cars creep ever higher. It’s not just the purchase, though — maintenance, insurance, even car washes have skyrocketed. Why? Well, it’s simple: The people selling you these things want to make more money. From the Guardian:

The average new car today sells for nearly $49,000, and the average used car lists at more than $26,000 – representing a 31% increase for new cars and nearly 40% increase for used cars since 2020, according to data from the industry group Cox Automotive.

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Here’s a hint: the automakers are doing great. By essentially coordinating an industry-wide production cut, the pandemic gave manufacturers power to demand mind-boggling prices for fewer cars, leading to record profits. As consumers adjusted their expectations, executives saw an opportunity to establish a lucrative new normal. Low inventory is an “opportunity to drive strong margins”, GM’s CEO, Mary Barra, told shareholders in 2022. Ford’s CEO, Jim Farley, went even further, declaring: “I want to make it extremely clear to everyone: we are going to run our business with a lower day supply than we have had in the recent past because that’s good for our company.”

Brian Moody, a senior editor at Kelley Blue Book, a car industry publication, says automakers used the pandemic to shift product lines toward higher-margin products. Instead of small cars and base models, they pivoted to luxury cars and SUVs with fully loaded trims, which turn far greater profits per sale. That means “the less expensive the car, the fewer choices you have”, says Moody. Some commentators have called the trend “trimflation”. A 2023 Cox Automotive report declared that “the US new vehicle market is becoming a luxury market”, a “seismic shift” that, for many buyers, is “about as enjoyable as a sharp stick in the eye”.

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The cost of insurance has brought even more pain. Data from the US Bureau of Labor Statistics shows that the average cost of car insurance rose more than 14% between the end of 2021 and 2022, before soaring another 20% by the end of 2023, the largest one-year increase since the 1970s.

In the U.S., car ownership isn’t really optional. If you live outside of New York City, San Fransisco, or some parts of Boston, you’re stuck using your own four wheels to get around. Ah, well. At least we can all rest easy, knowing automaker CEOs are individually earning tens of millions of dollars every year.

2nd Gear: Toyota Is Trying To Solve Its String Of Scandals

Toyota’s had a rough past few months. Its subsidiary companies have seen scandal after scandal, from crash tests to emissions to engine power ratings. Now, it seems the CEO has gathered his generals, and told them to politely get their shit together. From Automotive News:

Akio Toyoda is correcting course at Toyota Group companies in Japan amid a rash of misconduct that has embarrassed the world’s biggest carmaker and eroded public trust at home.

The Toyota Motor Corp. chairman summoned the leaders of the 17 group affiliates to a morning meeting Tuesday in Nagoya and outlined a new Global Vision to refocus their priorities.

Toyoda told them that the Toyota Group has lost sight of its founding principles. He urged a back-to-basics shift, returning agency to front-line workers and concentrating more on product.

One would hope that those front-line workers, newly empowered, could tell their bosses “Hey, perhaps we should stop with all the lying to regulators.” If there’s one thing I know about massive multinational corporations, it’s that they love to give every worker the power to do that.

3rd Gear: House Committee Chairs Want Ford’s Ties To China Investigated

Tensions between the U.S. and China are high, but never in interesting ways. We’re not doing another Cuban Missile Crisis here, but the two countries keep making weird, arcane legislative swipes at each other. From Reuters:

The chairs of two U.S. House committees asked the Biden administration to investigate four Chinese companies they say are involved in Ford Motor’s planned Michigan battery plant, according to a letter seen Monday by Reuters.

The letter first reported by Reuters said the four Chinese companies have direct ties to the Chinese military, Chinese Communist Party, North Korean government and alleged human rights abuses in China’s Xinjiang region.

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Representative Mike Gallagher, who chairs the select committee on China, and Representative Cathy McMorris Rodgers, who chairs the Energy and Commerce Committee, urged the Commerce Department to investigate and impose export restrictions on the four Chinese companies they said were involved in the “facility’s design, construction, and information technology (IT) processes.”

I do wonder what this decade’s Bay of Pigs is going to be. How will we massively fuck up some covert op this time? I’m imagining Seal Team 6 going in to sabotage BYD factories, and somehow making them more productive.

4th Gear: GM Says The Recession Has Been Called Off, My Friend

The past two years have held a lot of uncertainty and fear around the state of the market. Will we have a recession, depression, inflation, deflation, greedflation, stagflation? Well, according to GM, we’re getting none of those. From Reuters:

General Motors (GM.N), opens new tab on Tuesday reported lower pre-tax profit for the fourth quarter but gave investors an upbeat outlook for 2024 and signaled more capital could be returned to shareholders.

“Consensus is growing that the U.S. economy, the job market and auto sales will continue to be resilient,” GM Chief Executive Mary Barra told investors in a letter.

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GM is pinning hopes on strong demand for its combustion trucks and SUVs in North America, cost-cutting and increasing sales of its new generation of electric vehicles after 2023 deliveries fell short of earlier plans. GM expects overall EV sales will rise this year to 10% of the U.S. market from 7% in 2023.

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In a letter to shareholders, Barra highlighted the automaker’s moves to return cash to shareholders, including $12 billion in 2023 through a $10 billion share buyback and a 33% dividend increase.

Stock buybacks are one of those fun little economic tricks that make a line go up without ever contributing anything to the actual economy of real human beings buying and selling products and services. They cost obscene amounts of money, do nothing for any real people, and often kill companies. Line goes up though!

Reverse: The Miata Cometh