Cars continue to age, Mercedes wants to do business differently, while BMW is looking for alternative energy sources to reduce its dependence on Russian natural gas. All that and more in morning shift For Monday, May 23, 2022.
First gear: We all know why
12.2 years – That’s the average vehicle life on US roads as of this year, according to S&P Global Mobility. And if you don’t know why this number keeps on its slow upward march, I envy the rock you live under. from Car News:
Median age rose to 12.2 years in 2022 — an increase of nearly 2 percent over the average age in 2021 for just over 12 years, according to the research.
Standard & Poor’s Global said in a statement that the increase was driven by a global shortage of microchips and supply chain issues causing “a short supply of new cars and light trucks, amid strong demand for personal transportation.”
said Todd Campau, Head of Automotive Aftermarket Practice for S&P Global Car News Lack of supplies is causing owners to either keep their cars for longer or buy used cars.
“People value their cars; people still feel the need to provide them a car, and maybe more of it will come out of the pandemic, so that has caused the vehicle fleet to grow a little bit,” Campau said. The interior is really one of the cars that’s been on the road, and it’s staying available longer.”
The wisest thing you can do right now is to stick with the car you own, unless it is breaking down or life changes have made it impossible to bear. and if you were Act Should you buy, it probably makes more financial sense to buy used, which also contributes to the aging trend of cars. However, this does not mean that the average life of a car has increased exclusively due to the supply chain crisis. This has been the way for more than a decade now, although you could say the pace has actually picked up since the pandemic, according to the chart below:
If you want to know when S&P analysts expect this hell to end, the good news is that the end is in sight presumably. The bad news is that it won’t be tomorrow, or even next year:
“I think there will definitely be upward pressure in life expectancy to probably 2024, maybe even 25,” Campau said. “Then I think it will stabilize once the supply of new cars starts to catch up with the demand. There is even a possibility, I think, that we can see maybe lifespans go down a bit…when that pent-up demand for new vehicles is released.”
I’m no supply chain expert, but I’m going to argue here that you can’t be disappointed if and when things don’t improve in three years if you set low expectations. Besides, car manufacturers have basically Show their hands on this already.
Second gear: Rivian
Look, I don’t enjoy posting a story about Rivian’s struggle every other day on The Morning Shift, but they keep coming, so I keep sharing. latest from Reutershighlighting some customers’ frustration after their orders were skipped on the reservation line:
When Jeff Wells placed a reservation for the Rivian R1T truck in early 2019, he was among the early adopters of a pickup from the electric car startup backed by Amazon.com Inc that promised at the time to capitalize on a niche unserved by other automakers.
But Wells, an accountant from Southern California, is becoming increasingly frustrated as he sees others, who placed their orders years later, receive trucks while he waits.
“It’s just annoying and there seems to be no order in how they do things,” he said of Rivian.
Wells is one of dozens of bookers who in recent weeks have complained about unreliable delivery schedules and delays in online groups and forums.
Rivian announced last month that it will prioritize production of some trims and options regardless of when orders are placed, hoping incorporating similar vehicles will speed things up. As expected, this pissed some buyers off, although it also represented the risk of placing an order with a startup before it ever shipped for one product that wasn’t a shirt.
“Building in a small number of building blocks reduces complexity with our suppliers and in the factory and allows us to build a greater number of vehicles,” Rivian told customers in an email.
This means that many early bookers who have stuck to their original color preferences have had their orders delayed.
In a statement to Reuters, Rivian said delivery times are not based solely on pre-order timing, and that they are exploring new ways for customers to speed up deliveries.
The remainder of the Reuters story is largely a summary of the ups and downs that led Rivian to this point, and it’s well worth a read if you want to quickly make yourself aware of the details. It was a bumpy road, and the road ahead doesn’t look much smoother.
Third gear: This Mercedes-Benz exercises ‘control’
Dealers are very antique, and Mercedes-Benz wants to stay away from them in Europe, in Car News. Their replacement will be a direct sales model.
Mercedes-Benz plans to cut between 15 and 20 percent of its dealerships in Germany, and about 10 percent globally, as part of an overhaul of its distribution network, executives said.
Mercedes is also moving toward a more direct sales model – or “agency”, and is targeting 80 percent of European sales through this method by 2025, for a total of 20 markets, from five markets today.
At the same time, Mercedes is targeting 25 percent online sales by 2025.
Part of the reason they do this is to save on distribution and to exercise more ‘price control’. In other words, charge more.
The automaker says the moves will lower distribution costs and allow it to dampen incentives as the automaker seeks to move to a higher level than the market as average selling prices rise.
“We want to be closer to customers, and therefore have better control over prices,” Chief Financial Officer Harald Wilhelm said last week on Mercedes’ Capital Markets Day. “This is why we are moving away from the current merchant role.”
Mercedes has not indicated whether the dealership’s consolidation plans will affect the dealer base in the United States.
Car News He posted a story about a year ago covering efforts in multiple states across the United States to allow direct car sales. Legislation in Europe is more lenient on this sort of thing, so think of that area as a test of what automakers will be trying to push to do here down the line.
Fourth gear: BMW needs to diversify its energy supply
The embargo on Russian oil has caused great concern in the auto industry, especially in Europe. Germany finds itself in a particular predicament, as it is the continent’s number one customer for Russian energy and The second largest spender in the worldbehind China. This prompted BMW to redouble its efforts in looking for alternative sources, which seems like a pretty big thing to do all of a sudden, in a relatively short period of time. from Reuters:
The automaker, which relied on natural gas for 54% of its energy consumption in 2021, is studying where it can add solar panels to its plants and is making plans with local authorities to transport hydrogen to its plant in Leipzig, Germany.
“Hydrogen is very suitable for reducing or even completely offsetting the demand for gas,” [BMW board member] Milan Nedelkovic said.
When asked what would happen to BMW plants if gas deliveries from Russia were to be halted, he said: “Our industry accounts for about 37% of natural gas consumption in Germany.” “Not just BMW but the entire sector will stop.”
BMW’s plans reflect broader preparations underway across German industry to shift away from Russian gas and come up with a system to ration available supplies in the event of a sudden stoppage of delivery.
Germany’s attempts to ration gas and wean itself off Russian dependence on its own schedule could be accelerated if Russian companies start cutting supplies due to missed payments, as has already happened in Finland.
Fifth gear: Mercedes-Benz must have been “drunk” on the Green-Light One
We end this highly German-focused Morning Shift with a comment that actually came from the CEO of Mercedes, who recently seemed to regret giving Project One hypercar his seal of approval. from Autocar:
The team at AMG and [AMG] The high-performance powertrain arm in Formula 1 came to us about four years ago and said, “We have a great idea, to put a Formula 1 engine in a road car.” “I’ll have to go back to check the minutes, but I’m sure we were drunk when we said yes,” said Callinhos in Monaco when asked when the meeting would come into its final form.
In Kallenius’ defense, in 2018, there was no pandemic, no supply chain shortages, no war in Ukraine and no danger of a global recession. That’s not to say the company’s board of directors couldn’t scrap the car after those things happened, though, so he’s too good to stick with the plan. Personally I don’t lose sleep whether 275 people can afford one project they get, but there’s just something nice about automakers monitoring build the damn thing far away. We should hear an official update on Project One soon.
Back: The race is over
Neutral: Don’t forget the W supercarse lost
This Project One quote reminds me, Toyota still owes us one.