Why Bitcoin-Mining May Be Elon Musk"s Next Big Problem...

If you thought Tesla was burning cash now, wait until this latest scheme goes mainstream...

As EcoMotoringNews.com reports, some creative Tesla owners came up with a way to make a few bucks from their parked EVs: Cryptocurrency mining.

This raises questions that shouldn’t just be aimed at bitcoin mining, or even electric vehicles.

For those unfamiliar, cryptocurrencies only work because there is a network of distributed computing that processes the transactions. To reward those offering the computing power, cryptocurrencies give fractions of new bitcoins to those who did the work of running the network. This is referred to as “mining” bitcoins and other cryptocurrencies. This was an expensive and power-hungry task that could wear out computer components much faster than usual.

Initially, many doing this used high-end graphics processing units, but as the money earned per device diminished, miners turned to specialized computer units, called ASICs, to do the task faster with less electricity. But the units are still not free and they still can use kilowatts of electricity for a handful of them. To reduce the overall cost of running mining computers, some miners put the computers throughout their homes to act as small space heaters and reduce their heating bill. Others run their rigs on solar panels to avoid a monthly power cost.

Any source of electricity you don’t have to pay the normal rate for, or that you don’t have to pay for at all, is an opportunity for miners to increase their already thin profits. Teslas and other EVs have free access to power at many charging stations, so it was probably only a matter of time until somebody decided to plug their mining computers in.

One member of the Tesla Owners Worldwide on Facebook suggested the idea, possibly in jest. Then another owner went ahead and did it, posting a photo of his setup (above). Some members suggested that his setup could pull as much as 3 kilowatts of power and would probably require the vehicle’s air conditioning to be on for cooling. Other members raised ethical questions.

Is it stealing to use the power for something other than driving?

On the one hand, this could be a good way to offset the cost of owning an electric vehicle. On the other hand, it lowers the efficiency of the vehicle and increases the environmental impact. But then again, the mining was going to be done somewhere anyway, so does it really? Will many EV owners do this? Will they do it at places they were going to charge anyway, or will there be opportunistic fleets of EVs blocking up charging stations to make a quick buck? How will charging station owners respond?

But really, these questions shouldn’t just be aimed at bitcoin mining. Computing power is going to be in higher and higher demand going forward. Self-driving cars are already running on graphics processing units like bitcoin miners once all used. Infotainment systems are getting more and more powerful, and that power needs to come from somewhere. Mobile devices used by passengers are going to need more and more power to charge. Even beyond that, there are “V2H” systems that can run a house on an electric vehicle’s battery, and that goes far beyond the tiny bit of power needed to run a few mining computers.

And these questions shouldn’t just be applied to electric vehicles. Many of these power strains will apply to hybrid, regular gas and regular diesel vehicles. Alternators, the parts that charge most car’s 12v batteries, are already a big part of the car’s fuel consumption. Ecomodding hobbyists have gained as much as 15% fuel efficiency by removing them, and that amount is only going to grow as more demand is placed on it. Some companies are suggesting waste heat recovery to generate the electricity needed for the future.

When we look at these wider power issues, it becomes clear that bitcoin mining is just a drop in the bucket. Even if a large number of EV owners did it, it would still be nothing compared to the other computing future cars will eventually be doing. Where that power is going to come from is a good question we shouldn’t just be aiming at the odd bitcoin miner.

"This Is A Tax Bomb": Norway Considers Massive "Tesla Tax"

Elon Musk can"t seem to catch a break lately with cash burn rates surging to new highs every quarter and embarrassing rumors suggesting that the company, one that was supposed to be the most technologically sophisticated auto manufacturer in the world, has been making parts by hand to try to get Model 3s on the road.

Now, after being one of the largest contributors to Musk"s taxpayer-funded enrichment scheme for years, the country of Norway may have just decided that enough is enough with legislators considering a new tax for buyers of electric cars that weigh over two tons...which, as of now, would pretty much only include Teslas.  As the Financial Times notes today, the proposal could tack on a massively punitive $10,500 tax to the purchase of every Tesla in Norway.

Norway is proposing a “Tesla tax” that would hit owners of the heaviest electric cars in a move that critics say will undermine the Scandinavian country’s standing as a pioneer of zero-emission vehicles.

Sales of electric cars and hybrids accounted for 60 per cent of new vehicle sales in Norway last month, fuelled by extensive subsidies in taxes, tolls and parking fees.

But the centre-right minority government in Oslo is now proposing a one-off tax on all electric cars that weigh more than two tonnes — something that at present would predominantly target Teslas and potentially add up to NKr82,800 ($10,500) to the cost of buying one.

“This is a tax bomb. This is gambling with the whole electric vehicle market. It is a bad signal to send and will affect consumers,” Christina Bu, general secretary of the Norwegian Electric Vehicle Association, told the Financial Times.

To date, Norway has been by far the biggest adopter of electric cars and has vowed to sell only zero-emission new vehicles by 2025. But critics argue that their popularity comes down to an extremely generous set of subsidies that can cut the price of the most expensive Teslas by about NKr450,000.

When and how to withdraw those subsidies has sparked a huge political debate. Some Norwegian politicians point out that many of the early adopters of electric cars were rich households buying Teslas. Bus drivers in the richest parts of Oslo complain that bus lanes are clogged with electric cars, which are permitted to use them.

Before the tax proposal on Thursday, Andreas Halse, environmental spokesman in Oslo for the opposition Labour party, said although electric cars generated no emissions they contributed significantly to congestion in the capital as well as damaging roads because of their weight. “It is not just about emissions; there are other considerations, too, such as the use of cars versus public transport,” he added.

The new tax proposals would add at least NKr36,000 and as much as NKr82,800 to the cost of the Tesla Model X, a sport utility vehicle popular in Norway because of its ability to tow trailers, a feature appreciated by families who own mountain cabins.

Of course, as Morgan Stanley recently pointed out, Teslas and other EVs have recently been found to actually generate more CO2 than they save in many countries around the world.  As a stark reminder to our left-leaning political elites who created these companies with massive taxpayer funded subsidies, Morgan Stanley pointed out that while Teslas don"t burn gasoline they do have to be charged using electricity generated by coal and other fossil fuels.

This is where Tesla, along with China’s Guoxuan High-Tech fall short.

“Whilst the electric vehicles and lithium batteries manufactured by these two companies do indeed help to reduce direct CO2 emissions from vehicles, electricity is needed to power them,” Morgan Stanley wrote. “And with their primary markets still largely weighted towards fossil-fuel power (72% in the U.S. and 75% in China) the CO2 emissions from this electricity generation are still material.”

In other words, “the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions.”

Morgan Stanley calculated that an investment of $1 million in Canadian Solar results in nearly 15,300 metric tons of carbon dioxide being saved every year. For Tesla, such an investment adds nearly one-third of a metric ton of CO2.

Could it be that Tesla might one day have to compete in a world without the benefit of massive taxpayer-funded subsidies?  One can dream...

China's Electric (A.K.A. Coal-Fueled) Car Companies Soar On Promise Of Petrol Vehicle Ban

A few weeks ago we highlighted an "inconvenient fact" for the publicly traded electric car manufacturers and the environmentally-conscious Left, namely that, according to Morgan Stanley, electric cars generate more CO2 than they save.  As a stark reminder to our left-leaning political elites who created these companies with massive taxpayer funded subsidies in the United States, Morgan Stanley pointed out that while electric cars don"t burn gasoline they do have to be charged using electricity generated by coal and other fossil fuels.

This is where Tesla, along with China’s Guoxuan High-Tech fall short.

“Whilst the electric vehicles and lithium batteries manufactured by these two companies do indeed help to reduce direct CO2 emissions from vehicles, electricity is needed to power them,” Morgan Stanley wrote. “And with their primary markets still largely weighted towards fossil-fuel power (72% in the U.S. and 75% in China) the CO2 emissions from this electricity generation are still material.”

In other words, “the carbon emissions generated by the electricity required for electric vehicles are greater than those saved by cutting out direct vehicle emissions.”

Morgan Stanley calculated that an investment of $1 million in Canadian Solar results in nearly 15,300 metric tons of carbon dioxide being saved every year. For Tesla, such an investment adds nearly one-third of a metric ton of CO2.

Which seems like the perfect backdrop to report on the recent comments of Xin Guobin, vice-minister of industry and information technology, who told a forum in the northern city of Tianjin over the weekend that his ministry had started “relevant research” for establishing a timeline to phase out petrol and diesel vehicles in the Chinese market.  According to The Guardian, Xin said the policy would be implemented "in the near future."

“These measures will promote profound changes in the environment and give momentum to China’s auto industry development,” he said in remarks broadcast by CCTV state television.

“Enterprises should strive to improve the level of energy saving for traditional cars, and vigorously develop new energy vehicles according to assessment requirements,” he said.

China produced and sold more than 28m vehicles last year, according to the International Organization of Motor Vehicle Manufacturers.

Ironically, China generates 65% of its power, more than double the U.S., from the "dirtiest" fuel available: coal.  So, while the move to electric cars will undoubtedly be praised by blissfully ignorant politicians and environmental lobbyists, the end result will be even higher carbon emissions.

Of course, this is hardly a China-centric development as Bloomberg recently noted that almost 80% of the global auto market is pushing toward a phase-out of petroleum cars in favor of more "environmentally friendly" electric vehicles.

Meanwhile, aggregate global electric vehicle sales are expected to overtake internal combustion engines within about 20 years.

Ironically, the end result of this effort to "save the environment" will be more expensive vehicles, landfills full of lithium-ion batteries and more coal-fired generation plants...but, somehow we suspect those "inconvenient facts" are lost on our politicians and enviros who seem determined to subsidize Elon"s trip to Mars.

Oh well, at least electric car investors in China are having a good day...

China"s new energy car shares surging, after govt official said over the weekend China to make timetable for banning diesel and petrol cars pic.twitter.com/uIeZkilMhZ

— YUAN TALKS (@YuanTalks) September 11, 2017

Will EVs Break The Grid?

Authored by Tsvetana Paraskova via OilPrice.com,

While the UK government has vowed to end the sale of all new conventional gasoline and diesel cars by 2040, as part of a wider plan to fight air pollution, there is talk that electricity demand will lead to a fast and dirty response to a strained power grid.

But here’s what everyone’s missing in that debate: While EV sales are going to rise and electricity demand to power them will strain the grid and lead to less-than-ideal power generation solutions, the whole plan will help clean power generation to increase its market share.

Nothing is black and white. And big transformations are never immediate. We’re not talking about an overnight elixir that will magically clean up the air; we’re talking about a step-by-step process that is gradually less dirty.

Overloading the Grid (Mind the Gap)

The UK’s National Grid anticipates peak demand from electric vehicles alone being around 5 GW, which represents an 8 percent increase from today’s peak demand.

This peak demand forecast assumes what the National Grid calls the “Two Degrees” scenario, in which most cars would be EVS, with only 6 percent of them hybrids. But by 2045, only pure EVs would be on sale.

According to Wood Mackenzie, the UK plan to ban the sale of new gasoline and diesel cars by 2040 “will have a massive impact on the refining sector and the oil markets.”

To handle the extra peak demand, the most flexible way is to build open-cycle gas power plants.

One of the options for a “rapid response” plug-in capacity to make up for shortfalls could come from certain open-cycle gas-fired plants that are more polluting and less efficient.

So, while it’s still better than burning coal, the massive anticipated demand for energy to power up EVs on British roads may require some additional environmental triage - but, again, this is to be expected if renewables are ever to gain the market share they need to bring prices down and make it all mainstream. 

The first step is dealing with coal-fired plants, which the UK is proposing to close by 2025. And open-cycle gas-fired plants are certainly cleaner than coal, even if they aren’t the end-all ideal.  

Coal is rapidly losing share in the UK electricity generation fuel mix, while natural gas and renewables are boosting their respective shares. Coal’s share dropped to 11.3 percent in Q1 2017 from 15.9 percent in Q1 2016, government figures show.

At the same time, natural gas boosted its share to 39.9 percent from 37 percent a year earlier, while the renewables share increased to 26.6 percent in Q1 2017, from 25.6 percent in 2016.

Open-cycle plants may be more polluting than combined-cycle gas power generation, but their flexibility could help keep the system stable while increasing the share of renewables, according to Drax Group plc which is responsible for generating 7 percent of the UK’s electricity.

Drax is developing four rapid response gas power plants to increase the flexibility, Drax Power CEO Andy Koss said earlier this month. Once the plants are given consent, they will secure Capacity Market contracts and become operational in the early 2020s.

A spokeswoman for Drax told Bloomberg that under UK environmental regulations, such plants are allowed to be operated for a maximum of three months a year, and the company doesn’t expect to operate the units for that long. 

The UK subsidiary of Germany’s utility RWE plans to submit proposals to redevelop the former site of coal-fired and biomass plants in Tilbury, Essex, into a CCGT with capacity of up to 2,500 megawatts, 100 MW of energy storage facility, and a 300-MW open-cycle gas turbines plant.

No Fighting the EV Wave

Across Europe, EVs are on the edge of a major breakout—and they have a lot of help from the government and an excited auto industry.

But it’s also getting a boost from European Union regulations, which dictate that by 2021, the average emissions of all new cars sold must be 40 percent less than today—a challenge that can only be met with EVs.

In the meantime, Norway leads the way, with almost 40 percent of all new registered passenger cars now EVs. The country also now boasts the biggest fast-charging station in the world (28 cars can be charged in 30 minutes).

The Netherlands is the No. 2 leader in EVs, and is phasing out all conventional cars by 2025.

In July, plug-in EV sales hit a record 1.50 percent market share in Germany.

This is the new era in ‘electromobility’, and 2017 is a definitive one. Though questions remain about powering up these vast new fleets of EVs, we’re not at the finish line yet. Norway, for one, isn’t concerned in the least: 98 percent of its electricity comes from hydropower, so it’s about as clean as it can be.

Denmark has also come up with a creative solution … it’s using parked EVs to feed back into its grid--and even paying EV owners to do it. Vehicle-to-Grid (V2G) models working under the Parker Project in Denmark, and in collaboration with Nissan, Mitsubishi and others—can both receive grid electricity and give it back, helping to solve the peak demand issue. According to Bloomberg New Energy Finance, owners are earning up to $1,530 per year doing this.

At the end of the day, the UK, too, will find an answer, but the EVs have to come first because the market must dictate terms.

Electric Car Fever

Authored by Eric Peters via EricPetersAutos.com,

Maybe you remember Disco Fever.

Mid-70s, United States. For no apparent reason, suddenly everyone seemed to be singing in a high-pitched falsetto voice and wearing skin-tight lycra with open collared shirts displaying chest hair and gold medallions.

It was fun for awhile but got old fast.

Electric Car Fever is now upon us. Laws are being passed – the Brits being the latest – mandating the production of electric cars by outlawing the production of cars powered by internal combustion.

This will get old fast, too.

King Canute could decree that the tide not come back – and politicians can decree that we’ll all be driving electric cars by “x” year, not too far from now. But wishing – and decreeing – can’t overcome reality. It can just make things really expensive and difficult for us.

One reality almost no one seems willing to talk plainly about is the fact that hundreds of thousands of electric cars queuing up to spend 30-45 minutes each at a recharging port is as ludicrous in concept as waiting that long at McDonald’s to get a burger. Especially when there is a Wendy’s across the street that’ll get a burger in your hands and you back on the road in less than 5 minutes.

Most people will never accept this. Would you accept waiting 30-45 minutes (absolute best-case scenario, if a “fast” charger is available) to put a partial charge back into your EV? Were you aware that at the high-voltage “fast” chargers, due to the nature of the thing (and for the sake of battery life) you cannot put more than 80 percent charge back into the thing?

So, whatever the advertised best-case range of the car is, subtract 20 percent.

That puts even the longest-ranged of them in the same class as the fiercest-guzzling IC-engined SUV. Maybe 200 miles or so. But the fierce-guzzling SUV can be refueled to 100 percent in 5 minutes.

Which would you prefer to take on a road trip? One where there might not be a “fast” charger available when you run out of juice. What then?

Then, you spend overnight wherever you happen to be.

Electric car freaks peddle a Disney-esque fantasy to counter this objection. They envision everyone plugging in at home, overnight – or at work, while they work. The problem with this idea is the ant-like uniformity of use it assumes. Everyone going to work – and back home – at pretty much the same time.

A middling-bright eight-year-old would be raising his hand about now.

American driving patterns are scattershot. People are individuals and have individually variable schedules. They work odd hours. Part-time. They need to go Here – and then There.

On the spur of the moment, not planned in advance.

Have a look outside and see whether you see vacant streets during the hours in between 9 and 5. Then a sudden effusion of cars and people migrating homeward.

How about . . . traffic? It’s quite true that an electric car’s battery isn’t being drained to move the car when it’s not moving, as when it is stuck in traffic. But if you are running the AC (or the heater) and the lights you are drawing volts – and running the battery down. Keep in mind the best-case 30-45 minute wait to “fill ‘er up.”

It’s so laughable it’s painful.

The reality of EV World would be conga queues that would make the gas lines of the early ’70s (the result of oil embargoes, not lack of oil) seem like a minor irritation in comparison.

The Conga Effect would multiply, too – as  (potentially) hundreds of thousands of EVs jockey for a slot at a charging port. Imagine a gas station, right now, with each EV taking a minimum of 30-45 minutes to finish its business.

Certifiable.

Leaving aside the economic absurdity of electric cars – the least expensive of them cost in excess of $30,000 (heavily subsidized, the true cost is much higher) which renders retarded any talk of “saving money” when you could buy a more functionally competent IC-powered car for half that sum – there is one non-negotiable technical/practical hurdle that must be overcome before EVs could conceivably replace IC-powered cars on a mass scale:

They must be able to get back on the road within 5 minutes. Even a 15 minute wait is unacceptable. Five minutes. No more.

Or – as a compensatory fix – an EV must be able to travel at least 600 miles before needing to be recharged.

Absent one or the other, the whole scheme is preposterous. Either that or deliberately calculated to be ruinous.

Which may well be exactly it.

The people pushing electric cars are well aware of the realities discussed above and – their pie-in-the-sky assurances notwithstanding. By pushing cars that don’t work and which they know don’t work, they may be deliberately trying to recreate the world that existed before Henry Ford gave the world the Model T.

Which made cars affordable.

Before the T, cars were expensive extravagances, the toys of the rich.

Sound familiar?

From a certain point of view, affordable mobility is not desirable. That is to say, independent mobility. It is harder to control, encourages random and unpredictable patterns of human activity – the kind of activity loathed by the central planning, nudging technocrats who are (among other things) pushing electric cars.

The question is – will there be any push back?

And will it come in time?

Volvo Just Announced It Will Ditch Gas-Powered Engines in All New Models by 2019

(ANTIMEDIA) — Providing further evidence that the day of the gas-powered car is all but done, one of the old guard members of the auto industry just announced that within two years, all its new vehicle models will be based on emerging technologies. From a Reuters report on Wednesday:

“All Volvo car models launched after 2019 will be electric or hybrids, the Chinese-owned company said on Wednesday, making it the first major traditional automaker to set a date for phasing out vehicles powered solely by the internal combustion engine.

“The Sweden-based company will continue to produce pure combustion-engine Volvos from models launched before that date, but its move signals the eventual end of nearly a century of Volvos powered solely that way.”

Volvo has plans to launch five new models from 2019 through 2021. Three of those models will be produced by Volvo itself, while two will be developed by Polestar, a subsidiary of the automaker that’s currently being reshaped to focus solely on electric vehicles (EVs) in an effort to compete with Elon Musk’s Tesla.

Speaking to Reuters about his company’s future investments, Volvo Cars CEO Hakan Samuelsson said that at this point, dumping tons of cash into the development of fossil fuel-based technologies just doesn’t make sense.

“We of course will not be developing completely new generations of combustion engines,” he said, adding that part of Volvo’s strategy is to join the race to produce the fully-functional self-driving car. “This means that there will in future be no Volvo cars without an electric motor.”

One of the primary obstacles to the reality of roads full of EVs — and, eventually, self-driving cars — has been infrastructure. But as Anti-Media reported last week, this obstacle may not exist for much longer. From a June 30 article:

“Chargepoint, the company that maintains the largest network of EV charging stations on the planet, published press release Thursday announcing it had just secured $43 million in funding from Siemens, a corporation Chargepoint calls a ‘global powerhouse in electrical engineering and electronics.’

“The funding comes in addition to money provided by other investors with a stake in the game and brings the total for this latest round of Chargepoint’s financing to $125 million”

Additionally, it was reported last week that Chargepoint also just purchased all of General Electric’s EV charging stations, bringing the company’s total number of independently-owned spots to 36,000.

Creative Commons / Anti-Media / Report a typo

Carmageddon: Record Incentives And Financing Terms Fail To Stem The Auto Bleeding In June

Yesterday we noted that auto investors celebrated the fact that, while auto sales were down massively year-over-year (to the tune of nearly 6% for the Detroit 3), June figures were "less bad" than expected, so "good".  All of which sparked even more "irrational exuberance" among OEM equity owners and sent Ford/GM shares soaring. 

But, rather than focus on the headline numbers, perhaps those equity owners should spend a little more time analyzing the record incentives and deteriorating underwriting standards that have been required to generate those "less bad" results.

Take, for example, incentive spending for the month of June.  As Automotive News points out, overall industry incentive spending soared nearly 10% YoY with brands like Hyundai and Honda slashing 42% and 20%, respectively, to move their bloated dealer inventories.

ALG reports automakers spent an average of $3,550 per new vehicle sold in June, up 9.7 percent from a year ago. The average discount is expected to account for 10.8 percent of the average transaction price of vehicles sold last month -- marking the 11th time in the past year that incentive spending has accounted for 10 percent or more of the sale price, according to industry forecasters.

Autodata Corp. says average incentive spending heading into June was up 15 percent to $3,516 per vehicle sold. Despite weakening demand for cars, incentive spending for light-duty truck increased 16 percent compared to 13 percent for light-duty passenger cars during the first five months of the year.

American automakers, which continue to offer the most cash on the hood, matched the industry average for incentive spending, up 14 percent through May, while average discounts at Asian brands increased 19 percent and deals at European automakers rose only 3.9 percent.

ALG reported Subaru, Hyundai and Kia experienced the largest increases in incentive spending in June compared with a year ago. Average discounts at Subaru -- the lowest spender in the industry -- increased 63 percent to $1,032; followed by Hyundai, rising 42 percent to $3,259; and Kia, with an increase of 25 percent to $3,384.

Meanwhile, Edmunds notes that auto loan terms continue to get stretched out to record new highs each month all in an effort to continually lower monthly payments so that entitled Americans can buy cars they really can"t afford.

Edmunds analysts found that the average loan term for new vehicles soared to a record high of 69.3 months in June, an increase of 1 percent from June 2016 and up 6.8 percent from five years ago. In addition, the average amount financed by new-car buyers jumped to $30,945, which is a 2.6 percent increase from this time last year and 17.2 percent more than five years ago. And the average monthly car payment is now $517: That"s 2.1 percent more than in June 2016 and an 11.3 percent increase over five years.

"Stretching out loan terms to secure a monthly payment they"re comfortable with is becoming buyers" go-to way to get the cars they want, equipped the way they want them," said Jessica Caldwell, executive director of industry analysis for Edmunds. "It"s financially risky, leaving borrowers exposed to being upside down on their vehicles for a large chunk of their loans, but it"s also a sign that consumers are still confident enough in the economy to spend more on their vehicles and commit to paying for them longer."

And it"s not just new car loans as used car terms are getting stretched out as well...a fact that we"re sure will serve consumers well if Morgan Stanley"s downside case for used car prices ever actually plays out (see "Morgan Stanley: Used Car Prices May Crash 50%").

Consumers in the market for a used vehicle are also willing to stretch their payments. An Edmunds analysis found that the average loan length for a used car is now 66.9 months, up 0.1 percent from June 2016 and up 6 percent than five years ago. The average amount financed has risen to $21,142, a 0.4 percent jump from last year and an increase of 9.9 percent over five years. And the average used-car payment in June was $383, which is 0.8 percent more than a year ago and up 3.5 percent from five years ago.

And don"t even get us started on the record level of "channel stuffing" going on the industry...

...with GM being the biggest culprit with inventory days up a modest 46% YoY to an all new record high of 105 days.

???? GM"s inventory has officially hit a 10-year high. 980,454 units in stock (a 105-day supply) as of June 30, the most since June 2007.

— Nick Bunkley (@nickbunkley) July 3, 2017

Finally, as Stone McCarthy Research points out, Americans, flush with their $0 down, 0% interest for 84 month auto loans, continued to shun cars for much more expensive, and profitable, trucks and SUV"s.  Another "positive" for the industry...if you manage to ignore those record incentives we mentioned above which are eroding away all that extra profit.

General Motors domestic car sales came in much lower than we expected, and declined nearly 34% from June 2016. Their domestic light truck sales were much stronger than we expected, and were up over 7% from last year.

Domestic car sales were weaker than expected for Ford as well, and fell 23% from last year. Ford domestic light truck sales also came in below our expectations, though were not weak as ford domestic car sales, and were only up about 6% from June 2016.

Chrysler domestic light car sales came in right where we expected, down 19% from last year. Domestic light truck sales for Chrysler were below our expectations though, and fell around 3% from last year.

Car sales:

Truck sales:

Of course, things like math and critical thought are way more complicated than quickly reacting to "less bad" headlines.  That said, in the long run, math and logic tend to prevail.

 

JD Power Lowers 2017 Auto SAAR As High Discounts "Threaten Industry's Long-Term Health"

After a disappointing March for the auto OEM"s, a hopeful wall street has set it"s sites on a rebound in April with consensus SAAR estimates currently set at 17.25 million, up from 16.53 million in March.  Per the chart below, the March 2017 print for auto sales was the lowest in over two years, despite massive incentive spending by the OEMs.

Of course, OEMs didn"t bother to adjust production levels to sinking sales which pushed inventory days to the highest March print since 2009.

But while wall street seems to be in a phase of perpetual optimism, JD Power and LMC Automotive have decided to lower their expectations for 2017 sales and warn that consumer discounts remain high enough to "threaten the industry"s long-term health."  Per Reuters:

U.S. auto sales in April likely fell almost 2 percent from a year earlier, with consumer discounts remaining at levels high enough to threaten the industry"s long-term health, industry consultants J.D. Power and LMC Automotive said on Tuesday.

The consultancies also lowered their full-year 2017 forecast for new vehicle sales to 17.5 million units, from a previous forecast of 17.6 million.

April U.S. new vehicle sales will be about 1.48 million units, a drop of nearly 2 percent from 1.51 million units a year earlier, the consultancies said.

The forecast was based on the first 13 selling days of the month. Automakers are expected to report April U.S. sales results on May 2.

The seasonally adjusted annualized rate for the month will be 17.5 million vehicles, flat versus the same month in 2016.

Of course, as we"ve noted numerous times before (see "Morgan Stanley: Used Car Prices May Crash 50%"), the real story with the auto industry isn"t the sinking SAAR levels but rather the growing level of incentive spending required to keep sales from crashing even further. 

"While industry retail sales pace remains high, it is being powered by elevated levels of incentive spending which pose a serious threat to the long-term health of the industry," said Deirdre Borrego, senior vice president of automotive data and analytics at J.D. Power.

Excessive discounts can help sell new vehicles, but undermine resale prices.

The consultancies said consumer discounts averaged $3,499 per new vehicle sold, the highest ever for the month of April. The previous record was set in April 2009, during the height of the Great Recession.

But, auto investors don"t seem to be all that worried so we"re sure everything will work out just fine when OEM"s release April sales on May 2nd.

Auto Industry Resorts To Biggest Incentives Ever To Slow Decline In Sales

Submitted by Wolf Richter of WolfStreet

The Last time automakers tried this was in 2009!

In a few days, automakers are going to report their new vehicle deliveries for March. TrueCar, Kelley Blue Book, and LMC Automotive are predicting total vehicle sales slightly above the flat-line compared to March a year ago, though sales were down year-over-year in both January and February.

TrueCar forecasts an increase of 0.2% year-over-year to 1.586 million new cars and light trucks, with retail deliveries (excluding fleet sales) growing 1% to 1.276 million units. J.D. Power and LMC Automotive said on Friday that they expect an increase of 1.9%, to 1.62 million units, with retails sales up 1%, boosted by record incentives.

If sales nevertheless fall, everyone will blame the winter storm that arrived in the winter – “unexpectedly” or something. And it is possible that sales might fall. There was no winter storm in February, which was one of the warmest Februaries on record. Yet, sales in February fell 1.1% year-over year. They edged down in January too. And sales in both months combined fell 1.4% from the same period a year ago.

It’s not like automakers haven’t been trying. They paid out record incentives to accomplish this feat of slowing down the sales decline. In February, the industry in the US shelled out on average $3,587 per vehicle in incentive spending, per TrueCar. It was the highest ever for a February.

We’ll get to the March incentives in a moment. Just a quick word on what transpired in February. The table below shows average incentive spending per unit sold:

Some standouts among US brands:

• GM clocked in at over $5,125 per unit in incentives. That’s apparently what it took to get its sales to rise 4% year-over-year.


• Ford, which has been priding itself in its “disciplined approach” to incentives, spent over a grand less, $4,011 on average, and its sales declined 4%.


• Fiat Chrysler may be beyond help. That’s perhaps why CEO Sergio Marchionne has been so desperately looking for a buyer. FCA spent $4,362 per unit on incentives in February, as total sales still plunged 10% and are down 11% for the first two months.


• Car sales for GM, Ford, and FCA plunged 23%, 24%, and 26% respectively. While GM and Ford showed gains of 16% and 5% respectively in light truck sales, FCA couldn’t even do that, and its trucks sales fell 7%.

These are averages per unit: At $5,125 per unit at GM, there may be some models with $10,000 in incentives and others with none, depending on what GM needs to move at the moment, based on inventories on dealer lots, production, and profit margins (that range from very fat on high-end pickups to very slim on small cars).

For March, J.D. Power and LMC Automotive pegged incentives at $3,768 per new vehicle sold – the highest ever for any March. The prior record for March was achieved in 2009 as the industry was collapsing. In June 2009, GM filed for bankruptcy.

By these estimates, the incentives in March would amount to 10.4% of suggested retail price, in the double digits for the first time since 2009. These are some seriously desperate incentives!

TrueCar estimates that incentive spending in March rose 13.4% year-over-year to an average of $3,511 per vehicle sold. But this would be 2.1% lower than the desperate incentives in February:

Some standouts:

• GM cranked up its incentives by 21.4% from a year ago, but dialed it back 4.5% from February.


• Honda increased incentive spending 27% year-over-year, and increased it 2.9% from February.


• FCA, which had already been dousing the market with incentives a year ago, increased it another 7% year-over-year, but remained about flat with February.


• Subaru, lowest on the list with a modest $901 in incentives per unit sold, nevertheless felt it needed to crank them up by 59% from a year ago.

And look at the total dollar amounts spent in March: $5.54 billion! In just one month! GM alone spent $1.3 billion in March.

If GM piles on incentives at this rate three months in a row, it would spend nearly $4 billion on incentives, in just that quarter, just in the US alone. How much dough is that for GM? In Q1 2015, GM reported global net income of $2.0 billion. In Q1 2015, it reported global net income of $0.9 billion. These incentives can eat an automaker’s lunch in no time. And they did in the years before the industry collapsed during the Great Recession.

For consumers in the mood, there’s an old saw: “Good deals are made in tough times.”

But not for automakers. They face another reality: Sales have peaked. The seven-year up-trend has ended. Pent-up demand from the Great Recession has disappeared. Trading is getting more difficult, with falling used vehicle prices and rising interest rates. Subprime lending is facing real hardship. And these enormous incentives are now required just to keep sales from falling more quickly, and to defend market share against other desperate automakers and their incentives.

Is This The Sound Of The Bottom Falling Out Of The Auto Industry?

Authored by Wolf Richter via WolfStreet.com,

Not quite, not yet, but it’s not good either.

Let’s hope that the problems piling up in the used vehicle market - and their impact on new vehicle sales, automakers, $1.1 trillion in auto loans, and auto lenders - is just a blip, something caused by what has been getting blamed by just about everyone now: the delayed tax refunds.

In its March report, the National Association of Auto Dealers (NADA) reported an anomaly: dropping used vehicle prices in February, which occurred only for the second time in the past 20 years. It was a big one: Its Used Car Guide’s seasonally adjusted used vehicle price index plunged 3.8% from January, “by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble.”

The index has now dropped eight months in a row and hit the lowest level since September 2010. The index is down 8% year over year, and down 13% from its peak in 2014.

The price decline spanned all segments, but it hit the two ends of the spectrum — subcompact cars and the luxury end — particularly hard. The list shows the change in wholesale prices from January to February in vehicles up to eight years old:

NADA blamed three factors:

1. The surge in new vehicle incentive spending. Automakers, drowning in unsold inventories on dealer lots and desperate to move the iron and keep their plants running, increased incentive spending by 18% to the highest level in over a decade. This made new vehicle more competitive with late-model used vehicles. So this would be on the demand side.


2. The growing flood of used vehicles going through auction. Over the first two months this year, volume of vehicles up to eight years old rose by about 5% year-over-year. Volume of late-model vehicles – the supply from rental car companies and lease turn-ins – jumped 10%. So that’s on the supply side.


3. The IRS tax refund fiasco. Restaurants, retailers, and others are already blaming various February debacles on these delayed tax refunds. After the IRS was hit with millions of fake e-filed tax returns last year that claimed the Earned Income Tax Credit and the Additional Child Tax Credit, Congress required the agency to delay sending out refunds this year.

It’s big money. According to the IRS, refunds issued through February 10 plunged 69% from the same period a year ago. That’s $65 billion that didn’t make it into consumers’ bank accounts. But then the money was unleashed. In the week ending February 17, the IRS sent out a record $74 billion in refunds. By the week ending February 24, refunds were down only 10%, or $15 billion, year-over-year. So most of the problem was resolved by the end of February.

That might explain part of the problem on the demand side, at least at the lower end of the scale. But it’s hard to explain the plunge in prices at the luxury end. Also, these are wholesale prices. They don’t react instantly to a brief consumer cash crunch caused by tax-refund delays, now resolved. Something else appears to be going on.

The report, in attempting a forecast, cautioned:

February’s unusually soft showing makes pinpointing where used prices will go over the next few months a bit more challenging. However, given the slower than usual rollout of federal tax refunds, it’s assumed prices will be somewhat stronger in March and April than originally anticipated.

The Used Vehicle Index by Manheim, the world’s largest wholesale auto auction, didn’t pick up a massive drop in used vehicle prices over the past few months, though it too is showing some weakness. The index edged down 0.2% in February. The report pointed out that, “given a sharp decline in pricing in February of last year, the Manheim Index now shows a year-over-year gain of 1.1%.”

The index has dropped in six of the past seven months (chart), but in small increments, and as it says, “stability remains the watchword.” It too acknowledge headwinds for the market, including the “heavy new vehicle inventory and incentives,” and “a crazy tax refund season.”

Why are used vehicle wholesale prices important?

For one, they matter to lenders. Used vehicle wholesale prices determine the value of the collateral for $1.11 trillion in auto loans that have boomed on higher prices, higher unit sales, longer maturities (the average hit a new record of 66.5 months in Q4), and higher loan-to-value ratios (negative equity):

Dropping wholesale prices increase loan losses for lenders as recovery is lower. Declining wholesale values of lease turn-ins, if the trend persists, impacts how finance companies structure the lease terms, thus raising the costs for the customers and putting a damper on leasing activity.

All this puts pressure on new vehicle sales, further pushing automakers to pile on even larger incentives in order to move the units, grapple with inventories, and keep plants open. This works for a while – there’s nothing like big-fat incentives to bring out reluctant buyers. But incentives, when everyone is doing them, are front-loading sales. This is ultimately self-defeating and gets very costly even as sales begin to decline. It was a contributor in the collapse of the industry during the Financial Crisis.

And there are well-established patterns of customers switching between new vehicles and late-model used vehicles. Large incentives by automakers put pressure on late-model used vehicles. In turn, falling prices on the used vehicle side cannibalize sales from the new vehicle side. In other words, they compete with each other, often on the same dealer lot. Especially if demand is lackluster despite the incentives, these patterns can trigger a downward spiral that is difficult to get out of.

First oil & gas, then construction, then new vehicle sales. Read…  How Auto Sales Are Getting Crushed in Houston

Used Car Prices Crash Most Since 2008

Authored by Mike Shedlock via MishTalk.com,

According to NADA Used Car Guide, wholesale prices on used vehicles are getting crushed. Let’s take a look at the details.

Used Car Prices Since 1995

Used Car Prices by Type of Vehicle

Used Market Update

In a reversal of what typically occurs in February, wholesale prices of used vehicles up to eight years old fell substantially last month, dropping 1.6% compared to January. The drop was counter to the 1% increase expected for the month and marked just the second time in the past 20 years prices fell in February (last years’ scant 0.2% being the other instance).

NADA Used Car Guide’s seasonally adjusted used vehicle price index fell for the eighth straight month, declining 3.8% from January to 110.1. The drop was by far the worst recorded for any month since November 2008 as the result of a recession-related 5.6% tumble. February’s index figure was also 8% below February 2016’s 119.4 result and marked the index’s lowest level since September 2010.

Incentives Jump by 18.1%

Automakers grew incentive spending once again in February, making it the 23rd month in a row where spending was increased. On average, spending reached $3,594 per unit versus $3,043 per unit in February 2016 according to Autodata.

Among the U.S. Big Three, GM raised incentives by 27.4% in February to an average of $5,125 per unit. Spending at Ford Motor Company rose by 20.9% to $4,012 per unit, while FCA increased incentives by 10.6% to $4,365.

As for Import automakers, Toyota Motor Sales raised incentives by 7.9% in February, reaching an average of $2,267 per unit. American Honda grew incentives by 26.6% to $1,886, while Nissan North America increased spending by 20.1% to $4,080 for the month.

Inventory Falls to 74 Days

Compared to January, days’ supply fell by 11 days in February, landing at 74 days for the period. Looking back, February 2016 saw a supply of only 69 days according to Wards Auto.

GM’s supply reached 91 days over the month, due largely to Buick’s industry high 167-day inventory. Ford Motor Company’s supply fell to 78 days, while FCA’s inventory dropped to 83 days.

Toyota Motor Sales’ supply decreased to a lean 67 days, matching Nissan’s figure for 67 days for the month. Meanwhile, inventory for Honda fell to 74 days. Subaru’s 38 days of supply remained lowest in the industry.

As for luxury automakers, BMW’s inventory fell to 46 days, while Daimler inventory remained unchanged versus January at 44 days’ supply. Cadillac’s inventory of 107 days was the highest in the luxury sector, while Tesla’s two days was the lowest.

Desutche Bank is gravely concerned...

We’ve grown increasingly concerned about U.S. Used Vehicle Pricing down 7.7% yoy during February, per NADA. A decline in used prices has been widely anticipated given a significant increase in used vehicle supply (off-lease vehicles). But the magnitude of the recent drop was nonetheless surprising (February’s drop was largest recorded for any month since Nov. 2008). NADA cited a number of factors contributing to the drop, including an increase in late model auction supply from rental fleets, and delayed tax refunds. Used prices have a significant impact on New Vehicle demand/pricing through their effect on affordability (most new car purchases involve a trade-in).

New/Used Vehicle Pricing & Demand Relationship. Some consumers shift from New to Used when Used Vehicle prices become relatively more attractive, negatively impacting New Vehicle demand. Used price deterioration also has an impact on credit, as lenders watch loan loss severity (and frequency), and tighten when this stat. weakens (potentially creating a negative feedback loop). At a more macro level, used vehicle price weakness is also seen as an indicator of aggregate vehicle supply/demand imbalance in the economy–caused by new vehicles entering the parc significantly faster than the rate of scrappage and net new licensed driver growth. This situation should ultimately self-correct as new car sales come under pressure. That said, the biggest fear for investors is that Auto OEMs become incrementally more price aggressive to support New Vehicle sales. Historically, every 1% decline in Used Vehicle prices has corresponded with a 0.2% decline in New Vehicle prices.

Fundamentally Speaking

NADA partially blames late tax refunds for some of the declines in March.

While it’s true the IRS slowed claims for the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) to combat fraud, late refunds in 2017 cannot possibly explain an eight-month trend.

Yet, based on tax refunds, NADA expects a rebound in used car prices in March.

With massive incentives on new vehicles, I say, let’s see. Regardless, it’s pretty clear that car sales are slowing, and it takes bigger and bigger incentives to push them out the door.

Recall that on March 7, GDPNow 1st Quarter Forecast Plunges to 1.3% Following Vehicle Sales and Factory Orders Reports.

Also recall that the FRBNY Nowcast did not take auto sales into consideration.

On March 15, I reported GDPNow Forecast Dips to 0.9%: Divergence with Nowcast Hits 2.3 Percentage Points – Why?

Is this all related to slow tax refunds? We will soon find out.