Demand for cars is UP, not DOWN

It looks as though I actually can be wrong about everything.

From March 25, When do car makers cut prices?

Shouldn’t the car manufacturers be having coronavirus special deals? A car plainly isn’t worth as much as it was two months ago. Why are the prices mostly the same? Are people actually buying cars at a similar rate to what it was a year ago? Is the shutdown of car factories roughly balancing the collapse of demand? Even with the U.S. and Europe paralyzed, Japan and China are open for business, right? They can produce a ton of cars, can’t they?

We still don’t have that new car, but it looks as though I was dead wrong as usual: “Looking to Buy a Used Car in the Pandemic? So Is Everyone Else” (nytimes, yesterday). Excerpts:

Eager to avoid public transit and Uber, and to save money, buyers are emptying dealerships.

“Used cars are supposed to depreciate, but I’d look up the book value of a car on the lot and see it was higher than at the beginning of the month,” said Adam Silverleib, president of Silko Honda in Raynham, Mass. “I’ve never seen that before.”

Early in the pandemic, when many people avoided leaving home for all but the most pressing needs, carmakers offered no-interest loans for as long as 84 months to lure buyers. With new-car inventories low, such generous incentives have mostly disappeared.

I was only 90 percent wrong about new car demand:

Those fears might be overdone. Buying a used car does not increase the number of cars on the road, of course. And sales of new cars are not taking off. If anything, part of the sudden mania for used cars stems from the yearslong rise in the price of new cars and trucks. On average, new vehicles now sell for about $38,000, more than many consumers can afford or are willing to pay.

Speaking of wrong about everything, Senior Management likes the idea of a station wagon. These are rare birds on our Planet of the SUVs and I am seriously averse to the Karenmobile (Volvo). That leaves “How Subarus Came to Be Seen as Cars for Lesbians” (Atlantic: “it’s the result of a calculated, highly progressive ad campaign launched 20 years ago.”) and… what else? We saw an interesting looking car the other day, a Buick Regal TourX:

1.4 billion Chinese consumers can’t be wrong about Buick, can they?

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Tesla short pays off today: stock down to $500

My investment advice is almost as good as Nobel laureate Paul Krugman’s. On February 8, I implied that Tesla stock was overvalued. It was trading at around $700 then. Today it is only about $500. Now I can start an expensive subscription investment newsletter!

More seriously…. In a mostly static world where the average person has a car that will last another 15-50 years (depending on what travel and business restrictions his/her/zir/their state governor decides to order), how is this company worth $400 billion? Is it the incredible lameness of Tesla’s competitors? (Do any of them have Dog Mode yet? That was an obvious idea in 2003. Tesla introduced it in 2019.)

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Tesla implements my kid-in-hot-car alarm 17 years later

From 2003, “Lack of wireless Internet killing children”:

A recent AP story talks about the increasing number of children dying after being left in sealed cars by mistake. As a society we have 99% of the infrastructure necessary to prevent this. Most newer cars have an alarm system and automatic climate control. The alarm system implies a vibration sensor, a microphone (for glass breakage), and a little computer that is up and running all the time. The automatic climate control implies an interior thermometer.

With a bit of programming the car can recognize that (a) someone is inside the car making noise and moving around a bit, and (b) that the temperature is climbing to an unsafe level (or getting too cold in the winter). Now what? If we had a wireless Internet for the price of $3 in chips the car would be able to send an instant message to the owner and the local police to come back and check the car. (Of course you could do this now if you wanted to buy a $300/year cell phone subscription for the car, which is essentially what the GM OnStar system does, but most people wouldn’t be willing to pay the extra $300/year for something with such a low probability of ever being used. Hence the need for a better national infrastructure.)

From last week, “Tesla seeks approval for sensor that could detect child left in hot cars”:

Tesla Inc. asked the Federal Communications Commission (FCC) for approval to market a short-range interactive motion-sensing device that could help prevent children from being left behind in hot cars and boost theft-prevention systems.

So it wasn’t a terrible idea, but it did arrive 17 years after I thought it should have.

Related:

  • Car/Kennel (my 2003 plan for something like Tesla’s Dog Mode)
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We haven’t been using our car that much lately…

Perhaps we can get another year or two out of it?

(above vehicle is right next to the Minute Man National Historical Park’s Battle Road)

Meanwhile, I wonder if all of the bailout money has left the car dealers and manufacturers so flush that they don’t need to offer discounts. We still haven’t seen any “coronavirus offers” on new cars. Is that because factories are mostly closed around the world, except for Chinese factories making cars for the Chinese market? (Japanese factories could run, but they’re closed due to lack of demand? (and the lack of demand is partly due to the lack of any price cuts?))

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Why do we care about COVID-19 deaths more than driving-related deaths?

Working with third-year medical students involves much struggling with SQL, R, and data, but also chatting about the topics of the day. This year it is coronavirus, of course. Of the nine M3s that I work with most commonly, at least one believes that he has already had COVID-19 and recovered. Absent significant testing capability for infection or antibodies, however, these bright young people are as much in the dark as anyone else.

Leaving aside the true alarmists, estimates of likely U.S. deaths from COVID-19 seem to range from 50,000 to 500,000 in a “life goes on” scenario. The prospect of this many deaths has motivated us to shut down society and mobilize for what people say is a “war” (let’s hope it isn’t like any of the wars that the U.S. has fought and lost since 1960, e.g., Vietnam War, War on Cancer, War on Poverty, Iraq War, Afghanistan War, etc.).

This is as it should be, right? Let’s take a mid-range estimate. The prospect of 275,000 people dying is terrible and should motivate us to bold action. Yet roughly 36,500 Americans die every year in motor vehicle-related accidents (NHTSA data from 2018, the latest available).

This led to a discussion regarding human psychology. We are pretty confident that there will be more than 275,000 car-related deaths over the next 8 years in the U.S. Maybe this should motivate us to bold action, but it actually does motivate us to do almost nothing.

In the 24th year of the smartphone, we don’t bother with a car-to-smartphone communication system, for example, that would reduce pedestrian fatalities (since the car would know where all of the pedestrians were; I wrote about this in 2016; ordinary Bluetooth range seems to be roughly 100 meters outdoors). Considering the nation as a whole, we don’t invest much in separated (e.g., with a curb) bike lanes like they do in Denmark and Holland. We don’t cut the speed limit on the Interstate back to 55 or lower. We don’t say that cars have to have electronic governors so that it simply is impossible to speed (“I’m sorry, Dave, I feel you pressing the accelerator, but I can’t go faster than 35 mph on this stretch of road”). We don’t re-engineer the road network to eliminate traffic lights in favor of (a) traffic circles, and (b) overpasses. We don’t put in a car-to-traffic light communication system so that the car knows when the light is red and will hit the brakes before we inadvertently drive through an intersection (imagine a traffic light that broadcasts in Bluetooth “I am the light at Massachusetts Avenue and Vassar St. and am currently green for Vassar St.”). We don’t ask America’s nerds to stop working on clever Internet ad technology and try to come up with innovative ideas for reducing the carnage on our roads. We’re willing to invest $trillions to reduce the death toll from coronaplague, but hardly a dime to build centerline dividers on more of our two-lane roads so as to eliminate head-on collisions.

As with most discussions about psychology, we came to no conclusion!

Readers: What is the answer? Why do we accept that hundreds of thousands of Americans will die in the next 10-20 years because of our failure to invest in engineering and infrastructure today, but we can’t accept that up to hundreds of thousands of Americans will die in the next year because we didn’t do a sufficiently thorough shutdown?

Related:

  • Sweden’s Vision Zero, kicked off in 1997, which worked to reduce fatalities until it stopped working in 2013.
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When do car makers cut prices?

We’d like to buy or lease a new car, but right now we have two cars and almost nowhere to go. I expected to fight through traffic to Harvard Medical School every day this month. Instead, I’ve been on Webex and Zoom. There’s no point going to the supermarket, which has been stripped bare by the hoarding neighbors who, just a few months ago, were touting their superior virtue and empathy level compared to the out-of-state Deplorables who voted for Trump. We can’t go to the art museums, which are closed. We can’t go to restaurants, which are closed.

At the current rate of usage, our current fleet will last for at least 40 years (an aquarium maintenance service operator told us that she now has more than 300,000 miles on her Honda Odyssey!).

Shouldn’t the car manufacturers be having coronavirus special deals? A car plainly isn’t worth as much as it was two months ago. Why are the prices mostly the same? Are people actually buying cars at a similar rate to what it was a year ago? Is the shutdown of car factories roughly balancing the collapse of demand? Even with the U.S. and Europe paralyzed, Japan and China are open for business, right? They can produce a ton of cars, can’t they?

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Middle class Californians pay for all Tesla owners’ electricity

“Top Seventeen Surprises From The First Year Of Driving A Tesla EV” (Forbes):

I was amazed when my electricity bill went down after I got the car, rather than up. This is because in California, EV owners get access to a special electricity pricing plan that is much cheaper at night and more expensive in the afternoons. Charging the car at night is of course a win, but I also moved things like pumping the pool to the night, and so the overall bill dropped. And of course my gasoline bill went to zero for this car.

In other words, Californians who struggle to pay rising rents and afford a 10-year-old Ford Focus pay the rich guy’s electric bill, at least for his Tesla and also for part of the pool pump. What better way to fight inequality?

(In Massachusetts, no similar deal is available and thus it costs about the same to buy “fuel” for Tesla, per mile, as it does to fuel an efficient gasoline-powered car of the same size.)

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Tesla stock price versus worldwide market share

From a friend:

I hate day trading but can’t help but feel like I missed out on Tesla stock. Some people say it is going up another 20x, which would make them worth many trillions of dollars.

How can the big automakers continue to ignore Tesla, which is now a Colossus astride the stock market at least?

What if they’re managing the real world of car sales? Roughly 80 million cars are sold each year annually (CNBC). Tesla accounted for 367,500 of those (source). That’s 0.4 percent market share.

So perhaps there is no point in worrying about a 0.4 percent loss of sales unless Tesla can convert its stratospheric market cap into R&D money that will enable the company to pull ahead of Toyota, Honda, Audi, and BMW in overall engineering.

Separately, my Irish friend, a huge car enthusiast (owns an Aston Martin, a Land Rover, a vintage Mercedes, etc.), got his first ride in a Tesla S down in Charleston, South Carolina. “That was rubbish,” he said, after we got out of the 20-minute Uber trip from Signature to downtown. Interior noise, ride smoothness, seat comfort, and upholstery (“was that cheap vinyl?”) were not up to his standards for a luxury vehicle.

(By contrast, he loved an Uber ride in the front seat of a new Jeep Wrangler Unlimited, back from the USS Yorktown (CV-10; below), admittedly fairly noisy with the soft top.)

Finally, my friend with the Tesla X recently traded it in on a Tesla S. The “autopilot” software is getting worse, not better, in his opinion. The system gets confused about oncoming traffic on two-lane roads, freaks out, and hits the brakes unnecessarily. (Our 2018 Honda Odyssey, roughly once per month, similarly warns spuriously about an oncoming car, but the system does not apply brakes by itself.) He says that the car won’t use regenerative braking when the battery is cold (i.e., most of the time here in Massachusetts). Tesla has concluded that the batteries don’t like the sudden injection of power unless they’ve previously been warmed up, as they are during the first couple of minutes of being connected to a Supercharger.

Readers: What accounts for Tesla’s huge market cap? Is it achievement in the domain of self-driving technology, potentially revolutionary for sales? This market research firm does not put Tesla even in the top 10.

Bonus: demonstrating my own commitment to the battery-electric vehicle revolution by sitting in a 2005 Cirrus SR20 while wearing a Nissan LEAF cap:

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Tesla proves that it is easier to deal with government of China than government of Michigan

Annals of free markets #7231… “Tesla Model 3 floodgates open in China next week” (CNET):

Now, with local production in Shanghai, Tesla can skirt the ongoing US-China trade war. The occasion is also monumental for a different reason — Tesla’s Chinese factory is one of the first solely owned by a foreign automaker.

How are things back here in the Land of the Free (market)? Wikipedia shows that Tesla is restricted or banned from selling its products in 20 out of 50 states. It is banned from servicing its vehicles in 5 out of 50. “Our Tesla Model 3 Suffered a Catastrophic Failure While Parked” (Car and Driver):

… he received an ominous push notification from the Tesla app that the car had “suffered a failure and will no longer drive.” … it’s also an extraordinarily rare case of any car leaving us stranded, something unacceptable for any new vehicle, particularly one that costs $57,690 and with merely 5286 miles on the odometer. … even on Christmas Day, Tesla roadside assistance got a tow truck to us in about a half hour, which brought the car to the closest service center: Toledo, Ohio, because Tesla isn’t allowed to operate company-owned service centers in Michigan.

After a two-day wait, we were informed that there are issues with the rear drive unit, the pyrotechnic battery disconnect, and the 12-volt battery and that they are waiting for parts.

Separately, another recent Car and Driver article has a calculation by Mazda that its own modest-range electric car only emits less CO2 than a diesel-powered version after the car is driven at least 50,000 miles. It looks like a Tesla with a big battery would have to go 200,000+ miles before there was a net reduction in CO2 emissions compared to an efficient petroleum-powered car.

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