Anyone else feel like we are being gamed by the automakers?

SV reX said:

Oh, yippee!  I didn't realize arguing with the mods was allowed!

Lets all watch the fun!!...

I will address this, of course you can argue with mods. We nuke spammers and that's about it. GRM moderates the rules and discussions and frankly they allow a ton of leeway because this is an awesome place full of a broad spectrum of really great people.

Steve_Jones said:

In reply to NOHOME :

It's circumstance. The Automakers have no benefit to selling less cars. 

I'm not sure I agree. 
 

You're right. It's circumstance.  Absolutely no one planned this.  They are simply not that smart.

However, there is actually a huge benefit to making fewer cars. It's basic supply and demand. When there is a scarcity, prices go up.  The mistake automakers have made for decades is chasing market share with smaller and smaller profits.

I suspect they may have learned a few lessons in this crisis, and moving forward may give up on market share while actually trying to pursue scarcity and profits. 
 

Why should they work twice as hard making more cars at a lower profit?

Mazda CX-30 AWD 2.5 Turbo Premium...250 hp, 320 lb-ft of torque...$34,920 MSRP so ~$39,262 all up with "Winning Red" paint, TLR, & destination charge.

Admittedly not a dream car...too big, too high, too automatic to be passion invoking but versatile, reliable, attractive, comfortable, and safe for what

will wind up being ~$250 per month if you keep it for ten plus years and take good enough care of it to be worth decent money when you sell it.    

Seat warmers are standard with no subscription charge.

Bottom line, 2022 may well be light on passion but how could someone not realize that the value has never been better. 

In reply to 03Panther :

It was not an intentional attempt to be a jerk. It was a humorous poke at you to try to get you to tone down the BS.  

I guess subtly and humor doesn't work so well.

This place has been kind of a E36 M3show lately. 

In reply to gearheadmb :

Agreed. 

In reply to Steve_Jones :

And yet they are posting record profits selling fewer cars for more money. I can see a lot of benefit to selling fewer cars to net the same income. Less staff and materials to pay for so I can lower my manufacturing cost at the same time as I raise prices. The best part is that by fabricating a shortage, people are begging for the product rather than having to market them into purchasing.

I'm still not convinced that this won't recover.  There's more competition in making cars than there is in pretty much every single other thing you buy.  For sure, some makers will use this as a way to push their product to the premium market, and therefore make fewer cars and sell at a premium.

But there are enough lower market makers that can't do that across the line, and it will take just one company to lower the bar to trigger a return to that.

One note- I will point out, again, that it's curious that some people want fewer car regulations so that companies can make and sell what they want, and at the same time, when those same companies make a whole lot of money selling what they want because it's expensive- that's also a problem...  

RX Reven' said:

Mazda CX-30 AWD 2.5 Turbo Premium...250 hp, 320 lb-ft of torque...$34,920 MSRP so ~$39,262 all up with "Winning Red" paint, TLR, & destination charge.

Admittedly not a dream car...too big, too high, too automatic to be passion invoking but versatile, reliable, attractive, comfortable, and safe for what

will wind up being ~$250 per month if you keep it for ten plus years and take good enough care of it to be worth decent money when you sell it.    

Seat warmers are standard with no subscription charge.

Bottom line, 2022 may well be light on passion but how could someone not realize that the value has never been better. 

 

I would rather have a Mazda 2, but I don't get that option.

NOHOME said:

So is the current pricing of cars a deliberate thing that the Automakers are stick-handling to their benefit, or is it just a temporal collection of circumstances that will pass? That was more the question.

Both! Large companies sensed that they can increase their prices and they're playing that to the hilt.

It's easy to think in binaries (Capitalism vs. Communism) but almost every economy in the world has some services that are private and some that are public.  

alfadriver said:

I'm still not convinced that this won't recover.  There's more competition in making cars than there is in pretty much every single other thing you buy.  For sure, some makers will use this as a way to push their product to the premium market, and therefore make fewer cars and sell at a premium.

But there are enough lower market makers that can't do that across the line, and it will take just one company to lower the bar to trigger a return to that.

The Chinese have been looking for a way to break in to the US market. This could be it. 

NOHOME said:

In reply to Steve_Jones :

And yet they are posting record profits selling fewer cars for more money. I can see a lot of benefit to selling fewer cars to net the same income. Less staff and materials to pay for so I can lower my manufacturing cost at the same time as I raise prices. The best part is that by fabricating a shortage, people are begging for the product rather than having to market them into purchasing.

The oil industry is doing the same thing. Why spend money looking for more oil and building more refineries when you can not spend the money and charge more for less production. The Saudis have figured this out. 

SV reX said:

Steve_Jones said:

In reply to NOHOME :

It's circumstance. The Automakers have no benefit to selling less cars. 

I'm not sure I agree. 
 

You're right. It's circumstance.  Absolutely no one planned this.  They are simply not that smart.

 

However, there is actually a huge benefit to making fewer cars. It's basic supply and demand. When there is a scarcity, prices go up.  The mistake automakers have made for decades is chasing market share with smaller and smaller profits.

I suspect they may have learned a few lessons in this crisis, and moving forward may give up on market share while actually trying to pursue scarcity and profits. 
 

Why should they work twice as hard making more cars at a lower profit?

The manufacturers sell to the dealers at a fixed profit. The dealers must take the vehicles and pay for them. If the dealer does not sell them, it's not the manufacturers problem, it's the dealers problem. The dealer benefits from low supply by charging more, the manufacturer makes money on volume. 
If Ford builds 500,000 cars in a year, they sell 500,000 to the dealers. If they build 750,000 cars, they sell 750,000. They want to build more. 
 

The only positive a manufacturer has on less volume is prioritizing the higher profit vehicles and not building the lower profit ones, and no one complains. 

So, GM was already on strike when Covid hit.  Then, everyone had to go home and hide for a few months, then things had to get running again, but in way less efficient fashion.  All the new cars in stock on the planet were sold to cover the ones that were crashed or worn out...

We then have a chip shortage because of the above reasons, and everything built was going into crypto mining horseE36 M3, so you can build cars, but not finish them.

Now, we have a two year built up demand, so everything that gets built gets sold.

If I were a manufacturer or dealer, I'd sure be offering discounts to clear out the unsold inventory, because that makes sense.  Yeah...

Think of it this way:

I'm a supplier, I sell you 500 widgets a month at $5 profit, I make $2500

You sell 400 every month for $5 profit but have to discount 100 to $3. You make $2300. 
 

I have a supply issue, so I can only sell you 350 now. I make $1750. 
 

You have 500 buyers for 350 widgets, so you go to $8 and still sell out. You make $2800. 
 

Who likes the shortage, me or you?

CrustyRedXpress said:

NOHOME said:

So is the current pricing of cars a deliberate thing that the Automakers are stick-handling to their benefit, or is it just a temporal collection of circumstances that will pass? That was more the question.

Both! Large companies sensed that they can increase their prices and they're playing that to the hilt.

It's easy to think in binaries (Capitalism vs. Communism) but almost every economy in the world has some services that are private and some that are public.  

I certainly don't know the actual numbers, but I find it very hard to believe purposely reducing supply is a tactic that that would work, as noted it's likely more an unavoidable problem that is allowing the current situation.  The reason why, is that (apparently dirty) word, capitalism, and really, competition.  Unless there is some massive, all automaker, conspiracy, all it takes is one maker to ramp up production (assuming a purposeful production hold back) to steal away sales.  I don't think there has ever been a time where producing more, if you can, wasn't the best option, profit / business wise.

As a note on capitalism / communism:  yes, thank you, that was my point and why I found that statement rather silly.  There are maybe(?) two (three?) economies (all doing horribly BTW) in the world that are not heavily capitalistic, but as noted, all are controlled to some (and varied) extent. 

Interestingly enough, it you want a good idea of what unfettered capitalism looks looks like.... Russia.  Of course, they did not get there through capitalism.  There was a rather large shortcut by dividing up communist government holdings to a few oligarchs, but probably a good approximation.

Just like oil it only takes one manufacturer getting back up to speed before it all comes crashing down. Yeah not many people cross shop a bmw and a Hyundai but if the x5 is $75k and the Pallisaide drops to $35k you might get a lot more. 
 

It's like any large scale collusion. Margins will eventually go back down. Prices might not but margins will. 

The winner between the big 3 USA manufacturers will be the one that gets pickup trucks and cargo vans to the dealers first, and consistently. Commercial/Fleet buyers are really backed up on needing them. If a big construction company that usually buys Ford can't get a Ford, but can get a Ram, they're gonna start buying them. Once they switch, it's tough to get them to switch back because when it's time for a new truck, they will just grab a new version of what they have now out of habit. 

That doesn't make any sense. 
 

Dealers still have to place orders. They buy based on what they think their customers will buy.
 

Since when is a retailer bound to buy however many units that a manufacturer chooses to make?  What would stop manufacturers from building 10X as many vehicles as end-line consumers want to buy, and crushing the dealerships. 
 

That makes no sense. 

In reply to SV reX :

Most dealers get allocated vehicles, they don't order them. Toyota tells the dealer "these are the vehicles you will be getting in 60 days". If you refuse some, your allocation is cut next month, so you don't refuse them. It's why you can't order a specific 4Runner, there is no process to do so. A dealer can see who has that specific 4Runner on the lot, or coming soon, and trade for it (in normal times) but they can not tell Toyota "we need a black/tan limited 4Runner"

You get a certain amount of the most commonly sold/produced models for your market/region and it’s based off 1) how many of that model your store sold and 2) how fast you are moving your new cars  

It might not make sense, but that's how most work. American brands get allocations, but can also special order as well. Look at it the opposite way, if Porsche tells a dealer they're only getting 2 911 GT3 in a year, it doesn't matter if the order 10, they're getting 2, it works both ways.

It's an odd system because you can't get more allocated unless you sell more, well you can't sell more, unless you have more, rinse and repeat. It really hurts the small dealers, which is why they're getting bought up by the big boys. 

In reply to SV reX :

It makes sense from my perspective. The dealership I work at cannot keep inventory. Neither can any of the others in town. I know they're not unique in this situation. They are selling absolutely everything and anything they can get. They'll buy anything available from the manufacturer. If there was more product available, they'd buy all of it. In normal times, I think you're right. But these days it isn't a matter of only buying what will sell because everything is selling. 

In reply to Snowdoggie (Forum Supporter) :

I bought a CX-3 (Touring w/ the preferred equipment package) in April of 2019 which is mechanically the same as a Mazda 2 and a Toyota Yaris BTW.

Manual transmission is available everywhere except in the U.S. so I didn't think the car would all that satisfying being a FWD, automatic, with a n/a 2.0 straight four but I was so wrong...that little scamp punches way above its weight and puts a big smile on my face every time I drive it, even look at it for that matter.

I put in the garage (all up with TLR, destination, and premium paint) for an even 26K and I wouldn't have traded it for any mid 30K car at the time.

I wish Mazda offered a Speed 3 version of it but I've really come to appreciate it for what it is; an incredible value.

I live in an upscale area so it does lack "keeping up with the Joneses" points but that's perfectly fine by me...long ago I came up with the phrase "the best way to be poor is to worry about looking rich".  I just realized, in a way, that little CX-3 even teaches good values.

I have no need / desire to part with it except I'd feel safe giving it to my daughter who is headed off to University of Nevada, Reno which is 500 miles away...that's the only reason I'm thinking about pulling the trigger on a sweet CX-30.  I wouldn't even need the turbo but Mazda is only offering them in AWD which, in my mind, is pointless in Southern California unless you've got significant power to put down.       

I know part of it is being of the mindset that brings one to a site like GRM, but I also can't understand the need people have to replace their vehicle so frequently. Cars are expensive, and pretty soon I'll hopefully be in a scenario where I'll be driving only for fun and visiting family and no longer for work, school or groceries.

Also, while I understand why people shy away from it, I don't think we should shirk away from discussing the core issues of humanities- and our societies- constant need for consumption. 

Snowdoggie (Forum Supporter) said:

alfadriver said:

I'm still not convinced that this won't recover.  There's more competition in making cars than there is in pretty much every single other thing you buy.  For sure, some makers will use this as a way to push their product to the premium market, and therefore make fewer cars and sell at a premium.

But there are enough lower market makers that can't do that across the line, and it will take just one company to lower the bar to trigger a return to that.

The Chinese have been looking for a way to break in to the US market. This could be it. 

I'd believe it. Geeley Volvo added another Subcompact for under 10K:

https://insideevs.com/news/539437/geometry-ex3-costs-usd9250-china/

... and safety testing and design is one of the costliest parts of car design. The fed requirement for crash rollover protection I also recall, was infuriating for manufacturers and is cited as being the major reason why visibility is now so poor.

Of course, all that assumes anyone in America would buy a Chinese vehicle; but a 200 mile, $10K SUV EV is a hell of a sale to someone looking for a second car.

Hell, we are probably being gamed by ALL big business at this point.  But that would be fostering a conspiracy theory at this point.  And that just couldn't happen, could it?