Saturday, January 16, 2021

The automakers that have won big or lost ground going into 2021

Dec 25. 2020
Hyundai cars are displayed at the company's Motorstudio showroom in Goyang, South Korea, on Oct. 22, 2020. MUST CREDIT: Bloomberg photo by SeongJoon Cho
Hyundai cars are displayed at the company's Motorstudio showroom in Goyang, South Korea, on Oct. 22, 2020. MUST CREDIT: Bloomberg photo by SeongJoon Cho
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By Syndication Washington Post, Bloomberg · Hannah Elliott

If you asked automakers in April or May about the outlook for the rest of 2020, answers would have been grim.

Plants around the world were shut down, production stalled, workers were furloughed, sales plummeted, and billions of dollars were lost. Early estimates from IHS Markit had year-end U.S. sales barely cresting 12 million new vehicles.

By December, many automakers had bounced back-and then some. IHS now predicts 14.5 million new-vehicle units will be sold in the U.S. this year, down roughly 3 million units from 2019. Cox Automotive puts the number at 14.4 million, down 15.3% year-over-year.

"It's still a pretty big drop," says Stephanie Brinley, an automotive analyst for IHS Markit, "but better than we thought was going to happen in March when we shut the country down."

Americans, it turns out, still want to buy new cars. They're also buying homes, classic cars, and, in general, a lot of fancy things.

Credit the federal stimulus, says Brinley, plus improved online sales and configurators and pent-up consumers with time on their hands and a yearning to get out: "People who were already interested in buying a new car went and did it anyway, despite the covid situation."

Some automakers have responded better to the shifting markets than others. The pandemic has enabled them to stop producing cars that didn't make money, rein in incentives, trim budgets for efficiency, and become more disciplined regarding supply and demand. Some could even come out of the pandemic stronger, says Kevin Tynan, the senior automotive analyst for Bloomberg Intelligence.

"Our headline sales number may not be 17 [million], but it's a lot healthier than when it was 17.5 million, and 30% of that was from unprofitable cars," Tynan says. "We have spent decades trying to get to this."

Final reports will come in early January, but from this nearly year-end vantage point, it's easy to see which automakers and brands in the U.S. came out looking stronger, given the circumstances-and which did not.

To compile this list, we considered all different aspects of what makes a car manufacturer and specific brands healthy: sales rates, market share, the depth and variety of portfolio offerings, a brand's position within its holding company, the quality and performance of its products, and additional analysis from Bloomberg Intelligence, IHS Markit, and Cox Automotive.

 

WINNERS

Hyundai

Hyundai Hyundai Motor Co. has been one of the biggest gainers of U.S. market share in 2020, according to a Dec. 14 report by Cox Automotive analyst Vanessa Ton.

Hyundai succeeded by reaching younger, more affluent customers who had higher credit scores, Ton says. Nearly 45% of Hyundai buyers have $100,000-plus household incomes, compared with 33% in 2015; and 30% are aged 18-44, compared with 24% in 2015.

"Hyundai has been strengthening its affordability and fuel efficiency imageries for years, while putting a history of mediocre quality in the rearview mirror," Ton wrote in her year-end analysis. "In times of economic uncertainty, the value proposition is essential."

Tesla

The best-performing automotive stocks this year have been electric start-ups such as Nio, Li Auto, and for a time, Nikola. But they all still pale against the 17-year-old incumbent, Tesla Inc., whose shares have soared by as much as 700% in 2020, minting millionaires out of its most loyal fans. On Dec. 21, the company was added to the S&P 500 Index. (It was such a big addition that S&P Dow Jones Indices debated whether Tesla should be added all at once or in two separate pieces.)

With a value that reached as high as $649 billion-that's more than the collective value of the world's seven largest carmakers at the start of 2020, by the way-Tesla is the most valuable car company in the world.

Tesla has said it expects to deliver a half-million of its sufficiently-executed-to-achieve-cult status cars and SUVs this year. (Some 180,000 cars of those cars need to come in the final quarter to hit that figure.) Much of that demand is driven by China, where it sells more EVs than anywhere else. Still to come: That Blade Runner-esque Cybertruck we've been hearing about for more than a year.

General Motors and Ford

General Motors Co. is the nation's largest legacy automaker. It had a $4 billion third-quarter profit and has used 2020 to set itself up for a bold future, announcing plans to produce 30 electric vehicle models by 2025, starting with the gold standards for Detroit car lovers: Cadillac and Hummer. All told, GM has already started on spending what it says will be a total of $27 billion in an effort to remake 40% of its lineup.

Ford Motor Co., meanwhile, reported a healthy $2.4 billion in net income in the third quarter of this year. It has already shown signs of a potential upswing in earnings growth, thanks to its "global redesign" initiative (which streamlines overseas operations and eliminates poorly performing products) and an upcoming lineup of model debuts and announcements that includes an electric pickup (due in 2022), a modern Bronco and Bronco SUV, and Mustang Mach-E electric SUV.

It helps both Ford and GM that full-size pickup trucks in particular represent a $125 billion industry, according to research compiled by Bloomberg Intelligence's Tynan, with compact pickup trucks representing an additional $22.4 billion: "Trucks are going to be near 80% of [the U.S. automotive segment] by the end of this year. It's going to be 90% in the future."

The pickup segment will be the key to recovery for automakers and dealerships in 2021, Tynan continues. No other group can generate profit as quickly. "The automakers that are falling behind are the ones that don't get that."

While Tesla may be out "conquering hamlets, fighting these little battles with EVs, and the [compact car] Model 3," he says, "Ford and GM are rolling out the big artillery to the battlegrounds of pickup trucks-they're ready for those EVs."

Porsche

Porsche AG unveiled a whopping 17 new model iterations this year, including the next-generation Porsche 911 and additional versions of its electric Taycan sedan. That number rises to 33 new models if you include such mid-cycle refreshes as 16 Panamera variants on top of other new Panamera models like the Panamera 4S E-Hybrid in sedan, Executive, and Sport Turismo variants, and the Panamera Turbo S.

It's a very confusing rundown-but very effective. Aside from having its Porsche 911 Turbo S named the best new car of the year, Porsche generated revenue of €19.4 billion ($23.7 billion) and a 10.4% return on sales in the first nine months of 2020, a feat that Porsche executives are rightly calling a success. To wit: More than 25,400 911s were delivered-a 1% increase over 2019.

Rivian

Although it has yet to make and sell cars, Michigan-based Rivian positioned itself perfectly in 2020 to capitalize on the coming wave of electric pickups. It received $6 billion in infusions from the likes of Amazon and Ford itself since 2019. By July, Rivian had nearly doubled the $2.85 billion it raised in all of 2019 with a $2.5 billion round of investment led by T. Rowe Price Associates Inc.

Whether this translates into success when the Rivian R1T truck arrives in summer 2021, one thing is certain: Tesla is on the offense. In July it sued Rivian for allegedly poaching employees and stealing trade secrets; soon after, former Tesla employee Nick Kalayjian joined Rivian to oversee engineering and product.

 

LOST GROUND

Nissan

In May, Nissan reported its first fiscal year loss in a decade and its biggest loss in the past 20 years; by Nov. 12, Nissan had started to flatten out its decline but still expects to see an operating loss of $3.2 billion for the fiscal year to March, likely to be the largest blow to any major automaker.

Chalk it up to the company's being in the early stages of a massive cost-cutting and turnaround plan.

And a lack of exciting product: Even the line-topping Nissan GTR fared poorly in its most recent Bloomberg review. Despite the fact there are rumored talks of a possible Nissan electric truck, so far it can't compete in the essential truck space: U.S. sales of the Nissan Titan full-size pickup were down 24%, to 19,403, for the first three quarters of this year, compared with more than 589,000 deliveries of the winning Ford F-series pickup, which fell just 11% over the same period.

"They're in every segment, but they're not the model in any segment-there's always some other thing that's always a little bit better," Bloomberg Intelligence's Tynan says. "There's an identity crisis of what exactly is Nissan and why would I buy them. I don't know the answer to that any more. I think they have a lot of stuff that is just 'also ran.'"

Charlie Chesbrough, the senior economist and senior director of Industry Insights for Cox Automotive, has a similar outlook.

"Nissan, besides ongoing management issues, is being plagued by old products and big drops in fleet sales," he said via email, noting that the situation should improve in 2021. "New Rogue, Frontier, Pathfinder are scheduled to rollout in coming months, so more consumer interest should follow. Fleet activity should pickup in 2021, so this may help Nissan's overall sales numbers as well."

A representative from Nissan said that the brand is "fully committed" to Nissan Next, the plan launched in 2020 to build a more sustainable business.

"New models launched this year such as the all-new Sentra and Rogue demonstrate our focus on giving customers what they want, with safety, technology, design and value that exceeds their expectations," the spokesperson said in an emailed statement. "You will see this continued shift in Nissan showrooms in 2021 with five additional new models, along with a continued emphasis on putting the customer first in everything we do."

Maserati and Alfa Romeo

While parent company Fiat Chrysler Automobiles NV has popular pickups such the Ram to help it tap the lucrative truck market, its overlooked, under-loved Alfa Romeo and Maserati brands don't have anything to pull up to that tailgate party. In fact, brands that have fallen behind in transitioning to the next era of the industry (autonomous driving and electric mobility on an accessible level) have lagged in the stock market, and FCA-owned Maserati and Alfa Romeo fall into that category.

Despite public comments by FCA about its commitment to those brands, Tynan expects they could be soon packaged and sold. "I don't know that they necessarily want them, I don't know where they necessarily fit in the [FCA] portfolio." Maserati, he continues, "is not the brand-just not it, either performance-wise or luxury-wise, in its segment." Alfa presents a similar story: "It's good for what it is … but what is it?"

Chesbrough said much the same: "The [FCA] portfolio is old and too small for the current market where trucks are in favor and gasoline prices are low. Fiat sales are down significantly in 2020, and their days' supply continues to grow."

Maria Conti, chief communications officer at Maserati, responded that Maserati is moving past the dark days of 2020, poised for 2021. She points to its first electrified model, a refreshed lineup, and expanded V8 Trofeo range, as well as a "foundation for a new era" with a new product offensive pegged to the "100% made-in-Modena" MC20 Supercar announced in September. "Our future is bright."

Alfa Romeo reps also "respectfully disagree" with their place on this list, pointing to new connected infotainment systems with standard 8.8-inch touch screens in all 2020 models. "Last quarter our sales were up by 17%," said Bob Broderdorf, the director of Alfa Romeo Sales for FCA North America, in an emailed statement. He added that from January to October 2020, sales of Alfa Romeo were down 6% while the relevant premium segment decreased by 16%. "This clearly indicates that we are capturing net market share and we have been increasing our market share each month of this year."

On Dec 14., the company announced the Alfa Romeo 4C Tributo edition, which pays homage to the legendary 33 Stradale and is a nod to all the passionate Alfa Romeo fans in the U.S. Next year, Broderdorf said, the company will start production in Italy of the all-new Alfa Romeo Tonale, the brand's first-ever plug-in hybrid. Time will tell if it helps.

Jaguar Land Rover

Once a bastion of stylish saloons, powerful roadsters, and iconic off-roaders, Tata Motors-owned Jaguar has suffered in 2020, though its troubles have long been gestating following over-investment in manufacturing capacity, especially for now-unpopular sedans. It has fallen far from making memorable vehicles in favor of chasing market trends. Meanwhile, demand for Land Rover's diesel vehicles has stalled, sales in China have plummeted, and Brexit will make everything worse.

Its new electric products like the Jaguar I-Pace are, so far, forgettable. And as great as the F-Type was when it debuted, it needs a refresh. "Jag is just … I don't think anybody cares," Tynan says. "It is a brand with heritage that totally got away from the heritage, which was cars-sedans and saloons-and now it's nondescript, strangely named, crossover, weird stuff." The problem isn't that Jaguar has added SUVs to its lineup, it's that it hasn't done a very good job of it.

Land Rover suffers from a non-diverse portfolio that will hurt it in years to come, even with the 2020 advent of the new Defender. "With such a limited product portfolio on the Land Rover side, what else can they do to grow?" asks Tynan. "You can have your Hamptons market share, but what other white space do you have anymore to add new products?"

Not a lot, it seems. Especially when much of the U.S. market is going to pickups.

Representatives at Jaguar Land Rover, for their part, remain optimistic, noting that 2021 will bring "an exciting new range" including significant refreshes of the Jaguar F-Pace and E-Pace, Range Rover Velar, and Land Rover Discovery, with electrified options extended to 12 of the 13 models in their product lineup.

"In the quarter ended Sept. 30, the company saw sales increase over 50% from the prior quarter, and generated a profit with strong cash flow of £463 million ($620.8 million)," spokesman Jeffrey Jablansky said in an email. "We have said we expect the recovery in sales, revenue, and profitability to continue in the second half of our financial year ended March 31, 2021."

SSC Automotive

In October, the Richland, Wash.-based supercar maker wowed the world with its reports of a new world record for speed. But subsequent video analysis revealed inconsistencies with details surrounding SSC's record run.

Now the race is on, with Texas-based Hennessey announcing it will run its new Venom F5 for a high-speed test at NASA Kennedy Space Center Shuttle Landing Facility in Florida in 2021.

SSC founder Jerrod Shelby has said he intends to redo his run-but stands to lose millions of dollars in early orders on the SSC Tuatara in the meantime. And while SSC waits to correct the errors in reporting and plans another attempt, Hennessey may just swoop in and claim the record for itself. Talk about tension. SSC did not respond to a request for comment before this story was published.

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