For the first time ever, foreign automakers have built more cars in the United States than the Detroit 3 here in America. That’s a big deal. Even if you add in the non-Detroit 3 automakers (Lucid, Tesla, Rivian) you end up with a deficit.
Ford is going in the opposite direction as it has cut back a lot from its original plan to build battery facilities in Michigan and, right on cue, Michigan is cutting back its massive subsidies for the project.
For Toyota, in particular, building cars in the United States has worked out quite well. Toyota is killing it right now, so it’s no surprise its Chairman/outgoing CEO Akio Toyoda got a big fat paycheck. This is also a big deal, mostly because that’s not how Japanese companies usually work.
And, finally, used car values continue to drop like a stone.
International Automakers Have Increased Production 85% In The Last 25 Years
There’s nothing wrong with a few light trade barriers. Fences make good neighbors and all that. Starting in earnest with President Lyndon Johnson, the American government has frequently taken steps to encourage automakers to build cars here in the great United States. Under the Reagan Administration, foreign carmakers were further coaxed into getting their supplier buddies to build plants here as well.
Eventually, foreign automakers decided, hell, if we’re building cars here and getting parts here, you might as well design and engineer some cars here, too.
Some 4.94 million cars were built in the United States of America by international automakers. That’s what we’re calling them, I guess, because the report I’m quoting is from two different organizations (Autos Drive America and American International Auto Dealers Association) that are made up of carmakers and dealers representing non-American brands. They use “foreign” once in scare quotes and international 17o times. But aren’t all carmakers basically international at this point?
Either way, brands that are not traditionally American ones built 4.94 million cars here in 2023, the Detroit Three built 4.60 million cars here, and Lucid/Rivian/Tesla built 754,342 vehicles.
This speaks to the success of foreign automakers and also the success of NAFTA/USMCA in encouraging Stellantis, GM, and Ford to build plants in Mexico and Canada. Perhaps that’s not entirely fair, as Ford builds more cars here in the United States than any other carmaker. Plenty of foreign automakers also build cars in Mexico.
The distribution across America for these “international automakers” is also kind of interesting, as seen in this graphic:
Roll tide!
What you’ll notice about this graphic is that most of these places are in southern states where unionization isn’t a given. That explains the extreme urgency of the United Auto Workers union’s campaign to win union contracts with these automakers. The UAW has been on the decline for years and betting on the Detroit 3 doesn’t make a lot of sense.
It is, as pointed out by a professor in The Detroit News, literally “existential” for them, as their power falls with every closed plant.
Ford Cuts Back Battery Plants In Michigan, Will Lose About $750 Million
The hype around electric cars and the massive success of Tesla, coupled with increasing government requirements, led automakers to announce plans to build a ton of factories to create batteries, motors, and all the things you need to make the damn things.
And then EV car sales started to slow down, and carmakers started reconsidering some of those plans, including Ford, which massively scaled down plans in Michigan.
“We want people to trust us, we need people to trust us. We try to bring all the information we can forward to the (Michigan Strategic Fund) board,” Christin Armstrong, a senior vice president with the Michigan Economic Development Corp., said in an interview on Monday.
“We come with good intentions … what we are presenting to the board is the best project we can put together based on on the info and circumstances and conditions in that moment.”
The state and Ford agreed Tuesday to substantially cut a proposed $825 million in tax credits for an immense new EV battery factory planned for outside Marshall, reducing that to just shy of $225 million. They’re also slashing $69 million from a public grant for the project.
This is a little awkward because the Biden Administration and Governor Gretchen Whitmer made a big deal of this move. Better to reassess and cut back than just build these things and realize they’re not yet needed, I guess.
Akio Toyoda Gets $10 Million, Or About A Fourth Of What Carlos Tavares Got Last Year
The super disproportionate executive salary isn’t something that Japanese companies are hugely keen on and, in fact, the last time the CEO of a Japanese automaker tried to get a pay bump, well, it ended with him having to sneak out of the country in a box.
Ghosn merely got $6 million, so Akio Toyoda netting a $10 million payday is quite the jump, as Automotive News reports. OF course, this is happening because Toyota has become the most profitable company in Japanese history.
This whole thing is part of a larger trend of Japanese companies adopting more European/American-style corporate practices. See, also: the decrease in cross-held shares.
Japan still has a way to go, however, before it’s at the same level as American automakers re: executive salaries. To put this into context, last year Mary Barra pulled in about $28 million and Carlos Tavares made $39.5 million.
Used Car Prices Drop For 22nd Straight Month
The pandemic and related supply shortage led to an extreme lack of new cars, which inevitably led to a huge run on used cars. It didn’t hurt that interest rates were super low so people could finance used car purchases with relatively low monthly payments.
As you can see in the graph above from Manheim, the used vehicle value index shows wholesale rates continue to fall. From Manheim:
“Wholesale value declines have been stronger than we normally see for much of the last two months,” said Jeremy Robb, senior director of Economic and Industry Insights at Cox Automotive. “However, even though much of the industry was feeling the retail sales disruptions caused by the CDK outages in the latter part of the month, Manheim started to see wholesale price declines decelerate, ending the month at a seasonally normal pace. Sales conversion is currently running several points above the previous three years, including 2021, indicating that buyer demand is relatively strong despite all the uncertainty in the market.”
In June, Manheim Market Report (MMR) values saw weekly decreases above long-term average declines, with the first half of the month showing stronger depreciation while the last week slowed noticeably. Over the last four weeks, the Three-Year-Old Index decreased an aggregate of 1.5%, including a decline of only 0.2% in the last week of the month. Those same four weeks delivered an average decrease of 0.5% between 2014 and 2019, showing that depreciation trends are currently running higher than long-term averages for the year.
I’m glad I sold the Subaru, which… I owe you all updates on that. They’re coming, I promise.
What I’m Listening To While Writing TMD
I have a theory that the right amount of famous for me is, actually, not that famous. Would I like to be Andy Willman, the mega Top Gear/Grand Tour producer? Maybe. That’s pretty close. Pharrell Williams is way too famous. That dude can’t go to Harris Teeter and buy corn. That’s all I’m saying. People will bother him while trying to buy corn. You know who can buy any kind of cereal or grain he wants? Chad Hugo. He is the guy in producing group The Neptunes who is not Pharell Williams. He’s in the videos! He gets the awards and the credit! He gets to hang out with Pusha T and make songs like “Mr. Me Too” for Clipse. Buys corn whenever and wherever he wants. Chad Hugo. That’s the dream.
The Big Question
Do you know (or care) where your car was built?