Auto File: Ferrari roars, Carvana Soars

Nu Ride

05/05/2023 16:00

Joe White
  
    Global Autos Correspondent 
 
Greetings from the Motor City!  
 
Happy Cinco de Mayo! And a merry coronation weekend to readers
and colleagues in the United Kingdom. Before you slip out to
hoist a pint to the King – or enjoy a La Bandera – there’s news
from the world of cars.  
 
Today – 
 
    *         Carvana bounces back 

    * Ferrari’s Purosangue runs wild 
    * Auto suppliers are optimistic-ish 

 
    * Carvana: Back from the brink? 
Shares in online used car retailer Carvana jumped by as much as
a third in pre-market trading Friday after the company showed
evidence that cost-cutting and smarter inventory management are
pulling the operation out of its nosedive. 
 
Carvana’s combination of a slick online sales portal with a
smooth home delivery system (disclosure: I purchased a vehicle
from Carvana) was a pandemic-era winner. Rival auto retailers
rushed to emulate Carvana’s methods. General Motors went so far
as to set up a used car sales brand called….CarBravo! 
 
But Carvana shares collapsed by more than 90% last year as the
company got whipsawed by volatile used vehicle prices, the high
cost of its operations (including relentless advertising) and
run-ins with state regulators. 
 
A durable turnaround at Carvana could re-focus attention on its
innovative online retailing system and the challenge it poses to
legacy auto dealers. CEO Ernie Garcia promised positive earnings
before interest, taxes and amortization (EBITDA) in the second
quarter – a major step on the road to recovery. Stay tuned. 
 
    * Essential Reading 
    *         A heads-up for Detroit? Pilots win big at Delta 
    *         An argument for smaller electric vehicles 

    *         California’s robo-truck wars – Automotive News
(Paywall) 

 
    * Ferrari: The Purosangue Company? 
Ferrari is known for ultra-high performance sports cars and
Formula One racing (though it’s been a tough year for the
latter.) 
 
As of this week, Ferrari is also the Purosangue SUV company –
despite itself. The Italian icon’s shares surged to a new record
after it reported core profits jumped by 27% during the first
quarter as it began delivering the first 12-cylinder,
petrol-fueled Purosangues.  
 
Ferrari CEO Benedetto Vigna says he will limit the Purosangue to
just 20% of Ferrari’s production. Customers have other ideas.
The waiting list for the 390,000-euro super-SUV now extends to
2026.  
 
    * Auto suppliers peer into the uncertain future 
Here are some takeaways from first quarter financial reports
this week by several big automotive parts and technology
suppliers – Aptiv, Magna, Adient and BorgWarner among them.
(Lear, a big player in electronics and seating, reported in late
April.) 
 
    * The outlook for vehicle demand in North America and Europe
is
better than expected earlier this year.  
    * Chinese automakers are revving to expand exports,
confident
their technology and quality can compete.  
    * Legacy automakers are forging ahead with electrification
and
software-development programs, despite the painful costs. 
    * Supply chain bottlenecks are getting better, but high
materials
costs are still a challenge.  

 
Investors were tough on companies – such as Aptiv – that argued
the outlooks for their lines of business (automated driving,
electrification) are solid, but opted not to lift their 2023
profit targets, blaming the dicey macro-economic outlook. 
 
The caution among suppliers reflects the nervousness at big
automakers. BMW reported strong Q1 results but did not raise its
full-year profit forecast.   
 
    Volkswagen warned that competition will intensify as
semiconductor supplies and vehicle production increase. VW’s
electric vehicle deliveries in Q1 jumped 42% to 141,000
vehicles. But sales in China dropped 14.5% in the quarter from a
year ago. 
 
(Read more from Breakingviews on VW’s tricky road ahead.) 
 
    * New rules: What happens in China, stays in China 
    Manufacturers selling connected vehicles in China could not
transmit abroad the data collected from on-board sensors,
according to draft proposals put out by China’s Ministry of
Industry and Information Technology. 
 
Chinese policy has been headed in this direction since officials
imposed limits on where Teslas could operate. The new proposals
make it clear that automakers will have to create China-only
smart vehicle infrastructures. 
 
Separately, Chinese state media reported that central government
policymakers want to expand EV charging, under a new set of
policies previewed Friday.  
 
    * Carbon Collision 
The U.S. Environmental Protection Agency on May 9 will start a
round of hearings that will allow interest groups to sound off
on the Biden Administration’s proposals to get carbon out of the
U.S. vehicle industry.  
 
    Never mind the declarations from automakers that they are
committed to going all-in on EVs.  
 
The hearings will likely expose the extent to which industry
groups and the United Auto Workers are not sold on the
administration’s proposals to push electric vehicles to 67% of
U.S. light vehicle sales by 2032. A companion proposal would use
emissions limits to push medium and heavy trucks and buses
toward electrification. 
 
The hearings will offer a reminder of the sprawling diversity of
the U.S. auto sector. Consider the hundreds of small companies
that make performance and repair parts for combustion engines,
many of them members of the Specialty Equipment Manufacturers
Association (SEMA).  
 
“We think the future is several different technologies, not just
one,” said SEMA’s President Mike Spagnola, who said he intends
to testify next week.  
 
“Our industry and others are going to rally,” he said, to argue
that the EPA proposals are “too strict, too soon.” 
 
Scientists and environmental groups concerned about climate
change worry the proposals are not enough, and too late.  
 
    * Old trucks vs. California clean air rules 
California heavy truck fleet operators faced with mandates to
buy electric or hydrogen vehicles could opt to keep old trucks
running longer instead, Liane Randolph, the chair of the
California Air Resources Board said this week during a talk in
Brussels.   
 
California laws allow truck fleets to keep vehicles for as long
as 18 years – notwithstanding $40,000 in federal tax credits to
encourage buying clean trucks, and billions in California
subsidies for charging infrastructure. Randolph said that’s a
concern, and her agency plans to revisit what to do about old
trucks, according to my colleague Julia Payne who listened in.  
 
California policymakers are focused on cleaning up specific
trucking routes, such as the runs from the state’s big ports to
inland warehouses.  
 
“The transition is not all going to happen tomorrow,” she said. 
 
    Fast Laps 
    The company that makes London cabs plans to push into the
electric commercial vehicle business. The London Electric
Vehicle Company, a unit of Chinese automaker Geely, said it is
developing a large EV architecture to branch out beyond black
taxis. 
 
    Lyft shares took a beating in early trading Friday after the
distant No. 2 U.S. ride hailing company dismayed analysts with a
downbeat profit outlook and talk of cutting prices to claw back
riders from Uber. Lyft’s market cap was on track to fall to $3.3
billion – a long way down from the peak of $24 billion, and even
farther away from Uber’s $75-billion-plus market valuation. 
 
In U.S. ride sharing, we have a winner. 
 
    Volvo Cars will cut 
    1,300 jobs to offset rising costs. 
 
    Lordstown Motors could stop 
    building its Endurance pickup trucks as it scrambles to
avoid bankruptcy, the company said. Lordstown reported a wider
loss and said it had $108.1 million in cash as of March 31, down
from $203.6 million a year earlier. Lordstown said it is still
in talks with Foxconn, which has refused to go forward with a
promised investment. 

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