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Automakers face reality of EVs' cost — to jobs, and their bottom line

Related: We obsessively covered the Frankfurt Motor Show — here's our complete coverage FRANKFURT, Germany — European car bosses gathering for the Frankfurt auto show are beginning to address the realities of mass vehicle electrification, and its consequences for jobs and profit, their minds focused by government pledges to outlaw the combustion engine. As the latest such announcement by China added momentum to a push for zero-emissions motoring, Daimler, Volkswagen and PSA Group gave details about their electric programs that could give policymakers some pause. Planned electric Mercedes models will initially be just half as profitable as conventional alternatives, Daimler warned — forcing the group to find savings by outsourcing more component manufacturing, which may in turn threaten German jobs. "In-house production is almost irrelevant to the consumer," Daimler boss Dieter Zetsche told reporters on the eve of the Frankfurt Motor Show, in the midst of a German election campaign in which automotive jobs have loomed large. The company set a target of saving 4 billion euros ($4.8 billion) by 2025 to help fund the cost of its electric cars. "Daimler is the first company to state explicitly how much electric vehicles are going to hurt margins," said Bernstein analyst Max Warburton. "It was brave to go first — but of course it won't be the last." Volkswagen, for its part, said it was seeking new global supplier contracts to source 50 billion euros ($60 billion) of electric car content including batteries, which are not yet manufactured competitively in Europe. "A company like Volkswagen must lead, not follow," Chief Executive Matthias Mueller told reporters. VW diesel emissions-cheating exposed by U.S. regulators in 2015 triggered global public outrage, dozens more investigations into test-rigging by the wider industry and a push by some lawmakers to ban diesel and eventually all engines. TIGHTENING NOOSE Tesla shares jumped nearly 6 percent on Monday after a Chinese minister said it was a question of when, not if, Beijing bans fossil-fuel cars, tightening the noose around the combustion engine. France and Britain have promised its outright abolition by 2040. But PSA, the maker of Peugeots and Citroens, said it was concerned about the risks if consumers were left behind in the rush, and a new generation of battery cars does not sell.

Weekly Recap: An '80s encore in the auto world

The '80s returned in a big way this week, as National Lampoon's, Ghostbusters, Miami Vice, and even Tetris were back in the news. While there were far more serious topics (see below), nostalgia mingled with modern marketing to put these Reagan-era favorites back in the spotlight. The '80s were alternately cold and corny at times, but their cultural touchstones can still generate big money. That's why Infiniti recreated an iconic scene from National Lampoon's Vacation (1983) for an advertisement that hawks the QX60 crossover. Actor Ethan Embry, who played Rusty Griswold in a later Lampoon's movie, pilots the Infiniti – which is serving as a modern Family Truckster – for a trip to Walley World. A blonde pulls alongside in a red Lamborghini. They flirt, and she drives on. Christie Brinkley, who played the original girl in the red sports car (she drove a Ferrari in the '83 flick), is riding shotgun and chides Embry with: "A blonde. In a convertible. Seriously?" Okay, it's hardly on the level of "here's looking at you," or even "you can't handle the truth," but it should resonate with '80s babies, many of whom are now having children of their own and moving into three-row SUVs like the QX60. Naturally, Hollywood is going back to the well, too, with a Vacation remake that premiers July 29. Meanwhile, Ghostbusters is returning next year, and director Paul Feig offered a peak at the new Eco-1 in this tweet. In the 1984 classic, the team drove a modified 1959 Cadillac. Now, it will drive a late '80s Cadillac. As expected, the announcement generated support and controversy from movie and car enthusiasts. His tweet had generated several thousand retweets and favorites in the days following the news. Though the '80s Caddy looks, uh, less elegant in comparison to the now-iconic fins and curves of the original Ecto-1, it's about the same time lapse into the past as the '59 Caddy was to viewers in 1984. Speaking of 1984, Miami Vice, which debuted that year on NBC, is seeing one of its hero cars hit the auction block, Mecum Auctions announced this week. The 1986 Ferrari used on the show will be offered for sale Aug. 15 during Monterey classic car week. The white supercar runs a 390-hp flat 12-cylinder engine paired with a five-speed manual transmission and was in storage after the show ended in 1989 until earlier this year. It has 16,124 miles on the odometer and is authenticated by Ferrari North America and Classiche.

Average new-vehicle transaction price hits a whopping new peak in December

Elevated prices for products and higher borrowing rates led to record high transaction prices for new vehicles in December, with the average cost in the U.S. rising to a record $49,507, according to data from Kelley Blue Book released today. The report notes that ATPs — average transaction prices — have climbed above suggested retail prices — MSRPs — for more than a year. Sales volumes were up in December on a year-over-year basis by more than 5%, a situation Kelley attributed to improved supply. Overall sales for 2022, however, were off 8% year over year. “The transaction data from December clearly indicates overall prices showed no signs of coming down as we headed into year-end,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive. “Luxury prices fell slightly in December, but non-luxury transaction prices were up. Truck sales were particularly strong last month, and with many trucks selling for more than $60,000, a new record was all but inevitable.” Industry analysts claim the most obvious headwinds in the new car market are generated by higher interest rates, forced by the Federal Reserve's rate hikes intended to tame inflation, and by generally limited inventory. A recent report from J.D. Power showed that the average monthly payment for a new vehicle loan in December was $718, up $47 from a year ago. But 16% of consumers in December took out loans with monthly payments of over $1,000. Consumers think vehicles, and electric vehicles especially, are way too expensive. Fortunately, manufacturersÂ’ incentives, all but extinct in the past two years, are returning, especially in the electric-vehicle and luxury market, the Kelley data suggest. Plus, "With the new tax credits on the way, electric vehicle ATPs will drop lower for qualifying vehicles,” Rydzewski said. Non-luxury brands, such as Honda and Kia, showed particularly strong performance in December, with the average price paid at $45,578 — a record high and an increase of $994 month over month. Meanwhile, the average luxury buyer paid $66,660 for a new vehicle last month. Mercedes-Benz and Land Rover showed the most price strength in the luxury market, transacting between 2.6% to 6.5% over sticker price. But luxury brands Audi, BMW, Infiniti, Lexus, Lincoln, and Volvo showed the least price strength with some discounting in effect, selling 1% or more below MSRP in December, according to the survey.