“Money, it’s a gas. Grab that cash with both hands and make a stash.” This week it’s all about that green. The world’s most powerful motivator—MONEY. Global political tension and the ongoing trade war are beginning to show their wear-and-tear on auto manufacturers, hurting profits and raising operating costs. But on the plus side, creative car-buying startup Carvana reports impressive growth and skyrocketing stock value, indicating a possible new direction for vehicle shopping. And despite the squabbling among the big guys, enthusiast-directed groups show solidarity and growth, as excitement grows around auto shows, new overland ventures, and the mighty King of The Hammers.
Ongoing Trade War Continues
Well, the 90-day ongoing trade war truce between Presidents Trump and Xi Jinping ends on March 2 and we seem to be no closer to a resolution. While talks are expected to continue over the next month, progress has been minimal thus far, as China continues to hold out over what Forbes calls “the sticking points,” namely business reform and intellectual property practices. Trump has tweeted that “meetings are going well, with good intent and spirit on both sides,” but Congress seems unconvinced, as it seeks to pass legislation giving it veto power over tariffs passed on grounds of national security.
Meanwhile, auto makers report they are feeling the burn. Matt Blunt, a former Missouri governor who now heads up the trade group American Automotive Policy Council, asserted that producing a car in the U.S. now costs $464 more per vehicle. More than half of that is due to steel and aluminum tariffs.
Tariffs Take A Toll
Fox Business reports Ford Motor Company lost $116 million (or 3 cents per share) in the fourth quarter period alone, with profits decreasing more than 50% for the year. The company’s own Chief Financial Officer Bob Shanks, stated that the auto giant absorbed roughly $750 million in tariff costs during 2018. Fellow Top 3 manufacturer, GM, apparently faced worse, stating that regulations cost it $1 billion. It began sweeping layoffs this morning, starting with 4,000 salaried workers.
Even FCA, who showed incredible profits for 2018 and is looking at a steadier future than many of its competitors, expressed trepidation over the ongoing trade war. CEO Mike Manley told reporters in January that the company expects the steel and aluminum tariffs to cost it between $300 – $350 million in the upcoming year.
Those forecasts are sure to change, especially as the UK continues to struggle with Brexit negotiations. A study from IHS Automotive speculates the move could cost vehicle manufacturers upwards of 2.8 million sales over the next two years, with UK-based companies taking the brunt of the hit. And to rub salt in the wound, trans-Atlantic relations remain tense, as negotiations over industrial tariffs grow heated. The EU has threatened to slap $20 billion euros worth of U.S. goods with tariffs should Trump move forward with a threat to place duties on European cars and parts. And most recently, the bloc has launched a formal legal complaint against the U.S. with the World Trade Organization following what it calls “unjustified” and “unwarranted” duties imposed on Spanish olives. Yea, we’ve reached the point where we’re fighting over fruit.
Carvana Shakes Things Up
We’ve mentioned this unique online dealership on The Engine Block before. But back then we were more interested in its amusing use of technology than its earning power. In a nutshell, Carvana aims to revolutionize the car-buying process by shifting the process online. Customers shop for, finance, and purchase a used vehicle right through the company’s e-commerce platform. Then, they can schedule near-next-day delivery or pop into one of Carvana’s patented vending machine locations. Shoppers are given a giant coin which they insert into a slot that triggers an automated sequence that, just like a vending machine, dispenses their vehicle.
Whether you think it’s a stupid gimmick or radical technology, one thing’s for certain: MILLENNIALS LOVE THIS. In a world dominated by social media, he with the most Snapchat-worthy process is king, right?
The Little Startup That Could
The self-described “Amazon of cars” has grown rapidly since its founding in 2012. And despite never showing a profit, it continues to rack up impressive revenue. Carvana’s 2018 sales show that in the third quarter alone, it sold more vehicles than it did in 2015 and 2016 combined. And over the past year, the company’s equity price has risen 82.01%, and is up 13.24% since the start of 2019. Throw in rapidly rising stock over the last few weeks, recent expansion across the state of New York and, now, a partnership with tech company, nonda, and you’ve got one helluva startup to keep an eye on.
CEO Ernie Garcia says that while the company sold close to 100,000 units in 2018, he believes that number could be closer to 2 million in the future. He hasn’t offered a timeline for this projection, but stated that the key to increasing Carvana’s market share is to entice customers to buy cars more often. Frankly, with a new-car market struggling to get its act together, a revolutionary platform that makes buying a used car fun might just be the definition of ‘perfect timing.’
Enthusiasts Keep Things Cordial
As the world’s leaders and industry titans manipulate markets and chase their tails, enthusiasts continue to prove that we really all can get along. The Philadelphia Auto Show kicked off this past weekend in the City of Brotherly Love, while Chicago’s iteration prepares to open on February 9, both promising plenty of fun for car-loving families. (Check out our rundown here.)
Overlanding fans will be happy to hear that FOUR WHEELER announced a new enthusiast event—the Four Wheeler Overland Adventure—hosted through a new partnership with Overland Expo. Set for May 13, 2019 in Wickenburg, Arizona, the event will feature three days of expert-guided four-wheeling through the picturesque American desert. It will end with a big banquet and free access to the 2019 Overland Expo West. The caravan is only open to 20 participating vehicles, though ($300 each) and is sure to fill up fast. You can submit an application here starting February 13!
And for those looking to get a little more aggressive dirt on the tires, the 2019 King of The Hammers Week kicked off February 1 to big crowds and bigger thrills. Qualifying rounds dominated Friday and Saturday with the 8-hour UTV race kicking off yesterday morning. Last year’s victor, Mitch Guthrie Jr., stands in first followed by Wayland Campbell, Branden Sims, and Shannon Campbell. 4500/4800 Qualifying on short course runs today and tomorrow, along with plenty of crowd-pleasing shootouts, shows, and vendor hours.
The official (and brutal) 165-mile KOH race kicks off Friday, February 8 at Means Dry Lake in Johnson Valley. With bigger crowds and bigger stakes, the pot grows too. The 2019 champ will take home $100,000 this year, along with the glory of having mastered one of the most intense off-road events on Earth.