Automotive News - August 12, 2024 - 25

August 12, 2024 * 25
SONIC
continued from Page 4
compared with other brands.
Overall, U.S. new-vehicle inventory has recovered
from post-COVID production woes, but remained
under 3 million vehicles for more than
four years until briefly crossing that threshold
during the CDK outage, according to Cox Automotive.
Cox's latest estimate placed industry inventory
at 2.9 million vehicles, up about 1 million
vehicles from a year earlier.
By brand
Nissan had about 118 days' supply, according to
Cox's latest report. Nissan is investing in marketing
and engagement plans to boost traffic and
throughput, aiming to align production with the
market and adjusting mix and models as needed, a
spokesperson told Automotive News in an email.
A Stellantis spokesperson did not immediately
PLANTS
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explaining why utilization will drop along with
vehicle demand.
Average plant capacity utilization - is 70 percent
in North America so far this year, according
to GlobalData. That's 10 points shy of the level
most carmakers strive for, but an improvement
from the past four years when the pandemic and
chip shortage dragged the rate to 61 percent.
Capacity utilization will fall again starting next
year and plunge to an average 65 percent in 2030
and 63 percent in 2035, according to GlobalData's
forecast. All the while, the firm expects light-vehicle
sales to improve to 17 million from 15.6 million
in 2023 before leveling off. EV share will likely
exceed 50 percent by 2035, GlobalData said.
Through May, EV share was about 7 percent.
Production plans
Automakers building less than two-thirds of
their vehicle assembly capacity is inefficient, said
Jeff Schuster, global vice president of automotive
research at GlobalData.
But maintaining at least 70 percent in the next
several years is probably impossible, Schuster
said.
" The slow [EV] transition is keeping utilization
WEST
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know GM's U.S. retail network. It followed
record second-quarter earnings
for the company in North America,
with pretax profit rising 39 percent to
$4.4 billion. Strong sales of pickups
and SUVs contributed to a 14 percent
bump in global net income.
" I don't see how this could have
been related to poor North American
results, because there are not poor
North American results, " said David
Whiston, a U.S. autos equity analyst
with Morningstar Research Services.
" With Marissa leaving, the replacement
is someone who's already had
the role, " Whiston said of Harvey. " He
knows that market well. I think that my
only concern would be: Is he getting
stretched too thin? "
Additionally, GM said Duncan Aldred,
vice president of global BuickGMC,
will become vice president of
commercial growth strategies and operations
Sept. 1, reporting to Harvey.
Jaclyn McQuaid, president of GM Europe,
will succeed Aldred at BuickGMC.
" GM
is reducing the complexity of
our organization to better integrate
global markets, move faster, and serve
customers around the world, " the
company said in its statement. " The
structural changes we are making will
help modernize our end-to-end cusanswer
a request for comment, but the company
responded to a May letter from retailers about
their concerns, including supply woes, and
shared initiatives that could help, such as reducing
prices on some vehicles.
Dyke said the import brands are doing a " very,
very good job of controlling their inventory. " He
said Sonic had about 15 days' supply of Toyota
vehicles, Honda is between 30 and 40 days,
Hyundai is in the 50-day range and Subaru in the
30-day range.
" So they're doing a really, really good job, " Dyke
said. " The high lines are fighting a little bit. "
Import brands, including Toyota, Lexus and
Honda, have had the lowest days' supply across
the industry at 42, 54 and 67, according to Cox's
July 22 report.
Luxury vehicle sales contribute more than half of
Sonic's revenue, while import brands contribute
19 percent, used-vehicle-only EchoPark division
contributes 17 percent and domestic brands, infrom
improving, " he said. " The need to be flexible
and the need to have both ICE, BEV and everything
in between creates inefficiencies. "
Softening EV demand has flustered automakers,
pushing them to delay launches and postpone
construction on EV plants.
U.S. registrations for new EVs grew about 10
percent in May, compared with the same month
a year earlier, according to S&P Global Mobility,
largely driven by discounts of more than $9,000
for popular models. The 10 percent rise is small
compared with a 52 percent gain in new-EV registrations
last year.
Product planning has become tougher as EV
demand waffles and regulations tighten.
" It's really hard to address this when you don't
know the fallout or what the market mix looks
like, " Schuster said. " It has ripple effects through
a lot of things. "
That could create mismatches in the types of
powertrains demanded by consumers and what
the factories are building. " That could be even
more damaging than having too much capacity, "
Schuster said.
Automakers are reacting to market fluctuations,
and production and utilization forecasts
will likely change over the next decade as the industry
responds to regulations and consumer
demand.
tomer experience and create growth
opportunities across our products and
services. "
North American leadership
West, 42, was the first woman to lead
GM's largest and most profitable region.
In her two decades at the automaker,
West also was president of GM
Canada, executive chief engineer for
GM's global midsize truck and medium-duty
truck programs, and chief
engineer of the GMC Sierra and Chevrolet
Silverado heavy-duty pickup redesigns
that launched in 2019.
West was the fourth generation of
her family to work at GM, following
her father, both grandfathers, a grandmother
and a great-grandfather.
Harvey became president of global
markets, a new role that involves working
with regional teams abroad on
strategy and operations, when West
took charge of North America.
Andy Guelcher, chairman of the
Chevrolet National Dealer Council,
told Automotive News that Harvey and
senior leaders revealed on an Aug. 9
call that West had decided to step
down and Harvey again would lead
North America.
" Very surprised, and kind of
shocked, to be quite honest with you, "
said Guelcher, dealer principal of Mohawk
Chevrolet in Ballston Spa, N.Y.,
adding that West had been doing a
good job working with dealers.
RUDY SCHORK
" This is a relationship business, " Marissa West told Automotive News in April.
News of her leaving surprised dealers who found her engaging and involved.
" The thing that was most impressive
about her was that she was so engaged, "
he said.
Harvey is " extremely well-versed, "
Guelcher said. " If you're going to ask
for a transition, this is about probably
the best the dealers could ask for. "
Changes at Buick-GMC
Aldred's new role includes oversight
of the fleet and commercial division
called GM Envolve; GM Energy; retail
operations; Customer Care and Aftersales;
digital sales and service; and the
OnStar connectivity and safety service.
Under Aldred's leadership, Buick has
refreshed, redesigned or introduced
four gasoline crossovers in the past 18
months, including the subcompact
Envista. Buick's U.S. sales were up 11
percent in the first half of the year.
At GMC, Aldred has emphasized
growth in subbrands including the
high-end Denali line and the offroad-equipped
AT4 trim. Pricing for
the brand's trucks has climbed to
near-luxury territory.
" Great brands are built with consistency,
with repetition, " Aldred said at
the Detroit auto show last September.
" We're constantly pushing the boundaries
of what it can be. "
cluding Stellantis at 3 percent, collectively contribute
11 percent, according to Sonic's second-quarter
investors presentation. Sonic has about five
dealerships each selling Nissan and Stellantis vehicles.
A
call to work together
Sonic CEO David Smith said automakers and
retailers need to work together.
" If the manufacturers are having to give big incentives
to help sell product, to help sell new vehicles,
that's a problem for them, " Smith told Automotive
News. " And then if we're having to discount
new vehicles heavily, then that's a problem for us. "
Smith said gross margins on new vehicles have
been coming down dramatically. For its franchised
dealerships, the company reported $3,579
in gross profit per new vehicle, down 28 percent
year over year.
" We'd like to see that there is a good balance according
to supply and demand, to make sure that
Still, each company has a unique approach and
capacity utilization rate. Overall, assembly plants
in North America will use less than two-thirds of
their capacity from 2028 to 2035, according to
GlobalData.
Some automakers will have stronger capacity
utilization rates than others.
Honda Motor Co., Hyundai Motor America,
Mercedes-Benz, Toyota and Volkswagen Group
will each use at least 70 percent of their plant capacity
in 2030, according to GlobalData. General
Motors, Ford Motor Co., BMW Group and Renault-Nissan-Mitsubishi
will likely use less than
66 percent, according to the forecast.
ICE, EV utilization reversal
Capacity utilization will likely increase to 67
percent in 2035 for plants that exclusively build
battery-electric vehicles from 52 percent in 2028,
GlobalData said. For combustion and hybrid vehicles,
utilization will decline to 58 percent in
2035 from 74 percent in 2028.
At GM, EV capacity utilization will be only 37
percent in 2028, compared with 87 percent at
combustion plants, according to GlobalData.
Honda will have a similar split with 55 percent EV
capacity utilization and 96 percent at combustion
plants in 2028.
EV- or combustion-only plants are often more
we don't have too much supply, " Smith said. " It's
really that simple. "
During the second-quarter call, Dyke said the
bloated supply issue will eventually benefit consumers
and the group's EchoPark business.
" You've got manufacturers out there that have
just totally lost control of their day supply, and it's
going to cost them big time in terms of incentives, "
Dyke said on the call.
" The winner here is the consumer. They pay a
lot less for a vehicle over time. "
The group's second-quarter net income of
$41.2 million was nearly double the $23.4 million
it earned in second-quarter 2023, when it took a
charge for closing some of its EchoPark stores.
Sonic Automotive, of Charlotte, N.C., ranks No.
6 on Automotive News' list of the top 150 dealership
groups based in the U.S., retailing 107,257
new vehicles in 2023.
Larry P. Vellequette contributed to this report.
efficient than plants with multiple propulsion
systems, but they can limit automakers' production
plans, Robinet said.
" In the old world, your ability to move vehicles
back and forth between plants was a lot easier, but
when you go from ICE to BEV, that flexibility really
becomes difficult, " Robinet said. " It's not apples
and apples. It's apples and definitely oranges. "
Some plants that build gasoline-powered vehicles
will be highly utilized through 2031, the forecast
said. As gasoline-vehicle production dwindles
over the decades, most remaining combustion
plants will build pickups, Schuster said.
The EV-ICE isolation will resolve over time as
automakers set up more plants to build multiple
vehicle types. The number of plants that will
build vehicles with three propulsion systems -
internal combustion engine, hybrid and EV -
will nearly double to 21 in 2029 from 11 in 2023,
according to a July report by the Federal Reserve
Bank of Chicago, which analyzed S&P Global
Mobility data.
" Everyone is trying to have enough capacity
and enough capability to pivot on consumer
changes on preferences and on the regulatory
environment, " Schuster said. " It may not be the
most efficient production strategy, but in this uncertainty
period, it may be the best approach to
get flexibility. "
McQuaid has been president of GM
Europe since November 2022. She previously
was executive chief engineer
for full-size trucks.
" We are positioning ourselves in Europe
as an electric high performer and
a premium brand with American
roots, " McQuaid
told Automotive
News affiliate Automobilwoche in
May.
One way Cadillac aims to stand out
from its German premium rivals is
with the Lyriq's bold design.
" We're not like many other electric
brands. We want to offer the car to
people who want to express their personality
with it, " she said. " Our customers
are modern people who love
performance and love technology. "
Bo Mandal, chairman of the BuickGMC
National Dealer Council, said
Aldred's promotion is " bittersweet " after
leadership roles with both brands
for a decade.
" He's been an enormous part of
Buick-GMC's growth, " Mandal said,
adding that he briefly spoke to McQuaid,
who seemed eager and excited
to lead the brands.
Aldred's new role " is very important
to have retail dealer relations experiences,
not only in sales but in [Customer
Care and Aftersales], " said Mandal,
CEO of Mandal Automotive Group
in Biloxi, Miss. " He clearly has the pedigree
in his work over the last several
decades to be able to lead that. "
Automotive News - August 12, 2024

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