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US auto sales are falling as prices for new vehicles jump to highest ever

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New Ford cars are displayed on the sales lot at Veracom Ford in Burlingame, California.

U.S. auto sales are falling as vehicle prices climb, indicating that buyers at the lower end are getting squeezed out of the new car market, according to a new industry forecast.

First-quarter auto sales are expected to drop by nearly 2.5 percent from a year earlier, to 4 million units, according to J.D. Power and LMC Automotive.

Retail sales, which exclude sales to rental car companies and other commercial businesses, are expected to drop by about 5 percent to 2.9 million units. It's the first time first-quarter retail sales are projected to fall short of 3 million units in six years, said Thomas King, senior vice president of J.D. Power's data and analytics division.

It's more evidence that vehicle sales in the world's second-largest auto market are sliding from the record levels they had achieved in the years following the financial crisis.

While sales volumes are softening, especially for cheaper cars, customers are still paying remarkably high prices for cars, King added. Prices are hitting monthly records while retail sales of vehicles that cost under $25,000 are expected to fall 12 percent in the quarter, more than double the overall decline.

The average price of a new vehicle is expected to hit $33,319, the highest ever for the first quarter. The average buyer is paying $1,000 more per purchase than in the first quarter of 2018.

The data suggest that more and more buyers are getting squeezed out of the new vehicle market and are likely turning to used cars as manufacturers pull back on cheaper vehicles, said LMC Automotive President of Global Forecasting Jeff Schuster.

“The challenge will be holding discipline as new vehicles launch and competitive pressure grows,” Schuster said. “The Fed's decision to hold interest rates will help stabilize the interest element of the rising cost of buying a new vehicle.”

Renault reportedly wants to merge with Nissan and buy Fiat Chrysler

Bill Pugliano | Getty Images
Fiat Chrysler Automobiles, Chrysler Group headquarters

Renault is reportedly looking to restart merger talks with Nissan within the next 12 months before making an audacious attempt to buy Fiat Chrysler.

The Italian-American multinational is a prime target for the French firm, according to the Financial Times who cited several people familiar with Renault's plans, and former Renault CEO Carlos Ghosn held talks with Fiat in recent years before his arrest in Japan on financial misconduct charges.

The FT also reported that Fiat Chrysler Chairman John Elkann is open to a potential partnership or merger in a bid to boost his firm. A combination of Renault, Nissan and Fiat Chrysler would be viewed as a viable rival to the current global auto leaders, Volkswagen Group and Toyota.

Ensuring permanence of auto alliance a priority, Renault CEO says
7:15 AM ET Tue, 5 March 2019 | 04:24

Renault, Nissan and Mitsubishi are not officially merged but all three carmakers operate a partnership under a complex arrangement of cross-party share ownership.

The arrangement was plunged into crisis in November last year when former Nissan chairman and Renault CEO Carlos Ghosn was arrested in Japan following allegations of financial misconduct, which he denies.

Shares in Renault have risen 2.5 percent during Wednesday's European trade, while Fiat Chrysler is up more than 3 percent.

Renault and Fiat Chrysler were not immediately available for comment when contacted by CNBC.

For more on this story, please click here.

As Lyft goes public, profitability is a long-term goal, not a near-term likelihood

Lyft beat Uber to the punch on Friday — the number-two ride hailing service in the U.S. was the first to go public, pricing shares ahead of the IPO at $72. The stock popped as much as 20% in the first minutes of trading, valuing the company at nearly $25 billion.

But Lyft is deeply in the red today, with a net loss of $911 million in 2018. During its road show, Lyft told investors that eventually, it expects to hit twenty-percent margins. The company just didn't say when.

A fierce competition

Uber, which is expected to go public next month, still commands greater market share than Lyft.

It offers rides on-demand in 65 countries and has a stake in Didi and Careem, which operate in Asia and the Middle East and North Africa, respectively.

Lyft is far behind Uber when it comes to coverage. In 2018, its geographic expansion focused on coverage in 95 percent of the U.S., and some new locations in Canada, filings ahead of its IPO disclosed.

Uber was also the first ride-hailing company to expand into services like food delivery and bike-sharing (via its acquisition of Jump in April 2018) which provide it with different revenue streams.

Lyft has been slower to diversify, although it has invested in other modes of transit as well. It bought Motivate in 2018, a bike-sharing company after Uber bought Jump, for example. It also offers scooters to riders looking for options beyond the car.

Lyft
Lyft has invested in other modes of transit including scooters and bike-sharing.

Uber is making plays in logistics with Uber Freight, short-hop air travel with Uber Air, and driverless taxis with its own autonomous vehicle division, Uber Advanced Technology Group.

Lyft is more focused, although it is starting book passengers into self-driving vehicles via a partnership with Aptiv. It hasn't talked about any plans for air taxis.

The race to profit

The next race will pit these ride-hailing players against each other in a quest for profitability, and the confidence of the public market investor.

D.A. Davidson senior vice president and research analyst Tom White says Lyft is doing well with some traditional sales and marketing efforts, and incentives that keep drivers and riders loyal to their platform.

Long term, he says, “There's the potential for autonomous vehicles and autonomous technology to basically reduce the amount of times Lyft has to pay a driver. And that could be a big, big lever for profitability.”

Uber's costly ambitions and lack of focus could challenge its path to profitability, he suggested. “One of the things we like about Lyft being a little smaller than Uber is the fact that they are more focused,” he said.

Lyft
Lyft says it has facilitated 35,000 rides in autonomous vehicles like this one

Head of research at Manhattan Venture Partners, Santosh Rao, told CNBC: “The macro market is good, IPO sentiment is good, so I think this is the right time to get out and they're doing the right thing.”

Others look at Amazon, which lost money for the first several years it operated as a public company, and Tesla, which has yet to record a profitable year, as examples of growth stocks that didn't always prioritize profits.

For those holding out to see an end to Lyft's losses before buying shares, one recent SIG report forecasts the company will become profitable…but it may take seven years.

WATCH:
Lyft begins trading on the Nasdaq at $87.24 a share

Watch the moment Lyft begins trading on the Nasdaq at $87.24 a share
1 Hour Ago | 02:20

Volkswagen chooses Amazon’s cloud service to help it build cars

Julian Stratenschulte | picture alliance | Getty Images

Volkswagen and Amazon Web Services (AWS) have teamed up to work on a cloud-based platform to transform the auto giant's “manufacturing and logistics processes.”

The multi-year, global agreement, announced on Wednesday, would see Volkswagen use a range of services from AWS, including machine learning, the internet of things and analytics.

Among other things, these technologies will be used to boost plant efficiency, increase the quality of vehicles, and improve production flexibility.
Real time data from 122 manufacturing plants will be collated to track parts and vehicles and “manage the overall effectiveness of assembly equipment,” AWS said. The platform will eventually integrate over 30,000 facilities and 1,500 suppliers in Volkswagen's supply chain.
“The Volkswagen Group, with its global expertise in automobile production, and AWS, with its technological know-how, complement each other extraordinarily well,” Oliver Blume, who is chairman of the executive board of Porsche AG and a member of the board of management of Volkswagen Aktiengesellschaft, said in a statement Wednesday.
“With our global industry platform we want to create a growing industrial ecosystem with transparency and efficiency bringing benefits to all concerned,” Blume added.

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Nissan executives allegedly orchestrated Carlos Ghosn’s arrest to kill merger with Renault

Takaaki Iwabu | Bloomberg | Getty Images
Carlos Ghosn, former chairman of Nissan Motor Co., center, sits in a vehicle as he leaves his lawyer's office in Tokyo, Japan, on Wednesday, March 6, 2019.

Nissan executives took steps to have former Chairman Carlos Ghosn jailed in the hopes the arrest would stall or kill any attempts to merge the Japanese automaker with its French counterpart Renault, reported the Wall Street Journal Thursday, citing unnamed people familiar with the matter.

Nissan CEO Hiroto Saikawa, who had in the past been close with Ghosn, said at a Jan. 31 meeting that he believed Nissan executives had gone digging for evidence and presented their findings to Japanese authorities with the purpose of removing Ghosn from power, the paper reported. Ghosn had reportedly been trying to merge the two automakers, who had formed an alliance in 1999.

Theories that Nissan executives might have had a role in Ghosn's arrest have abounded in the automotive world. Ghosn had become something of a national hero in Japan for his role in helping to turn around Nissan, but many who follow the industry say the Japanese would have balked at the idea of a foreign automaker such as Renault owning such an important company in Japan.

Ghosn spent more than 100 days in jail in Japan for an array of alleged financial misdeeds before he was released on bail. He has been stripped of his roles at the Renault-Nissan-Mitsubishi alliance, which he had formerly chaired. If found guilty he could face up to 15 years in prison. He has denied the accusations.

Nissan was not immediately available for comment to CNBC, but company spokesman Nicholas Maxfield told the Wall Street Journal the motives of company executives is not relevant, and that the company found “substantial evidence of blatantly unethical conduct. The sole cause of this chain of events is the misconduct led by Ghosn.”

Read the full story in the Wall Street Journal.

Fiat Chrysler shares climb on talk of a merger analysts think is ‘half-baked’

Uli Deck | picture alliance | Getty Images
A Jeep Renegade 4×4 e is presented at the Geneva Motor Show March 5, 2019. Signage in the background says”'FCA Fiat Chrysler Automobiles,” to which Jeep belongs.

Shares of Fiat Chrysler climbed just over 3 percent Wednesday on talk of a merger with French carmaker Renault, but analysts are skeptical a marriage between the two companies is likely.

The Financial Times reported Wednesday the automaker is a potential acquisition target by French carmaker Renault, after Renault sorts out its relationship with Nissan, the Japanese manufacturer with which Renault has had a longstanding but lately troubled alliance.

But a merger between Renault and Fiat Chrysler seems just a bit far-fetched, Bernstein analyst Max Warburton said in a research note Wednesday.

“We've been asked to give a view, so here goes: this idea is half-baked, politically almost impossible to deliver and even if achieved, the resulting company would be unmanageable,” Warburton said. “We hope it is a banker's fantasy rather than a serious proposal from the key decision makers.”

Renault and Nissan have lately had their relationship tested after Japanese authorities jailed the alliance's former leader Carlos Ghosn over allegations of financial misbehavior.

But before going after Fiat Chrysler, Renault wants to restart talks of a merger with Nissan, the Financial Times reported. That is something Ghosn had reportedly been working on himself a few years ago, long before he was ousted from his position over accusations of financial misbehavior. Ghosn has denied all the accusations against him.

Commerzbank analyst Demian Flowers said he thinks the ordeal will drag on.

“Therefore, it's far from clear that the alliance can sort their internal disagreements out in time to be in the running for FCA,” Flowers said of Fiat Chrysler. That at least one other automaker has expressed interest in acquiring Fiat Chrysler and that the company's controlling owners, the Agnelli family, seems interested in a deal suggests the automaker is a potential target, Flowers added. If the deal depends on Renault's merger with Nissan, it will be a lot tougher to pull off, he said.

Warburton had even stronger words of skepticism for the hope that Renault and Nissan can reconcile their differences.

The problems between Renault and Nissan do not stem directly from Ghosn himself, said Warburton, but from the wider French control at Japanese Nissan and Renault's “cadre of international 'citizen of nowhere' managers.”

“We live in an era of de-globalisation and heightened anxieties about national and regional identities,” he said. “This applies to corporations as well as politicians and individuals. Proposing a merger with Nissan would be like demanding the UK's Brexiteers turn 180 degrees and sign up to a European superstate, or inviting the Baltic States to rejoin the USSR. We just can't see it happening. We'd describe hopes of a functional Renault-Nissan merger as delusional.”

Automotive history is littered with examples of mergers that have not worked out, he added. The alliance between Renault and Nissan, which Japanese manufacturer Mitsubishi later joined, proved critics wrong and functioned largely because it was not a merger, but a loose alliance. Now even that has unraveled.

That said, Renault would probably be a better candidate for a merger with Fiat Chrysler if the alliance breaks up, which seems more likely than a Renault-Nissan merger anyway, Warburton said. Alternatively, a merger between Fiat Chrysler and French automaker Groupe PSA, could be a better fit.

“PSA may not bring electric tech or Asian exposure but it does come complete with a superstar CEO with a proven ability to lead, motivate and integrate,” he said of Groupe PSA CEO Carlos Tavares. Groupe PSA owns Peugeot, Citroen, Opel and other carmakers. “And in this industry, that's probably worth more than a few million units more 'scale,' an extra nameplate or the ability to build a battery.”

Elon Musk just sent his second email this month to employees explaining Tesla’s store closure plan

Patrick T. Fallon | Bloomberg | Getty Images
Elon Musk, co-founder and chief executive officer of Tesla Inc., speaks during an unveiling event for the Tesla Model Y crossover electric vehicle in Hawthorne, California, U.S., on Friday, March 15, 2019.

Tesla CEO Elon Musk sent his second email to employees in a month to clear up confusion around its store closures, according to a copy of the memo viewed by CNBC.

The email says Tesla stores with high foot traffic and sales will remain open. It also says Tesla will open more stores if it thinks it can increase sales. Musk's memo also said customers will still have to buy cars from their phone or a computer, even if they do so in a store.

Tesla originally caused a stir with its February announcement that it would shift to online only sales. At the time, Musk confirmed this move would involve reducing the headcount in Tesla's sales and retail force. On March 10, Musk addressed employees directly in an internal email to all employees, saying its plans had changed and Tesla would “retain more stores than previously announced.” The company also published a blog post to explain its shifted mindset to the public, saying that upon review, it had decided to close fewer stores.

As a tradeoff, the company said, “Tesla will need to raise vehicle prices by about 3% on average worldwide. In other words, we will only close about half as many stores, but the cost savings are therefore only about half.”

In the latest email to employees sent Wednesday, Musk said he hoped to clarify some confusion around the new plans around retail locations.

“Stores with a high visitation rate and that lead to significant sales will absolutely not be closed down,” Musk said in the email. “It would not make any sense to do so, except in rare cases where the rent is absurdly high. Moreover, Tesla will continue to open stores throughout the world that meet the above criteria.”

He also cleared up some misconceptions around Tesla's decision to sell online only.

“What is meant by 'all sales will be online' is just that the act of purchasing a Tesla will always be done via the potential new owner's phone or computer,” Musk wrote.

Tesla was not immediately available to comment.

Read the full memo below:

From: Elon Musk
To: Everyone
March 27, 2019
Subject: Tesla Stores & Sales
There [is] still some uncertainty around Tesla stores and the sales team. Hopefully, this note clears things up. Please let me know if there is anything I've forgotten to address.
– Stores with a high visitation rate and that lead to significant sales will absolutely not be closed down. It would not make any sense to do so, except in rare cases where the rent is absurdly high. Moreover, Tesla will continue to open stores throughout the world that meet the above criteria.
– Stores that are in a location with low visitation rates (ie empty most of their opening hours) and lead to low sales will gradually be closed down. This is analogous to seeds on barren ground. There is no reasonable way to justify keeping such stores open.
– Stores that are somewhere in the middle will be evaluated over time to see [if] there is some way to allow them to cover their costs. If there is, they will remain open, otherwise not. However, these stores will be given a fair opportunity to prove their case.
The above principles also apply to the sales team. No one who is a major contributor to demand generation will be let go. That would make no sense. However, sometimes, in a company with 45,000 people, things happen that make no sense. I will do my best to remedy issues when brought to my attention directly or through emdesk@tesla.com.
What is meant by “all sales will be online” is just that the act of purchasing a Tesla will always be done via the potential new owner's phone or computer. This is true whether they are at home or in a store. Unlike buying from other carmakers, ordering a Tesla doesn't require any *physical paperwork*.
This is very different from normal expectations for buying from other carmakers and is simply meant to emphasize that ordering a Tesla is super easy and can be done in 2 minutes from your phone or laptop at Tesla.com. Ordering a Tesla is not much harder than ordering an Uber, but hardly anyone knows this!
However, many potential Tesla owners will still want to talk to a Tesla representative in person or want a test drive from a Tesla representative. Stores also have a small number of Tesla vehicles available to drive away immediately for customers that want a car right then and there.
This is why stores and Tesla product specialists and owner advisors will always be of critical importance to our long-term success.
Thanks,
Elon

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This court appearance might be a problem for Musk, says Jim Cramer
6 Hours Ago | 02:46

Cars in Europe could soon be fitted with technology to stop drivers speeding

Silas Stein | picture alliance | Getty Images
Illuminated panels indicate a speed limit of 120 kilometers per hour above the A3 motorway near Frankfurt Airport, Germany.

A range of mandatory safety features for new vehicles, including technology that could limit speed, are set to be introduced in the European Union (EU).

In an announcement Tuesday, the European Commission — the EU's executive arm — said that EU institutions had come to a provisional political agreement on the new measures. That agreement is now subject to formal approval from the European Parliament and Council, with the new technologies set to be introduced in 2022.

The proposed safety features include the introduction of intelligent speed-assistance technology, or ISA. According to the European Transport Safety Council (ETSC), ISA uses technology such as GPS, digital mapping and cameras to give vehicles location and speed limit information.
ISA systems can “limit engine power” to stop drivers from going above the speed limit. The ETSC says it recommends ISA technologies that can be temporarily overridden. This would mean that drivers could, in scenarios such as overtakes on lower-speed sections of road, override the system by putting their foot down on the accelerator.

The mandatory ISA system proposed by the Commission would not automatically slow a car down, but warn a driver that they were travelling above a road's speed limit.

Several major car manufacturers already offer various iterations of ISA systems in their vehicles.

Other proposed safety features include advanced emergency braking, cameras that assist with reversing, and lane-keeping assistance. Vehicles will also provide warnings if they detect a driver is drowsy or distracted and will use data recorders to document accidents.

“Every year, 25,000 people lose their lives on our roads,” EU Commissioner Elzbieta Bienkowska said in a statement.
“The vast majority of these accidents are caused by human error,” she added. “We can and must act to change this. With the new advanced safety features that will become mandatory, we can have the same kind of impact as when the safety belts were first introduced.”
A number of major car firms are looking to introduce increasingly sophisticated and connected safety features to their vehicles.
Just last week, Volvo Cars announced it would install in-car cameras and sensors to monitor drivers for signs of intoxication and distraction.

The firm said the technology would be used to monitor drivers and, when needed, enable the car “to intervene if a clearly intoxicated or distracted driver does not respond to warning signals and is risking an accident involving serious injury or death.”

Actions the car could take include limiting speed to slowing down and then parking the car in a safe place. Installation of the technology will start in the early 2020s.

At the beginning of March, the company announced it would introduce a 180 kilometers per hour (112 miles per hour) speed limit on all its cars from 2020.

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Clarification: This story has been updated to reflect how the ISA system proposed by the European Commission would work.

A Tesla rival in China wants at least $500 million in funding, and it may try a US IPO

Original Article

Nissan reportedly paid to send Carlos Ghosn’s four children to Stanford University

Takaaki Iwabu | Bloomberg | Getty Images
Carlos Ghosn, former chairman of Nissan Motor Co., center, sits in a taxi as he leaves his lawyer's office in Tokyo, Japan, on Wednesday, March 6, 2018.

Nissan paid to send all four of former chairman Carlos Ghosn's children to Stanford University, according to a Bloomberg report.

His children attended Stanford between 2004 and 2015, when the total tuition would have been worth at least $601,000, according to Bloomberg.

The perk was part of Ghosn's original employment contract when he signed on as chief executive officer in 1999, Bloomberg said, citing anonymous people familiar with the matter.

A spokesman for Nissan did not immediately respond to a request for comment from CNBC. Nissan and Ghosn's lawyer, Jean-Yves Le Borgne, declined to comment to Bloomberg.

Ghosn was charged last fall in Japan for allegedly underreporting his compensation by millions of dollars and misusing company funds. His recent request for bond was approved after he spent 108 days in jail.

Ghosn has maintained his innocence throughout the process and denied any wrongdoing.

“I am not guilty of the charges against me and I look forward to defending my reputation in the courtroom; nothing is more important to me or to my family,” Ghosn said at his Jan. 20 bond hearing.

Read Bloomberg's report here.