Welcome back to the latest episode of The Future of Automotive on CBT News, where we put recent automotive and mobility news into the context of the broader themes impacting the industry.
I’m Steve Greenfield from Automotive Ventures, and I’m glad that you could join us.
It’s been a tough quarter for many of the legacy automakers, and their stock prices have taken a hit as a result. Much of the pain continues to be caused due to the challenges anticipating consumer demand for electric vehicles and hybrids. But, many are also warning of softness in their traditional internal-combustion engine businesses as well.
Ford, Tesla and Stellantis last week saw their share prices hammered after posting results that fell short of Wall Street’s expectations. General Motors did beat estimates and raised its full-year profit outlook, but frustratingly, its shares also sank.
Reasons for profit pressure last quarter ranged from warranty expenses and bloated vehicle inventory to trouble in overseas operations. Taken together, they signaled to investors that automakers may have a challenged second half of the year.
One particular concern among automotive investors has grown louder: The strong pricing power that carmakers enjoyed throughout the COVID-19 pandemic era continues to fade. Several auto executives warned that in the second half of the year, they expect that pricing power will continue to erode.
Car companies for years have tried to convince Wall Street that they are evolving into technology companies, with plans to transform cars into battery-powered smartphones on wheels. Billions of dollars of new, recurring subscription dollars were supposed to be created through unbundling vehicle features and selling them to consumer subscribers on a monthly basis. And billions more were going to be saved by conducting a significant proportion of recalls and repairs through remote, over-the-air updates. And OEMs proclaimed that they had found religion in limiting supply, and selling cars at a premium over MSRP.
Those ambitions, coupled with an unprecedented run of profitability fueled by supply-constrained pricing power, lifted automaker stocks prices.
Wall Street’s enthusiasm for this vision has now seemed to fade, as U.S. electric-vehicle demand hasn’t continued as inventories have mounted. Now, with signs that pricing is losing steam at the same time that the average American car buyer grapples with high interest rates, investors are starting to head for the exits.
With softer consumer demand, automakers are stepping back from bold, all-in proclamations of switching from ICE to EV powertrains. And automakers like Ford and GM continue to lose tens of thousands of dollars per new EV sold. Trying to anticipate consumer demand for EVs has proven to be an impossible task and has made for a very painful transition.
And none of this accounts for who ends up in the White House come November. Donald Trump has consistently signaled his intent to dismantle Biden’s Inflation Reduction Act, eliminating consumer-facing tax incentives on EVs. Except recent Trump rhetoric appears to have softened on EVs, and he may have even flipped his perspective after Elon Musk endorsed him for President.
The markets seem cautious about what the rest of the year is going to play out for the automakers, and anticipate more pain to come. Dealers should be keeping an eye on how the rest of the year will play out, which OEMs further soften on their EV future resolve, and should continue to keep a watchful eye on the ongoing health of their OEMs.
So, with that, let’s transition to Our Companies to Watch.
Every week we highlight interesting companies in the automotive technology space to keep an eye on. If you read my weekly Intel Report, we showcase a company to watch, and take the opportunity here on this segment each week to share that company with you.
Today, our new company to watch is Fairway.
Fairway offers AI automation for fleet management. The company focuses on automated registration & licensing, maintenance management, and fuel optimization for Fleet Management Companies and fleets.
Fairway’s mission is to help companies that manage fleets reduce their total cost of ownership and ensure 100% compliance by automating burdensome processes and delivering actionable insights at scale.
The company’s first service is automating vehicle licensing and registration. ‘
Fairway helps fleet management companies and fleets reduce the cost and administrative burden of compliance and avoid violations and downtime.
Fairway leverages AI to track the laws and processes at the state and municipal level, track the status of each vehicle, and automatically file paperwork to ensure 100% compliance in all 50 states.
If you’d like to learn more about Fairway you can check them out at www.getfairway.com
So that’s it for this week’s Future of Automotive segment.
If you’re an AutoTech entrepreneur working on a solution that helps car dealerships, we want to hear from you. We are actively investing out of our DealerFund.
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Don’t forget to check out my book, The Future of Automotive Retail, which is available on Amazon.com. And keep an eye out for my new book, “The Future of Mobility”, which is almost done, and will be out soon.
Thanks (as always) for your ongoing support and for tuning into CBT News for this week’s Future of Automotive segment. We’ll see you next week!
