Kia America COO: Inflation Reduction Act Disrupts EV Market

First Up 11/28/22

Kia America COO: Inflation Reduction Act Disrupts EV Market

Import auto brands have been mostly circumspect about how the new Inflation Reduction Act will impact their efforts to market electric vehicles in the U.S. Steve Center, COO of Kia America, is a bit more blunt. The law pulls the rug out from the entire industry, he said. "To have anything just changed 'presto change-o' is very disruptive to everybody," Center told Automotive News. "You have the whole industry aggressively developing and getting ready to manufacture electric cars ... and you go in, you change it and it disrupts everybody's planning," he said. Enacted in August, the IRA requires that to qualify for a $7,500 tax credit, an EV and its battery must be assembled in North America and certain battery materials must be sourced or processed in North America. Hyundai Motor Group's three brands — Kia, Hyundai, and Genesis — each has made robust plans to build and sell EVs in the U.S. They have launched popular EVs into the market ahead of many domestic brands and have more in the queue. The group is the No. 2 seller of EVs behind Tesla, accounting for 9.4 percent share of the EV market, according to Experian Automotive. Click here for the full story.

Toyota Looks to Turn Buyers Back to Leasing

The Toyota brand's North American boss has a long-term homework project: Figure out a way to convert recent lessees-turned-buyers back into lessees three or four years down the road. It's a tough task, David Christ admits, and one that will require a lot of creativity to complete as inventory and reduced incentives have slashed leasing penetration this year. But given what a vital tool leasing historically has been for automakers and dealers, Christ says the industry will need to find an effective answer. "Toyota's leasing percentage right now is about 14 percent [of total sales], and it would normally be [near] 30 percent, so that's 15 percent of business which is now in a retail contract instead of a lease," Christ told Automotive News. "That's a concern, because a customer on a lease cycle is normally back in three years, and it's an automatic opportunity to re-lease them a new car or sell them a new car." Getting those customers back into the dealership on something close to a normal leasing cycle "is something we've got to create, because historically we've had 30 percent of our portfolio just automatically coming back." Click here for the full story.

Most Americans Would Still Prefer an ICE Over an EV, Regardless of Price

A study from Australian insurance comparison site Compare the Market has revealed that Americans still favor ICE-powered vehicles over electric vehicles, despite consumers in Australia and Canada preferring EVs. The study started by asking consumers whether they’d prefer to own an ICE vehicle or an electric vehicle at the same price. Carscoops reports no less than 53 per cent of Americans said they would prefer a traditional vehicle compared to 34 per cent who would prefer an EV. The rest had no preference either way. This contrasts to Australia where 50.8 said they would prefer an EV and Canada where 51.4 per cent of respondents said they would prefer an EV. Of those Americans that would prefer to own an EV, 18-24 years olds were the most likely to opt for an EV, with 43 per cent preferring them over ICEs. By comparison, upwards of 70 per cent of people aged between 55-64 would prefer an ICE. Click here for the full story.

How High Will New Car Profits Go?

As 2022 winds down, retail auto dealers continue to enjoy higher-than-ever profits, some up to 50 percent, even as inventory shortages persist. A WardsAuto survey of dealers across the U.S. has found the majority of respondents report meeting (39 percent), exceeding (30.5 percent), or far exceeding (9.7 percent) their revenue/profit objectives during the past 12 months. But will that trend continue during the next 12 months? Like everything else in this unprecedented auto retail market, it’s difficult to say. The answer depends on a variety of factors, perhaps none as significant as the actions of the Federal Reserve Board. Cox Automotive’s Chief Economist Jonathan Smoke cites rising interest rates as among the main factors that stalled retail auto sales. Cox Automotive was among the analysis groups that revised the forecasts downward after a disappointing third quarter. But that doesn’t signal a crisis. J.D. Power reports modest improvements in dealerships’ inventories that boosted retail sales increases from a year ago. Click here for the full story.

Analysis: U.S. Green Subsidies Heighten Fears for German Industry

Building a lithium-ion battery factory in Germany, Europe's top car producer, had seemed like a no-brainer for Northvolt. But a new U.S. law offering hefty subsidies to local manufacturers of green technology has given the company pause for thought. Chief Executive Peter Carlsson said that under the Inflation Reduction Act (IRA), Reuters reports Swedish-based Northvolt could get up to $836 million in U.S. state aid to build a factory making the batteries used in electric vehicles. That is roughly four times what the German government is offering, he said, with cheaper energy prices in the United States on top. As a result, the company is considering delaying its plans to build a factory in Heide, northern Germany. "We are now at a point where we may priorities expansion in the U.S. over Europe first," said Carlsson. German carmakers and suppliers, for which the United States is a main export market, are among its biggest victims. An October survey by the German Chambers of Commerce and Industry showed 39 percent of companies wanted to increase investment in the United States compared with 32 percent for Europe. Click here for the full story.

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