michael
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 4:14 pm

roundpeg wrote:
LeftieBiker wrote:That's pretty much what I wrote, except that you seem to discount the significance of leasing. In the case of EV's it's actually pretty important, both because of the higher vehicle prices and because of the rapidly changing technology. So if GM makes leasing unappealing (and they've just about done that already), then the "sales" of the Bolt (the "sales" figures usually include leases) will drop substantially, Add to that the addition drop from the loss of the rebate, and...well I already wrote that, didn't I? ;-)


Sort of, except that you as many others seem to believe that lease math is some sort of special magic that has little or no relationship to the net price of the car, when in fact it is exactly related. If leasing is "unappealing" then it's because the car is expensive. If leasing is appealing, it's because the car is inexpensive.


It's not as simple as that.

Wall Street looks at this quarter and next quarter. That's what American business worries about. Making your numbers. People don't worry about next year or three years from now. If they don't make their numbers today, they won't be around in three years. If they make their numbers, they will be promoted and the time bomb they planted will be someone else's headache.

If a company reduces selling price, it goes straight to the bottom line and become today's problem.

If a company establishes artificially high residuals on a lease, the problem won't surface for three years, becomes someone else's problem.

So a company has more flexibility to reduce lease price than it does to reduce selling price.
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roundpeg
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 4:25 pm

boltage wrote:Product planning by the auto industry is a difficult task, because it takes 5 or so years for a new product or the next generation of a current product to reach the market. 5 or so years is an eternity in terms of oil price fluctuations. Reconfiguring factories and changing orders from suppliers in response to changing market demand can also require non-trivial effort and cost.

When gasoline hit $4 per gallon in 2008, most of the auto industry was caught with a product mix designed for cheaper gasoline (and Toyota sold Priuses quickly). So new development went into improving fuel economy improvements and EVs. These new more fuel efficient models were hitting the market around 2014, when the fracking boom drove crude oil and hence gasoline prices down, reducing market demand for fuel efficiency.

If gasoline prices stay low for the time being, auto companies may still want to keep EVs and PHEVs around as a hedge in case gasoline prices go up, even if sales are not particularly high.

Note that an article in Barron's claims that oil prices are likely to rise this year. Whether or not this will come true will not be known until later this year.
http://www.barrons.com/articles/oil-pri ... 1486186051


You kind of make my point for me. The auto industry has been "caught" many times by spikes in gasoline prices, and they always went back to making more land yachts as quickly as they could after the market absorbed the shock. The only force operating in the other direction is government policy to increase fleet efficiency. Take that away or relax that force significantly and the automakers will be delighted to go back to building large, profitable vehicles and not hedging their bets.

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roundpeg
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 4:28 pm

michael wrote:So a company has more flexibility to reduce lease price than it does to reduce selling price.


Actually, no. I've looked at the leasing math from all directions. Leasers are not getting any special deals, though I agree leasers are helping the automakers' bottom lines by signing over their federal tax credit and only getting part of it back.

boltage
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 4:55 pm

roundpeg wrote:You kind of make my point for me. The auto industry has been "caught" many times by spikes in gasoline prices, and they always went back to making more land yachts as quickly as they could after the market absorbed the shock. The only force operating in the other direction is government policy to increase fleet efficiency. Take that away or relax that force significantly and the automakers will be delighted to go back to building large, profitable vehicles and not hedging their bets.


Gasoline prices are a much stronger force since they cause buyer preferences to change. Smaller more fuel efficient vehicles were more popular while gasoline was $4 per gallon. When gasoline fell to $2.whatever per gallon after 2014, larger vehicles increased in popularity.

Of course, the fact that buyers think in very short time frames when considering gasoline prices in their vehicle choices is another matter. It appears that most buyers fail to consider potential fluctuations in gasoline prices over the time that they keep their vehicles.

michael
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 6:10 pm

roundpeg wrote:
michael wrote:So a company has more flexibility to reduce lease price than it does to reduce selling price.


Actually, no. I've looked at the leasing math from all directions. Leasers are not getting any special deals, though I agree leasers are helping the automakers' bottom lines by signing over their federal tax credit and only getting part of it back.


Actually, yes. The residuals are inappropriately high. This artificially reduces the lease payment.

Example: my Focus Electric had $17K residual. Actual FMV was less than half that. Ford, unlike GM, did not keep any part of the $7500 as a buffer against this, they applied the full amount as cap reduction. Ford ate maybe $8K - $10K on the lease which I would have eaten had I bought.
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roundpeg
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 7:04 pm

boltage wrote:Gasoline prices are a much stronger force since they cause buyer preferences to change. Smaller more fuel efficient vehicles were more popular while gasoline was $4 per gallon. When gasoline fell to $2.whatever per gallon after 2014, larger vehicles increased in popularity.

Of course, the fact that buyers think in very short time frames when considering gasoline prices in their vehicle choices is another matter. It appears that most buyers fail to consider potential fluctuations in gasoline prices over the time that they keep their vehicles.


Sure, and what I am saying besides is the U.S. auto industry is perpetually out of sync with the cost of fuel and unprepared to address shifts in consumer preference. This has happened at least three times that I can remember. If it wasn't for the CAFE standards the industry would be even less prepared.

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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 7:12 pm

michael wrote:Actually, yes. The residuals are inappropriately high. This artificially reduces the lease payment.

Example: my Focus Electric had $17K residual. Actual FMV was less than half that. Ford, unlike GM, did not keep any part of the $7500 as a buffer against this, they applied the full amount as cap reduction. Ford ate maybe $8K - $10K on the lease which I would have eaten had I bought.


Actually, no, because those residuals are a function of the federal tax credits and any other incentives they may be offering at that time. You sign your tax credit of $7500 over to the leasing company, in full. They then use however much of it they feel they need to inflate the residual and make you say yes to a monthly payment, and keep the rest as profit. They may also very well be offering cash incentives for buyers that the leasers don't know about, because they don't ask.

An artificially high residual is no bargain, either, unless you are almost certain that you won't want the car in three years, or really like the process of bargaining with car dealers.

michael
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 9:22 pm

roundpeg wrote:
michael wrote:Actually, yes. The residuals are inappropriately high. This artificially reduces the lease payment.

Example: my Focus Electric had $17K residual. Actual FMV was less than half that. Ford, unlike GM, did not keep any part of the $7500 as a buffer against this, they applied the full amount as cap reduction. Ford ate maybe $8K - $10K on the lease which I would have eaten had I bought.


Actually, no, because those residuals are a function of the federal tax credits and any other incentives they may be offering at that time. You sign your tax credit of $7500 over to the leasing company, in full. They then use however much of it they feel they need to inflate the residual and make you say yes to a monthly payment, and keep the rest as profit. They may also very well be offering cash incentives for buyers that the leasers don't know about, because they don't ask.

An artificially high residual is no bargain, either, unless you are almost certain that you won't want the car in three years, or really like the process of bargaining with car dealers.


An artificially high residual is a terrific bargain because it makes no sense to buy a three year old EV out of a lease unless the leasing company in effect throws up its hands and says "take this piece of junk from me for a very low price". For exactly the reasons I stated above, the lease payments are small compared to the huge hit one takes being stuck with a three year old EV.

Yes, it's true that some companies (GM, US Bank, etc) apply the $7500 toward an inflated residual, but it flies in the face of history to suggest that they "keep the rest as profit" in the long run. They get killed at the end of the lease when they own cars that have very low FMV.

Let me ask others on this board who have previously leased an EV: when it came time to return the car, would it even occur to you to keep the car for the residual? EV prices keep dropping and capability keeps increasing. It's not the same as with a conventional car.

I couldn't wait to get rid of my Focus so I would have the opportunity to replace it with something newer. Ditto for my Gen 1 Volts.
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 9:32 pm

michael wrote:Let me ask others on this board who have previously leased an EV: when it came time to return the car, would it even occur to you to keep the car for the residual?


Yes, it did. Fortunately, I didn't have to worry about it because Nissan handed me $5k off my residual before my lease even ended. But I think that pretty much proves your point.

Needless to say, I jumped on the offer. Now I own an EV, and can upgrade whenever the right EV comes along at the right price. Fortunately for me, my 2012 Leaf will still suit my needs just fine for many years, even with continued battery degradation (currently down to about 80% from new).
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LeftieBiker
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Re: Is GM committed to manufacturing the Bolt in the Trump Era

Mon Feb 06, 2017 10:56 pm

Let me ask others on this board who have previously leased an EV: when it came time to return the car, would it even occur to you to keep the car for the residual? EV prices keep dropping and capability keeps increasing. It's not the same as with a conventional car.



My lease payment was ridiculously low ($149 on the original lease) so my residual was insanely high ($20k+). One of the discount offers would have allowed me to buy my Leaf for $9k (plus tax) but the lack of QC and the decreasing range made me decide not to buy. I may yet lease a virtually identical 2016 SV, with QC and 107 mile range, for literally half the cost of a Bolt lease, with a low residual.
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