April's new car sales, Tesla layoffs continue, wholesale used car prices

Hey everyone. Welcome back to the CDG daily roundup of industry news.

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Market Watch

1. U.S. new vehicle sales decline in April

Big picture: April’s U.S. new vehicle sales are in, and the numbers reveal a slightly steeper decline than analysts initially forecasted.

Data dump:

• New light vehicle sales dropped by 3.3% year-over-year.

• The estimated average transaction price (ATP) rose to $48,510, the highest level since last December, but down 0.5% from April 2023.

• The average MSRP increased 2.2% in April and was up 1.3% from this time last year.

• Fleet sales overall were down 5.6% year-over-year.

• Sales into large rental fleets were down 2.0% from April of last year while sales into commercial fleets were down 14.3%. Sales into government fleets were up 8.3%.

What this means: New car sales are facing headwinds due to rising vehicle costs and auto loan rates. A potential cooling of inflation and subsequent interest rate cuts could help, but declining commercial fleet purchases raise broader concerns for automakers as fleet sales have traditionally been a way to sell large volumes and offload surplus inventory.

2. More layoffs at Tesla amid sales slowdown

At a glance: Tesla's layoff saga enters its fourth consecutive week, affecting personnel across several different teams including software, services, engineering, and recruiting. On April 14, CEO Elon Musk, announced Tesla would slash 10% of its global workforce.

The big picture:

• Four employees confirmed to Business Insider that they were notified of additional cuts on Monday. Several others shared layoff notices on LinkedIn over the weekend.

• One Tesla employee shared on LinkedIn, “After watching my team gradually slimmed down week after week since mid-April, I received the dreaded 'Hello Employee' email this Sunday afternoon.”

• At least six Tesla executives have left the company in the past month, including Drew Baglino, SVP of powertrain and electrical engineering, and Rohan Patel, VP of public policy and business development.

• Rebecca Tinucci, head of EV charging, and her entire 500-person Supercharger team were laid off.

Musk’s approach: The CEO called for the company to be “absolutely hard core” about headcount, in an email to executives. 

• According to unnamed sources, Musk also privately expressed a desire to trim at least 20% of Tesla's workforce after quarterly vehicle deliveries dropped.

Why it matters: Tesla, the leading luxury EV maker, faces a sales slowdown. 

• Deliveries fell 8.5% year-over-year, marking their lowest quarterly total since 2022. While earnings met expectations, revenue and net income took a hit, dropping 9% and 55% respectively.

• Musk attributed the layoffs to the company's rapid hiring in recent years, suggesting it led to redundancies and inefficiencies. But to shareholders, Musk said the cuts are part of "restructuring for the next phase of growth.”

Bottom line: This is not out of the blue for Tesla. The EV maker has historically increased hiring during periods of growth and cut headcounts during slowdowns to shore up profits.

3. Wholesale used car prices dropped last month

Top line: Wholesale used car prices declined for the second straight month in April, according to the latest data. 

By the numbers: 

• Used car prices (adjusted for seasonality) decreased 14% year-over-year in April. Unadjusted prices fell 0.6% month-over-month. 

• The daily sales conversion rate (the number of used cars actually sold each day dipped from March, in line with seasonal trends.

• Luxury cars had the smallest decline in prices, down 12.9% year-over-year.

• Compact cars were hit the hardest, decreasing 17.6% from this time last year.

• Preliminary data shows a 17.5% year-over-year price decline for electric vehicles.

Of note: The current data includes vehicles that meet their market clearing price at auctions, excluding those that do not sell.

Why it matters: Used car prices are dropping faster than usual. 3-year-old cars depreciated by 1.6% in April compared to 1% between 2014 and 2019. Yet, retail used sales are still surprisingly strong, up 9% year-over-year. The drop in prices and rise in sales could be indicative of excess used car supply from a weaker than expected tax season.

• Apple could be in talks with EV maker Rivian about a potential partnership.

• Workers at Stellantis' Warren Stamping Plant voted to authorize a strike.

• British self-driving car startup Wayve has raised $1.05 billion in an investment round.

• Republicans have introduced a bill to eliminate the U.S. EV tax credit under the Inflation Reduction Act.

• Fisker has begun to close its Manhattan Beach office sources say.

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Thanks for reading. Hope to see you back here tomorrow.

— CDG