May's new car sales, surprising winners in EV registration, Musk critical of Biden tariffs

Hey everyone.  It’s tough to stay on top of all the latest auto industry news every single day — trust me, I get it. 

That’s why a few weeks ago, I started sending out an email every Saturday morning breaking down the most critical stories you might have missed.

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— CDG

1. U.S. auto sales are poised to increase in May

Top line: Boosted by the usual bump from Memorial Day sales and the return of more aggressive discounts, new car sales are expected to rise in May.

Driving the news:

• Sales Pace: The seasonally adjusted annualized rate (SAAR), or annual sales pace for total new vehicle sales, is expected to be 16.1 million units, up 0.5 million units from May 2023.

• Sales Volume: Analysts expect retail sales of new vehicles to reach 1,187,000 units, a 4.4% increase on a selling-day-adjusted basis.

• Inventory Levels: Projected retail inventory will finish around 1.8 million units, a 0.6% increase from April 2024 and a 52.7% rise from May 2023.

Key quote: “Expected new-vehicle sales results for May represent a mixed bag of outcomes. On the positive side, the total sales pace will exceed 16 million units for the first time this year. Also, discounts are similar to last month, despite May being a month in which discounts traditionally increase to take advantage of elevated shopping activity during the Memorial Day weekend. This is good news for manufacturer and retailer profitability,” said Thomas King, president of the data and analytics division at J.D. Power.

What’s more: The uptick in inventory and return of incentives year-over-year has led to a drop in average new car transaction prices (ATP). Transaction prices are trending towards $45,033, down $1,045 or 2.3% from May 2023.

On the lot: This month, dealers expect to sell 33.3% of cars within 10 days of being on the lot, which is about the same as last month. Vehicles are now likely to stay at dealerships for an average of 40 days before they sell, an increase of 29 days from last year.

Good news for consumers, but it’s putting a dent in car dealer profit margins.

• Total retailer profit per unit (including vehicle gross plus finance and insurance income) is expected to be $2,471, down 31.5% from May 2023. 

• In May, dealers sold only 14.9% of new vehicles above MSRP, down from 29.2% in May 2023.

• Average monthly loan payments are stabilizing at $727, down $3 from May 2023. The average interest rate for new-vehicle loans is expected to be 7.1%.

• Leasing is expected to account for 23.9% of retail sales this month, up from 20.6% in May 2023.

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2. Surprising winners from March’s EV registration data

What's happening: EV registrations grew 3.8% in March, buoyed by strong upticks from automakers like Hyundai and Ford, according to data from S&P Global Mobility.

By the numbers:

• EV registrations increased from 6.8% to 7.1% of the light vehicle market in March, with a 5.2% rise (264,268 units) in the first three months of the year.

• Tesla’s registrations fell 12% in March, taking a market share of 52.4%, down from 61.5% a year ago. Due to production limitations, the Model 3 saw an unsurprising 53% drop in registrations, but many analysts expect the Model 3 to make a comeback this year.

• Ford saw significant growth, with EV registrations tripling. Hyundai doubled its registrations in March. 

• Ford sold 20,223 EVs in Q1, up 86% from Q1 2023, with the Mustang Mach-E and F-150 Lightning leading their categories. 

• Hyundai set new sales records with the IONIQ 5, IONIQ 6, and Kona Electric.

Ford’s adjustments: Despite strong sales, Ford is still losing money on every EV it produces. In response, the automaker cut the workforce at its Rouge EV plant. It's also delaying $12 billion in EV spending and focusing instead on a hybrid lineup. Ford also doubled down on Mustang Mach-E affordability this month, cutting 2024 model interest rates to 0% APR for 48 months.

Hyundai’s EV commitment: The automaker is on track to complete its first EV and battery plant in the U.S., aiming to improve competitiveness and qualify for the $7,500 federal tax credit.

Other Automakers: Kia also doubled its EV registrations. Luxury brands BMW and Mercedes-Benz saw double-digit growth. Rivian's registrations were flat in March but up 30% in Q1, with production improvements in the works. Chevy’s EV registrations dipped 66% in March due to the end of Bolt EV production. But new models like the electric Equinox and Blazer are poised to give the automaker a potential boost.

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3. Tesla CEO Elon Musk ‘in favor of no tariffs’ on Chinese EVs

At a glance: At the VivaTech conference this week, Tesla CEO Elon Musk told reporters that he doesn’t support the tariff increases on Chinese EVs recently announced by the Biden Administration.

Context: Last week, the White House quadrupled tariffs on EVs from China and other exports in response to threats to U.S. jobs and national security due to China's manufacturing "overcapacity."

What’s more: Tesla’s sales in China slumped 18% year-over-year in April and dropped 30% from March, extending the EV maker’s first-quarter global declines—the likes of which it hasn’t seen since 2020. 

• The China slowdown comes as domestic EV makers like BYD hit the gas, briefly surpassing Tesla as the world's top seller late last year.

• In response, Tesla has slashed prices in China, Europe, and the U.S.

Big picture: The entire industry is worried about the sheer size of the Chinese vehicle production as there's a big opening for budget-priced EVs in the U.S. that BYD and other EV makers could fill. 

• Tesla has put plans for a sub-$25,000 model on the back burner, but still promises more affordable vehicles as early as later this year. Just how affordable remains to be seen.

• Tesla Motors' brand reputation continued to slip over the last year, according to a new poll.

• GM CEO and Chair Mary Barra said she has no plans to retire anytime soon.

• Lucid Group will reduce its workforce in the United States by 6%, or around 400 employees.

• Kia introduced the finalized version of its EV3 small electric SUV.

• Rivian lost $38,000 per vehicle it delivered in Q1.

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• More comfortable inside the dealership? Tom Whiteside Chrysler Dodge Jeep Ram has 5 open positions, including technicians, engineers, and sales associates.

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Thanks for reading everyone.

— CDG