Subaru/Toyota EV partnership, April's auto loan delinquencies, new recall analysis

Hey everyone. Before we dive into today’s daily roundup, I want to shout out my latest episode of the CDG podcast with dealer Robert Ourisman, which dropped today. In 2020, Robert suddenly found himself in the CEO’s chair, overseeing 18 stores. Today, he expects to sell 20,000 at the end of the year.

In this episode, we discuss holding on to talented staff, fixing the Cherokee 4xe sales slump, inventory allocation, and much more. I *highly* encourage you to give this one a listen.

Now, let’s get into today’s top stories.

—CDG

1. Subaru, Toyota team up for three new EV crossovers

Big picture: Subaru announced plans to deepen its ties to Toyota and build three new electric crossovers together, Subaru CEO Atsushi Osaki said during a conference on Monday.

What it means: Building EVs is expensive even for the biggest auto brands. So it makes sense that a smaller automaker like Subaru would tap stakeholder Toyota for help with the transition.

Zooming in: As it stands, Subaru will build one of the three EVs at its Yajima plant in Japan, while Toyota will handle another in the United States. Both will supply vehicles to each other.

• Toyota will also take the wheel for Subaru's first three-row electric SUV, scheduled for production in Kentucky in 2025 after Toyota launches its own larger electric SUV model.
  

• Subaru plans to produce its own in-house EVs in Japan in 2025, with a goal of manufacturing 200,000 units annually.

Subaru’s broader EV strategy: Osaki, who took over in April 2023, has charted a course for aggressive electrification. 

• The automaker now aims for 50% of its sales to be EVs by 2030, which would translate to roughly 600,000 units sold annually.

• The Subaru Solterra, the automaker’s only current EV offering, is already built by Toyota at its factory in Japan. Subaru sold 14,000 units of this model last year, including 8,872 in the U.S. 

• Meaning, of the 852,000 vehicles delivered globally last year, EVs only made up 1.6% of total sales.

• Subaru plans to introduce four new fully electric SUVs by the end of 2026 (including the Solterra), followed by another four EVs by 2028, bringing the total to eight.

The intrigue: In addition to bolstering its EV portfolio, Subaru hasn’t given up gas-powered options either. The automaker plans to introduce hybrid versions of the popular Crosstrek crossover and Forester SUV, scheduled to begin production in Indiana by 2026.

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2. Car loan delinquencies tick down in April

Top line: Tax refund season helped drive down auto loan delinquencies for the month of April but are still considerably higher year-over-year, according to data from Cox Automotive.

By the numbers: 

• Despite the improvement, 60-day plus delinquencies remain 11.8% higher than a year ago. This was the highest delinquency rate for the month of April since at least 2006.

• 1.77% of all auto loans were severely delinquent in April, down from 1.88% in March.

• 6.79% of subprime loans were severely delinquent, down from 7.25% in March.

• Default rates followed a similar trend. Defaults declined 11.2% in April compared to March, but year-over-year, they're up 27.3%.

• Subprime auto loan defaults declined by 17% in April but were up 15.9% year over year.

Of note: Simply being delinquent on a car loan does not necessarily mean it will turn into a default or lead to a repossession. However, falling behind on payments does impact credit score. 

• Overall high delinquencies also suggest the Federal Reserve's interest rate hikes are putting a strain on consumers, making it harder for them to afford car payments.

What we’re watching: Despite a sharp uptick in delinquencies and defaults over the past two years, repossessions haven’t changed much since before the pandemic. According to Cox, at the end of 2023, repossessions were up 29% from 2022. Yet, repossessions were still 5% below 2019 levels.

What do you think…Will there be a big uptick in repossessions this year? Let me know in the comments.

3. Recalls: more frequent for EVs, but OTA updates offer flexibility

At a glance: According to a new analysis, EVs are projected to be recalled more often compared to their gasoline counterparts over time. 

What’s happening: The Porshe Taycan EV leads the pack with 70.7 potential recalls over a 30-year period, while the Tesla Model Y and 3 round out the top three with over 60 projected recalls each. 

But there’s a key difference: While Tesla tops the recall charts, the majority are software-related and can be fixed with over-the-air (OTA) updates. Meaning, drivers can have their recalls taken care of without a trip to the dealership or service center. 

• When OTA updates are taken out of the equation, Tesla has a projected 3.1 recalls over 30 years, below the median average of 3.2.

By the numbers:

Most recalled cars (projected 30-year recalls): 

• Porsche Taycan EV: 70.7

• Tesla Model Y: 66.9

• Tesla Model 3: 60.7

• Porsche Panamera: 43.1

• Lucid Air: 40.1

Let’s take a look at the most recalled cars when OTA updates are not considered:

• Porsche Taycan EV: 70.7

• Porsche Panamera: 43.1

• Lincoln Aviator: 26.2

• Genesis GV70: 22.3

• Kia Telluride: 22.2

Why it matters: While OTA updates are still considered recalls (a recall is a recall regardless of how the fix is delivered) according to the National Highway Traffic Safety Administration (NHTSA), there is a growing distinction for consumers. OTA updates offer advantages in convenience and speed and could have less of an impact on car buyer perception. 

Adjacent news: In March, Sawyer Merritt announced on X that he launched a petition to urge the NHTSA to stop classifying OTA software updates as recall and use more accurate language.

On the flip side: Lexus and Mercedes-Benz dominate the top 25 list of fewest projected recalls over 30 years. But it’s the MINI Cooper that claims the top spot at only 0.2 projected recalls. 

Least recalled cars:

• MINI Cooper: 0.2

• Lexus ES 300h: 0.3

• Lexus RX 450h: 0.3

• Lexus NX 300h: 0.3

• Lexus ES 250: 0.3

Bottom Line: The data suggests that new EV technology might initially lead to more frequent recalls. However, OTA updates mitigate some inconvenience. Ultimately, the EV market is changing fast, and these growing pains may be temporary.

• Update: President Biden has gone through with his plans to impose higher tariffs on Chinese EVs.

• U.S. auto safety regulators are investigating Alphabet-owned Waymo after 22 reports of incidents.

• Chevrolet has announced that production of the 2024 Silverado EV First Edition RST is now underway.

• Low-income households spend 17.8% of their income on energy bills and transportation fuel, more than three times the national average.

• More than 5,000 workers at Mercedes-Benz near Tuscaloosa, AL, are voting on whether to join the UAW this week.

We’ve got tons of great jobs hitting the CDG Job Board right now. Here are some standouts for anyone looking for their next move.

• Are you a big-picture kind of person? AutoNation is looking for a Director of Strategy & Business Development.

• OPENLANE is looking for tons of new talent—they’re hiring market sales managers across the country. In Pensacola, Chicago, and Las Vegas to name a few.

• Sales more your game? S&P Global is looking for a Sales Executive-retail.

Looking to hire? Add your roles today—it’s 100% free.

Thanks for reading everyone. Hope you have a great day.

— CDG