Industry Ups and Downs

The last few weeks have seen some great news and some bad news for the industry – on two and four wheels. Personal transportation is going through a difficult time yet there are some highlights.

On two wheels, The Economist magazine reported that Harley-Davidson is going through a rough patch – not the first in their 116 year history. In the US they have seen sales figures drop for the last two years with every Quarter worse than the last. Their problem is simple in some respects: demographics and a lack of diversity when it comes to who buys the motorcycles. The majority of buyers are middle-aged white men who buy their dream bike and then spend their money on after-market add-ons, mostly not from Harley-Davidson. The company is trying to reverse sales by adopting a five year plan to sell a wider range of machines with 16 new models due out including some electric motorcycles. They recognise that to increase sales, they need to lower the average age of the buyers and widen their racial appeal.

On four wheels, we saw the announcement from Jaguar that they would trim their workforce by 4,500 jobs in the UK, mostly in management and have started a voluntary redundancy program. They have already been trimming their staffing levels and are also trimming some new models that were to be launched this year. They did Ford a favour because the media focused solely on Jaguar and ignored Ford’s similar announcement that they would be trimming employees across Europe.

Ford also announced a loss for the final Quarter of 2018, the first in two years. Margins were reduced in their home market and combined with losses elsewhere meant poor figures. One area that really affected both Ford and Harley-Davidson were the tariffs imposed by the Trump Administration. Ford has commented about the increase in steel costs after those tariffs were started – Ford buys local steel, however the steelmakers saw a chance to increase their pricing which then meant that raw materials pricing rose. H-D saw import tariffs rise on their machines in export markets making them less competitive. This meant that they have to consider assembling motorcycles in other countries.

Tesla, who trimmed their workforce by 9% in June of last year also announced another 7% of the 45,000 workforce will go. Elon Musk believes that this will mean he can reduce the pricing of each unit sold. Humans are expensive, however poor quality can be even more expensive in rework and warranty costs, so this could backfire on the company.

What’s the good news? Jaguar will invest more in plants to produce electric drive systems and battery units in the UK. They have made a commitment to move away from diesel power to fully electric and to do this, they need to ramp up the technology manufacturing facilities. This countered some of the job losses announced at the same time.

Waymo in the US announced the creation of 400 more jobs in Michigan in partnership with Magna. The workers will be integrating their systems into more FIAT Chrysler and Jaguar vehicles, the main two manufacturers for their robotaxis.

Despite having reduced global sales, General Motors recorded a profit in the last Quarter of 2018. Some analysts were sceptical, however if you can make money and still sell fewer product units, the main lever to press has got to be the selling one! GM got the bad news out of the way last year so now show that they are heading in the right direction. Like the other US manufacturers, they have dropped some of their passenger vehicles and concentrated on pickup trucks and the luxury market with Cadillac. This has been successful – certainly for the last Quarter despite slower sales in China, although Cadillac saw a 20% increase in that market!

2019 will be an interesting year – we will see the continued growth of electric vehicles, however with confusion around Brexit, possibly more tariffs from the US and China’s market becoming volatile, it could be the year we see some manufacturers disappear as newer players gain market share.