TS: $F Having Bad Luck On Vehicle Recalls

Investment Analysis Clubs Destiny Solutions Corporation
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Disclosure: I own one-share each of $NIO $F and $GM to force myself to follow along in how the car business develops going forward. I will probably buy one-share of Toyota who has quietly entered the BEV side of things after dominating in the PHEV side of things. I already own - by extension of the Korean Fund $EWY shares in Hyundai and Kia - which are also doing very well with their PHEV/BEV/H2 initiatives.

Watching how this big change in this large consumer discretionary business unfolds going forward will mean some will win big, others might, as Musk contends, go to zero.

So, I’ll be placing even more car news on this board to try and follow along at home. Today’s visit to the new/used car lot was an eye opener to me. I still can’t get over the 8 to 10 year car loans.

Prediction: the first OEM to give us an entry level BEV in the $20-$25 range is going to win big if they can boost margins - somehow - with add ons. I saw enough fat tired EV bicycles today in Key West to tell me there’s a niche for cheaper lower range EVs than ever before, and, consumers not willing to pay $1,000 monthly for an EV car will opt for a car costing $400 a month. (It rained hard while I was down in Key West and I know everyone on EV scooters, boards and bicycles had to be thinking how nice it would be to have a roof over their heads at that moment.)

That said, with higher rates in the wings, how long before this “repossession armageddon” to kick in as my friend selling new and used cars at a big car dealership told me today?

Then toss in this thought: how many OEMs selling EVs who don’t have Tesla’s experience at OTA repairs are going to send owners of their EVs to dealerships for service after they’ve cut the dealer out of the sale of said EV?

As TMFRob just said, interesting times ahead in the car automotive space.

The Street headline: Ford Having Some Really Bad Luck With Its Vehicles

Ford has recalled a total of 215,834 vehicles in three safety recalls over the last two months.
KIRK O’NEILJUL 10, 2022 8:05 PM EDT

https://www.thestreet.com/investing/ford-recalls-200000-vehi…

Ford Motor Co. (F) - Get Ford Motor Company Report would probably like to hide under the hood of its vehicles lately, but that might not be such a good idea with the all bad luck the automaker has faced with its vehicles.

The Dearborn, Mich., company on July 8 issued a safety recall of a total of 100,689 of its 2020-2022 Corsair, Escape and Maverick vehicles with 2.5 liter HEV/PHEV engines because of an under hood fire hazard, according to a statement it sent to UPI.

p.s. Two years ago I drove a hybrid Ford Fusion with driver assistance and loved, loved, loved that car. But can you imagine the affected people above who just pulled their respective Fords out of their car garages so that they might not burn down their homes?

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I meant to comment:

  • 8-10 year car loans. That doesn’t seem like that will end well. Not good to have people in a situation where they need that kind of loan duration on a depreciating asset. Bad for the people. Bad for our economy. Probably bad for our US way of life.

  • EV bikes. We got a couple of those last year after renting near Cape Canaveral (watched several launches… very cool, especially landings). Very convenient. There’s more than one class of EV bike and the high speed version you mention is not what we got. No way I want to be whizzing down a sidewalk at 30mph. Too dangerous! Even for the bicyclist. With pedestrians, that’s just not reasonable.

  • Crime. We had some patio seat cushions stolen a couple years ago. That seems crazy. Like “Really?”. On the NextDoor app (neighborhood discussion app), there are a lot of reports of cars being broken into, presumably to find stuff to sell to buy drugs (that’s the popular consensus and what the police say). We keep our cars in the garage and keep the garage closed unless we’re outside. A lot of neighbors have outside garages because of all their garage junk… I figure criminals will preferentially visit them instead of thinking of lugging off our patio furniture or grille.

Well… I’ve got my 3 charging in the garage right now and our grandsons (about 8 & 10) are enjoying a sleepover tonight. All seems right with our little world at the moment. Chocolate chip pancakes and turkey sausage in the morning… :slight_smile:

Rob
Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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This :point_down:

- 8-10 year car loans. That doesn’t seem like that will end well. Bad for the people. Bad for our economy. Probably bad for our US way of life.

I think the line “Not good to have people in a situation where they need that kind of loan duration on a depreciating asset” is something you could write many long posts on at this moment in time.

I can imagine there will be many car owners wishing to trade in a late model with 6-8 years use on it in the future and who will not end up net positive on the trade-in if the car has depreciated more than what is remaining on the loan. Especially if the loan is one from today or next month or the month thereafter.

Imagine what is about to happen to car loans if the Fed raises rates by 100 basis points later this month. I can feel my car selling friend’s “repossession Armageddon” (which I also heard in that Barron’s story about $CRMT)scenario is very much in the cards for us going forward.

8-year loans will give way to 9 and 10 year loans as “normal.” Like my friend at the car dealership said today, last month the 8-year loan was their lead lending service. Let that sink in: 96 damn months of car payments?

People stretching financially to drive a shiny new toy to feel better about themselves are going to rue the day they went with an eight-year loan so as to afford a monthly payment.

As paul on this board knows (who I believe owns $AZO and $ORLY), certain car parts stocks are doing well - some are even up for this year. Mix in the right to fix protests for newer consumers stuck with cars and farm equipment where warranties will void if you try to repair them yourself, and I foresee an extension of the life of “beaters” (such as my old 2005 Ford Explorer) rather than venturing into the world of new cars which snoop on you and sell your driving telematics and stops and starts at local businesses, and which you cannot repair on your own as the OEM will void your warranty. (And that issue of privacy in your newer vehicles is moot anyway if your cellphone is on and you’re not even using it.)

This brave new world is not to my liking. I don’t like being “the product” which can’t make a move unless corporations allow me to make my choice to repair something I bought and which I thought I owned outright and under warranty.

But what would be worse is taking a car to trade in to buy a newer model and being told, “Sorry, Mr. Falcon, but you’ll owe your lender $5,000 on your old 8-year loan and we cannot take it as a trade-in until you pay off that loan. Now what we can do is move you into a 10-year loan where we lend you the money to pay off that loan AND buy this new shiny car. What do you think?”

I’m with you XMFRob, and I have you to thank for making me think harder and clearer and seek some answers on the local level about EV sales online by Ford E vs Ford Blue. That issue right there is bigger than what I first recognized. This is a detonating cap waiting to set off bigger explosions at dealerships.

Grab the popcorn. The car biz is about to have a banging revolution.

Thinking out loud: What if, just what if, mass transportation were to make a comeback? What if I could dial a Cruise robotaxi, no driver, and make my store runs and never worry about maintenance, washing, waxing, car payments and insurance (and that’s another big issue we need to address with EVs made from one casting and which will cost $20,000 or more to replace a dent which used to cost $1,000 on a quarter panel, but I digress.)

Let’s say robotaxis become the norm. What happens to all the former $UBER, $LYFT, taxi-medallion drivers? Can you imagine what kind of wrench this will thrown into the “gig economy?”

I wish you were still writing for Fool, Rob, and focusing on the car business. There are so many new stories unwinding in this space and how the business evolves from here will be fruitful for those of us who can suss the trends before, or immediately, happening.

I encourage you to write more about what you run across in this space, Rob. There are some veins of gold out here in plain sight and all we have to do is connect the core samplings to realize what is investible and what should be avoided.

p.s. After that $CRMT mention (concerning the booming car repossession biz and reselling those cars) that stock has fallen hard this week. Interesting.

Daily chart $CMRT:

https://schrts.co/iAVJHkHV

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Imagine what is about to happen to car loans if the Fed raises rates by 100 basis points later this month.

Imagine what happens if overall interest rates rise very much at all for a sustained period… considering interest payments on Federal debt is already so large a portion of the total budget. Seems like we’re dancing on the edge of economic catastrophe. Raise rates, print money to cover the interest payments… inflation rises some more… a bad cycle ensues.

No, I don’t have a stockpile of gold or food or ammo :slight_smile: … just seems like debt is becoming a big risk. And we lost a TON of money in the recent market downturn (nearly 90%). Getting tricky as we move forward. :slight_smile:

Rob
Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.

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Imagine what happens if overall interests rates rise very much at all for a sustained period … considering interest payments on Federal debt is already so large a portion of the total budget.

Interest rates on the debt are currently one-half of one percent of the budget. (0.5%). Even at five times that level (roughly what the Peterson Institute is projecting) that would make them less than they were in the 1980’s, and we seem to have escaped Armageddon.
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&…

A complaint is that the increasing debt hasn’t been used for “investment”, and I agree with that, but I note that there is one party which has decided not to do that, so there is little that I am able to do about it. (We used to “invest” in things like the space program, highways, etc.)

I also note that when those interest payments are made, more than a third is paid back to the Federal government itself (mostly Social Security, but also the Fed). Another significant hunk goes to individual Americans via pensions, insurance funds (annuities), banks, mutual funds, and similar. It is a shibboleth that all that money leaves the country (China, for instance, gets maybe 5% of the total.

Maybe it’s worth mentioning that the Peterson Institute has been complaining about the debt since the beginning of time. They have a seemingly abnormal fear of the borrowing, even when the US was among the lowest (percentage of GDP) among the developed world. We aren’t anymore, but we’re still not standing at cliff’s edge.

Let’s say robotaxis become the norm

Let’s not, because it’s not gonna happen. Almost no one in suburbia is going to give up their individual car on the hope that they don’t have to stand around for 15 minutes waiting for a car to show up. Maybe that could happen in ultra-high dense areas (NYC) where it’s not practical for private ownership for many, but out here in suburb and rural land, that’s a non-starter, and I don’t just mean now, I mean forever.

We are rich enough to afford out own vehicles, and every country on the planet that gets rich enough has a sudden explosion of private ownership of automobiles. Sharing cars, motorbikes, mopeds, what have you ends with personal money and personal freedom, and we have more than enough of both to make some sort of Jetson’s future of roving robotaxis a pipe dream.

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