Tesla Sales Continue To Drop In California As People Buy Hybrids Or Anything Else

It’s Friday! And Crowdstrike and Microsoft have likely given you the gift of not being able to work. Let’s enjoy it a bit by having a Morning Dump that has some politics and Tesla in it. Uh oh. Why work when you can get in an internet flame war? Just kidding, please don’t do that.

Tesla sales are down in California for the third straight quarter, which is an interesting outcome given that California is the place that made Tesla. It’s not just Tesla, as BEV growth is stalling out a bit in the state as hybrid sales surge.

Oh man, politics? Really? Here we go: Republican nominee Donald Trump said the UAW should fire its president Shawn Fain because of the threat of Chinese cars from Mexico. What?

Oh boy, let’s keep going. Did the Inflation Reduction Act do anything? An analysis shows that it probably has.

And, finally, car repossessions are surging.

Happy Friday!

Tesla Sales Are Crashing In California

Everything is relative, and I feel like all the stories you’re going to potentially read today about Tesla’s performance in California should be heavily caveated with the fact that three of the four best-selling EVs in California are all Teslas.

Even with falling sales, Tesla is still lapping the rest of the field. Or, to use another sports metaphor: Tesla is still the Harlem Globetrotters and everyone else is still the Washington Generals.

All of this data comes from the California New Car Dealers Association, which put together this great quarterly report on sales in the state. Tesla sales have fallen for the third quarter and, through the first half of the year Tesla sales are down 17% in the state, whereas the overall EV market is slightly up year-to-date.

In particular, Toyota, Cadillac, Lexus, Rivian, and a bunch of other automakers are up a lot. Polestar, Volkswagen, Volvo, and Chevrolet (RIP Bolt) are down more than Tesla.

What’s the deal? I think a few things are going on here. First, the EV market in California has been strong for years and, with higher interest rates, it was bound to slow down eventually. There’s also increased competition, meaning that more people are looking to good alternatives like the Ioniq 5 (the best-selling non-Tesla) and Mach-E.

There’s probably some Elon Musk Effect here as California trends liberal, though it’s hard to say for sure and I’d love to see some good data on this.

Finally, hybrids are becoming more competitive and you can see it in the data:

Electric car growth is stalling out but hybrids are marching along. In fact, both the Toyota RAV4 PHEV and Jeep Wrangler PHEV cracked into the top ten of BEV/PHEVs this year, ahead of the ID.4, F-150 Lightning, and other historically popular vehicles.

Year of the Hybrid, et cetera.

Ok, Let’s Talk About What Donald Trump Said Last Night

It’s news! It’s news! It’s news! I scream as the keyboard tries to jump out of my window and sacrifice its life before I attempt to do this.

The former President mentioned, in a speech where he was nominated to be the presidential candidate of one of our country’s two major parties, that the President of the United Auto Workers should be fired. He also said some other things. Would it surprise you if I said I don’t think most of these things are true?

You can see in the video above what he said (do not, under any circumstances, watch any other videos link on that channel if you enjoy your sanity).

Here’s the transcript of the speech as written:

I will END the Electric Vehicle Mandate on Day One — thereby saving the U.S. auto industry from complete obliteration, and saving U.S. customers thousands of dollars per car.

I will bring auto jobs back to our country, through the proper use of taxes, tariffs, and incentives, and will not allow massive auto manufacturing plants to be built in Mexico, China, or other countries, where they send the product back to the United States, and steal our jobs, creating a hopeless situation for our companies and autoworkers.

Trump went a little off script and added:

The United Auto Workers ought to be ashamed for allowing this to happen. And the leader of the United Auto Workers should be fired immediately. And every single auto worker, union and non-union, should be voting for Donald Trump.

Oh boy. Let’s start with: There is no federal Electric Vehicle Mandate. There’s one in California and other states might follow it, but technically the new federal regulations on cars do not mandate any specific technology and leave it up to automakers to decide what they want to make (with a lot of leeway given to hybrids).

Maybe I’m being pedantic? Maybe. The bit about whether EVs will cause some kind of automotive apocalypse is also an opinion and maybe you agree or not.

The bit about Chinese companies building factories in Mexico to bring cars over here being UAW President Shawn Fain’s fault is interesting, mostly because it makes no sense.

First, as background: Chinese automakers sell cars in Mexico and have made noise about building cars there, albeit with the stated reason of selling to Latin America and not America America. No one really believed them and everyone freaked out. Mexico itself balked and said it wouldn’t provide incentives for these factories to get built.

President Trump, already concerned about this, pushed forward a 25% tariff on Chinese EVs when he was in office. President Biden doubled down on this after the most recent dustup and made it a 100% tariff.

The reason why China might be able to sneak cars in via Mexico without extra trade duties is because of the United States Mexico Canada Agreement (USMCA), which is an update of the North American Free Trade Agreement (NAFTA). The USMCA was supposed to fix some shortcomings in NAFTA related to job losses in the US, but it didn’t quite work and ultimately created an opening for Chinese automakers.

Don’t believe me? Here’s a report from the Alliance for American Manufacturing explaining how this happened:

Under the NAFTA framework, Mexican auto industry employment grew by 620,000 between 1999 and 2016, while the U.S. lost 360,000 auto jobs during the same period, according to the Economic Policy Institute. Mexican workers, meanwhile, made an estimated 12% of the wages of their U.S. counterparts.

The USMCA was meant to help correct this imbalance that weighed heavily on U.S. autoworkers by including rules of origin designed to guarantee that products qualifying for duty-free status would be produced regionally, as well as average wage thresholds meant to raise pay for workers across the trading bloc. So far there are strong indications that it has not rebalanced trade, but rather has created disproportionate investments into Mexico including from Chinese entities. Indeed, between 2018 and the first 11 months of 2023, the automotive trade imbalance between the U.S. and Mexico increased by $12 billion, and the auto parts trade imbalance increased by $9 billion.

Should we blame the UAW for the USMCA? In the most abstract way, the existence of unionized workers makes cheaper non-union workers more attractive, but the leakage effect of the USMCA is really the fault of the administration that negotiated and signed the treaty.

Would it surprise anyone to find out that the USMCA was the suggestion of then-President Donald Trump and that it was President Trump who signed it into law?

He did. Here’s video of him calling it a “colossal victory” for America.

So what’s the deal here? I think it’s quite simple. Fain called Trump a “Scab” in his endorsement of Biden and is therefore one of the former President’s enemies. No one listening to that speech will care that the unscripted aside doesn’t make any sense.

The Inflation Reduction Act Probably Saved/Created A Lot Of Jobs In Republican Districts

Whether you think it’s smart or dumb, the Inflation Reduction Act is likely the most important industrial policy initiative since NAFTA and there are now some numbers to back that up.

This is from a thread on the platform X, which I’m embedding below:

Inflation Reduction Act + 23 months

My students at @Wellesley and I are tracking investments in the US electric vehicle supply chain.

Here is our post-I.R.A. tally for the US since 8/16/22:

121 new projects
$94.2B in planned investments
60,597 new jobs

A short???? 1/9 pic.twitter.com/8lnDNFWw9y

— Jay Turner (@_jay_turner) July 17, 2024

If you don’t like to read the news that way, the highlight is that in the 23 months since the passage of the IRA, there have been about $94 billion worth of new projects announced. These are likely to produce about 60,597 new jobs just in the EV supply chain (total jobs are about 375k by the current calculations).

As you can see, most of these projects are in Republican-led districts. Some of this is just a result of these investments being focused in places where cars are already made which, in general, tend to be less urban and thus more Republican.

Literally every Republican in the House of Representatives voted against the legislation, if you were curious. Now that it’s law, though, many of them seem to be quite happy to crow about the new jobs.

Repos Will Likely Continue To Climb

About a year ago I did a story on loan vintages and how, over the next few years, the loans that were given out during the pandemic are likely to become a problem.

As you can see in this graphic from Cox Automotive, they’re seeing the same thing. Repossessions are up more than 20% compared to last year and Cox thanks the numbers will continue to grow.

It’s been a bit of whiplash lately as interest rates dropped but cars got super expensive during the pandemic. Now cars are getting cheaper, but interest rates are up.

Buying a car now puts you at a little less risk as you’re likely buying something that will follow a normal depreciation curve. Cars sold during the pandemic were priced so high above normal that buyers who have held onto their cars are more likely to be upside down on their loans, thus more repos.

What I’m Listening To While Writing The Morning Dump

Let’s inject a little happiness into today with The Troggs. Gotta love The Troggs. “Love is all around” if you look for it.

The Big Question

Are you going to ignore what I ask and just talk about politics? Almost certainly, but lemme give it a shot anyway: What’s the longest you’ve gone without getting into a fender-bender?