Americans Are Back To Borrowing A Lot Of Money To Buy Cars

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Auto lending dropped sharply when the pandemic started but is now hitting record levels, it’s EV Day at Stellantis, and Tesla. All that and more in The Morning Shift for July 8, 2021.

1st Gear: We Love A Car Loan

Taking out a loan to buy a depreciating asset isn’t optimal, but many people don’t have a choice because they’re poor and America’s public transportation sucks. On the other hand, many people who do have a choice opt to get a car loan anyway, because they are in a good enough financial position to command a favorable interest rate and, you know, it’s convenient or whatever.

All of which is to say that I suspect it’s that latter group that is now driving auto lending to record levels, according to The Wall Street Journal. And not just auto lending but also credit cards and other types of loans, which have made a roaring comeback in this pre-post-pandemic world, after a huge fall in the beginning of all of this as fear took hold.

Lending is also up compared to before the pandemic, per the WSJ:

Consumer demand for auto loans and leases, general-purpose credit cards and personal loans was up 39% in April compared with the same period last year, according to credit-reporting firm Equifax Inc. EFX 0.95% It was also up 11% compared with April 2019, according to Equifax, which measured how often lenders checked consumers’ credit reports to make loan decisions.

Lenders are meeting the moment. Equifax said lenders extended a record number of auto loans and leases in March, the latest month for which data are available.


Lenders originated some three million auto loans and leases in March, up about 53% from the same month in 2020 and the highest monthly figure on record, according to Equifax. Auto balances for new originations also hit a record of $73.6 billion in March, up 59% from a year prior.

These stories often feature anecdotes in which people make obviously dumb car-buying decisions without seeming aware that they are making dumb car-buying decisions. This story, for once, includes an anecdote that I can’t argue with.

Pat Lynch of Eagan, Minn., signed up for a $31,000 loan from his local credit union to buy a 2016 Lexus RX 350 in June. It was a splurge that Mr. Lynch felt was time to make. His old car, a Honda Odyssey minivan, was breaking down and required costly repairs.

Mr. Lynch, a sales manager for a beer distributor, was out of work for about 4½ months last year due to the pandemic. He returned to his job in January and wanted a reliable car since he drives a lot for work. His retirement investment accounts appreciated significantly over the past year. That gave him peace of mind about spending some of the money he had saved in his bank account before the pandemic.

“I’m 57. I can’t take it with me. I figured why not enjoy a nice car,” Mr. Lynch said.

Hell, yes. When I’m 57, I’m definitely taking out a dumb loan to buy something nice.

2nd Gear: Tesla Is Doing All Right In China

It is somewhat hilarious to me that Tesla releases little information about the cars it sells beyond saying how many its sold each year globally every quarter, and then every month the China Passenger Car Association announces how many China-made cars Tesla sold anyway.

The CPCA said Thursday that that number was 33,155 for June, which, annualized, is pretty healthy for Tesla and more or less on pace with its competitors there, though it’s a slight drop-off from May.

From Reuters:

Tesla, which is making Model 3 sedans and Model Y sport-utility vehicles in Shanghai, sold 28,138 China-made cars in China and exported 5,017 cars in June.

In May, Tesla sold 33,463 China-made cars.


BYD (002594.SZ) sold 40,532 so-called new energy vehicles, which include battery electric and plug-in hybrid vehicles, last month in China. General Motors Co’s (GM.N) venture with SAIC Motor (600104.SS) sold 30,479 such cars.

3rd Gear: That Is Despite Lots Of People Being Mad At Tesla In China

The company also debuted a cheaper Model Y there on Thursday that will cost the equivalent of $42,600, per Bloomberg. This Model Y will have less range than the one Tesla has been selling, 326 miles versus 369, but will (conveniently) qualify for a subsidy there.

This latest version, which is available in Hong Kong but hasn’t been sold in China before, can run for 326 miles. Because it’s priced under 300,000 yuan, it is eligible for a particular state new-energy vehicle subsidy. Its price is only 10 percent higher than Tesla’s most-basic China-made Model 3 sedan and deliveries will start as soon as next month.

“China has the world-leading new-energy market and is the first market outside the U.S. that Tesla owns a locally produced product,” Tesla said in a statement. The company will “continue its investment in China and carry on its corporate mission of accelerating the world’s transition to sustainable energy and helping to boost the realization of a carbon-neutral target.”


Thursday’s launch is especially telling considering it comes after months of bad press in the world’s biggest electric-car market.

This year alone, Tesla has battled everything from an angry driver protest that went viral at the Shanghai Auto Show in April to online criticism about its perceived arrogance and lack of customer service. The California-based company has also weathered other issues that have seen its cars banned from some military complexes over concern the vehicles’ in-built cameras may be collecting sensitive data. Tesla immediately moved to reassure authorities, saying any data collected in China is stored locally.

Tesla’s China operation seems like almost a completely different part of the company, what with their statements to the press — Tesla has no PR team in America— actual local competition in the form of Nio, Wuling, Xpeng, et al., and real government regulation.

4th Gear: Oh, Nothing, Just A Billion Dollars In Fines For BMW And VW In Europe

This is intriguing because Daimler managed to not be fined by snitching on its peers. Daimler, VW, BMW, Porsche, and Audi have all been accused of intentionally limiting cleaner exhaust systems. The fine by the European Union for VW and BMW, announced Thursday, amounted to €875 million, or just over $1 billion, actually seen as a bit of a let-off.

From the Financial Times:

Daimler, which was also part of the cartel, escaped a €727m fine because the German carmaker revealed the existence of the group, the commission said in a statement on Thursday.


“The five car manufacturers Daimler, BMW, Volkswagen, Audi and Porsche possessed the technology to reduce harmful emissions beyond what was legally required under EU emission standards,” said Margrethe Vestager, the [European Union] commission’s executive vice-president in charge of competition policy.

“So today’s decision is about how legitimate technical co-operation went wrong,” she said. “And we do not tolerate it when companies collude. It is illegal under EU antitrust rules.”

In response to the commission’s decision, VW and BMW both pointed out that the EU was interpreting initial discussions, which did not lead to actual co-operation between the companies, as a violation of antitrust law, even though no customers were harmed as a result.

The real truth of what went down here is probably unknowable, given the complexity of European regulations and the tendency of multinational companies to obfuscate as much as possible, but after dieselgate the European auto industry will never again have the benefit of the doubt.

5th Gear: Stellantis’s Big EV Day Is Here

Automakers have taken to imitating Tesla’s every move, which has been somewhat depressing if also somewhat predictable. Stellantis, the result of the merger of Fiat Chrysler and Peugeot/Citroën, is no different, holding an “EV Day” today in which Stellantis says it is finally going in on electric cars.

Stellantis will invest €30 billion through 2025 for electrification and software, Stellantis says. Over 70 percent of sales in Europe and over 40 percent of sales in the U.S. will be “low-emission vehicles” by 2030, which is real chickenshit language when you think about it.

Anyway I will spare you more boring details and present easily the funniest part of Stellantis’s press release below. I can’t believe any of these are real:

Stellantis revealed the following statements expressing each of the brand’s electrification approach:

● Abarth – “Heating Up People, But Not the Planet”

● Alfa Romeo – “From 2024, Alfa Becomes Alfa e-Romeo”

● Chrysler – “Clean Technology for a New Generation of Families”

● Citroën – “Citroën Electric: Well-Being for All!”

● Dodge – “Tear Up the Streets… Not the Planet”

● DS Automobiles – “The Art of Travel, Magnified”

● Fiat – “It’s Only Green When It’s Green for All”

● Jeep® – “Zero Emission Freedom”

● Lancia – “The Most Elegant Way to Protect the Planet”

● Maserati – “The Best in Performance Luxury, Electrified”

● Opel/Vauxhall – “Green is the New Cool”

● Peugeot – “Turning Sustainable Mobility into Quality Time”

● Ram – “Built to Serve a Sustainable Planet”

● Commercial Vehicles – “The Global Leader in e-Commercial Vehicles”

Reverse: Commodore Perry