Tesla slashes Model Y price by $3,000 as pandemic upends market

Tesla Inc. has cut the price of its Model Y crossover by $3,000 less than four months after starting sales.

The starting price is now $51,190, including a $1,200 destination and documentation fee, according to Tesla’s website. The electric-car maker had been charging $54,190 since beginning deliveries in mid-March.

The Model Y reduction is the second significant price cut Tesla has made to its vehicles in roughly six weeks. In late May, the company lopped $5,000 off the Model S and X and $2,000 off the Model 3, which some analysts viewed as a bearish signal of demand.

Tesla ended up delivering 90,650 cars to customers in the second quarter, beating analysts’ estimates and sending its shares soaring. The 269 percent surge in the stock price this year has vaulted CEO Elon Musk past Warren Buffett on the Bloomberg Billionaires Index.

Tesla did not immediately respond to a request for comment.

The company started deliveries of the Model Y in March, promising a much-awaited crossover that will face competition from European carmakers as Volkswagen Group and others roll out their own electric rivals.

In April, Tesla had said the Model Y was already profitable, marking the first time in the company’s 17-year history that one of its new vehicles turned a profit in the first quarter it was launched.

The blog Electrek reported the Model Y price cut earlier Saturday.

Reuters and Automotive News contributed to this report.

Toyota moves Lexus LS to a higher level of automation

TOKYO — Toyota Motor Corp. will deploy its most advanced automated driving system to date in a freshened Lexus LS sedan later this year, pitching the setup as a lidar-based Level 2 system that can automatically change lanes and pass other vehicles in highway driving.

The rollout furthers Toyota’s bid to catch competitors, especially in the luxury segment, that have been more aggressive in introducing self-driving vehicles.

Last week, Tesla CEO Elon Musk told a technical conference audience that Tesla could have the technology for completely autonomous Level 5 driving within the year. But some in the industry now doubt that automakers will ever achieve commercially viable, completely autonomous driving.

Toyota, preferring a more conservative approach, has steered clear of labeling its system self-driving or autonomous. Toyota instead calls its systems automated, a nod to the system’s reliance on human interaction.

The new technology, marketed as Lexus Teammate, is an outgrowth of the Mobility Teammate concept Toyota has been working on for years.

In a statement last week, Lexus said the new setup will debut in a midcycle freshening of the flagship LS sedan, which also gets new interior flourishes and a smoother, quieter ride.

Toyota signaled last year that it would deploy the technology in a production car in 2020. At that time, James Kuffner, the head of Toyota’s automated driving program, said his team aimed to develop the “most powerful supercomputer on wheels.”

The technology was prepared by Kuffner’s Tokyo-based Toyota Research Institute Advanced Development Inc.

Lexus Teammate, the company said, incorporates artificial intelligence and deep learning “for predicting and responding to various situations possibly encountered.”

The updated LS goes on sale in Japan later this year. Lexus declined to give further details about launches in other markets. Lexus Teammate is initially geared toward Japanese laws and regulations.

The system will underpin Toyota’s first Level 2 automated vehicle and is expected to use lidar technology developed partly with Denso Corp. That system will enable the Lexus to automatically change lanes, follow lanes and pass vehicles in highway driving.

Pictures of the new LS show black lidar scanners inset behind the front wheel wells, lending the look of brake cooling vents. Other lidar scanners are on the front and rear of the car.

One image depicts a pop-out washer showering the front lidar with two jets of water to keep it clean.

It is unclear whether Lexus Teammate will be offered standard or as an option on certain trims. But the media photos depicted the lidar sensors deployed in the hybrid LS.

Lexus Teammate will be able to navigate a series of highway driving scenarios, including keeping the vehicle in its lane, maintaining vehicle-to-vehicle distance, lane splits, changing lanes and overtaking other vehicles.

It also features an automated parking assist that supports steering, braking, acceleration and gear changing to help guide the car, with a bird’s-eye view display.

Denso already supplies the forward radar, forward stereo camera and electronic control unit that is part of the current Lexus Safety System+. For the Lexus Teammate version, Denso will supply one more sensor and an additional ECU to be capable of higher-level calculations.

GM cuts shift at pickup plant for absenteeism due to COVID-19

General Motors is temporarily cutting the third shift at its midsize pickup plant in Wentzville, Mo., due to worker absenteeism as cases of COVID-19 in the area increase.

The production cutback, which likely will result in about 1,250 layoffs for an undetermined length of time, is not related to low demand for the Chevrolet Colorado and GMC Canyon that are built at the plant northwest of St. Louis, GM said Saturday. There is enough demand for three shifts, and GM is working on a staffing plan to resume a three-shift schedule as soon as possible, spokesman David Barnas said.

“We believe in the short term, a two-shift operating plan will allow us to operate as efficiently as possible and accommodate team members who are not reporting to work due to concerns about COVID-19 in the local community,” Barnas said in a prepared statement.

It’s the first known instance of a U.S. automaker reducing its production schedule due to absenteeism since plants reopened in mid-May. The Detroit Free Press, which reported the layoff plans Saturday morning, said 23 workers at the Wentzville plant have been diagnosed with COVID-19, citing a note to members from officials at UAW Local 2250. Missouri set new daily records for confirmed cases of the virus twice in the past week, bringing the total number for the state to more than 28,000 as of Friday.

“People on our team should not be concerned about coming to work,” Barnas said in the statement. “GM Wentzville is following multi-layered safety protocols that are working very well to keep people safe by reducing the possibility that COVID-19 can enter the plant and preventing any spread within the plant.”

In addition to the Colorado and Canyon, the Wentzville plant, which employs 4,100 salaried and hourly workers, builds the Chevy Express and GMC Savana full-size commercial vans.

“We are still working on details regarding the number for temporary layoffs,” but the cuts will be determined by seniority, Barnas said.

GM requires workers at all of its North American plants to remain a safe distance away from each other, wear face masks and safety glasses, and participate in health questionnaires and temperature screenings. GM’s housekeeping team cleans high-traffic areas three to four times per shift, as well as between shifts. Doors are propped open when possible to increase airflow and eliminate the need for workers to touch them. GM suggests that its workers follow similar health and safety protocols outside of the plant, Barnas said.

“The same in-plant protocols can help keep people safe when they’re not at work,” he said. “We encourage everyone to follow them, especially social distancing and wearing masks when they’re in groups.”

Last month, GM permanently cut the third shift at its assembly plant in Spring Hill, Tenn., citing lower demand for the Cadillac and GMC crossovers it makes amid the pandemic.

Consumer credit roiled by COVID-19

Data sets that auto lenders typically use to determine who is creditworthy have been upended by the fallout of the coronavirus, consumer credit experts say.

As a result, lenders concerned with loan losses and fraud have clamped down on access for customers they believe pose more risk to their business. Subprime customers, with credit scores typically below 620, especially are having a harder time getting approved and dealers say that customers on unemployment are being rejected out of hand.

To make matters worse, sorting through the confusion prompted by massive job losses and unprecedented federal intervention could take years for lenders as the industry struggles to compete in a market with wild swings in supply and demand. This means over the long term that lenders could increasingly be exposed to potential losses and limited in taking on new business while they grapple with who is creditworthy.

The federal government’s pandemic provisions protect consumer credit scores, preventing lenders from counting negative information against potential customers. Credit standards remain tight as lenders navigate the uncertain circumstances sparked by the pandemic.

Credit tightening for subprime borrowers began in April and continued into May, said Jonathan Smoke, chief economist at Cox Automotive, noting declining approval rates for automotive loans and the shift in credit distribution toward those in higher tiers.

Subprime consumers made up 8.8 percent of the market in May and June, Smoke said, citing Equifax data. That’s down from 14 percent in May and June of 2019.
“You’re particularly making it more difficult and less attractive for subprime people to get a loan,” Smoke said. “You’re limiting nearly a quarter of consumers.”

Sorting out who is creditworthy has been more of a challenge during the pandemic than in previous downturns. Americans weren’t provided the same tools, including stimulus checks and enhanced unemployment benefits, during the financial crisis of 2008. Therefore, consumers found themselves in delinquent status before they could get assistance.

Provisions of the rapidly deployed Coronavirus Aid, Relief, and Economic Security Act shielded consumer credit portfolios from negative data, including missed and late payments on existing credit products. Millions of consumers have taken advantage of these benefits since March, particularly with automotive bills.

Automotive accounts in financial hardship status — which could mean a deferred payment, frozen account or frozen past-due payment — reached 7.04 percent in May, up from 3.54 percent in April.

Accounts in financial hardship aren’t expected to go delinquent and don’t have a negative impact on a person’s credit score. But lenders may have to incorporate new decisioning processes when it comes to working with consumers who have several credit products in forbearance status vs. those with just one or two.

Vladimir Kovacevic, co-founder and managing partner of Inovatec, a leading software provider to U.S. and Canadian financial institutions, said the financial hardship status may eventually need to be factored into decisioning algorithms.

For consumers with multiple products in financial hardship status, “Is there any indication … that means you’re at high risk or a lower risk?” Kovacevic said. “I don’t think anybody knows that yet.”

Joanne Gaskin, vice president of scores and analytics at credit-scoring agency Fair Isaac Corp., said the company’s scores focus primarily on a consumer’s payment history, so an unexpected job loss or financial hardship is weighed appropriately. If an unexpected job loss prevents customers from paying their bills, their credit history should provide sufficient information for a lender to make a measured decision, she said.

“We want to make certain that the model is intuitive so you’re not going to see something strange from the consumer or lender’s perspective,” Gaskin said.

In general, consumers with a history of struggling to stay current on repayment of credit products have a harder time getting approved for auto loans, said Dina Wilson, general manager and head of finance at Timbrook Kia in Cumberland, Md. About one-third of Wilson’s customers have subprime credit, she said.

“If you have a lot of bills that you aren’t paying, your risk is much higher than someone who only has medical bills they aren’t paying,” Wilson said.

Mounting unemployment during the coronavirus recession is further straining the new-vehicle market in lower credit tiers.

Geography and employment type are key when it comes to which consumers needed assistance and were exposed to job losses or job reductions. The pandemic impacted different factions of the work force than in the last recession, with jobs in entertainment, the service industry, travel and transportation being more at risk.

Some of the data lenders relied on to determine what types of jobs are considered risky won’t be useful in this environment, said Dan Faggella, founder of artificial intelligence consultancy Emerj. The influx of new information likely will hinder accurate decisioning processes at auto lenders.

“It’s obviously going to tilt the keel of the entire economic ballgame,” Faggella said. “Because of that, our historical data about who has been more likely to pay or not pay may be much less trustable with machine learning algorithms because we’re now dealing with a new normal.”

Chevrolet dealer David Vara said there hasn’t been much of a noticeable change in how the lenders that work with his store in San Antonio want deals constructed. But he has noticed lenders more frequently asking for proof of employment — even for customers with credit scores above 700.

“If you have more people out of work, you’re going to have less sales,” Vara said. “But if anything, lenders are going to be more aggressive because there’s less business.”

Government stimulus has boosted the buying power of many American consumers. But for those assisted by the extra unemployment cash, lenders aren’t willing to take the gamble.

Wilson said several of her customers applying for auto loans on unemployment have been rejected outright by subprime auto lenders — even the larger, more established lenders.

“We’re having a harder time getting them bought,” Wilson said. “In this area, you have people making more money on unemployment than on the job. From the lender side, they’re saying, ‘What if their job’s not there when they get back?’ ”

VW diesel scandal exec could finish prison term in Germany, report says

DETROIT — Oliver Schmidt, the former Volkswagen engineer who was sentenced to seven years in federal prison for his role in covering up Volkswagen’s diesel emissions scandal, could be extradited to his native Germany up to two years early to face charges there, the Detroit News reported Friday.

Schmidt, 51, who’s been in prison since his arrest at Miami-Dade County Airport in January 2017 while returning from a Christmas holiday in Florida, filed a request two years ago to finish his sentence in Germany, the newspaper reported.

Citing a notice filed in U.S. District Court in Detroit, the newspaper said a federal magistrate could approve the request next week.

Schmidt has been serving his sentence at a federal penitentiary in Milan, Mich., west of Detroit.

The newspaper said Schmidt’s potential transfer to Germany is part of the Justice Department’s International Prisoner Transfer unit, which oversees the transfer of prisoners between countries, and that under terms of a treaty, Germany would assume responsibility to carry out the rest of Schmidt’s sentence under German law. Schmidt’s request was not unexpected.

Schmidt, the former general manager of Volkswagen’s U.S. Environment and Engineering Office in suburban Detroit, spearheaded VW’s efforts to hide the truth about its diesel emissions cheating from U.S. regulators. In addition to his extended prison sentence, he was fined $400,000 when he was sentenced in Dec. 2017.

Before the scandal, Schmidt was a rising star VW executive and was a featured speaker at the 2013 CAR Management Briefing Seminars in Traverse City, Mich.

Honda invests in CATL to jointly develop EV batteries

BEIJING/TOKYO — Japan’s Honda Motor Co. will buy a 1 percent stake in Chinese battery maker Contemporary Amperex Technology and the two will jointly develop EV batteries, the companies said Friday.

The move comes at a time when auto manufacturers and EV battery makers are joining forces in pursuit of an electric future. CATL said last year it would develop batteries with Honda and also supply batteries to Tesla , Toyota and Volkswagen.

Honda and CATL said in a statement they would develop battery technologies and research a battery recycling business. Honda will launch its first EV with CATL’s battery in China in 2022 and will expand the partnership with a stable EV battery supply globally.

Honda has struck a number of partnerships to make electric cars, including a joint venture with China’s GAC under which the Japanese automaker began selling its first all-battery EV, the Everus VE-1 crossover, in China last year.

It has also tied up with Hitachi Ltd.’s auto parts subsidiary to develop, produce and sell motors to be used in hybrids, plug-in hybrids and battery electric cars.

For the North American market, Honda has partnered with General Motors to develop two new EVs. The two companies are also working to develop hydrogen fuel cell vehicle technology.

CATL is building a battery plant in Germany and is considering expanding to North America. It has an office in Yokohama near Tokyo.