The Mitsubishi Mirage is going to Car Heaven soon, but at least it won’t be lonely up there. Soon it will be joined by the Kia Rio, a relative steal these days at $16,750 for the sedan and $17,690 for the five-door hatch. It’s now due to be canceled, and the dwindling affordable subcompact car market in America seems likely to go with it.
That leads off today’s morning news roundup. Also on tap: an unexpected way to score a cheap car deal right now, the latest on a potential United Auto Workers strike and somehow, VinFast’s stock price is popping off—but we’ll dive into why that’s the case. Let’s do this thing.
Adios, Rio
The affordable subcompact is perhaps the most noble of all the cars. It does its job without glory—even pickup trucks get some of that—yet it’s no less necessary to countless people who just need to get around. Because sometimes you just need a cheap, small car. Maybe it’s for your kid in high school; maybe it’s a post-college ride when you’re still working for that thing you really want; or maybe you live in a city and need a car sometimes, but need easy parking even more.
Sadly for all involved, America’s cheap subcompact market is vanishing rapidly. In recent years we’ve seen the death of the Mazda 2, Honda Fit, Chevy Spark and Sonic, Ford Fiesta, Toyota Yaris and Yaris Hatchback, the aforementioned Mirage and the Hyundai Accent.
Now the Accent’s platform-mate, the Kia Rio, is on the way out too, taking with it one of the very few sub-$20,000 new car options America had left. From Automotive News:
Kia America’s Rio subcompact car will not return for the 2024 model year, the company confirmed. It follows the demise of its small Hyundai counterpart, the Accent, discontinued after the 2022 model year.
Though Kia said it will remain in the sedan business, Americans are leaning toward larger, higher-riding crossovers. Light trucks, a category that includes minivans, crossovers, SUVs and pickups, accounted for 79 percent of all new U.S. vehicle sales for the first six months of 2023 .
That trend was reflected in Rio sales. The Rio ended 2022 with sales of just 26,996, a 14-percent decline, according to the Automotive News Data & Research Center. Through July of this year, Rio sales are down 2 percent.
Buyer trends are partly responsible, for sure. (As is cheaper gas in the fracking era.) But the automakers are also all too happy to push you into bigger, more expensive cars at longer loan and lease terms, and the way new car technology is evolving makes “cheap” harder than ever to do. I can’t mourn the Kia Rio as some great icon of motoring, but the lack of choices in the market—as well as the many negative effects of upsizing—is disappointing to see.
At least Kia still makes the Forte, which is a good little sedan option. For now, anyway.
Want A Cheap Car? Lease An EV, Apparently
But if you do want to find “the most affordable way to get a new car of any kind,” the best way to do so is leasing an electric vehicle right now, also according to Automotive News. The publication cites a study from Energy Innovation, a nonpartisan energy and environmental policy firm. Its data reveals that between price cuts from dealers themselves, aggressive tax subsidies, and using no gas and lower maintenance, an EV lease could save you a ton of money all around.
Here are some charts:
And here’s a summary from the study itself:
Our analysis shows that while EVs are cost competitive even without federal incentives, the IRA federal EV tax credit makes EVs significantly cheaper than gasoline-powered vehicles. The federal EV tax credit makes average monthly lease prices 12 percent cheaper for leased vehicles that pass the incentive along to lessees, making almost every EV model cheaper to lease than gasoline-powered alternatives in most states.
Increasing competition among EV dealers with new incentives and growing inventories is creating significant price declines; last month’s average transaction price for EVs was 20 percent lower than the same time last year. EV ownership savings could also expand further if oil prices increase again to anything close to 2022 levels, about 40 cents per gallon more than their current level.
This dynamic is most apparent for leases, but is also significant for new vehicles financed to own. For new car buyers uninterested in leasing, financing new EVs is often cheaper than financing equivalent gasoline vehicles, an important angle considering nearly 80 percent of Americans finance new car purchases.1 While higher interest rates make financing any car more expensive than it was a year ago, many EVs in many states are still cheaper to finance and own per month than an equivalent gasoline vehicle.
Altogether, EVs are cheaper to lease than their gas counterpart in every state but one for all the models we evaluated, except for the Ford F-150 Lightning. On average, leased EVs were $220 cheaper than their ICE alternatives on a monthly basis.
EV ownership isn’t for everyone, and charging is still a pain in the ass (unless you drive a Tesla, in which it’s generally pretty fine these days.) But if you take the leap, it might be easier and cheaper than you might think. Get the full report here, I’m still parsing all of it myself.
Ford Votes ‘Yes’ On Strike Authorization, Stellantis Gets Hit Hard By UAW
Now, for the latest on the ongoing union contract negotiations between the UAW and the Big Three automakers. Workers are currently holding a strike authorization vote, which doesn’t mean they’ll go on strike but that they’re giving leadership the go-ahead to do that later if negotiations don’t go the way they want. It sends a powerful message to management, too. Ford workers in Louisville have already voted 99% “yes” to authorize a strike.
Meanwhile, Stellantis finds itself perhaps the biggest target for the UAW this time around—an unusual turn for the Chrysler brands, usually the “smallest” of the Big Three. But this isn’t Chrysler or even Fiat Chrysler anymore, it’s a massive global company. And the union wants to send a message there, too. From The Detroit News:
The automaker, now known as Stellantis NV, is in a different position than it was during the previous talks in 2019. Since the 2021 merger between Fiat Chrysler Automobiles NV and French competitor Groupe PSA, Stellantis has become the fourth-largest automaker in the world by volume. CEO Carlos Tavares has emphasized execution, and Stellantis’ $8.88 billion adjusted operating income in the first half of 2023 makes it more profitable than either General Motors Co. or Ford Motor Co. in North America. It’s the automaker yielding the fattest profit-sharing checks — at $14,760 for 2022 — for the autoworkers.
[…] “Stellantis has emerged as an economic powerhouse and is producing really record profits, and as a result, it is very prominent in these negotiations,” said Harley Shaiken, a professor at the University of California, Berkeley, specializing in labor and the global economy. “They have record profits, and (Stellantis CEO Carlos Tavares) is talking about how do we reduce costs. It makes it more possible for them to be a target.”
Now with Stellantis surpassing its neighbors in money-making, the UAW’s public messaging has proved relentless. Fain has made personal attacks on the automaker’s top executives and thrown a proposal from the automaker into his office trash can during a Facebook livestream. The UAW Twitter account has shared memes and information scrutinizing the “lifestyles of the rich and famous.”
Tavares, whose total compensation was $26 million last year, is urging the company and its workers to find cost savings everywhere they can with the electric-vehicle transition underway.
Why VinFast’s Valuation Is Sky-High
And in another one for the Capitalism Is Make-Believe File, please know that Vietnamese EV maker VinFast—still reeling from the most troubled new-car launch I have seen in my career—now has a market cap worth as much as General Motors and Ford combined.
That’s a staggering headline, and it makes me want to pour bourbon into my coffee. But! Here’s the Financial Times to throw some water on this crazy news:
Bloomberg said that the spectacular first-day pop “added $39bn to the net worth of the chairman Pham Nhat Vuong.” The stock has since snapped back, but with a $36bn market cap, the sugar-high from the listing still hasn’t worn off.
The press articles all mention that the chair controls 99 per cent of newly listed VinFast. But that’s not just an aside: it is the story. This is no conventional de-Spac; rather it resembles a backdoor listing into an empty listed shell. And the stock price is just an arbitrary number on a screen, not the market’s judgment of the company’s worth.
This is all complicated Wall Street Black Magic stuff, but without going into SPACs, de-SPACs and reverse mergers, here’s the important part:
The worry here is that retail investors might buy VinFast shares in the mistaken belief that the stock price reflects the collective market judgment. In fact, almost no market players have validated the valuation. After filing with the SEC, VinFast withdrew its IPO and so never tested investor appetite. And nearly all Spac shareholders redeemed for cash instead of taking VinFast shares. In June VinFast tried to raise $250mn via a PIPE (private investment in public equity), which is a common feature in de-Spacs, but dropped the idea.
In short, this is kind of all bullshit. The FT calls it a “spac oddity,” because maybe someone was listening to Bowie that morning. But if you’re expecting this to turn into the next Tesla, I have a bridge to sell you.
Your Turn
Is the death of the small, cheap car market really a bad thing? Or will it ultimately be no great loss to consumers?
