Why GM Ditched Heated Seats In The Middle Of Winter 2

In 2016, the average vehicle cost 30 percent above MSRP, in 2021 that figure was on trend to reach 38 percent. The pandemic really created additional demand for people that no longer want to use public transit or have left big cities and so need a vehicle, so the overall size of the park has grown. The average age of vehicles as a result is older, and OEMs and dealerships in particular have really benefited from the ability to charge higher prices, not provide the types of incentives that they've had to. And combine that with very low interest rates. Again, people buy on payment more than they do the cost of a vehicle. And so that's also gone a long way toward providing a big boost to OEM profitability. And that's been true, certainly in the U.S. and Europe as well. Paul Zimmermann runs Chevrolet and Toyota dealerships in the Detroit, Michigan area. And I would say normally pre-COVID, and I'm speaking just at Chevrolet for a moment, you know, somewhere between 800-1,000 new cars  the ground or end or in transit, either on a car hauler or a rail car in route to our facility. As we sit here currently, we have 48 in stock, five percent, essentially, of what we would normally carry. In November, GM said it was going to remove heated seats and heated steering wheels from vehicles. And they said they were getting rid of heated seats. And people who live in northern Michigan, like me, said that's utterly ridiculous because we use them eight months out of the year. So in fact, Saturday morning I got up, it was minus four up here. You know, to get in a leather vehicle and that kind of temperature is nuts. A few days after that news broke, the company said it planned to retrofit vehicles, with the  starting in the second quarter of 2022.  buying a car without an option like that can be a tough choice, especially for shoppers heading to dealers, like Zimmermann, in the middle of Michigan. Heated seats  become one of those options that folks have just gotten so used to, and sometimes I think it's based on the climate in terms of where they live and just getting into that car that, you know, immediately warm your car and 20 degree weather is a big thing. And I think others, you know, they throw that thing on because they might have a back issue. And based on age and just muscle relaxation, they put that on for five minutes it helps their commute in terms of being in that chair for X amount of time. So hopefully, you know, we're talking about a five or six month sacrifice that folks would have to go through in terms of the life cycle of that vehicle. And then once those retrofits are available, they'd come to the dealer for them. Zimmermann also said that a lot of his customers are leaseholders and their leases are coming due. They need new cars. So he and his staff have been trying to be proactive. Team members have been reaching out to the customers ahead of time, whether it's five or six months before their lease is due, to make sure that they know what the landscape of the inventory and then their options look like and really just prep them for what's going to lie ahead. Because in past times, you know, a customer could show up a week before their lease matured and have a pick of a thousand vehicles. You know, they don't have that option now. On the other hand, is it really too much to ask consumers to live without heated seats? In fact, a lot of customers have been quite understanding, Zimmerman said, making the messaging a bit easier. There's an understanding from a lot of folks that, again, these are unprecedented times and this is unusual. Everybody's been affected one way or another. Zimmermann has been selling cars for decades and has seen the product become incredibly sophisticated, but he also has seen how important cars have become to people. A lot of the options on cars nowadays, and I almost feel like,  this is, you know, the lap of luxury. There's so much stuff in this thing. You know, I almost feel guilty using it. But having said that, the older I get, the more I realize that if it can be built it can be executed well, why not? Of course, GM is far from the only manufacturer that has had to make these kinds of choices. Any option that might not be highly sought after or might not be considered essential for performance, safety or basic comfort could be on the chopping block. One example is infotainment systems and onboard navigation modules—anything that does basically the same job as a smartphone can do. But there are others. There are other car companies that have had seat memory modules is a good example where the electronics weren't available. So you have vehicles that have a button for that feature, but that button doesn't do anything. So they're not the only ones. It's pretty pervasive. The industry is not expecting relief anytime soon. Even though a lot of positive comments came out end of last year/early this year, now most automakers are seeing, and analysts are saying 2023 before we start to see some more relief. Already, this is showing up in annual sales forecasts. As of late January, the seasonally adjusted annual rate of  the common metric used by the industry, was a lot lower than had been expected. The SARS being predicted about 15.2. When we first entered this pandemic, we thought by 2022 it'd be back in the 17 millions. So you can see the impact is already at two million. That's mainly semiconductors. But it remains to be seen. We've become more pessimistic as the weeks go on, and we have to see also on the customer side, with the average transaction price going up so drastically to over $45,000. People are priced out of the market. One interesting development is how consumers have responded to the situation. , they seem happy to pay more. We did a survey not too long ago, and a pretty small amount of consumers said that they felt that they paid too much. And I'm looking at the transaction prices thinking that's not the case. A lot of you definitely paid, probably too much, but it all, you know, it really is just about the optics of the situation that they don't feel that they got a bad deal. They're also willing to wait longer, and they show an interest in custom ordering cars. This is a common way of buying cars in other countries such as Japan, but it is far rarer in the United States. Americans tend to like buying cars off the lot. Ordering a car up front lets a buyer choose a car to spec, but typically comes with a waiting period of several weeks. There's also no opportunity to haggle over the price, So we did ask about the build-to-order concept basically described it, we didn't necessarily call it build-to-order. And over half of the respondents were into the idea, even if they had to wait 8-10 weeks. And I thought the number would actually be a lot less. I thought that American consumers were a bit too antsy for their vehicles for that, but it seemed like a lot of people responded favorably to the concept. And it probably is related to the fact that people have to wait right now anyhow, so you might as well get the car that you want at a price that is guaranteed versus kind of the environment now where you're trying to scramble for a vehicle, maybe paying a bit too much, not getting the exact vehicle that you want. The chips ordeal has spurred conversation about whether more of these supply chains should move back to the United States, or at least be more widely distributed throughout the world. I'm for small intervention with the government, but I think there needs to be some quick and effective work done to try and bring some of this manufacturing for these chips back onto American soil and to be completely dependent on primarily Asia, 95 percent of these, you see the risk. The U.S. Senate passed the Chips Act in 2021, but the bill was stuck in the House of Representatives. The act would set aside $52 billion for chip manufacturing in the U.S. and establish a National Semiconductor Technology Center. Microchips were invented in the United States, but Asian manufacturers became dominant. The U.S. made about 37 percent of the world's chips in 1990, but only makes about 12 percent in 2021. Intel, TSMC and Samsung are all developing chip plants in the U.S., but it will take years before they are producing at full capacity. Some say the geographic concentration of these factories is not really the issue. At the end of the day, it is just a heated seat, and it is important to understand that for decades drivers got along just fine without them. But these little comforts add up to an experience that can really set one car apart from another. Well, I can completely understand General Motors trying to figure out how come when you sell these vehicles and these are the sacrifices that we have to make just to get some vehicles out the door. I'm sure that they want to get those back as soon as possible because those creature comforts are what really delight people. And I think that when you're happy in your car, you're also more likely to tell people about it and be that evangelist that auto companies want to have for their brands. In the meantime, drivers will have to bundle up and rely on heat coming out of the vents.