Auto File: The EV Hunger Games

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30/01/2024 15:30

Joe White
Global Autos Correspondent
    
    
     
    Greetings from the Motor City!
     
Or should I say, Greetings from Mudville! Yes, midnight arrived
on Sunday for our Cinderella team, the Detroit Lions. No
historic Super Bowl appearance. No rendez-vous with Taylor
Swift. Just Eminem giving a heartfelt Detroit salute to the San
Francisco fans. Imported from Detroit, indeed!
     
    Now that the football fantasy is over, Detroit and the other
citizens of the World of Cars must deal with the realities of
earnings season. You’d be surprised who’s looking at the sunny
side – read on!
     
    We’ve got lots of ground to cover. Let’s dive in:
     
    Today:
    *         GM’s cash machine wows Wall Street
    *         BYD and The EV Hunger Games
    * Toyota’s victory party, spoiled by scandal

    
     
GM wins with optimism – and cash
    General Motors shares jumped Tuesday after CEO Mary Barra
delivered a more upbeat outlook for 2024 than Elon Musk – and
encouraged investors to expect that more of the billions in cash
being generated by sales of combustion trucks and SUVs will wind
up in their pockets.
    
GM forecast that pre-tax profits for this year could land in a
range between $12 billion and $14 billion – roughly in line with
2023 if you back adjust for one-time events such as the UAW
strike.
     
    More important, GM forecast $8 billion to $10 billion in
cash flow after capital spending. That’s money that could fund
more share buybacks on top of the $10 billion repurchase
launched late last year.
     
    Barra told investors GM wants to get shares outstanding
below 1 billion from 1.2 billion currently.
     
Investors got the message, and looked past less positive
developments, such as the costly regulatory mess at the Cruise
robo-taxi operation, slumping sales and profits in China and a
fumbled launch of new software that forced suspension of sales
of GM’s new Chevy Blazer EV in North America.
     
Barra delayed an investor day promised for March, indicating
management needs more time to lock in plans for fixing Cruise
and the internal software factory.
    
Essential Reading
    *         S. sales of EVs and Plug-ins are growing. Really.
    *         CO2 emissions from EU vehicles are stuck in 2012
    * Can military AI predict critical mineral prices?

    
 
BYD stays hot as EV rivals shiver
    
Global electric vehicle sales leader BYD told investors it
expects net profits to jump by as much as 86.5% for 2023
compared to a year earlier – another win for the most formidable
rival to Tesla.
     
The battery and EV maker’s profits are growing and worldwide EV
sales expanding even as it fights a price war with Tesla and
other EV manufacturers. That price war – and a slowdown in the
growth of demand for EVs - forced Polestar, the EV brand
controlled by China’s Geely and its affiliate Volvo Cars, to cut
450 of its staff.
     
    BYD expects 2023 profits in a range between $4.04 and 4.32
billion. Tesla earned $8.9 billion from operations last year,
not including a $5.9 billion tax-related gain. BYD credited
cost-cutting and a “continuously expanding scale advantage” for
the result.
     
Investors will ask: Can BYD keep defying gravity? Tesla could
not. Its profit margins are shrinking and Elon Musk’s flat
growth forecast for 2024 led investors to slash nearly $80
billion from Tesla’s market cap last week.    
    
     
The EV Hunger Games
    
    BYD’s strong numbers stand out even more when considered
against the rest of the EV industry.
     
    In the long run, electric vehicles could be a great
business. In the short term, the EV industry looks more and more
like the Hunger Games meets Death Valley Days. Some will make it
across – but as Stellantis CEO Carlos Tavares likes to say, the
next few years will be “Darwinian.”
     
    Global EV demand is growing, but there are more signs that
growth is not coming fast enough for automakers, battery
manufacturers and miners that invested far ahead of consumer
demand. Tesla’s warning last week is not the only sign of
stress:
     
    Renault cancelled plans to float shares in its electric
vehicle business, Ampere, amid slowing EV demand, brutal
competition from China and withering investor interest in EV
startups.
     
    Renault will now fund Ampere product development on its own.
Renault shares initially climbed on the news, but then wobbled.
     
    German EV sales are forecast to fall by 13% in 2024, the
German auto industry association reported. Government EV
purchase subsidies have run dry, and consumers are waiting for
better technology.
     
     
    Lithium miner Albermarle is cutting staff as global prices
for battery minerals fall. Australian nickel miners are
struggling with a collapse in prices for the battery mineral as
revved up Indonesian production collides with slowing demand.
    
    
 
Toyota’s mini-Dieselgate
    
Toyota should have spent Tuesday celebrating another year as the
world’s top-selling automaker with 11.2 million vehicles
delivered in 2023.
     
    Instead, Toyota Chair Akio Toyoda had to apologize for
another scandal over regulatory cheating at an affiliate.
     
Toyota temporarily halted shipments of Hilux trucks and Land
Cruiser SUVs outfitted with diesel engines after investigators
discovered that the affiliate producing the engines may have
rigged testing for the motors to produce smoother power and
torque curves.
     
    The affiliate, Toyota Industries Corporation, or TICO,
admitted in March 2023 that employees had rigged testing of
diesel engines used in certain industrial equipment to meet
Japanese emissions standards. Toyota commissioned an
investigation, and that review revealed the irregularities in
testing for the diesel passenger vehicles.
     
In a TICO report here, and a Toyota statement here, the
companies said performance testing of the diesel engines used in
ten vehicles sold in Japan, Europe, the Middle East and
Southeast Asia was done using engine control units programmed
with different software than that used in models delivered to
customers. The companies said the software used for testing
produced smoother, more consistent results.
     
Toyota said the temporary stop-shipping order for vehicles with
TICO diesels hit six assembly lines. The company is already
dealing with the fallout from revelations about cheating on
safety tests at its Daihatsu mini-car affiliate. Daihatsu halted
production last year through this month. In 2022, Toyota
affiliate Hino was found to be falsifying data for engine
emissions and performance tests.
     
The test-fudging at Toyota’s affiliates is not at the level of
Volkswagen’s Dieselgate emissions cheating scandal. But echoes
of Dieselgate and its profound impact on the auto industry – the
scandal was a spur to the global EV race – sound in Toyota’s
statement about the TICO revelations.
     
    “We recognize the gravity of the fact that the repeated
certification irregularities at TICO, following those at
Daihatsu, have shaken the very foundations of the company as an
automobile manufacturer,” Toyota said.
    
     
     
EV politics bite Ford
    
Electric vehicles are getting a starring role in the U.S.
election brawl, and that could be a problem for Ford.
     
Four senior Republican House lawmakers have demanded that the
Biden administration investigate Chinese companies that would be
providing technology and know-how to Ford’s proposed EV battery
plant in Michigan.
     
    Their letter charges that the companies have ties to China’s
Communist Party, or human rights abuses in China’s Xinjiang
province, or the North Korean government.
     
If the U.S. government declared Ford’s battery technology
partner CATL or other Chinese suppliers to be foreign entities
of concern, Ford’s Michigan-made batteries could be ineligible
for U.S. subsidies.
     
The letter is the latest salvo in a Republican effort to paint
Biden’s pro-EV policies as a giveaway to China, and win votes in
auto states such as Michigan that are key to the presidential
race.
 
    
Fast Laps
    
 
* Volkswagen is folding its “New Mobility” electrification and
autonomous driving unit into its technical development
department, and sending the New Mobility unit’s head, Thomas
Ulbrich, to lead technical development in China. The Volkswagen
brand won’t replace Ulbrich on the brand’s management board.
 
* Vroom will exit the retail online used car selling business -
good news for rivals Carvana, CarMax and other auto retail
chains such as Lithia, AutoNation and Sonic.
     
* Toyota warned owners of about 50,000 Corolla and RAV4 models
from the 2003 to 2005 model years not to drive the vehicles
because their two-decade old Takata airbags could rupture. The
warning underscores why the Takata airbag recall is so
problematic: Many of the vehicles equipped with Takata airbags
are otherwise durable as granite.
 
* Stellantis will use ChatGPT in future Peugeot models.
    
     
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 (Editing by Tomasz Janowski)