Auto File: Tesla's RangeGate. Ford's EV Rethink

Aurora Innovation

28/07/2023 15:20

July 28 - 
  
Joe White 
Global Autos Correspondent 
   

        
Greetings from the Motor City!
      
 
It’s a summer Friday. It’s already been one of those eight-day
weeks the Beatles used to sing about. And it’s not over.  
 
Before we all clock out, could the U.S. government release some
potentially controversial new vehicle fuel economy rules just
ahead of quitting time? Find someone who will bet against you,
and your first drink could be free!  
 
Ok, no more time for wisecracks. Today – 
    
 
    *         Ford slows its EV roll 
    * How Tesla games driving range complaints 
    *         GM clashes with Biden over climate policy 

 
Ford gets real on EVs 
Ford CEO Jim Farley used Thursday’s Q2 results call to sketch
out a sharp turn in the automaker’s electrification strategy.
Not a full U-turn, perhaps, but a change in speed and direction
abrupt enough to leave some analysts dizzy. 
 
There was a lot going on in the presentation from Farley and CFO
John Lawler. One way to put the pieces together is to start with
what’s happening in Ford’s business: 
 
Ford’s projected losses on its first-generation EVs are soaring,
and now could total $4.5 billion this year – roughly 50% more
than forecast just a few months ago. Tesla’s price-chopping and
slower-than-expected uptake of EVs by mainstream U.S. consumers
(aka Ford’s base) are clobbering the Ford Model-e EV unit with
no near-term respite in sight. 
 
At the same time, Ford Pro, the automaker’s commercial vehicle
unit, is crushing it, delivering 15% pre-tax margins in Q2. Ford
Pro sells mostly combustion vehicles, including the latest
versions of the super-profitable Super Duty F-series trucks. 
 
Farley’s response (sketched in Ford’s presentation here: ) Slow
the ramp up of Ford’s money-losing EVs and feed more capital to
Ford Pro’s strategy of bundling work vehicles with high-margin
software products.  
 
Put another way, Ford is sending capital to a business model
that works and pulling back from a capital-burning war of
attrition with Tesla.  
 
Before yesterday, Ford’s official plan was to build 2 million
EVs annually by 2026. Today, Ford no longer will say when it
could hit 2 million EVs a year. The new key words for EV
strategy: “Flexibility, balancing growth and profitability.” 
 
One more thing: Over the next five years, Ford plans to
quadruple sales of gas-electric hybrids such as the Maverick
pickup and Ford F-150 hybrid.  
 
As Toyota’s Akio Toyoda could tell you, climate action advocates
aren’t fans of hybrids. But Ford customers are. Farley said 60%
of Maverick buyers are opting for the 37-mpg hybrid version, far
more than Ford planners expected. 
 
As GM showed earlier in the week, the best-laid business plans
often don’t survive the first encounter with market reality.
Especially when the competition isn’t playing by Detroit’s
rules. 
    
 
Essential Reading 
    * Ocean shippers can’t handle EV fires 
    * Attention engineers: SAE experts talk battery charging  
    * Back to the Future with the new Ford Mustang 

 
Tesla’s Range Games 
Tesla used in-car software to persuade drivers they had more
driving range than they could likely achieve, and then created a
team of employees to suppress customer complaints and visits to
Tesla’s overloaded service centers, Reuters correspondents Steve
Stecklow and Norihiko Shirouzu disclosed. 
 
Members of that team would bang on a xylophone to celebrate a
cancelled service appointment, sources said. Musk did not
respond to Reuters questions. 
 
It’s not clear what the fallout from these revelations will be.
Range matters in the EV business. Tesla’s dominance in the EV
market depends, in part, on its claims that its vehicles deliver
driving range superior to most competitors.  
 
Tesla has gotten in trouble with regulators in South Korea for
overstating range. U.S. regulators have ordered Tesla to ratchet
down range claims by an average of 3%. 
 
But the Tesla approach to range, detailed by Reuters, suggests
that this is one more area, like autonomous driving, where U.S.
regulators are scrambling to keep up.
      
 
China Syndrome 
    Global automakers that once dominated the Chinese market are
in trouble as domestic EV makers and Tesla gobble up market
share.  
 
Some are in full retreat, but others, including Volkswagen and
General Motors, have little choice but to double down and fight
for survival or resign themselves to becoming much smaller and
less global - as shown here, and above. 
 
For years, industry executives predicted a shakeout in China’s
crowded vehicle market would clear away weak Chinese auto
companies, some propped up by provincial governments.  
 
Now, the players being sent to the showers could also include
once-mighty global brands. 
    
 
Fuel Fight! 
General Motors and the White House are butting heads over the
Biden Administration’s efforts to attack climate change with
much tougher vehicle CO2 emissions standards. 
 
In a presentation to regulators, GM said administration
emissions proposals – including fuel efficiency standards
expected today from the National Highway Traffic Safety
Administration – could cost the industry between $100 billion
and $300 billion in fines and penalties from 2027-2031. 
 
The White House told Reuters’ David Shepardson GM’s estimates of
the potential fines are wrong by a factor of 100X – and the
proposed rules could save consumers $18 billion more than they
cost. 
 
This dustup underscores the administration’s climate policy
dilemma: U.S. President Joe Biden’s re-election efforts depend
on winning votes from Michigan auto workers who build big trucks
and millions of Americans alarmed by climate disruption.  
    
 
Robo-trucking Retreat 
Waymo said it will slow down its efforts to develop an
autonomous truck driver, and focus instead on its Waymo One
robo-taxi operation. 
 
The move comes as rival Cruise, the General Motors robo-taxi
unit, is accelerating expansion of its services in San
Francisco, Phoenix, Austin and other cities where Waymo One is
trying to build franchises.  
 
Waymo, Cruise, robo-trucking company Aurora Innovation and
others still hoping to turn a profit from autonomous vehicles
are not getting much comfort from lawmakers and policy makers. 
 
Federal legislation to clear the regulatory path for widespread,
large-scale AV deployment is stuck in a loop, as demonstrated by
a hearing this week. The AV and auto industry’s new argument –
that the United States risks falling behind China in the AV
version of the space race – isn’t working yet with lawmakers
worried about the impact on jobs. 
 
In California, homebase for much of the AV industry, lawmakers
are advancing legislation that would require human minders to be
in the cabs of robo-semis until at least 2030. The AV industry
is trying to stop the train, but so far, opponents, including
the Teamsters, are winning. 
 
Robo-truckers get a much more welcoming reception in Texas,
Arizona and other Southwestern states. But the robo-truck
business model doesn’t work as well if trucks with no
wage-earning humans aboard cannot haul loads from the Port of
Los Angeles all the way to Dallas. 
    
 
Fast Laps 
        
South Korean EV battery maker LG Energy Solution warned
investors it sees slower EV demand in Europe and China. The
warning from LGES came two days after Chinese battery power CATL
reported sharply slower profit growth.  
 
A top Panasonic executive said this week the Tesla supplier
needs four more factories, notwithstanding what LGES and CATL
had to say. 
 
The United Auto Workers hailed the new contract negotiated by
shipper UPS and the Teamsters because it eliminated UPS’s
two-tier wage structure – which paid new hires less than
veterans. Ending tiered wages at the Detroit automakers is a top
goal for the UAW as it bargains ahead of a Sept. 14 strike
deadline.  
 
Volkswagen cut its full-year sales outlook to 9 million
vehicles, down by 500,000 vehicles, in part because of declining
sales in China. CFO Arno Antlitz promised more cost-cutting to
sustain profits.  
 
Mercedes raised its full-year profit forecast and executives
said the luxury automaker expects to raise prices to cover
higher costs. Mercedes’ Q2 sales rose by 6% and the company said
its supply chain problems are easing – in contrast to
Volkswagen’s Porsche brand which said it is still having
problems getting all the components it needs.
     
    
    
Auto File is published on Mondays, Wednesdays and Fridays. Think
your friend or colleague should know about us? Forward this
newsletter to them. They can also subscribe here.

    
    

 (Editing by Jane Merriman)