Auto File: China’s Automakers Buy Bigger Boats

AutoNation

12/04/2024 15:39

Joe White
Global Autos Correspondent
    
    Greetings from the Motor City! 
    
    Following the news from the World of Cars often brings on
déjà vu.
    U.S. and European politicians are hitting the panic buttons
over cars made in Asia washing away their national champion
automakers. The costs of buying and owning a car are soaring out
of the reach of middle-income buyers. The Motor City Three
automakers rely for survival on big, petrol-burning vehicles
while rivals work overtime to perfect more energy-efficient
technology. 
    Are you getting one of those flashes we’ve been here before?
    You don’t need to have lived through the 1970s to see the
rhymes with history. Today’s Auto File has you covered.
    One more thing: Next week, the Auto File will take a spring
vacation. I’ll be back on April 23 – just in time for earnings
season.
    
    Have a great weekend!   
    
    Today -  
 
    * China’s automakers won’t slow down 
    *         Soaring U.S. auto insurance costs threaten auto
sales 
    *         A Modi-Musk Summit   

    
    * China’s automakers sail into the storm 
    Chinese automakers are pushing past warnings from U.S. and
European policymakers and accelerating global expansion
strategies as their home market economy slumps.  
    Chinese automakers and their shippers have ordered a record
number of car-carrying ships to send vehicles to overseas
markets, Reuters reported Wednesday. 
    The investments in a blue water navy of car carriers come as
European and U.S. policymakers – responding to alarms from their
big employers - are warning China not to export its clean
technology overcapacity problem to their markets.  
    Chinese officials profess to be shocked, shocked by charges
that the world’s biggest auto market harbors too many
unproductive auto and clean technology factories.  
    Plant closures have pushed China’s auto sector capacity
utilization to 70%, a senior official of the China Association
of Auto Manufacturers said. A top official of another industry
trade group made similar comments. (A 70% capacity utilization
rate is still less than most automakers consider ideal.) 
    Breakingviews writes that independent analysts say excess
capacity in China’s EV and green energy sectors is real and here
to stay. 
    Chinese automakers argue their success is down to hard work
and innovation.  
    On Friday, Chinese EV startup brand Hyper said it has
cracked the code on solid state batteries with longer range and
faster charging than current technology. Hyper plans to bring
the technology to market in two years - potentially beating
Western rivals.  
    Smartphone maker  Xiaomi’s connected, electric car looks
like a hit. Xiaomi chose to make the smartphone on wheels Apple
did not. Is that wrong? 
    Here's another lesson from history: Trade barriers did not
stop Toyota or Hyundai from becoming global players.   
    
    * Essential Reading 
    *         EV sales are up globally, down in the United
States. 
    *         Toyota has a super-cheap yen at its back 
    * California buys a big battery to shore up its grid   

    
    * China and Carlos Tavares’ warning for Rome 
Chinese automakers may be closing plants at home, but they are
looking to open new ones abroad – globalizing their
manufacturing footprints as the Motor City Three, Toyota and
Hyundai have done before. Europe is a top target. 
    Chinese automaker Chery is negotiating with Spain to take
over a former Nissan car factory near Barcelona, with the help
of a government subsidy package, Reuters reported. Chery has
also talked with Italian government officials, who have put the
Open for Business sign out to Chinese automakers to offset job
losses at national auto champion Fiat. 
    Rome’s overtures to China prompted a blunt warning from
Carlos Tavares, CEO of Fiat’s parent, Stellantis.  
    If European-made Chinese cars took sales from Fiat, “then we
might not need so many plants as we have now," Tavares said.
"We're ready to battle, but in a battle there are casualties." 
    Nice auto industry you have there, shame if something would
happen to it.   
    
    * Musk and Modi  
    Elon Musk and Indian Prime Minister Narendra Modi are
expected to meet during the week of April 22, stoking
anticipation for a deal to bring a new Tesla factory to the
world’s most populous country. India’s EV market is small but
expanding five times faster than EV sales globally. 
    The Modi-Musk summit will give Tesla investors something to
talk about instead of the company’s skidding share price or its
first quarter numbers, scheduled for release April 23.  
    Most analysts expect the results will disappoint after first
quarter deliveries fell 8.5% from a year ago.  
    Musk has also directed attention to an event August 8 when
he promised to reveal the long-promised Tesla robotaxi.  
    The timing of an India factory and the robotaxi are
uncertain – as is the status of the $25,000 Tesla vehicle that
Musk has sidelined, sources told Reuters. Musk has denied this,
without giving specifics. 
    Wedbush analysts Dan Ives said cancelling the Model 2 would
be a “debacle negative” for Tesla shareholders.   
    
    * Elon Musk’s ambitious timelines 
    Elon Musk thrives on bold goals, as he illustrated last week
during a podcast interview with the head of Norway’s sovereign
wealth fund.  
    In the chat – which you can find here -  Musk predicted: 
 
    * His X.ai startup’s Grok software will be better than
OpenAI’s
ChatGPT 4 when it launches in May. 
    * AI will be smarter than any human by the end of 2025. 

    * The first SpaceX rockets will land astronauts on the Moon
within
five years. 
    * The first SpaceX rockets will land on Mars within five
years. 
    * The first humans will land on Mars within seven to nine
years. 
    * SpaceX will have delivered 1 million or more tons of
material
for a Mars colony and deployed a fleet of 10,000 Mars rockets
within 20 years. 

 
Musk’s least specific prediction had to do with electric cars.
“All vehicles will go fully electric. It’s only a matter of
time,” he said. “That includes aircraft. It’s not going to be a
completely straight up line.”   
    
    * Tesla’s Swedish labor storm is not over
    Swedish union leaders said their strike against Tesla
operations is not over, contradicting Elon Musk’s assertion
on the podcast hosted by the head of the Norwegian sovereign
wealth fund, a major Tesla shareholder. 
    Musk told Nicolai Tangen that the “storm has passed” in
Sweden, where port workers and other unionized service personnel
have refused to handle Tesla business over a wage dispute. The
brawl has prompted concern from some Nordic investment funds for
Tesla to respect union rights. Norway and other Nordic countries
are important markets for Tesla. 
    KLP, a Norwegian pension fund, said it wants to raise
Tesla’s anti-union tactics at the annual shareholders meeting.  
    Musk is fighting efforts by the United Auto Workers to
organize Tesla’s U.S. workers and has clashed with German unions
over labor representation at the automaker’s Berlin
manufacturing complex.   
    
    * Auto insurance threatens Detroit 
    Speaking of 1970’s flashbacks, the biggest spike in auto
insurance premiums in nearly 50 years threatens to crimp new
vehicle sales – echoing the role auto insurers played – along
with OPEC – in killing off the Motor City Three’s muscle cars. 
    Auto insurance costs rose by 22% in March compared with a
year before according to the Labor Department. The inflation
rate for car coverage was more than six times the overall
increase in the consumer price index. (See the government data
here.)   
    
    * Fast Laps 
    - CarMax shares tanked, falling 9% after the used car
retailer’s quarterly profits fell short of expectations. CarMax
warned of slower-than-forecast growth over the next six years.
Executives blamed higher prices and interest rates for putting
even used vehicles out of reach for many less affluent
consumers. Shares in rivals Carvana and AutoNation took lesser
hits. 
 
    - Ford cut prices again for certain versions of its F-150
Lightning electric pickup truck. Ford also said Thursday it will
resume shipping Lightnings to dealers this month. Ford is now
shipping 144,000 redesigned F-150 and Ranger trucks to North
American dealers. The trucks were built in the first quarter but
held back for quality checks. The cautious launches are part of
an effort to cut warranty costs that hit nearly $4.8 billion
last year. 
 
    - Volkswagen will invest $2.7 billion to retool a factory in
China for production of vehicles co-developed with Xpeng. 
 
    - German automakers BMW, Porsche and Mercedes all reported
lower sales in China for the first quarter – bad news for
companies that rely on the world’s largest car market for
profits and revenue growth. 
 
    - U.S. safety regulators are investigating a fatal crash
involving a Ford Mustang Mach-E that plowed into vehicles
stopped on a Philadelphia freeway. Officials said a different
electric Mustang SUV involved in a fatal crash in Texas was
operating on Ford’s Blue Cruise assisted driving system.  
 
    - Vinfast’s troubles pose a threat to its parent, Vietnam’s
biggest conglomerate Vingroup, Reuters reported. Shares in
Vingroup are down 38% for the year as investors digest Vinfast
disclosures that 82% of the EVs it sold went to companies
affiliated with Vingroup.
    
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 (Editing by Andrew Heavens)