Auto File: Cruising for Trouble
21/08/2023 16:00
Joe White
Global Autos Correspondent
Greetings from the Motor City!
There’s nothing like riding the clutch of a 62-year-old truck in
a mega-gridlock on Detroit’s Woodward Avenue to make you
question the way we manage traffic in crowded cities.
Who thinks it is a good idea to have thousands of cars descend
on a single street with not-so-synchronized red lights,
pedestrians wandering across traffic and tens of thousands of
exhaust pipes pumping CO2 into the air? Not me now that I have
scratched running the Dream Cruise off my lifetime to-do list.
On the other hand, are we ready for a world in which we are only
passengers in automated vehicles, letting artificial
intelligence (AI) do the driving and giving up the freedom to
change routes with the spin of a steering wheel? That’s an open
question, as we’ll see.
Here’s what’s happening in the World of Cars today –
* Trouble for Cruise’s robotaxis in San Francisco
* Indonesia’s EV paradox
* Detroit hunkers down for an auto strike
* A setback for GM, Cruise and robotaxis
General Motors’ robotaxi company, Cruise, agreed to park half
its fleet of self-driving vehicles in San Francisco after one of
its driverless cars drove into the path of a firetruck. A
passenger in the Cruise car was injured.
Pending a full investigation, one thing is clear: This incident
is a setback for Cruise, and perhaps for other automated vehicle
operators as well.
Just a week before the Cruise accident, California regulators
had given Cruise and Waymo permission to expand their robotaxi
services in San Francisco, siding with company arguments that
AVs are safe over the objections of city officials who said they
are not ready for large-scale deployment.
Now, the AV skepticism of San Francisco officials, and experts
such as George Mason University’s Missy Cummings, appear to be
vindicated. They have new ammunition to push for slowing down
efforts by Cruise and Waymo, Alphabet’s rival robotaxi service,
to scale up revenue-generating operations in the nation’s
technology capital.
Cruise’s problems are also a problem for GM, its controlling
shareholder. Cruise CEO Kyle Vogt told GM investors during the
automaker’s Q2 results call that the robotaxi company was on “a
trajectory that most businesses dream of, which is exponential
growth…”
GM CFO Paul Jacobson told a conference earlier this month that
“Cruise has largely solved all the technology challenges," and
is on track to generate $1 billion in revenue in 2025. Cruise is
currently on track to lose $2 billion this year. (See page 26 of
this deck.)
GM CEO Mary Barra has stood by her Cruise bet even as rivals
Ford and Volkswagen have put the brakes on AV investments. Barra
has told investors that Cruise and other AV tech businesses can
scale up rapidly enough to generate $50 billion in revenue for
GM by 2030.
Look for some tough questions from investors about all of that,
unless Cruise can rapidly resolve its San Francisco problems and
get back on track.
* Essential Reading
* S. unions demand a bigger share of profits
* Big banks slash outlooks for China’s growth
* Tesla blames insiders for a data leak
* Indonesia’s electric dreams
Indonesia is Southeast Asia’s largest auto market, and its
territory includes rich deposits of nickel, a vital EV battery
mineral. Indonesia’s government wants to make the nation an EV
production hub, as well as a leading market for EV sales.
Indonesian consumers aren’t rushing to buy, Reuters
colleagues Johan Purnomo and Stefanno Sulaiman report from the
sidelines of this year’s Jakarta auto show. EVs in Indonesia are
priced at about a 60% premium to conventional vehicles, and so
far make up just 1% of the market.
Japan’s Toyota and Honda currently dominate the Indonesian
market and have been slow to launch EVs. Toyota said it has no
plans to build an EV in Indonesia.
* Does fast-charging fry Mustang Mach-Es?
Federal regulators and Ford are investigating whether the
company should recall as many as 64,000 Mustang Mach-E electric
SUVs to fix electrical system problems that could cause vehicles
to lose power and crash after getting a DC fast charge.
* Detroit battens down the hatches
Leaders of the United Auto Workers held a rally on a broiling
August Sunday in suburban Detroit to bash the Detroit Three
automakers. One UAW leader said Stellantis North America wants
to shift production of combustion Ram pickups from a suburban
Detroit plant to Mexico, replacing it with an electric Ram that
would likely require fewer workers.
The red shirts and hot rhetoric from UAW activists are not the
only signs of trouble ahead for Detroit’s automakers.
General Motors, Ford and Stellantis are building up stocks of
vehicles. New vehicles in transit to dealers from the Detroit
Three have risen 25.5% in the last seven weeks, compared to a
7.5% increase for rival automakers, according to data from Cloud
Theory, a startup that applies AI to automotive data.
Cox Automotive reports that inventories of unsold vehicles
overall were flat in July compared to June at 56 days’ supply,
but noted that inventories for several Detroit brands – notably
Stellantis’ Ram and Jeep - are well above the industry
average.
The animosity between UAW leaders and Stellantis has focused
attention on the potential for a strike at the maker of Jeep
SUVs and Ram trucks. That is speculation, but the Stellantis
situation does provide a framework for assessing the financial
implications of a strike.
The union has promised strikers $500 a week. If 43,000 UAW
workers at Stellantis decide to walk out because they don’t have
a new contract by the Sept. 14 deadline, they could get full
strike pay for more than a month.
Stellantis has the resources to hold out that long if CEO Carlos
Tavares chooses to do so. The company reported having nearly 64
billion euros in available industrial liquidity as of June 30
(see page 6.) Cox counts more than 100 days’ supply of Ram
trucks and Jeep SUVs, for example.
* Fast Laps
Superchip designer Nvidia will report results Wednesday, and
investors will be tuned in for clues to the durability of the
boom in demand for advanced semiconductors that power artificial
intelligence systems – including advanced cars. Nvidia has a
growing business supplying powerful chips to the auto industry,
making it an honorary auto stock, except for one thing: it has a
$1 trillion market cap and a price/earnings ratio roughly 20
times that of Ford.
Electric hypercar maker Rimac used Monterey car week to set a
new benchmark for crazy with the “Time Attack” version of its
Nevera supercar. You can’t have one. They’re only making 12. A
“Time Attack” set a new record for an electric car at Germany’s
Nurburgring. Could be time for a re-make of Back to the Future.
Germany’s Continental could spin off more of its remaining
automotive businesses, manager magazin reports.
Mexico rebuffed a U.S. request to investigate labor conditions
at an auto parts factory owned by Japanese supplier Yazaki. This
is one of the few times Mexico’s government has not complied
with a request from Washington to look into potential labor
rights abuses.
The CEO of Piaggio, Italian financier Roberto Colaninno, died at
the age of 80. Piaggio, maker of Vespa scooters, was just one of
a series of Italian companies Colaninno turned around in a long
career