Auto File: Toyota’s Hybrids for the Win

China Rare Earth Holdings

06/02/2024 15:59

Joe White
Global Autos Correspondent
     
Greetings from the Motor City! 
 
Chuck Berry wrote some of the best songs about driving – but the
one that popped up on the mental jukebox after reading this
morning’s news from the World of Cars was “You Can’t Catch Me” –
the new theme song of the Tesla drivers tooling around with
their Apple VR goggles on.  
 
Yes. People appear to be doing that. Look out New Jersey... 
 
In addition to surveying the new frontiers in distracted
driving, we’ll dig into Toyota’s hybrid-powered profit surge and
check in on the troubles at Tesla and Cruise. Everybody ready? 
 
Today:  
    *         Hybrids and a weak yen power Toyota 
    * Is Tesla still one of the “Magnificent Seven?”
    * Cruise tries to catch a break

 
Toyota: Who’s a laggard now? 
    Toyota shares jumped Tuesday after the world’s top-selling
automaker reported stronger-than-expected quarterly profits and
boosted its fiscal year profit outlook. 
 
    Strong sales of gas-electric hybrid vehicles and a weak yen
that pushed up dollar-denominated revenue drove the result.  
 
Quite a turnaround from last year when Chair Akio Toyoda was
under fire from big investors for questioning the wisdom of a
rapid transition to fully electric vehicles.  
 
Toyota’s decision to walk more slowly toward an all-electric
future than rivals such as Volkswagen or General Motors is
paying off – for now.  
 
(Some rivals are also climbing back on the hybrid bandwagon.
Ford reported sales of its hybrid models jumped nearly 43% in
January, while EV sales slumped by nearly 11%. GM confirmed it
plans to offer a plug-in hybrid in North America.) 
 
Toyota cranked profit margins to 14% for the latest quarter by
holding down inventories and defending high prices. Tesla’s
pursuit of sales volume through price cutting sliced its profit
margins to a more Detroit-style 8.2%. 
 
Toyota’s culture of rejecting complacency and pushing for
continuous improvement will come in handy going forward. The
company has to deal with product certification test cheating
scandals at affiliates, including the Daihatsu mini-car brand. 
 
Tesla and China’s BYD have leads in EV production profitability
and new manufacturing technology that threaten Toyota’s
dominance as the industry’s low-cost mass producer in the longer
term.  
 
But for now, Akio Toyoda and CEO Koji Sato are winning. Since
Jan. 1, Toyota’s Japanese shares are up 21% and are testing
record highs. Tesla’s stock is down 27% - a market cap loss of
$214 billion.  
 
Essential Reading 
    *         The Sergio Quotient:  A look at Detroit’s capital
addiction
    *  EVs threaten Africa’s platinum mines 
    *  Should India chase Toyota instead of Tesla?

 
Tesla gets snubbed 
Tesla shares on Monday hit their lowest level since last May
after German software company SAP took Tesla off its list of
company cars and brokerage Piper Sandler dropped its price
target. 
 
Tesla shares have been skidding since late December. The decline
steepened after Elon Musk told investors on Jan. 30 to brace for
a year of slower growth. 
 
Tesla’s luster has dulled to the point that some analysts are
suggesting the electric vehicle pioneer should get tossed out of
Wall Street’s “Magnificent Seven” tech stocks.  
 
Cruise tries for a second chance 
Representatives of General Motors’ Cruise robo-taxi company are
scheduled to plead their case today to California regulators who
ordered the company’s driverless cars off the streets of San
Francisco last October. 
 
Cruise has offered $75,000 to resolve the California Public
Utilities Commission’s investigation of the response to an Oct.
2 accident during which a Cruise robo-taxi dragged a pedestrian
20 feet down a San Francisco street after the victim was hit by
another, human-driven car. 
 
Today’s hearing, scheduled at 1:30 PM Pacific time, can be
viewed here.  
 
The incident and Cruise management’s mishandling of subsequent
disclosures to regulators have put in doubt the future of what
was the leading U.S. rival to Alphabet’s Waymo robo-taxi
operation.  
 
It is not clear where or when Cruise will relaunch its service,
and experts predict it will be a long road back after the
disclosures about technical and management mistakes in a lengthy
and scathing report by an outside law firm. The U.S. Justice
Department, the SEC and other regulators are investigating. 
 
GM CEO Mary Barra has said Cruise will be relaunched. But she
has ordered spending be cut by $1 billion this year. GM has
reported $9 billion in operating losses at Cruise since 2017. A
review of the unit’s strategy is underway, and the outcome may
not become clear until a GM investor day, as yet unscheduled. 
 
Fallout from the Cruise debacle could become a problem for
Waymo, which is seeking to expand its Los Angeles and San
Francisco service areas. The Cruise accident could boost the
chances for a proposal in the state legislature to give local
governments the power to block robo-taxis in their
communities.  
 
The UAW’s organizing drive grinds out the yards 
The United Auto Workers’ effort to organize workers at non-union
auto factories has hit another milestone: Half the workers at
Volkswagen’s Chattanooga, Tenn. assembly plant have signed on to
support joining the union. 
 
More than 30% of workers at Hyundai’s assembly plant in
Montgomery, Ala. and the Mercedes plant in Vance, Ala. have
signed union cards, the union has said. 
 
The UAW’s unprecedented effort to organize all non-union
assembly plants all at once is gaining ground, but still has a
long way to go.  
 
The union has said 10,000 workers at 13 factories have signed
union cards. That’s a lot – but averages to 769 workers per
factory. Tesla’s Austin assembly operation employs 20,000
people, according to the Austin Regional Manufacturers
Association.  
 
The big test will be whether the UAW can get 70% of a plant’s
workers to sign on – the threshold the union has said would
trigger a move for a formal recognition vote sanctioned by the
National Labor Relations board. 
 
Fast Laps 
Electric van startup Arrival put two units into the UK
equivalent of bankruptcy protection and named EY as
administrators. 
 
Stellantis chair John Elkann scotched rumors that the automaker
created by the merger of Peugeot and Fiat Chrysler has designs
on another acquisition. Or rather, he tried. Elkann was
responding to market chatter that Stellantis had discussed a
combination with Renault, which is partly controlled by the
French government. Could be too soon after the former Fiat
Chrysler’s talks with Renault in 2019 were frustrated by
meddling from French ministers.  
 
 
Battery maker SK Innovation warned investors it expects slower
growth in EV demand and posted worse than expected results for
the latest quarter. SK supplies legacy automakers including
Ford, Volkswagen and Hyundai. 
 
Prices for rare earth minerals essential to EVs appear to have
bottomed out and could head up later this year – especially if
China throttles back output, analysts said. Instead of OPEC, the
green energy sector can worry about ….C-REMM? (China Rare Earth
Mineral Monopoly.) 
 
Lyft will guarantee weekly earnings for drivers on its network.
The move is designed to attract more drivers. Lyft and larger
rival Uber have faced penalties for underpaying drivers. 
 
Honda recalled 750,000 late-model vehicles to fix potentially
defective airbags. 
     
Auto File is published on Tuesdays  and Fridays. Think your
friend or colleague should know about us? Forward this
newsletter to them. They can also subscribe here.
    
 

 (Editing by Emelia Sithole-Matarise)