Auto File: The Fed and the Fall

CIE Automotive India

23/09/2022 16:00

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       Sept 23 - 
    Joe White
  
    Global Autos Correspondent
  
Greetings from the Motor City! 
Leaves are starting to drop, and the weather turned chilly right
on cue yesterday, the first official day of Autumn. It was over
80 degrees the day before. We like rapid shifts here in Detroit.
Not all signs of summer are gone. I saw a 1970 Pontiac GTO
parked on the street looking like its next stop was Woodward
Avenue. Vintage cars like that will be going into hibernation
soon.   
The auto industry could be feeling the chill in other ways.
Today, we’ll look at whether used car prices are heralds of a
slump, ask whether we are charging EVs at the wrong times of day
and take a look at a new trove of data about who’s buying
electric cars. 
Have a great weekend!
    The Used Car in the Coal Mine
  
The Federal Reserve’s campaign to crush inflation with higher
borrowing costs is starting to have an impact on the used car
market, Cox Automotive Chief Economist Jonathan Smoke writes.
Supply chain snafus are still holding down new vehicle
inventories, although those ended August at 40 days’ supply, the
highest level since June 2021, according to Cox data., “There is
no evidence yet of demand destruction in the new market,” Smoke
wrote in a note Wednesday. “It is the used market that is the
canary in the coal mine.”
    Used car wholesale prices are down 10% over the last 100
days, according to Cox data. Retail prices have not matched that
decline…yet. But lower income buyers are getting flushed out of
the new and used vehicle markets as loan rates and monthly
payments rise.
“With additional rate increases expected by year-end,
new-vehicle demand may not hold up when production and product
availability improve,” Smoke wrote. “That could mean the market
will likely see the return of discounting and incentives. If
that does happen, the Fed will claim victory over inflation in
all parts of auto.”
    Who buys EVs? “American Royalty” and hybrid owners
  
Owners of plug-in hybrids and gasoline-hybrids such as the Prius
are shifting to fully electric vehicles in growing numbers,
according to a new analysis by Experian.
Over the past 12 months, 23.5% of plug-in hybrid owners bought
an EV, while 8.8% of gasoline-hybrid owners switched to an EV,
according to Experian. Two years ago, those switch rates were
19.1% and 5.4% respectively. Among owners of gasoline vehicles,
90% stick with combustion when they buy another vehicle, said
Kirsten Von Busch, Experian’s director of product marketing for
Automotive.
Experian’s “Automotive Consumer Trends and Analysis” for Q2 has
other revealing data points on the U.S. EV market. Among them:
Electric vehicles have jumped to 5.7% of total U.S. vehicle
registrations from 1.9% in 2020 as more models hit the market. 
Tesla is the dominant EV brand, but rival brands are growing
fast and now account for just over half of new EV registrations.
The No. 3 selling EV in America is the Ford Mach-E, though it
has a 5.7% share of the EV market compared to 64% share for the
Tesla Model Y and 3 combined.
Electric SUVs and crossovers such as Ford’s Mach-E now have a
59% share of the EV market.
EV buyers are mostly affluent and mostly Gen Xers and
Millennials. Experian identifies some of the main demographic
groups buying EVs as “American Royalty,” “Couples with Clout,” 
“Philanthropic Sophisticates” and “Cosmopolitan Achievers.”
EV sales are still concentrated in California, the Northeast and
certain Sunbelt states. But EV registrations in Oklahoma City
jumped 75% over the past 12 months with more than 1,100 new EVs
registered.
The United States has a long, long way to go before even half
the vehicles on the road are EVs. Out of 284 million vehicles in
operation, only 1.7 million run on electricity.
    EV Charging: Are we doing it wrong?
  
For years, EV advocates and automakers have talked up the
virtues of charging electric vehicles at home during off-peak
night-time hours. A new study by researchers at Stanford argues
this approach is 180 degrees wrong for a grid that relies more
and more on solar power. Sticking to the night-time charging
model will require huge increases in electric generation
capacity to manage peak charging loads, the researchers
conclude.
Instead, the Stanford researchers argue that EVs should be
charged during the day at workplaces and public charging
stations. Daytime charging takes advantage of solar power
generation, which peaks during the day, the researchers write.
    Volvo’s newest EV stacks LiDAR, radar and cameras. 
  
    Volvo’s new EX90 electric SUV, officially launching in
November, will scan the world around it with long-range LiDAR,
radar and cameras - a sensor array that takes the opposite side
of the argument from Elon Musk on whether cameras and software
alone can safely enable automated driving.
    The EX90 is a much-needed win for Luminar, which supplies
the long-range LiDAR for the EX90. Volvo said it will make LiDAR
standard equipment. Luminar is also supplying sensors to
Mercedes. Even so, Luminar shares took another downward slide
Thursday as Northland Capital Markets downgraded the stock,
citing concerns that LiDAR adoption across the auto industry is
taking longer than expected.
    Mahindra looks for an EV down payment
  
    Indian automaker Mahindra is sounding out global investors
to raise up to $500 million to accelerate development of EVs.
Sounds like a lot, but in the world of electric vehicle
spending, it’s not.
    Qualcomm’s $30 billion auto pipeline
  
    Smartphone chipmaker Qualcomm is gaining some serious
yardage in the automotive chip business. The company said it now
has $30 billion worth of automotive chip deals in its pipeline,
up more than $10 billion since July.
    In China, Big Oil gets behind swappable EV batteries
  
    China’s largest oil company, PetroChina, will join battery
power CATL and automaker SAIC to develop swappable batteries for
electric vehicles.
China’s oil majors are pushing aggressively into greener fuel
ventures. In August, state-run oil company Sinopec announced a
$4.6 billion plan to develop hydrogen fueling infrastructure.
    Watch out Tesla: Here’s the Xpeng G9
  
    Chinese EV maker Xpeng is getting a lot of attention for its
newly-launched G9 SUV, which offers 15-minute fast charging, a
luxurious interior with a giant screen, and an Nvidia-powered
automated driving system that rivals Tesla’s Autopilot/FSD. 
Xpeng doesn’t plan to compete only in China. The company said
the G9 is designed “for both the Chinese and international
markets from the start.”
    Musk redefines the recall
  
    Tesla agreed to fix 1.1 million vehicles with power windows
that could pinch occupants, in what federal regulators termed a
“recall.”
    CEO Elon Musk complained on Twitter that the “terminology is
outdated & inaccurate. This is a tiny over-the-air software
update” and there have been no known injuries. 
The Tesla windows had the potential to hurt people. But it is a
good question: Do we need a new term to describe over-the-air
software fixes that eliminate the need for vehicles to be called
back to a dealer for a physical repair?
    Ford’s Silicon Valley makeover
  
    Ford’s latest reshuffle of management gives Chief Technology
Officer Doug Field, formerly of Tesla and Apple, more sway over
new product development, and brings aboard more new hires from
Silicon Valley. CEO Jim Farley has been blunt about his concerns
that Ford does not have enough digital technology know-how to
compete with Tesla as vehicles become software-defined
products. 
    Ford also plans to hire a chief supply chain officer. Until
then, CFO John Lawler “will oversee a makeover of Ford’s global
supply chain operations.” This after the company warned that in
Q3 it will pay $1 billion in unanticipated supply chain costs,
and lose production of 40,000 to 45,000 high-margin vehicles
because of missing parts.
    Clean, Canadian Cobalt
  
Canada continues to benefit from the EV industry’s hunt for
battery minerals that don’t come with human rights or ESG
baggage - and comply with new U.S. domestic content standards
for EV subsidies.. South Korea’s LG Energy Solution is the
latest battery maker to sign deals to secure cobalt and lithium
from Canadian mines.
    Renault fights inflation 
  
    Renault workers in France will get 1,000 euro payments to
offset rising costs for energy and other necessities. CEO Luca
de Meo told a conference Renault is ahead of schedule in
securing partnerships it needs to develop EVs.
    Mercedes maps out a gas austerity plan
  
    Mercedes-Benz has plans to cut natural gas consumption by
50% “at any minute” at its European operations should Russia
choke off supplies, as threatened. Mercedes and Volkswagen
executives have cautioned that sustaining the flow of parts from
European suppliers could be a bigger challenge than reducing
natural gas consumption in their own operations. 
    Faraday Future blames “misinformation” for funding struggles
  
    Electric luxury car startup Faraday Future conceded that it
is having trouble raising capital, and blamed a “misinformation
campaign” by “certain directors.” Faraday warned in late August
that its cash balance had fallen to $52 million as of Aug. 9,
but said the company planned to raise $600 million. Since then,
Faraday’s board has been embroiled in a fight with the company’s
largest shareholder.
    Essential Reading
  
    How much does it cost to “fuel” an EV?
  
    One more reason to learn to drive a stick shift
  
    Homeland Security’s electric Mustang police cars
  
 (Editing by Alexander Smith)