Auto File: Big Trouble in China

CreateAl Holdings

31/10/2022 15:00

Oct 31 - 
    Joe White
  
    Global Autos Correspondent
  
Greetings from the Motor City! Happy Halloween! 
Plenty to be superstitious about today. “Shanghai Disney shuts
over COVID, visitors unable to leave” is a real headline this
morning, not a Halloween spoof by the Onion.
There’s good cause for anxiety and paranoia. The axes are
swinging to cut corporate staffs and budgets ahead of what could
be a rough year. How long will the supernatural forces that have
lifted new and used car prices to record heights hold sway
before demand falls apart? You’ll need a black cat bone and a
trip to the Fortune Teller for the answer.
Today, we’ll get you up to speed on China Syndrome at
Stellantis, staff cuts in Detroit and Elon Musk’s Twitter
troubles. 
    * Jeep’s China venture goes bust  
  
The joint venture that builds Jeeps in China will file for
bankruptcy, parents Stellantis and Guangzhou Automobile Group
(GAC) said. The decision is not a shock given the divorce the
two partners announced earlier this year. It is, however, a
powerful symbol of the growing challenges global auto brands
face in the world’s largest market.
Jeep is one of the most valuable brands in the auto industry.
Yet in China, sales of Jeep vehicles have collapsed over the
past five years from more than 200,000 vehicles in 2017 to fewer
than 2,000 so far this year. In May, Jeep sold exactly one new
vehicle in China. To that proud owner, a word of advice: Put
that baby in storage and look forward to selling it as a
collector car someday.
China’s rapid shift to electric vehicles - driven by government
policy and the growing skill of domestic auto brands at
delivering in-vehicle connectivity tailored to Chinese consumer
tastes - is challenging global brands. Foreign auto brands lost
5.5 percentage points of market share in China last year,
according to the China Passenger Car Association. 
Some day, China’s crowded vehicle market may consolidate and
give survivors more breathing room. But someday never seems to
come. Instead, new entrants such as an EV startup called Beyonca
keep popping up.
The battle is not over. Volkswagen, for example, took a pounding
in China last year - in part because of the pandemic. VW said
last week that sales recovered in Q3 and the company is taking
action to catch up with connectivity trends, including
partnering with Chinese smart vehicle tech company Horizon
Robotics.
Global automakers’ efforts to rebuild sales and profitability in
China face near-term risks from Beijing’s war on COVID - which
escalated over the weekend with the lockdown at Shanghai Disney
and restrictions that slammed Apple’s production network. 
Those disruptions, and a potential slowdown in China’s economy,
give Chinese manufacturers (and the Chinese operations of
players such as Tesla) even more incentive to export vehicles to
chase sales in Europe. Which explains why Stellantis CEO Carlos
Tavares is calling for the EU to impose higher tariffs on
Chinese vehicles.
    * TuSimple faces probe of ties to China
  
File this in the China-Trouble folder: Autonomous truck startup
TuSimple is being investigated for its relationship to Hydron,
Inc., a Chinese-backed company. TuSimple disclosed earlier this
year that U.S. authorities had investigated its links to a
Chinese social media company. 
    * Pink slips for the holidays
  
Stellantis and Ford have launched new efforts to cut office
workers and managerial staff through buyouts and other means.
The Wall Street Journal reports Ford will accelerate efforts to
offload employees identified as underperformers.
Executives at these companies talk a lot about talent shortages
and recruiting challenges. Those “shortages” are of younger
people equipped with software or electrical engineering chops.
Ford’s website currently lists 515 jobs - including 145 in
Dearborn, Mich. The largest single job category: Information
technology. Openings for combustion engineers: Zero.
Another sign of cost-consciousness among automakers: Audi said
it wants to offer workers one-time payments instead of base wage
increases that would then be baked into ongoing costs.
    * Musk, Twitter and Tesla
  
If Elon Musk imagined for one minute that he could buy Twitter
and then quietly get back to his day jobs running Tesla and
SpaceX - well, surely he didn’t think that. 
That said, investors concerned that Musk has signed up for
months of distraction are getting plenty to worry about. The
turbulence around Twitter has been relentless since Musk took
control Thursday. Just today, Reuters reported that Musk has
reached out to European regulators to assure them that Twitter
will abide by tough EU content policing rules.
There’s the hubbub around how many Twitter employees Musk and
his team will order to be fired, and whether those firings will
take place just ahead of those workers getting fresh stock
grants. (Musk denied that was his plan.)
Trolls wasted little time testing Musk’s promises that Twitter
could be less restrictive without becoming a “hellscape.” Musk
tweeted Twitter is working on new ways to verify users, and
separately suggested his legal beefs with Twitter’s former
directors and executives aren’t over.
    General Motors said it would pause advertising on Twitter
while it engaged with management to “understand the direction of
the platform under their new ownership.” GM called this just the
“normal course of business.” But it never hurts to cause
discomfort to a powerful rival. GM, Lucid, Ford and Rivian CEOs
can hope that the aggravation of fixing Twitter’s business and
mollifying advertisers and regulators becomes yet another
full-time job for their nemesis. 
    * The Battery Hockey Stick Curve
  
Automakers will need 3.4 terawatt hours of batteries by 2030 to
hit their EV and hybrid production goals, S&P Global Mobility
said in a new report today. How much EV battery capacity exists
today? Just 0.29 terawatt-hours, S&P reports. That implies a
steep curve - and potentially a slower shift away from
fossil-fuel vehicles than some anticipate.
Automakers and battery manufacturers are adding new production.
Panasonic said today it is beginning construction of a new
battery gigafactory in Kansas, aiming for 2025 production. S&P
Global questions whether the pace of growth can match the
projected acceleration of EV demand.
“Geopolitical turbulence and the fragile and volatile nature of
the critical raw-material supply chain could curtail planned
expansion in battery production - slowing mainstream
electric-vehicle (EV) adoption and the transition to an
electrified future,” S&P Global Mobility’s Graham Evans writes.
What’s more, surging raw materials prices threaten automakers’
EV profit margins.
    * It’s game on between the UAW and GM’s battery venture
  
The United Auto Workers said Monday it will file for an election
to organize about 900 workers at the Ultium LLC battery factory
in Warren, Ohio. 
Now, comes a long-anticipated showdown between the UAW and
General Motors and its Ultium JV partner, LG Energy Solutions.
UAW President Ray Curry said in September he wanted Ultium to
recognize UAW representation at its U.S. factories without votes
- a process called “card check.” The UAW said on Monday Ultium
has refused - a decision the union criticized. 
The outcome of this vote will be pivotal for both the union and
GM. The UAW needs to prove it can win organizing votes as
non-union EV operations proliferate at the expense of union
combustion vehicle shops. GM - and other automakers - want to
keep labor costs at EV operations down.
    * Nikola, KeyState hydrogen deal
  
Nikola said it has a preliminary agreement to buy hydrogen for
its fuel cell trucks from a project run by a joint venture of
KeyState Energy and Frontier Natural Resources.
    * JLR signs up for Wolfspeed Silicon Carbide chips
  
Jaguar Land Rover and chip maker Wolfspeed said they have agreed
to a partnership to develop and produce silicon carbide
semiconductors for the inverters in next-generation Jaguar and
Land Rover vehicles.
    * Essential Reading
  
    Tesla considered a stake in miner Glencore - FT
  
    Greta Thunberg trashes the COP 27 climate summit
  
    Why do you need a truck? To haul your 12 foot skeleton
  
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