Auto File: Vinfast: Party Like It’s 2021

CreateAl Holdings

07/12/2022 16:10

Dec 7 - Joe White
Global Autos Correspondent
Greetings from the Motor City!
Just when you think you know what’s going on in the auto
industry, you don’t.
Consider today’s grab bag of news: A money-losing EV startup is
filing for an IPO in the middle of a capital market deep freeze,
Tesla is offering more discounts on cars it once couldn’t build
fast enough and Toyota wants to pay Prius customers for
accepting over-the-air software updates. That's right, most
companies want to sell OTA upgrades. 
And then there’s Carvana. Shares in the company once seen as the
future of auto retailing nosedived by more than 40% Wednesday
after Bloomberg reported the used car retailer’s creditors took
action that could foreshadow a debt restructuring.
    Oh my poor brain! To quote a delightful audiobook on heavy
rotation once upon a time in our family car.
Let’s make sense of it all.
Vinfast challenges the bears
One thing is for sure: Vietnamese EV startup Vinfast chose its
name well. “Fast” is what this company has been all about since
it showed its first cars in Paris just four years ago.
Now, Vinfast has filed the paperwork to launch a U.S. IPO, at a
time when valuations for electric car companies - including the
sector’s 500-pound gorilla, Tesla - have been savagely beaten
down. 
The Breakingviews take on Vinfast’s bold move sums it up.
Vinfast faces a tough road to achieve its goal of a $60 billion
valuation in a market that is nowhere near as welcoming of
little-known, money-losing EV startups as it was in 2021, during
the peak of the blank-check, SPAC deal boom. 
Working in Vinfast’s favor: Support from the U.S. government for
its plans to build a $4 billion factory in North Carolina.
An IRA Subsidy Path for Foreign Cars?
    Automakers are taking a hard look at a provision of the U.S.
Inflation Reduction Act that could offer a way for EVs made
outside of the United States to qualify for U.S. EV subsidies,
Reuters’ David Shepardson reports.
It’s complicated, but it appears an EV registered to a business
or leasing company as a “commercial vehicle” could get U.S.
subsidies without passing the domestic content and income tests
required for vehicles sold to individual buyers. The South
Korean government (on behalf of Hyundai) is calling on the Biden
Administration to interpret this section of the IRA broadly
enough to allow subsidies for rental cars, leased vehicles and
vehicles used on ride-hailing platforms. 
Tesla China’s got a deal for you
    Tesla is offering new discounts to Chinese customers - a
fresh sign that the days when the company’s production could not
keep pace with demand are over. 
Meanwhile, Tesla is launching sales in Thailand, a growing
market where lower cost Chinese EV brands have a head start.
Tesla’s lead over EV rivals in production costs and operating
margin will come in handy in both markets. Tesla has room to cut
prices. Some rivals may not.
Why aren’t more Americans buying EVs?
Electric vehicles are capturing about 6% of the U.S. market - a
big leap from just a couple of years ago, but well short of the
EV adoption rates in China or several European countries.
    High EV prices and insufficient charging infrastructure are
two key reasons why Americans are balking at taking the EV
plunge, according to a new poll from Ipsos.
One finding that should worry automakers going “all in” on EVs
for America: Among respondents who do not own an EV, 42% said
none of the current incentives - tax subsidies or workplace
charging - would convince them to consider an EV or plug-in
hybrid.
A more confrontational union for Detroit?
The Detroit Three will start bargaining in the New Year with the
United Auto Workers to determine wages and employment levels at
U.S. factories. Any notion those talks would be easy is going
out the window.
First, UAW members are taking advantage of election reforms to
vote in new leaders who promise a more confrontational approach
in bargaining the next contract. Incumbent UAW President Ray
Curry now faces a runoff after failing to win a majority in the
first round.
Curry’s rival, Shawn Fain, and others on the upstart UAW Members
United slate promised to end a two-tier wage system that has
held down Detroit Three labor costs for the past 15 years.
Second, UAW members see other unions, such as airline pilots and
auto workers in Europe, landing richer wage deals than UAW
leaders have won in the past.
The UAW is also turning up the volume in its attacks on
automakers for relying on China. The union this week called on
automakers to move supply chains out of China’s Xinjiang region,
citing a new study that concluded a wide range of automakers and
suppliers get products made with forced labor in the region.
One more thing: The UAW and the Detroit Three have a September
2023 deadline to finish talks. By then, the U.S. economy and
auto markets could be in the middle of a slowdown - at least
that’s what the Business Roundtable, a club of CEOs led by
General Motors chief Mary Barra, said this week.
Volkswagen’s “reality check.”
Volkswagen CEO Oliver Blume is doing a “reality check” on his
predecessor’s automaker’s software strategy - and a big
manufacturing decision as well. 
Blume is expected to outline a new software strategy for the
automaker on Dec. 15, sources told Reuters. Blume has his job in
part because VW’s directors were unhappy at delays and cost
overruns in the Cariad software operation set up by predecessor
Herbert Diess. 
At the same time, VW executives are sending more signals that a
Diess plan to spend 2 billion euros on a new German EV
super-factory, code-named Trinity, may not come to pass.
Whatever directions Blume chooses, VW will need to move fast. 
A new study by Signal Climate Analytics reinforces the view held
among many investors that legacy automakers such as VW are far
behind Tesla and China’s BYD in the race to develop competitive
EVs.
Toyota, Polestar and Upgrade Economics
Toyota and EV brand Polestar this week showed two very different
strategies for marketing over-the-air software upgrades.
    Toyota is offering customers in Japan a 10% discount on a
lease if they agree to accept OTA updates on safety features
such as the collision avoidance system. Why? Because the updates
could help the car hold a higher value at the end of the lease,
and Toyota customers are price sensitive.
Polestar, in contrast, is selling a 68 horsepower over-the-air
performance upgrade for $1,195 to North American owners of
certain Polestar 2 vehicles. The upgrade will allow the Polestar
2 to sprint from 0-60 miles per hour in 4.2 seconds, and
accelerate from 50 to 75 mph in just 2.2 seconds. Look for more
such add-ons from every automaker.
Can you imagine what Ford, GM and Dodge could have done with
their muscle cars if OTA upgrades had been possible in 1969?
BorgWarner unloads the ICE
Auto supplier BorgWarner plans to spin off its internal
combustion engine (ICE) fuel systems and replacement parts
businesses, giving investors the choice of a purer-play EV
technology company and a run-to-the-sunset ICE business.
Analysts were upgrading the company’s shares Wednesday morning.
The 2017 breakup of Delphi into EV and electronics focused Aptiv
and combustion-focused Delphi Technologies (later bought
by….BorgWarner) continues to influence the U.S. auto supplier
sector.
Automakers to dealers: We want that $2,000 
Ford CEO Jim Farley used an appearance at a conference hosted by
Automotive News in Detroit to double-down on a message to the
company’s dealers: The old retail model is on the way out.
Customers who order a vehicle - rather than choosing one from a
dealer’s inventory - account for 60% of Ford sales, Farley said.
Before the pandemic, only 2% of sales came from orders. 
The more customers order directly, the less need there is for
dealers to stock two to three months worth of vehicles, and
maintain large sales staffs to move them out.
Farley said about 65% of Ford’s U.S. dealers have signed up to
sell EVs under new agreements aimed at chopping into a $2,000
per vehicle advantage Farley has said Tesla enjoys with its
direct sales model.
Put another way: More than a third of U.S. Ford dealers - more
than 1,000 - have not gotten aboard the EV bus, and may not have
another chance for five years.
Ford is not alone in looking to reclaim profit margins in its
retail distribution system. Stellantis and General Motors are
pursuing their own efforts to shake up their franchise dealer
sales model – without jettisoning independent dealers
altogether. GM, for example, is developing central depots for
holding electric vehicles to expedite delivery to customers. 
Navistar and TuSimple scrap their robo-truck alliance.
    Robo-truck startup TuSimple’s shares hit a new low after the
company and truck maker Navistar announced they will scrap an
alliance to develop self-driving trucks. TuSimple last month
dismissed its CEO amid an investigation of ties to a Chinese
robo-truck company.
Einride raises $500 million
Good news, maybe, from the world of automated driving tech:
Einride, a Swedish self-driving truck startup, said it raised
$500 million via a combination of debt and equity. Einride said
some of the funding involved converting debt to equity, and the
company did not say where the financing round leaves its
valuation.
Essential Reading
    Rising battery prices delay the “affordable EV.”
  
    The Apple Car: Wait for it
  
    Macro Read: China’s trade slump
  
 (Editing by Alexander Smith)