Auto File: Toyota Changes Drivers...Maybe

Envista Holdings

27/01/2023 15:00

Jan 27 - Joe White 
Global Autos Correspondent 
Greetings from the Motor City!  
Lots of ground to cover before the weekend, starting with the
surprise leadership change at Toyota. We’ll also check in with
Detroit’s Big Two ahead of their Q4 results next week and look
at how Chinese cars are finding their way into the North
American market – mainly via General Motors. 
A happy Friday to all! 
Akio Toyoda and the EV Wars  
    Akio Toyoda surprised people inside and outside Toyota with
the timing of his announcement on Thursday that he will hand
over the CEO role to Lexus boss Koji Sato.  
Now come the important questions.   
First, Akio Toyoda is not leaving the company his grandfather
founded. He will stay on as board chair and as a force
determining the company’s direction. His skeptical views about
the industry’s rush to go all-electric will continue to be heard
as Toyota executives weigh the pace and scope of EV
investments.  
Toyoda said “the new team under upcoming President Sato has a
mission to transform Toyota into a mobility company.” Declaring
that a car company is now a “mobility company” is not a new
strategy idea in the auto business. Sato, for his part, said “I
want to be a president who continues to make cars.”  
Toyoda and Sato barely mentioned electric vehicles in their
scripted remarks.  
    As Breakingviews writes, investor reaction suggests they do
not expect the new direction on EVs that ESG-focused funds have
advocated. Analysts and industry executives agreed, predicting
“stable management” as Toyoda kept watch on his relatively young
(53 years old) CEO. 
Sato takes over at a time when Toyota and other established
automakers face the most profound challenges in decades. 
Akio Toyoda led the world’s largest automaker through a series
of crises during 14 years at the top, but for most of that time
he could count on Toyota having a lead over rivals in
manufacturing costs, global scale and financial strength.  
Now, Tesla is the industry leader in profitability, and is far
ahead of Toyota in deploying and continuously improving electric
vehicles – currently the global industry’s only significant
growth segment. 
Elon Musk may be over-reaching as he pushes to sell 20 million
cars a year – more than twice Toyota’s current volume. But he
will cause Toyota and Sato a lot of expensive trouble in the
process.  
More Chinese Buicks head to North America  
Steep U.S. government tariffs are keeping most Chinese
automakers out of the world’s second-largest market. But
vehicles made in China are finding their way to North America,
mainly through General Motors’ distribution channels, according
to data from S&P Global Mobility.  
GM plans to add a new Chinese-built model, the Buick Envista
compact SUV, to its U.S. lineup later this year. S&P Global’s
Joe Langley said production of the Envista for the United States
could shift to South Korea to avoid 25% U.S. tariffs. 
The tariffs have not stopped GM from selling its Buick Envision
SUV in the U.S. market. Last year, 36,407 Made -in-China
vehicles were imported to the United States, of which 25,871
were Buick Envisions. The rest were imported by Chinese
automaker Geely’s Polestar and Volvo brands, according to S&P
Global. 
China’s main beachhead in North America is Mexico. There were
177,788 Chinese-made cars and light trucks shipped to Mexico
last year, making up 24% of all Mexican vehicle imports. That
was double the share a year earlier, S&P Global’s data shows. GM
and its Chinese partner SAIC accounted for 88% of the Chinese
vehicles imported to Mexico last year. 
Questions for GM and Ford  
General Motors CEO Mary Barra and Ford CEO Jim Farley have their
quarterly chats with investors next week, and how they did in Q4
will be the least relevant topic, barring an ugly surprise. 
The bigger questions facing Barra and Farley revolve around
whether they will stick with plans to spend a combined $85
billion plus on EVs, automation and other new technologies
through the middle of the decade.  
Tesla’s price war, rising battery materials costs and the
downbeat outlook for the U.S. economy threaten the automakers’
profitability. Already, GM appears to have postponed plans for a
fourth U.S. EV battery plant (deferring a $2 billion-plus
capital investment) and Ford is accelerating cost-cutting in
Europe.  
Splashing out big EV investment numbers was the way to woo
investors two or three years ago. Wall Street may want to hear a
different tune today. 
LG Energy charges up 
    South Korean battery maker LG said it expects 25-30% revenue
growth this year, driven mainly by increasing EV demand in North
America. LGES, which supplies Tesla and GM, said it will target
the North American market (and Inflation Reduction Act
subsidies) as it raises investment by 50% this year vs last
year. See the presentation here. 
CATL Revs up its German factory 
The Chinese battery power plans to have six production lines
running by the end of the year.  
EVs move India’s oil consumption tipping point   
Faster than expected adoption of electric vehicles has led
analysts to forecast that India’s demand for petroleum fuels
could peak in the 2030s, a decade or more sooner than previously
predicted.  
Tesla’s Insurance challenge 
Teslas are expensive to repair, and insurers charge high rates
to their drivers. That’s why Tesla’s in-house car insurance –
sold at lower rates - could be an important sales tool for the
company, company executives said.  
Of more than 120 Model Ys listed at auction in December and
early January after being declared a total loss by insurers, the
vast majority had fewer than 10,000 miles on the odometer,
Reuters found. 
Find your EV subsidy 
Confused by federal, state and local EV subsidy programs? The
Electrification Coalition, an EV advocacy group, wants to help
with an online “EV Funding Finder.” One catch: You need to enter
a name, email and zip code. Other sites including
Fueleconomy.gov and the EV industry advocacy group,
Veloz/Electric for All, have subsidy finder tools that require
turning over less data. 
Auto dealers look to a less profitable normal 
Members of the National Automobile Dealers Association meeting
this weekend in Dallas got a sobering message from consultancy
J.D. Power : You had an epic 2022 with a record $55 billion in
gross profits. This year might not be so super.  
Dealer profits soared last year as strong demand met tight
supplies created by semiconductor shortages. Now, inventories
are rising, and high interest rates are pushing new cars out of
reach for many U.S. consumers. 
Could EVs power an elevator? 
Hitachi and Nissan are experimenting with using EV batteries as
emergency backup power for elevators. 
Essential Reading 
    Remember these classic, cringe-worthy car ads? 
    Did Norway just find an undersea trove of EV minerals? 
    Good news/Bad news on the U.S. economy 
 (Editing by Alexander Smith)