Auto File: Take the Next Exit
16/05/2022 16:00
Joe White
Global Autos Correspondent
joe.white@thomsonreuters.com
Greetings from the Motor City!
Welcome to Monday. It was hot, hot, hot in Detroit this
weekend https://www.youtube.com/watch?v=807WSdkStgs. Now, back
to business. Today, Elon Musk searches for an off-ramp at
Twitter, Renault leaves the light on in Russia and Carvana
starts acting like a real used car dealer.
Here we go -
* Mr. Musk’s wild ride
Elon Musk is flashing more signals that he’s looking for a
way out of his $44 billion offer to buy Twitter, as Tesla shares
keep sliding away from their peak.
On Friday, Musk put the Twitter deal on “hold” and said he
wanted to investigate whether Twitter is telling the truth when
it says fewer than 5% of its accounts are fakes https://www.reuters.com/technology/do-spam-bots-really-comprise-under-5-twitter-users-elon-musk-wants-know-2022-05-13
run by robots.
At 2:39 AM Sunday, Musk doubled down with a tweet
speculating that more than 90% of Twitter’s daily active users
are spam-bots https://twitter.com/elonmusk/status/1525727450872926209.
Daily active users, Musk added, are “the metric that matters to
advertisers.”
Here’s another metric that matters: Since Musk disclosed his
stake in Twitter and his subsequent takeover bid, funded in part
by loans against his Tesla shares, Tesla’s shares have dropped
by a third. The world’s most valuable automaker has shed more
than $390 billion in market value. That’s more than Volkswagen,
GM and Ford combined.
Investors are now betting on whether Musk will try to
renegotiate the price for Twitter https://www.bloomberg.com/opinion/articles/2022-05-13/elon-musk-trolls-twitter,
or attempt to walk away altogether. That would cost him, though
perhaps not as much as paying $44 billion for a company the
market currently values at $31 billion.
Meanwhile, Tesla has plenty of challenges to occupy Musk’s
time. The company’s effort to accelerate production at its
Shanghai factory back to pre-pandemic levels is hitting snags https://www.reuters.com/business/autos-transportation/tesla-delays-plan-restore-shanghai-plant-output-pre-lockdown-levels-memo-2022-05-16.
The company has been forced to recall vehicles in the United
States https://www.reuters.com/legal/litigation/tesla-recalls-us-130000-vehicles-over-touchscreen-display-malfunction-2022-05-10
and in China https://www.reuters.com/business/autos-transportation/china-regulator-says-tesla-recalling-107293-china-made-model-3-model-y-vehicles-2022-05-16
to fix malfunctioning touch screens.
And Musk spent part of the weekend in Texas meeting with the
President of Indonesia https://www.reuters.com/world/asia-pacific/indonesias-jokowi-meets-teslas-musk-after-nickel-talks-2022-05-15
to discuss potential investments by Tesla in the Southeast
Asian nation. Indonesia has large reserves of nickel Musk needs
to produce more batteries. Busy, busy, busy https://www.reuters.com/technology/can-elon-musk-renegotiate-lower-price-his-twitter-deal-2022-05-11.
* Renault exits Russia
Renault said it will sell its majority stake in Russian
automaker Avtovaz to a Russian science institute for one rouble
- but with an option to buy back the stake and return to Russia
within six years https://www.reuters.com/markets/deals/renault-sells-its-stake-russias-avtovaz-option-buy-it-back-2022-05-16.
Renault is making an intriguing bet that within six years
Russia will be forgiven the devastation of the war in Ukraine,
and that Western sanctions will be lifted. Renault joins
McDonald’s and about 400 other Western corporations https://www.reuters.com/business/mcdonalds-exit-russia-after-30-years-2022-05-16
abandoning the Russian market as the war in Ukraine grinds on.
In the meantime, the city of Moscow will try to use
Renault’s factory in the city to revive the venerable Soviet-era
Moskvich car brand https://www.reuters.com/business/autos-transportation/return-moskvich-russia-revive-legendary-soviet-era-car-after-renault-exit-2022-05-16.
Potential fodder for the brand-building campaign: There are
46,000 Moskviches still on the road that are 35 years old, or
older.
* Carvana: Wait ‘til next year!
Online used car retailer Carvana told investors Friday it is
working to generate “significant” positive EBITDA by 2023 https://www.reuters.com/business/autos-transportation/used-car-retailer-carvana-sees-significant-core-earnings-2023-2022-05-13,
slashing costs and focusing on cash flow instead of crazy-fast
growth https://investors.carvana.com/~/media/Files/C/Carvana-IR/documents/update-on-carvana-operating-plan-may-2022.pdf.
Carvana is the Icarus of the used car e-commerce world.
Once valued at more than $70 billion, Carvana’s share price
had plummeted 83% this year before rebounding 13% Monday
morning. The company’s well-designed website and its home
delivery system were real innovations in the fragmented, highly
analog world of used car dealers. Cheap capital from investors
looking for tech-driven disruption allowed Carvana to expand its
vehicle sales by 27X over the years 2016-2021.
But behind the e-commerce curtain, Carvana was still in the
used car sales business where margins are tight, customers are
price conscious and inventory can lose substantial value
overnight https://publish.manheim.com/en/services/consulting/used-vehicle-value-index.html.
Now, Carvana and other e-commerce used car sellers such as
Vroom https://ir.vroom.com/news-releases/news-release-details/vroom-exceeds-q1-guidance-across-all-key-financial-metrics-vroom
are going old-school: Clamping down on costs and ditching
hyper-growth ambitions to stay in the game.
* Detroit Three dig out the masks
The Detroit Three automakers and the United Auto Workers
union said workers in Michigan will have to put masks on at work
again https://www.reuters.com/business/autos-transportation/detroit-three-automakers-reinstate-mask-mandate-some-michigan-facilities-2022-05-15,
at least temporarily. COVID cases are spiking in Southeast
Michigan. The arrival of summer heat won’t make the decision
more popular.
* Watching King Dollar
The U.S. dollar has hit a 20-year high https://www.reuters.com/markets/europe/gold-up-3-month-lows-us-bond-yields-weaken-2022-05-16
as financial and commodity markets rock and roll. Global
automakers have gotten much better at constructing natural
hedges for currency volatility - U.S. factories and supply
chains that can do business in dollars. Still, a strong dollar
could be a challenge for automakers such as BMW and Mercedes
that export vehicles to the rest of the world from U.S. plants.
* Platinum and palladium
Automakers are speeding up efforts to dump Russian-produced
palladium https://www.reuters.com/business/autos-transportation/russia-risks-speed-up-automakers-switch-palladium-platinum-wpic-says-2022-05-15
from their exhaust scrubbing catalytic converters and use
platinum instead, the World Platinum Investment Council says.
Both metals are expensive. But platinum at $950 an ounce is
half the price of palladium, and is more readily obtainable from
sources outside Russia. Switching could save automakers as much
as $1.1 billion a year, though demand could also push platinum
prices higher, the WPIC said in a report https://platinuminvestment.com/files/329871/WPIC_Platinum_Quarterly_Q1_2022.pdf.
* Ford monetizes more Rivian shares
Ford reported selling another chunk of Rivian shares for
$188.2 million https://www.reuters.com/business/autos-transportation/ford-sells-shares-ev-maker-rivian-1882-mln-2022-05-14,
or $26.88 a piece.
* Hopium lands a minister
Yes, there is a French hydrogen luxury car startup called
Hopium, and it just named France’s outgoing transport minister
to its board https://www.hopium.com/downloads/press/en/05.16.22.Hopium.PR.Nomination.EN.pdf.
Hopium was founded by Olivier Lombard https://www.lesechos.fr/industrie-services/automobile/une-voiture-hydrogene-haut-de-gamme-le-pari-fou-du-pilote-olivier-lombard-1250575,
the youngest driver to win the 24 Hours of Le Mans. French
newspaper Les Echos called Hopium a “crazy bet.”
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