Auto File: The Deflating EV Technology Bubble

Panasonic Holdings

17/11/2023 16:10

Nov 17 - Joe White
Global Autos Correspondent
 
Greetings from the Motor City!  
 
The end of the year is a festive season, but it’s also a time
when auto industry executives take stock of how bold plans they
made when the year was new have played out. Reality check season
– like Black Friday sales – is starting early this year. It’s no
time to be a turkey – especially one that is losing money. 
 
There’s good news, too. Just in time for Christmas, United Auto
Workers union members at GM, Ford and Stellantis are on the
verge of ratifying new contracts that will deliver double-digit
pay raises and $5,000 ratification bonuses. (Ho! Ho! Ho!)  
 
And for the first time in a long time, new vehicle prices are
going down. Well, just a little.  
 
Have a great weekend!  
 
Today – 
    *         GM, Geely re-think big bets on EVs and tech 
    * What comes after the UAW contracts get ratified 
    * Tesla’s union troubles 

 
Crunch time for high-tech EV dreams 
General Motors warned Thursday that it may have to slash the
value of its Cruise robo-taxi operation now that ambitious
revenue and service expansion timelines have become
inoperative.  
 
GM also announced it is abandoning an effort to stand up its
BrightDrop electric commercial van operation as a separate
entity (with Silicon Valley startup IPO dreams.) The tech
entrepreneur hired to run the business is leaving. 
 
Chinese automaker Geely on Thursday sold some of its stake in
Sweden’s Volvo Cars at a below-market price. The move came three
weeks after Volvo Cars CEO Jim Rowan tried, and spectacularly
failed, to persuade investors that margins on Volvo EVs would
rise.  
 
Rivals – including the Polestar EV brand which is part-owned by
Volvo and uses its technology – were saying the opposite. Volvo
Cars shares have lost 12% of their value in two days. 
 
These events are more signs of the collapse of automakers’
efforts to convince investors that the EV revolution will
transform them into high-growth technology companies.  
 
Two years ago, GM CEO Mary Barra and other top executives told
investors the automaker was transforming itself into a “platform
innovator” with a goal generating $80 billion a year revenue
from new, non-traditional businesses by 2030.   
 
Investors have concluded instead that automakers are
incinerating value with forays into robo-taxis, Silicon
Valley-inspired concepts such as BrightDrop and “all-in”
electrification strategies that eclipse profit-making combustion
vehicles. 
 
GM shares are now hovering at three-year lows and are roughly
15% below the $33 a share 2010 post-bankruptcy IPO price. This
is not just a GM issue. Ford, Volkswagen, Mercedes – it’s been a
rough year for all of them. 
 
As always, what happens next is the most important thing. 
 
Cruise CEO Kyle Vogt told employees the company had to stop
buying virtual shares granted in lieu of an IPO. The regulatory
and political backlash following accidents involving Cruise
robo-taxis, and the suspension of Cruise operations,
has "materially changed the situation that existed at the time
of the last valuation."  
 
Cruise has less than nine months of cash left. GM has said it
has plans to continue funding the business. GM has yet to map
out in detail what Cruise’s future will be, its new valuation
and what impact that revaluation will have on GM’s finances. 
 
As for BrightDrop, GM said it will retain the brand, but the
vans and the software services will now be sold through its
mainstream commercial vehicle operations. This allows for
cost-cutting. For example, outgoing BrightDrop CEO Travis Katz
had a vision of a stand-alone company with its own dealer
network. The expenses related to that concept are no longer
required. 
 
Essential Reading 
 
    * U.S. CEOs give Xi Jinping a standing ovation 
    * Company lobbying undermines climate pledges 
    *         A look under the hood of U.S.-China ties 

 
UAW clinches record deals. Now comes cost-cutting 
United Auto Workers President Shawn Fain has powered past the
doubters once again, clinching ratification of new contracts
negotiated with General Motors, Ford and on Friday, Stellantis. 
 
That’s good news for 150,000 UAW workers at the Detroit Three
who will get big pay raises and holiday-season signing bonuses.
But the UAW contract drama is not over. 
 
Look for the Detroit Three to start outlining plans to cut costs
to offset the 25% + wage increases negotiated in the new
contracts. Stellantis has already got that ball rolling with a
salaried staff buyout. 
 
Part of the cost-cutting will likely involve redoubled efforts
to push back expensive climate emissions mandates proposed by
the Biden Administration. 
 
As for Fain, he’s already begun the campaign to organize
non-union auto factories run by Tesla, Toyota and other Asian
and European manufacturers.  
 
Underestimating Fain has been a good way to lose bets during the
past six months. But don’t underestimate the determination of
Elon Musk or less openly pugnacious employers such as Hyundai to
keep the UAW out by any means necessary. 
 
The LA Auto Show and look-alike SUVs 
The Los Angeles Auto Show starts today and judging from the
pre-show new model unveilings this week, show-goers are going to
face a challenge: Remembering which of the multiple SUVs on
display is which. 
 
This is an industry challenge. Kia to Toyota to Lucid, the Los
Angeles show debuts illustrate how hard it is for automakers to
fight the tyranny of aerodynamics – crucial to EV efficiency –
to create distinctive vehicles. 
 
Quick take on the EQE: The pillar-to-pillar dashboard screen
array is remarkable and so immersive that the “don’t be
distracted” disclaimer that pops up when you hit the start
button makes me laugh. My friends dissolved in laughter when
they heard the “Death Star” whale sounds the vehicle makes when
you use the remote key to shut down or unlock the vehicle.  
 
The EQE AMG is extremely fast – but it does not deliver the
visceral sensations of an AMG combustion engine. 
 
But this vehicle has one other issue: In chilly Michigan late
fall weather, the battery range after hours on a Level 2 charger
was just 232 miles.  
 
Will your next car be Prime? 
    Amazon will start offering Hyundai vehicles for sale on its
website starting early next year. Investors dumped shares in
AutoNation, Carvana and Carmax after the announcement. 
 
Customers will still have to take delivery from a Hyundai store.
But allowing consumers to configure and finance a car on
Amazon’s website threatens the opportunity for dealers to take
profits on financing and add-ons. (Dealers still get fat service
profits.) 
 
Against that backdrop, dealers are flexing their muscles in
Washington. A House committee convened a hearing to beat up on
the Federal Trade Commission for proposing limits on what the
regulators call “junk fees” imposed by dealers. 
 
Fast Laps 
Tesla is having union problems – in Sweden. Swedish port workers
are refusing to process Tesla vehicles in support of a strike by
unionized Tesla mechanics. 
 
China’s automated vehicles are under fire from U.S. lawmakers
concerned about the sensitive data that Chinese AV startups
could be collecting as they test vehicles in the United
States.  
 
Hyundai and Kia must deal with lawsuits filed by insurers who
want the affiliated automakers to pay them $1 billion for losses
blamed on inadequate anti-theft systems. A judge refused the
automakers’ plea to dismiss the cases. 
 
The Biden administration is offering $3.5 billion to subsidize
U.S. production of EV batteries and battery materials. 
 
Panasonic wants to unload a stake in its automotive cockpit
systems business to private equity firm Apollo.

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 (Editing by Alexander Smith)