Auto File: Winners and Losers in China

Shift Technologies

14/07/2023 16:00

Joe White 
Global Autos Correspondent 
  
    
    Greetings from the Motor City! 
 
It’s a beautiful day in the neighborhood. Nothing like a sunny
summer Friday. Hope the weather in the UK smiles on the Goodwood
Festival of Speed. Wish I could go. Maybe next year. 
    Me? I’m going to work all day today. How about you? Don’t
answer that. Instead, let’s get caught up on the news from the
World of Cars, where things are not so bright.  
 
Today - 
    * Legacy automakers keep losing in China. 
    *         Tesla and BYD splash out cash 
    * Washington has good news for robo-taxis   

    
    * China’s legacy automaker shakeout 
Japanese automakers Mitsubishi and Mazda are the latest
incumbent global automakers getting run off the road as Chinese
consumers turn to electric vehicles from domestic brands. 
    Mazda CEO Masahiro Moro told reporters Friday his company
needs to overhaul its strategy for China in the face of a 41%
plunge in sales.   
    Mitsubishi and its Chinese partner said earlier this week
they will accelerate cost-cutting at its Chinese joint venture
production operation following a nosedive in sales of the
Japanese automaker’s SUVs. 
    Mazda and Mitsubishi, like other Japanese automakers, are
paying the price in China for moving slowly to develop
competitive EVs.  
    Volkswagen, once China’s No. 1 auto brand, said its sales in
China dropped 1.2%, even as overall global sales rose 12.8%. VW
officials said China sales rebounded in June, but the company is
under intense pressure as Tesla, BYD and other EV brands surge. 
    In all, not a good week for legacy foreign auto brands in
China, especially when compared with how things are going at
Chinese EV leader BYD, and at Tesla. More on that below ...   
    
    * Essential Reading 
    * Logistics nightmare: A UPS strike could cost $7 billion 
    * How China got the edge in “chiplets” 
    *         The UAW’s leader sees no limits to what workers
can
win   

    
    * Flush times for BYD and Tesla 
Chinese EV powerhouse BYD told investors late in the Asia day
Friday that it expects first half profits to more than triple
from a year earlier to $1.64 billion. 
    That’s bad news for rivals on many levels.  
    BYD offers some of the most affordable EVs in China and has
joined Tesla in cutting prices to increase share. Now BYD is
demonstrating that it can go for growth without sacrificing
profitability – a feat most legacy automakers are a long way
from accomplishing.    
    BYD can use its profits to keep expanding its reach globally
–increasing the threat level for incumbents. Reuters colleagues
Sarita Chaganti Singh and Aditi Shah had a scoop Friday that BYD
has proposed a $1 billion factory in India with a local
partner. 
    India has not approved the BYD plan, nor a proposal from
Chinese automaker SAIC to build a factory. Tesla is still
bargaining over the terms of a passage to India. 
    Meanwhile, BYD rival Tesla sent a fresh signal that it too
is maintaining profitability as it cuts prices. The company
sharply increased bonuses paid to workers at its Shanghai
factory after they achieved a new record for deliveries, Reuters
colleagues Zoey Zhang, Zhuzhu Cui and Brenda Goh report. 
    Is Tesla still making better profit margins than most legacy
automakers? Find out next Wednesday here.   
    
    * A glimmer of hope for the robo-taxi industry? 
Federal vehicle safety regulators will decide in the coming
weeks whether to allow General Motors to deploy its Cruise
Origin automated people carriers, the acting head of the
National Highway Traffic Safety Administration said this week.  
    The statement by acting administrator Ann Carlson was a
hopeful sign for GM, which petitioned NHTSA in February 2022 for
permission to put Origin AVs into service. GM needs a waiver
because Origins, by design, lack human-operated steering wheels
and human-operated brakes required under current law.  
    GM has said deploying the multi-passenger Origin is a key to
making Cruise profitable. 
    Carlson also outlined a proposal that could open a new legal
path for robo-taxi fleets and other automated vehicle operators
to deploy more AVs that don’t comply with current federal safety
rules designed for human-operated cars.  
    This story isn’t over. Opponents to wider deployment of AVs
are bushwhacking Cruise robo-taxis with traffic cones, forcing
them to stop ... cruising.   
    Unions – a critical 2024 voting group – remain opposed to
giving taxi and delivery driving jobs to robots.  
    
    * Muscle cars, mini-cars and the demographics of safety 
    Mini-cars and muscle cars dominated a new list of vehicles
with the highest rates of fatal accidents compiled by the
Insurance Institute for Highway Safety. 
    The IIHS report offers a sobering take on the impacts of
physics and demographics on vehicle safety. 
    The physics angle is straightforward. Small, light cars do
worse in collisions with larger, heavier vehicles. The wide
range of the U.S. vehicle market – where minicars weighing
barely over a ton mix on the streets with heavy duty pickups
weighing nearly six times as much – exacerbates this challenge,
which safety experts and regulators have wrestled with for
years. 
    As a companion to its new lists of most dangerous and safest
vehicles, IIHS published a paper on how to adjust fatality
statistics for demographics. The differences in behavior among
various demographic groups – especially young men vs older
people – complicate the analysis of crash data.  
    Is a 2020 BMW X3, with a death rate of zero, really that
much safer in its design and equipment than a 2020 Dodge
Challenger with a death rate of 151 per million registered
vehicle years? Or are differences among the people who buy and
drive the vehicles also a factor? 
    The paper’s author, IIHS researcher Charles M. Farmer,
concludes that standardizing death rates to levels representing
female drivers aged 25 to 64 dropped the death rates of vehicles
favored by men: Muscle cars and trucks.  
    You can download Farmer’s complete paper here.  
    
    * Elon Musk wants something to do  
Elon Musk clearly doesn’t have enough to keep himself busy at
Tesla, SpaceX, Twitter and Neuralink. So he has launched xAI, an
artificial intelligence startup that will give chase to ChatGPT,
Google and a host of others looking to cash in on the tech
sector’s AI frenzy.  
    Musk has called artificial intelligence a threat to
civilization – and also told investors that Tesla should be
considered an AI and robotics company.  
    
    * Has the fuel cell moment arrived? 
Bosch said it expects to generate 5 billion euros annually from
hydrogen fuel cell technology by 2030. That’s not a lot relative
to Bosch’s size, but it suggests the German engineering and
automotive conglomerate thinks fuel cells could at last become a
meaningful revenue generator.   
    
    * Fast Laps 
 
    - The SPAC behind Vinfast’s proposed quickie IPO extended
its deadline to do the deal by a year until July 2024, and said
80% of its investors had taken their money out. Stay tuned for
where this leaves Vinfast’s plan to build and launch a $4
billion assembly plant in North Carolina, already delayed by a
year to 2025.  
 
    - EV brand Smart, jointly owned by Mercedes and Geely, said
it plans to raise $250 million to $300 million, with Chinese
lithium producer Tianqi Lithium as an anchor investor. 
 
    - An army of retail investors sent green truck maker
Nikola’s shares to the moon on Friday, apparently hoping to
profit from a short squeeze on the company’s beaten-down shares.
Nikola had some good news this week: A deal to sell 50 fuel cell
trucks to hydrogen company BayoTech, and a sequential rise in
overall deliveries. 
 
    - A group of 100 U.S. lawmakers is urging the Biden
administration to enact even tougher limits on combustion
vehicle emissions than its proposal to effectively require 67%
of new vehicles sold in 2032 to be EVs. The stand by members of
Congress shows how challenging vehicle-related climate policy
will be for the White House. Automakers and Republicans say the
emissions proposal is unrealistic. 
 
    - Shift Technologies, an online used car retailer, is
cutting its staff by a third, Automotive News reported.
Separately, analysts are warning that the share price rally for
online used car seller Carvana is vastly overdone given
volatility in second-hand vehicle pricing.  
    
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 (Editing by Andrew Heavens)