Auto File: China, Tesla, and the Battle for Europe
Joe White
Global Autos Correspondent
Greetings from the Motor City!
There is a truckload of news from the World of Cars that we will get to in a moment, but first an announcement.
As of today, I am retiring from full-time work and passing the Auto File on to a new host, my London-based colleague Nick Carey.
Nick comes to the Auto File with a wide range of experiences during his 19-year career at Reuters. He started out covering the transportation industry from Chicago, riding trucks and trains and shipping aboard Mississippi river barges.
In 2009, he took a blogging trip across the United States, chronicling the impact of the Great Recession and won a SABEW award for a Special Report based on the journey. He reported from war zones in Iraq and Libya in 2011, covered the rise of the U.S. Tea Party movement and in 2016 moved to Detroit to cover the auto industry full time.
Now based in London, Nick has written widely about the shift to electric vehicles. He has collaborated with Reuters colleagues on coverage of the European auto industry’s competitive struggles as Chinese automakers have stormed the continent.
With a home base in the UK, and long experience and family ties in the United States, Nick will bring a fresh voice and perspective to the Auto File.
Going forward, the Auto File will be published on Tuesdays, with special editions as news warrants.
As for me, I am taking the summer off for the first time in 50 years – 45 of those years spent as a reporter and editor and 37 spent covering the auto industry in one way or another.
It has been an amazing journey. I have traveled to places I never imagined I would go – China, Japan and the former East Germany among them. I watched an industry central to the global economy go through not one but two profound transformations – the rise of Toyota and lean production, and the rise of Tesla, Elon Musk and electric cars.
And I got to drive more cars and trucks than most people touch in a lifetime, including a Ferrari that cost more than my house. What’s not to like?
I am grateful to the Auto File’s readers, including more than 50,000 email subscribers, for making the last few years among the most rewarding of my career. Thank you all!
And now, on with the show!
Today -
- How Chinese EV makers plan to conquer Europe
- Musk’s shareholder charm offensive
- The cost of low-cost EVs
* Chinese EV brands have big plans for Europe
Top executives at European automakers and Tesla CEO Elon Musk are hammering alarm bells over the challenge from Chinese EV brands. A new look by Reuters inside the strategies Chinese automakers are revving up in Europe show they have good reason to shout “Winter is coming!”
Chinese automakers such as BYD, Chery and the MG brand of Shanghai’s SAIC are gearing up for a full-on assault of the European auto market, using lessons from Japanese and South Korean automakers, market intelligence from European advisers and dealers eager to get in on the ground floor.
Chinese EV brands have opened a beach head in Europe with vehicles designed for and exported from China.
Now, Reuters reports, Chinese automakers are developing models specifically with European drivers in mind, scouting European suppliers and manufacturing sites, and going to school on how cars are sold (or more often, leased) in the market.
Many Europeans lease their cars through company car programs – which have promoted EVs to advance corporate ESG goals. Good news for Chery and other Chinese players: Tesla poisoned its relationship with European auto leasing companies by slashing prices and undermining resale values.
But wait! Won’t European Union regulators just emulate Washington and slap crippling tariffs on Chinese EVs to protect jobs at their home team automakers?
Perhaps. But negotiators from Beijing and Brussels could make a deal to avert a trade war that could spike consumer vehicle prices, hurt European employers and undermine EU efforts to promote green technology and cut CO2 emissions. EU officials have decided to postpone a decision on EV tariffs until after June elections, Reuters reported.
Chinese EV makers are following the trails blazed by Japanese and South Korean brands, which also faced threats of protective tariffs.
Toyota and Hyundai started in Europe with imported cars and minimal name recognition. Today, Toyota and Hyundai together account for about 16% of European passenger vehicle registrations – only VW and Stellantis have larger market shares. (The latest ACEA registration data is here.)
Tariffs won’t end pressure on Western automakers from low-cost Chinese EV technology and supply chains– because Western automakers can tap into China’s EV machine.
Tesla is already one of the largest exporters of Chinese-made vehicles to Europe and other markets.
Renault on Thursday said it will collaborate with a Chinese partner to develop a BYD fighter for Europe that could sell for less than 20,000 euros. Rival Stellantis plans to launch low-cost EVs in Europe and other markets based on technology from its Chinese affiliate Leapmotor.
“We will try to be Chinese ourselves,” said Stellantis CEO Carlos Tavares.
* Essential Reading
- The U.S. sues Hyundai over child labor
- Uber’s strategy to grab Olympic gold
- An aging grid frustrates England’s green dreams
* Elon Musk’s Full Self Driving Charm Offensive
Tesla CEO Elon Musk is a busy man ahead of the electric vehicle company’s June 13 shareholder meeting.
Tesla plans to roll out its “Full Self Driving” assisted driving technology in China later this year, registering the software with Chinese authorities, Reuters reported on Thursday. The move follows a surprise visit by Musk to Beijing last month.
A move to expand FSD’s revenue base to the world’s largest EV market would give Musk something to talk about instead of declining sales or the regulatory and legal problems Tesla’s partially-automated driving technology faces in the United States.
Meanwhile, Musk is stepping up his charm offensive to win support from 50% plus one of Tesla shareholders to reinstate his $56 billion pay deal that was struck down by a Delaware judge.
Musk is offering investors tours of the Cybertruck and Model Y production lines at the company’s Austin, Texas Gigafactory. (My advice to shareholders – sign up! Even if you vote no. Auto plants are cool!)
Reinstatement of the record pay package is backed by Tesla’s board, but opposed by proxy advisers Glass Lewis and ISS, as well as the CALPERS California public pension fund.
What happens if Tesla shareholders approve Musk’s pay deal and reincorporation in Texas? What happens if they do not? There are no clear answers. Expect more litigation.
Investors will keep their eyes and ears open for what Musk says about the future of Tesla’s artificial intelligence and robotics ventures. Musk has threatened to pull AI work out of Tesla if he does not get 25% control of the company.
Tesla shares are down 29% for the year, but still command a valuation far exceeding an ordinary automaker. Carving out AI development – which feeds on video captured by Tesla vehicles – could change that.
* Low-cost EVs come at a price
The race by European automakers to match Chinese electric vehicle costs means hard times for auto parts makers and auto sector workers.
Stellantis CEO Carlos Tavares on Wednesday amplified his warnings that narrowing the 30% or more cost advantage Chinese EV makers enjoy over Western rivals will be a “significant burden” on auto suppliers.
Jobs will shift out of Western countries to what Stellantis calls “best cost countries,” he said.
Meanwhile, Volkswagen confirmed it will push forward on its own to develop an electric vehicle it can sell in Europe for 20,000 euros. The Volkswagen BYD fighter won’t launch until 2027 – suggesting that Europe’s No.1 automaker is starting development of the vehicle afresh after walking away from a plan to develop a low-cost EV with Renault. Renault said Thursday it will turn to a Chinese partner for its sub-20,000 euro EV.
Auto suppliers are already battening down for the storm, shifting jobs out of Europe, cutting headcount and slowing investments in EV related capacity to conserve cash.
* Ford and GM place opposing hybrid bets
Ford CEO Jim Farley and General Motors CEO Mary Barra laid out sharply opposing views Thursday on the best way to respond to the majority of U.S. consumers still reluctant to buy electric vehicles, according to a new KPMG study.
Farley told investors at a Bernstein conference that gas-electric hybrid vehicles should not be viewed as a short-lived transition to a fully electric fleet, but a durable alternative.
Ford is shifting investment to expand hybrid sales in the U.S. and Europe, while slowing investments in its deeply unprofitable EV operations. Ford hybrids are now more profitable than similar gasoline models, Farley said.
Barra said that GM will develop plug-in hybrids for the U.S. market by 2027 to hit emissions targets, but an all-electric fleet is still the automaker’s goal. Hybrids are “not the end game because it’s not zero emission,” she said.
This is high-stakes poker, with jobs and billions in capital at risk. The U.S. EV market is growing, but slowly from a low base. Tesla, Ford, GM, Volkswagen and Rivian have hit the brakes on new EV launches and EV factory investments as sales of gas-electric hybrids have accelerated.
Just to make things more interesting, Farley and Barra are also effectively wagering on whether U.S. EV subsidy and CO2 emissions policies will stay the same after November’s presidential election.
Who needs FanDuel?
* Vinfast slows its U.S. roll
Vietnamese EV startup Vinfast is considering more delays in starting work on a $4 billion assembly plant it has proposed in North Carolina, Reuters reported.
The delay has a political dimension. U.S. President Joe Biden in 2022 hailed Vinfast’s announcement of the North Carolina investment as evidence that his strategy of subsidizing EV market growth was working. Republicans are now arguing that Biden’s EV policies are misguided and a reason for voters to turn him out of office in November.
Vinfast has already pushed the start of construction to 2025. Its paltry U.S. sales so far, the general slowdown in the growth of EV demand in the United States and tough competition from better-established brands all threaten the money-losing company that went public in a SPAC deal last year.
Vinfast is showing multiple signs of stress. The safety of the company’s EVs is under investigation by U.S. regulators after a deadly crash. The owner of one of the company’s California stores is suing for unpaid rent. And controlling shareholder Pham Nhat Vuong, a Vietnamese billionaire, is pouring billions into the company to keep it afloat.
* Fast Laps
- U.S. regulators warned owners of 84,000 Nissan vehicles, most more than 20 years old, to stop driving the cars because their defective Takata airbag systems could explode. Age amplifies the risk for owners of vehicles with Takata airbag inflators. The action underscores the dark side of a U.S. vehicle fleet that is hitting new records for age.
- Makers of old-schoolauto batteries will fight European regulators who have accused the companies of creating a cartel to keep prices for conventional vehicle batteries high.
- Renault and Geelyformally launched Horse, a 50-50 joint venture to develop gas-electric hybrid powertrains. Horse will now enter a hybrid technology arms race along with Toyota and BYD. Geely and BYD say they are ready to launch plug-in hybrid vehicles capable of averaging 2.9 liters per 100 km, or 81 MPG.
- Faraday Futuresaid on Thursday it is in talks with “several global OEMS and suppliers” interested in an alliance that would plug in to Faraday’s Chinese supply chain. The day before, Faraday withdrew its full year production guidance and said it was seeking more funding. The company said it had just $5 million in cash as of May 23. Faraday is on a growing list of EV startups including Fisker and Polestar whose shares are under threat of being delisted.
- Jeepis charging into the premium electric SUV market with the Wagoneer S, its first fully electric model. The Wagoneer S will be priced at $71,995 and up when it launches in the U.S. market this fall, competing with a growing herd of battery-powered SUVs.
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Editing by Andrew Heavens
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