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Greetings from the Motor City!
My goodness there is a lot to cover today, and that does not count Elon Musk’s escalating war with Apple. (Imagine what Musk would do if Apple started building electric cars!)
Let’s start with highlights from my interview with the COO of GM’s Cruise about the robotaxi/robodelivery company’s plans to scale up in 2023, check in on the latest data on the bruising competition in China’s EV market and take a look at new technology from Mercedes and Bosch that could eliminate the headache of finding a parking spot at the airport.
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Headed to your hometown?
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Cruise plans to enter “a large number of markets” in 2023
Cruise, GM’s robotaxi/robodelivery unit, plans to enter a “large number of markets” and scale operations up to “thousands of vehicles” in 2023, Chief Operating Officer Gil West told Reuters.
Cruise has announced plans to start offering rides in Austin and Phoenix, adding those cities to its current base in San Francisco. West said the company plans to expand to more cities in 2023.
“You’ll likely see us expand the number of markets in a large number next year,” he said. Cruise believes it can accelerate application of its technology to other cities using a “repeatable playbook” developed in San Francisco, Austin and Phoenix. That should start to deliver revenue numbers with more zeros in them, he said.
The planned launch of the Origin automated vehicle “is a huge unlock” for Cruise because of its lower cost, West said. Cruise is currently testing human operated Origins in San Francisco. Volume production is expected to start in 2023. Up to now, Cruise has operated its limited service in San Francisco with a small fleet of Chevrolet Bolt EVs.
Cruise is working to expand delivery services - a prototype of an Origin outfitted with lockers for goods is on the company’s website. Walmart is an investor, and is currently testing Cruise delivery at eight stores in Phoenix. Delivery has “the potential to be a big part of the business,” West said.
Wall Street will be watching Cruise closely in 2023.
The decision by Ford and Volkswagen to pull the plug on their jointly-controlled automated vehicle operation, Argo AI, threw the entire automated vehicle sector into a tailspin. Investors have hammered the shares of public AV tech companies and driven a wave of consolidation deals.
Ford and VW said they saw no near-term profit in robotaxis. GM CEO Mary Barra is taking the opposite bet - at considerable cost. She has told analysts to expect GM to keep spending $500 million a quarter, $2 billion a year on Cruise’s expansion.
GM has promised the operation can generate revenue of $50 billion a year by 2030. Investors will want to see a robust start toward that level in 2023. The shakeout in the AV sector has cleared the field for Cruise to an extent. But rival Waymo is already operating in Phoenix, and is driving to expand its robotaxi and delivery businesses into Cruise’s backyard in San Francisco and other markets Cruise likely has in its sights.
Cruise must also compete with ride-hailing platforms Uber and Lyft. They have to contend with the costs of human drivers, but they have millions of customers already signed up, and experience dealing with local regulators who do not always welcome more competition for public transit or licensed cabs.
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Nevermind the robotaxis, here’s robo-airport parking!
Mercedes and Bosch demonstrated technology that enables a Mercedes vehicle to park itself in a Stuttgart airport garage. No more frantic searches for a spot while the deadline for boarding a flight ticks down? That’s a use of automation we can all get behind.
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BYD: Up and to the right.
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BYD, Tesla: Winning in China?
Chinese automaker BYD is on track to be the No. 1-selling brand in the world’s largest auto market for November, outselling the VW brand, Reuters reported. Tesla’s sales in China nearly doubled in the month compared to a year ago after the company cut prices.
At the same time, Chinese EV brand Xpeng warned that its Q4 deliveries could fall by nearly 50%. Xpeng shares rose, nonetheless, as investors cheered signs that Beijing may be ready to back off on its COVID restrictions, under pressure from extraordinary mass protests.
Investors will have a challenge sorting out the effects of competitive moves such as Tesla’s price cuts from the impact of COVID lockdowns. Suffice to say that the “rising tide lifts all boats” view of the Chinese auto market no longer applies.
BYD isn't planning to rely on China alone. The company plans to start sales in Mexico.
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Semi-Charmed Life.
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Tesla Semi Day is tomorrow
Tesla is promising a show tomorrow as it hands over the first production versions of its Semi electric Class 8 truck. Details of a webcast were not available on Tesla’s website Wednesday morning.
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Ferrari puts the brakes on Purosangue orders
Ferrari has paused taking new orders for its 12-cylinder, combustion-powered Purosangue SUV, a senior executive said. The waiting list is out to two years - which makes it riskier for Ferrari to guarantee a price given the uncertainty of materials costs.
Ferrari has also said the Purosangue should not be more than 20% of its total volume. That will require some serious demand management. At Porsche USA, SUV’s now account for nearly 68% of total sales.
Ford revs up its Electric Mustang
Ford will increase the global annual production rate for the Mustang Mach-E to 270,000 vehicles. The expansion plan was tucked into a press release trumpeting assembly of Mach-E number 150,000 at the assembly plant in Cuautitlan, Mexico.
Honda’s law-abiding automated driver
Honda said it plans to launch a “Level 3” automated driving system by 2029 that could allow drivers to watch movies or send emails on the highway.
Just one catch: The vehicle’s automated driver would not exceed the speed limit. That could limit the appeal in many U.S. states (like Michigan) where speed limits are treated as suggestions.
Is VW scouting Foxconn’s Lordstown plant?
Automobilewoche reports VW is looking at Foxconn’s auto factory in Lordstown, Ohio, and also is in talks with Magna’s Magna Steyr contract assembly unit.
Very likely, VW will have plenty of options to consider as U.S. states compete to land new jobs. A decision will need to happen soon to meet a 2026 launch plan.
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Battery costs head up as oil heads down
Prices for EV battery cathode materials have surged by nearly a third this year as lithium prices have soared to new records, according to Benchmark Source, a UK firm that tracks mineral and battery production.
That makes EV batteries more expensive just as legacy automakers are trying to scale up production to compete with Tesla.
At the same time, oil prices are volatile, but well off their highs earlier in the year. U.S. gasoline prices are back in the $3.50 a gallon range after jumping to nearly $5 in June.
Lithium hits production costs for EVs. Gasoline prices drive operating costs for combustion vehicles. Different metrics, but they do interact. LMC Automotive analyst Kevin Riddell says that consumers considering an EV don’t focus on the potential cost-savings of an EV over time. “They just see these whopping initial price tags.”
Make mine an E15
The U.S. farm industry’s efforts to expand sales of corn-based ethanol motor fuel got a big lift. For the first time, the U.S. oil industry is supporting legislation to expand sales of E15 - a 15% ethanol/gasoline blend.
Could Renault and Nissan get a new alliance deal for Christmas?
Executives at Renault and Nissan are gearing up to announce a deal to restructure their fraught Alliance next month, sources told Reuters. Just in time for the holidays (and year-end financial reporting.)
U.K. car industry lobby sounds the alarm on electrification
The U.K. is at risk of losing even more jobs in its auto sector if the government doesn’t spend more to help manufacturers make the jump to electric vehicles, the main U.K. motor industry trade group said. The struggles of Britishvolt, a would-be U.K. battery maker, have added to the anxiety in the British auto sector, which has been shrinking for decades.
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Top brands losing sales to Tesla. Source: S&P Global.
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S&P Global: Tesla will lose share, hurt Honda and Toyota
Tesla’s dominant 65% share of the U.S. electric vehicle market will decline by 2025 to below 20%, S&P Global writes in a new study.
At one level, that is just math. Tesla will keep selling more vehicles. But “S&P Global Mobility predicts the number of battery-electric nameplates will grow from 48 at present to 159 by the end of 2025, at a pace faster than Tesla will be able to add factories” or models in new segments, the company writes.
Equally striking is S&P Global’s finding that Honda and Toyota are the top two brands losing customers to Tesla now. The two leading Japanese brands have been slow to launch EVs. Combined, they accounted for nearly 29% of Tesla’s conquest sales, S&P Global found. German luxury brands BMW and Mercedes - whose vehicles are closer to the price ranges of Tesla models - account for 12.9% of Tesla’s conquest sales, according to S&P Global’s data.
One more point: Of 48 EV models on the U.S. market currently, two - the Tesla Models Y and 3 - account for 56% of all EV registrations. “...The other 46 vehicles are competing for scraps until EVs cross the chasm into mainstream appeal,” S&P Global concludes.
Mr. Darwin, your ride’s here.
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