Speed of Change in the Global Industry: Blink and You May Miss It

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By Gary S. Vasilash

The first thing to acknowledge is that the auto industry today is characterized by various forms of partnerships and alliances, whether they are codified like the Renault Nissan Mitsubishi Alliance or looser-but-still actionable work being done on things from entire vehicles to propulsion systems by General Motors and Honda.

Last week Volkswagen brand and XPENG and Audi and SAIC announced that there will be “strategic co-operations” for, initially, products for China that will carry the badges of the German companies, with XPENG supporting VW and SAIC Audi.

The cooperation isn’t particularly surprising. That’s just happening.

What is:

VW will build electric vehicles on an XPENG platform. Yes, there is still the VW MEB platform. But somehow it seems that’s not getting it done in China.

Audi will work with SAIC on developing electric vehicles for the China market in categories that it currently doesn’t have offerings. You’d imagine that the people in Ingolstadt would be up to the challenge, but evidently there is something that needs to be supplemented.

It wasn’t all that long ago that Chinese OEMs had partnerships with Western OEMs with the latter having the engineering and development chops and the former the production resources.

In the current case, it seems that the Chinese companies have the tech and know-how being sought by the German brands. And undoubtedly the production facilities to build the vehicles to be developed, too.

Things are moving far more rapidly than might have been expected even 10 years ago.

GM Making Money—Thanks to Trucks

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By Gary S. Vasilash

General Motors reported exceedingly good earnings for Q2: non-adjusted net income attributed to stockholders of $2.57 billion. It was $1.69 billion last year.

The company thinks it will make a lot more this year than it previously expected:

  • $9.3 billion to $10.7 billion is the new target
  • $8.4 billion to $9.9 billion was the previous target

Getting Deluxe for Bucks

A big part of this: full-size truck and SUV sales, especially the high-trim trucks.

  • At GMC 70% of Sierra HD trucks were lux. Some 50% of Sierra light-duty trucks were. And 74% of Canyons were loaded.
  • At Chevy, about 75% were top trim models.

Nine Chevy SUVs—One Economical

Of course, GM points out that the Chevy Trax, an “affordable SUV” (starts at $20,400) had an increase in sales of 115%. (Last year it sold a total of 26,597 Trax models so if the sales were to double this year compared to last, it would still be fewer than Blazer 2022 sales, 67,246.)

Where’s the Money Going?

And regarding trucks, GM noted it is investing to “strengthen our industry-leading full-size truck and SUV business.”

With:

  • $1-billion invested in a plant in Flint, Michigan for next-gen heavy-duty trucks
  • $0.5-billion in Arlington, Texas for next-gen full-size SUVs
  • $0.6-billion for next-gen light-duty trucks

Maybe not the crazy money being thrown at electric vehicles, but clearly there are plans in place for next-gen trucks and SUVs that will continue to haul in the money.

EV Issues

As for EVs, the company built 50,000 in the first half and plans to build 100,000 in the second.

What’s interesting is that in Q2 it sold 15,700 EVs, which is down from the 20,700 it sold in Q1 ’23 and the 16,300 it sold in Q4 2022.

Clearly, not the right direction.

In terms of EV sales, the Chevy Bolt has been making the biggest difference. Through the first half there were 33,659 sold.

The Bolt Will Be Back

However, GM had announced that the Bolt, which doesn’t use the company’s Ultium battery technology, was going out of production. . .until today, when it announced there will be the development of a new Bolt, that will use the battery tech.

GM chair and CEO Mary Barra said, “Our customer’s love today’s Bolt. It has been delivering record sales and some of the highest customer satisfaction and loyalty scores in the industry.”

Starting at $26,500, it is also one of the most cost-competitive EVs in the market, which undoubtedly accounts for more than a slight amount of that popularity.

As long as GM can keep the price low, the Bolt should continue to do well.

If GM ups the price significantly, then its EV sales numbers will grow, but at an anemic pace.

Tesla & Scale

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By Gary S. Vasilash

During yesterday’s Telsa Q2 earnings call, there was, not surprisingly, a whole lot of discussion of COGS, or cost-of-goods-sold. (There was seemingly an equal amount of time talking about the Dojo supercomputer that the company has built and is using in its pursuit of full self-driving vehicles, including its, in Elon Musk’s words, “our sort of future robotaxi products,” which essentially got no attention.)

Anyway, the issue for the investors is to make sure that costs are at the least kept under control, if not cut, so that there will be more goods sold.

(And on the subject of “more,” Musk, understandably proudly, noted at the top of his comments “Model Y because the bestselling vehicle of any kind globally in Q1, surpassing the likes of Corolla and Golf. So, it was the number one vehicle of any kind, including vehicles that are sold at a far lower price.”)

Karn Budhiraj, vp of Supply Chain at Tesla, made an interesting comment that was essentially overwhelmed by the other observations made by Musk and his colleagues:

“And there’s also the unit economics improve as volumes grow. That’s the other thing we’re seeing. As we’re becoming a bigger and better part of a lot of suppliers, the economies of scale come into play.”

Yes, the size of Tesla’s marketshare will decrease as other OEMs’ EVs begin to populate showrooms, but given its massive scale predicated on sales, those others still have a steep challenge ahead of them.

Ford F-150 Lightning & the Potential of Scale

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By Gary S. Vasilash

As is widely known, there is a pricing benefit when lots of something is made.

The technical term is “economies of scale.”

Companies get to buy components in bulk and, like a giant pack of paper towel or a vat of peanut butter from Costco, the prices are consequently reduced.

That said, Ford announced today that it is cutting the prices for F-150 Lightning models. The Pro model on Saturday had an MSRP of $59,974. Now it is $49,995. A reduction of $9,979. Some 16% off.

And probably figuring those who would buy a Platinum Extended Range wouldn’t need to have as great a reduction, today the MSRP is $91,995, or $6,079 less than it was Saturday.

In announcing the price reductions, Marin Gjaja, chief customer officer, Ford Model e (the electric vehicle part of the company), said, “Shortly after launching the F-150 Lightning, rapidly rising material costs, supply constraints and other factors drove up the cost of the EV truck for Ford and our customers.”

That was a situation where economies of scale were not working.

Gjaja continued, “We’ve continued to work in the background to improve accessibility and affordability to help to lower prices for our customers and shorten the wait times for their new F-150 Lightning.”

Arguably they are getting better scale.

But there could be something else at play here.

Through the first half, Ford delivered 8,757 Lightnings.

As of this fall it will have the ability at the Rouge Electric Vehicle Center to produce 150,000 per year.

At the current rate, it would take a long time to get to 150,000.

VW EV Globally

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By Gary S. Vasilash

Volkswagen Group—as in the whole thing, globally (everything from Audi to VW, with Lambo, Porsche and others in between—is taking the electrification of its portfolio quite seriously and so was rather pleased with its sales of battery electric vehicles during the first half of 2023.

It delivered 321,600 EVs—a 48% year-on-year improvement.

In Europe its EV deliveries were up 68%, to 217,100 EVs.

Which means 104,500 for the rest of the world.

In the U.S., there were 29,800 EVs delivered by the Group. That was a 76% improvement.

Meanwhile, over in China in the first half, things actually fell by about 2%, to 62,400 EVs.

These numbers provide a good sense of how EVs are playing out in various markets: the Europeans are buying a lot, as are the Chinese. While the numbers are growing in the U.S., compare the 76% improvement with the 2% decline in China: The Chinese bought 32,600 more EVs than U.S. customers, yet that’s a decline.

A Word About Mercedes-Benz USA Q2 Sales

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By Gary S. Vasilash

Although there is increasing rhetoric about the U.S. economy being bad, you really couldn’t come to that conclusion based on the Q2 2023 sales of Mercedes-Benz in the U.S.

It achieved some impressive figures, such as sales in its “Top-End” segment of 26,927 units, or a 40% increase compared to Q2 2022.

A standout for the brand in that segment is the G-Class, that seriously geometric vehicle that seems as though it could bash through brick walls without a scratch while driving up hill in sand towing a full-size Airstream trailer.

G-Class sales were up 553%.

There were 3,088 of them sold in Q2.

It starts at ~$140,000.

And over on the electric vehicle side of things, the EQS, which starts at $104,400, was delivered 2,456 times, for a 25% rise compared with Q2 ’22.

It is worth knowing that the non-electric S-Class had sales of 3,164, a comparative decrease of 19.3% from Q2 ’22, which could be interpreted as those who have some serious money to spend on vehicles are going electric.

An Unusual Audi

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Odds are that when you think of Audi–electric or otherwise–you don’t think of somthing that looks, well, like this:

(Image: Audi)

That is the Audi S1 e-tron quattro Hoonitron.

While it had been developed for the rally driver extraordinaire Ken Block, who died earlier this year, the car, which was built at Audi Sport HQ in Neckarsulm, it will be driven at the Goodwood hillclimb by Tom Kristensen. Kristensen is an “Audi ambassador.” He also happens to be a six-time Le Mans winner, so he knows more than a bit about performance driving.

The vehicle has electric motors on each axle that produce about 2,212 lb-ft of torque each, which will cetainly propel it up the hill.

Mercedes Goes NACS: Another OEM Takes the Short-Term Gain

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“To accelerate the shift to electric vehicles, we are dedicated to elevating the entire EV-experience for our customers – including fast, convenient, and reliable charging solutions wherever their Mercedes-Benz takes them. That’s why we are committed to building our global Mercedes-Benz High-Power Charging Network, with the first sites opening this year.”

So said Ola Källenius, Chairman of the Board of Management Mercedes-Benz Group AG.

Mercedes will be opening in North America a “High-Power Charging Network” that will include more than 400 charging hubs and more than 2,500 high-power chargers.

This won’t all be up and running until the end of the decade. Some will open this year.

Källenius went on to say, “In parallel, we are also implementing NACS in our vehicles, allowing drivers to access an expansive network of high-quality charging offerings in North America.”

Yes, Mercedes is signing on to the Tesla Supercharger network—more than 12,000 Superchargers (considerably more than the 2,500 Mercedes plans to have in some six years). Starting next year, they’ll be equipping their vehicles with the socket and software to take the Tesla juice.

So now there are Ford, General Motors, Volvo, Rivian, Mercedes, and probably more by the time you read this all planning on having their vehicles charging at the network created by what is arguably the world’s most desirable electric vehicle company (how else to explain the market dominance it continues to have—and when you hear about how its market share is declining, realize that the market is getting bigger, so while its slice may be smaller from a percentage standpoint, the real thing to pay attention to is the number of vehicle it is selling vis-à-vis the other companies).

This strikes me as something analogous to Apple in its early days saying that it would offer Windows as the operating system and then trying to persuade users to switch to its OS.

What would be the point?

These OEMs are taking a short-term gain and will experience a long-term disadvantage.

If someone buys a Mercedes rather than a Tesla it is probably because they think the Mercedes is a superior vehicle.

And there’s Mercedes saying, “Yes, our vehicle is great but our charging system isn’t, so go use the system from the other brand.”

Isn’t that admitting that the other brand is technologically more capable?

General Motors: About Those EV Sales. . .

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By Gary S. Vasilash

General Motors was rather chuffed with its U.S. sales results for Q2 2023 as well as for the first half of the year.

It delivered 691,978 vehicles in Q2, up 18.8% from the same period last year. And for the first half it has delivered 1,295,186, or 18.3% more than in the first half of 2022.

Drilling into the electric vehicle space, the company sold in Q2 13,959 Chevy Bolt EV/Bolt EUV models, up an impressive 101%. Even more impressive, with Bolt sales of 33,659 for the first half, that’s a 360.9% increase. However, due to a problem with battery fires that occurred in the summer of 2022 General Motors stopped production of the vehicles as it handled a recall, so there were fewer vehicles available last year. What’s more, when it brought the vehicles back on the market it did so making the pricing exceedingly attractive—even for people who otherwise wouldn’t have considered an EV.

Then there are two other EVs in the GM portfolio:

  • Cadillac Lyriq
  • Hummer EV

As for Cadillac, it delivered 1,348 Lyriqs in Q2 and a total of 2,316 during the first half. The vehicle wasn’t available during the first half of 2022 so there is no comparison.

As for the Hummer EV, there were 47 deliveries in Q2 and a total of 49 for the first half. Yes, two were delivered in Q1 2023. Those numbers are down 82.7 and 86.8%, respectively. There were 185 days between January 1 and June 30. 49 Lyriqs.

All in, General Motors sold 36,024 electric vehicles during the first half of 2023.

To put that number in perspective, know that it sold 78,169 Chevy Malibus during the same period, and while nary a word is pronounced about the importance of that midsize sedan to its future portfolio, for the past few years there have been more pronouncements about how EVs are going to be transformative to the company’s fortunes than mere mortals can imagine.

Of course, “Past performance is no guarantee of future results.”

But there are two factors that need to be kept in mind.

  1. GM has announced Bolt production will end in November. On the Chevrolet shopping site it is able to proclaim that the Bolt is “America’s Most Affordable EV.” Strike that from the books.
  2. When the Chevy Silverado EV was first announced the company talked about the WT (as in “work truck”) trim starting at about $39,900. However, it recently said that when the first WTs roll off the line, they will be 4WT trim, capable of 450 miles and featuring AWD, for a price of . . .$79,800

Hard to see how the company is going to have sustainably large EV sales numbers as it goes into the future.

It may have the capacity–lots of capacity–but there are another two factors that come into play:

  1. Execution
  2. Market demand for vehicles that aren’t necessarily leading in affordability.

Jeep? Ram? Huh?

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By Gary S. Vasilash

The first half (H1) 2023 results for FCA US LLC—that part of Stellantis that is often referred to by the shorthand “Chrysler”—are out.

And look odd.

It is generally considered to be the case that the real U.S. crown jewels that the company based in the Netherlands obtained when Fiat and PSA merged were Jeep and Ram, the brands that don’t offer things that in any way, shape or form resemble cars.

For the U.S. sales for the first half of 2023 there is only one Jeep model that has actually had greater sales compared with H1 2022, the Compass. And arguably the Compass is, by and large, the least Jeep-like Jeep of all Jeeps in the showroom.

Wrangler sales are off by 15% and the Grand Cherokee is down 7%. Those two vehicles are essentially the bookends of the brand.

There was great hope for the Wagoneer and the considerably more expensive Grand Wagoneer, but they are off 21% and 26%, respectively.

An argument could be made that Jeep had the segment to itself for a long, long time and now things like the Bronco Sport and Bronco are taking away sales. Which could, indeed, be the case because for H1 Bronco Sport is up 7.8% and Bronco 6.8%.

Another thing might be that post-pandemic the whole “overlanding” phenomenon is waning and those who are more likely to use their Wranglers as Wranglers are still buying Wranglers and the rest have moved on to something else.

As for the Grand Cherokee, it is possible that some of its sales have gone to the Dodge Durango. Its sales for H1 are up 82%. Realize that there are plenty of dealerships that have Jeep, Ram, Chrysler, and Dodge under the same roof, so someone shopping could easily see a Durango and opt for it because, say, a Grand Cherokee with the sought configuration isn’t available.

Overall Jeep brand sales are off by 12% compared with the same period last year.

Meanwhile, over at Ram, it is only off 2%–but it would seem that it should be up.

For example, Ford truck sales are up 23.1%. GM also shows black ink for truck sales, with all flavors of Silverado being up 1.6% in H1 and the Sierra portfolio up 20.2%.

What is strange about the Ram numbers is that the Ram pickup is down 9% for H1 and the only reason why the brand isn’t down more is because the two commercial trucks on offer—the ProMaster Van and the ProMaster City—are both up, 50% for the Van and 70% for the City.

As for the other FCA US brands, that Durango has really boosted Dodge H1 results: up 31%.

Even Chrysler brand is up 23% thanks entirely to the Pacifica minivan, which is up 26%. The only other vehicle in the Chrysler showroom is the 300, which is (a) down 5% for H1. And given that for the first half there were 73,845 Pacificas sold and 7,197 300s. . .well, it makes one wonder about the on-going value of the Chrysler brand.

So maybe a few years from now that shorthand identifier for the company will be something else. But what that is isn’t entirely clear at this point.