Fisker Begins U.S. Deliveries. Some.

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By Gary S. Vasilash

“We have been waiting for this moment ever since we started the development of the Fisker Ocean in October 2020.

“As a California-based company, we are thrilled that our first US customers are finally getting behind the wheel of the Fisker Ocean and will experience its innovative features, class-leading 360-mile range, and highest levels of sustainability.”—Henrik Fisker, Chairman and CEO, Fisker Inc.

He was talking about the start of deliveries of the Fisker EV SUV on June 23, 2023 in Los Angeles.

The company delivered 22 cars.

Auto Industry’s Quality Breakdown (You Won’t Necessarily Be Left at the Side of the Road, But. . .)

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By Gary S. Vasilash

In the J.D. Power U.S. Initial Quality Study (IQS), researchers use “problems per 100 vehicles” (PP100) as a metric.

A lower number is better.

In an ideal world, 0 PP100.

But in the real world, in the 2023 IQS, it was discovered that the PP100 was up on average by 12 over 2022’s IQS.

And that’s on top of the 18 PP100 increase the year before.

So in two years, there has been a 30-point rise, which means a 30-point quality drop.

Clearly: quality is declining.

While there are things like difficult-to-use infotainment systems, there are also problems with. . .door handles.

Safety systems are certainly a good thing to have in a vehicle. But lane departure warning/lane keeping assistance and forward collision warning/automatic emergency braking both saw considerable increases—meaning, more troublesome.

The industry average is now 192 PP100.

Think of that: every 2023 model vehicle has approximately two problems that rise to the level of notability by those surveyed by J.D. Power.

The brand with the best quality: Dodge. 140 PP100.

The brands at the bottom: Chrysler and Volvo. Both score 250 PP100.

(Although Tesla doesn’t make the “official” list due to restrictions on surveying its owners, J.D. Power calculates that it would be below the bottom: 257 PP100. Which just goes to show there isn’t necessarily a correlation between popularity and quality.)

Would You Consider an EV?

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By Gary S. Vasilash

The J.D. Power 2023 U.S. Electric Vehicle Consideration study is sort of a good-news/bad-news report for the global OEMs that are spending billions on the building of plants for vehicles and batteries.

That is, the number of people surveyed who said they’re “very likely” to consider the purchase of an EV increased over the finding in last year’s version.

But the increase is only 2%.

From 24% to 26%.

Pulling back the focus, the number of people who are “overall likely” has also increased.

Here 3%.

From 59% to 62%.

Not exactly a ground swell of consideration.

And while those numbers are on the rise, let’s face it: consideration and likelihood aren’t downpayments.

According to Stewart Stropp, executive director of EV intelligence at J.D. Power, what a consumer owns now has a big influence on what they’ll consider next.

The breakdown of the “very likely” respondents are:

  • EV: 74%
  • PHEV: 63%
  • HEV: 36%
  • ICE: 22%

One way of looking at it is that those who have experience with vehicles they plug in (EV and PHEV) are comfortable with them and EV owners are likely to consider another and PHEV owners are inclined, as well.

However, the owners of hybrids and straight gasoline engines are seemingly reticent to make a switch.

Presumably, it is particularly important to convert those owners of ICE vehicles: 78% is a big number, especially as most people have cars they fill up at gas stations.

And speaking of filling up: Charging is a big hurdle. Some 49% of shoppers say that lack of charging station availability—as in both sites and equipment at those sites that actually charge—is what makes them reject the idea of an EV.

The Cost of Cars & a Considered Alternative

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By Gary S. Vasilash

According to the most-recent numbers from Kelley Blue Book, the average transaction price paid for a vehicle in May 2023 was $48,528. And this is even though, KBB found, the average price paid was $410 below sticker, not some wild figure well above it, which people were paying as a result of the pandemic: KBB notes that in May 2022 the price paid was $637 above sticker.

S&P Global Mobility reports that account-level delinquency rates of auto loads 60+ days past due are now up 26 basis points from Q1 2021, from 1.43% to 1.69%.

While that is a non-trivial jump, the folks at TransUnion and S&P Global Mobility point out that this is a situation that is being faced by a segment of the consumers and lenders, those who are in the subprime category and more than likely to be buying a used car.

So since that $48,528 MSRP may not apply to those people, know that according to Cox Automotive, the average used vehicle listing price in May was $27,256, “the highest since early January.”

Meaning, new or used, vehicle are pricy.

But this statement related to the loan delinquencies is somewhat startling:

“The interest rate rise is squeezing the monthly budget for the average American consumer. Consumers set aside money monthly for housing, vehicles, and insurance, but may not pay other obligations with the same frequency, such as medical bills and credit cards. People need their vehicles to get to work to make money and pay their obligations.”–Jill Louden, product management associate director for S&P Global Mobility

Something of a vicious cycle: buy a car, go into debt, use the car to go to work, pay for the vehicle and other things, but rack up even more debt for things like health care and presumably things like food.

If some company comes to market with appealing vehicles that have a low price—and this might be a Chinese company, 25% tariff notwithstanding—then this industry could be upended.

Presumably there is a considerable percentage of people who use their vehicles strictly for transportation and not as a signifier of their wealth or coolness. If the vehicle can do the job and do so reliably–without seeming like vehicular penance–then being able to acquire such a vehicle would be the way to go.

Let’s face it: not everyone—even those who are well above subprime—can afford an electric vehicle, which Kelley Blue Book found had an average transaction price of $55,488 in May—down 14% compared to May 2022, but probably because of Elon Musk adjusting the prices of his cars in a way that is completely uncharacteristic of traditional OEMs, so probably not something that can be counted on going forward.

Everyone talks about the transition to EVs and OEMs are tripping over one another to make this change to their showrooms.

But consider: How many people will be left by the side of the proverbial road by OEMs those consumers could once count on for reliable, affordable vehicles?

Tesla, Tesla, Tesla

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By Gary S. Vasilash

Sandy Munro and Cory Steuben of Munro & Associates have, through a comprehensive tear-down analysis of Tesla models as well as EVs from other OEMs (as well as a vast array of ICE vehicles over the years), achieved a special POV regarding the means and methods that are used by Tesla to produce its vehicles. Using the context they have acquired from the analyses of both Teslas and other vehicles (as well as from working in other industries, which provides different perspectives on product and process), they are able to make assessments about how Tesla is developing and producing its vehicles.

And they are, putting it mildly, damned impressed, such that Sandy Munro expresses a concern that traditional domestic OEMs are likely to find themselves trumped by Tesla in terms of sales—before the decade is out. (Globally, Tesla says that it plans to build 20 million vehicles by 2030. By any measure a lot of cars.)

Tesla recently held an investor day at its plant in Austin, Texas. The attendees were from various big and bigger money firms that can direct investors’ funds into firms like Tesla. So the objective on Tesla’s part is to make sure that the best foot is put forward so that it can get some of that cash.

But Munro and Steuben scored valuable laminated credentials to be part of the audience during with the “Master Plan 3” was revealed—everything from new manufacturing methods to a home-grown operating system that combines ERP, MES, and even more.

And on this edition of “Autoline After Hours” Munro and Steuben talk to “Autoline’s” John McElroy and me about what they learned at the event, particularly focusing on the operational developments that Tesla is making.

For example, there is a new method Tesla will be using for vehicle assembly.

During his presentation at the Tesla program Drew Baglino, senior vp, Powertrain & Energy engineering, explained:

“We build the sides of the car independently, we only paint what we need to, and then we assemble the parts once, only once.”

That, Munro points out, is a non-trivial change, as paint shops in factories are typically large, complex and very expensive. This changes that.

That rethinking of the industry status quo and others are examined in a deep-dive into what Tesla is doing—and what other OEMs ought to be thinking about regarding their futures.

And you can see it here.

The EV Outlook: How Many People Taking Buyouts Are Likely to Buy One?

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By Gary S. Vasilash

Last week GM announced that in its efforts to “permanently bring down structured costs” it would request that its salaried employees in the U.S. seriously consider taking a buyout. In January GM execs said that their goal is to reduce $2-billion in spending. By taking a number of its 58,000 of salaried employees off the books, it reckons it will get closer to its goal.

Given that in 2022 its full-year revenue was $156.7 billion, net income attributable to stockholders $9.9-billion and EBIT-adjusted was a record $14.5 billion, it would seem to be in good shape.

But there is something that GM and all other OEMs are grappling with, and that’s the billions of dollars that need to be invested in developing electric vehicles as well as creating the means by which the vehicles and the batteries used to store the energy for those vehicles can be produced.

It is a huge—and expensive—undertaking.

And so when they look at their books and see that one non-trivial number is salaries, product trumps people in order to maintain profit.

(To be sure there are a number of people who probably have a skillset that is not particularly relevant to automobility going forward and it would probably be tenuous from a legal standpoint to single them out, which may make casting a larger net better from a corporate point of view.)

But the point is: EVs are (1) costly to develop and (2) not making money for corporations the way that gasoline-powered vehicles are (yet).

So, in order to keep earnings up and costs down, there will be people who will have to find something else to do with their working hours.

The state of EVs is the topic on this edition of “Autoline After Hours.” Joining me are Greg Migliore, editor of Autoblog and the newly launched Autoblog Electric; Chris Paukert, director of Video for Edmunds; and Matt DeLorenzo, long-time auto journalist and author of How To Buy an Affordable Electric Car.

The discussion delves into an array of EV-related topics, from affordability to charging to how long it will be until EVs are the norm and internal combustion engines are the exception.

And as for that last topic, it may be longer than you might think.

You can see the show here.

China Notable Number

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There were 572,000 Wuling Hong Guang Mini EV vehicles sold in China in 2022, according to analyst firm Inovev.

The vehicle is produced by SAIC-GM-Wuling. A joint venture company. With that middle bit being General Motors.

South America, Inovev says, is GM’s third-largest market (after China and the U.S., respectively).

In 2022 GM sold 350,000 vehicles in South America.

572,000 of one model in one country.

350,000 of a show room on a continent.

Sort of puts the China market in perspective.

Tesla Dominates S&P Global Mobility Loyalty Awards: How Come?

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By Gary S. Vasilash

Tesla is a phenomenal company in many respects, not the least of which are captured in the most recent S&P Global Mobility Loyalty Award assessment. The firm has been doing this for 27 years, so it has a good handle on what’s going on.

Based on 11.7-million new vehicle registrations in 2022, the loyalty determination is made on whether a household with a particular make, model or manufacturer in the garage goes out and buys a new vehicle that repeats the same. So a Tesla loyalist might have a Model 3 in the garage and gets (additive or replacement) another Model 3 or a Model Y or S or X.

Of the eight overall categories, Tesla took five:

  • Overall Loyalty to Make
  • Ethnic Market Loyalty to Make
  • Most Improved Make Loyalty
  • Highest Conquest Percentage
  • Alternative Powertrain Loyalty to Make

The other three are:

  • Overall Loyalty to Manufacturer: General Motors
  • Overall Loyalty to Dealer: Subaru
  • Most Improved Alternative Powertrain Loyalty to Make: Mercedes-Benz

As for those three: Tesla couldn’t have won the Manufacturer award because that goes to a firm with multiple brands, and Tesla just has one. It doesn’t have dealers, so that’s out. And the “Most Improved” goes to a brand that has historically had one type of powertrain (e.g., ICE) and is now adding EVs to the mix.

All of which is to say that Tesla is dominant.

On this edition of “Autoline After Hours,” Vince Palomarez, who manages and develops the Loyalty tools at S&P Global Mobility, talks with “Autoline’s” John McElroy, Jeff Gilbert of WWJ-950, and me about Tesla’s performance as well as how other companies did in this latest assessment.

Realize that, for example, GM has taken the Manufacturing award for eight years running and has taken it 19 times out of the possible 27, so it isn’t like it is withering from the Tesla onslaught.

That said, when you think of the OEMs spending literally billions of dollars on advertising (according to Statista, Ford spent $1.98-billion in 2021 on advertising in the U.S. to persuade people to buy its vehicles—those who already own a Ford or Lincoln and those it hoped to conquest) and Tesla spent $0, how it is accomplishing its domination of the Loyalty awards is something that is essential for some to know and just fascinating for the rest of us.

And you can see it here.

What the IRA Means to the Auto Industry

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By Gary S. Vasilash

According to the U.S. Energy Dept., the Inflation Reduction Act of 2022 is “the single largest investment in climate and energy in American history.”

And in the automotive space, the IRA means a continuation of tax credits for consumers who buy electric vehicles (up to $7,500, though the math gets tricky) and even for OEMs and other companies that get into the business of making batteries.

Blue Oval City, the $5.6-billion, 3,600-acre campus for EV and battery production Ford is building in Stanton, Tennessee. (Image: Ford)

As for that battery money:

It provides tax credits of $35 per kWh for the cells. And if another company organizes those cells into battery modules, it gets $10 per kWh. So if there are two companies involved and they each produce portions for a 100-kWh battery for an EV, then the cell manufacturer would get $3,500 and the module maker $1,000. And if a single company did both, then that’s $4,500.

So if you wonder why vehicle manufacturers are investing billions in battery plants (like Ford’s recent $3.5-billion announcement) perhaps that makes it even more understandable.

Not only do they make money by selling vehicles, but they also make money by producing the batteries that go into those vehicles.

On this edition of “Autoline After Hours” we’re joined by Devin Lindsay, who is responsible for Alternative Propulsion forecasting at S&P Global Mobility, Mark Barrott, principal with Plante Moran’s strategy and automotive practice, and Mike Martinez, who covers Ford for Automotive News.

The topic is the multi-billion dollar effect of the IRA on the automotive industry.

The IRA is essentially industrial policy. The aforementioned tax credits that consumers can receive are only possible if the vehicle in question not only falls below a price cap, but if the vehicle’s manufacturing—including the batteries—has sufficient domestic content. This puts companies that do make electric vehicles but don’t make them in the U.S. (think Audi, for example) at a competitive disadvantage.

While an objective is to make EVs more accessible to more people—right now EVs account for 5.6% of the market—it isn’t entirely clear that the 50% mark that the Biden Administration hopes to achieve by 2030 (and that several OEMs seem to be capacitizing themselves to provide) will happen: Do consumers really want EVs?

These and other questions are explored on the show.

And you can see it here.

The Expanding Growth of the Chinese Auto Industry Examined

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By Gary S. Vasilash

Tu Le grew up in metro Detroit. He made his way out to Silicon Valley, where he lived and worked. Then made a move to Beijing.

He recalls that when in China he recognized that there was a massive shift going on in the auto industry, one largely predicated on the digitalization borne of on-board electronics. Then there was the electrification of the powertrain.

This led him to found a consulting firm, Sino Auto Insights, which has a perspective on what’s going on in the industry—which he refers to as the “mobility industry”—from the perspectives he’s gained from living in Detroit, working in Silicon Valley, then spending serious time in China.

Tu thinks that one of the things that is happening that is going to have profound effects on the traditional OEMs—be they based in the U.S., Europe or Japan—is that Chinese companies are working at a clock speed that can make efforts undertaken by those traditional seem to be in slow motion.

The technology transition is not in the least bit minor.

What’s more, not only is the competitiveness of Western companies operating in China waning, but Chinese OEMs are now selling their vehicles—which have, he says, surprising levels of tech and capability—in markets around the world, which puts pressure on OEMs in their home markets.

And while this hasn’t happened in a notable way in the U.S., it is a matter of when, not if, Tu says.

On this edition of “Autoline After Hours” John McElroy, Lindsay Brooke of SAE International and I talk with Tu about these developments.

Not only is the growth and expansion of the Chinese auto industry a technology story, but given the tensions that are increasing between the U.S. and China (think only of the recent spate of balloons), there is a political aspect to this, as well.

And you can see the show here.