Tag Archives: economics

China Lifting Non-Domestic Ownership Rule

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Right now (i.e., 12/28/21) a non-Chinese OEM that has an operation in China that isn’t building EVs can only operate through a 50-50 joint venture with a Chinese company.

In a few days (i.e., 1/1/22) that will change. Nikkei Asia reports that yesterday (i.e., 12/27/21) the Chinese Ministry of Commerce and the National Development and Reform Commission lifted the requirement as of the first of January.

Right now, there is an array of OEMs that have 50-50 joint ventures with Chinese partners.

Does this mean that they’ll suddenly buy out their partners and go for the whole thing?

Probably not.

Why?

It is undoubtedly a good thing to have a Chinese partner who can help with indigenous issues that may not be recognized by someone who is not absolutely embedded in the country and its culture. Even though a company may have people who have been in a given country for a number of years (be it China, the U.S. or anywhere else), not everything that someone who has lived there all of their lives simply knows can be understood by someone who hasn’t had that experience.

While there may be increases in the level of ownership of the various OEMs for financial reasons, odds are things aren’t going to change on a wholesale basis.

Presumably the non-Chinese OEMs have worked to develop good relationships with their partners. So there isn’t a whole lot of upside to throwing a wrench in those works.

The global auto industry is simply getting a bit more global.

Big Change in the Cost of EV Batteries

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A huge concern in the auto industry—always and everywhere—is cost. The cost of batteries for EVs is showing an impressive decline.

By Gary S. Vasilash

One of the things about electric vehicle development that doesn’t get quite the amount of attention that it deserves is the rate at which the prices of lithium-ion battery packs are declining.

According to the US. Department of Energy Vehicle Technologies Office, the cost of a Li-ion battery pack declined 87% between 2008 and 2021, based on 2021 constant dollars.

The DOE estimates that the cost of a Li-ion battery pack circa 2021 is $157/kWh based on a usable energy basis (i.e., the battery pack may have more stored energy but it is not used because it is important to maintain the health of the battery).

Back in 2008 that number was $1,237/kWh.

Impressive decline in battery costs. (Image: DOE)

Recognize that what is happening is that there are improvements in technologies and chemistries, as well as in manufacturing economies of scale. (Did you notice that when people are talking about battery plants they typically refer to them as “gigafactories”? They’re big and make lots of batteries, which leads to the economies of scale. It is somewhat odd, if you think about it, to know that Mars makes about 15 million Snickers per day and there is no mention of a “megafactory.”)

The improvements in technologies and chemistries are probably the real, as they say, game-changer in batteries.

Realize that you have vehicle manufacturers, Tier One suppliers, battery companies, chemical companies, electronics companies, utility companies, energy suppliers, research organizations, universities, and undoubtedly others working on batteries.

Nowadays only a fraction of them are working on eking out improvements for internal combustion engines, which leads to the hypothesis that with time ICEs are going to run out of time.

That 87% is a big number. And the decline in price-performance will undoubtedly continue to change for the better.

Good Thing They’re in Government, Not the Auto Industry

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Your tax dollars at work?

By Gary S. Vasilash

Although the report produced by the U.S. Dept. of Commerce in February 2019 about the importance of imposing tariffs on imported motor vehicles and components, “The Effect of Imports of Automobiles and Automobile Parts on the National Security,” had been kept under wraps by the Trump Administration and was released in redacted form last week, the rationale for keeping this report, which could have resulted in tariffs on the 25 to 35% level (remember: the consumer pays the additional costs, not the manufacturer), on a shelf somewhere probably had a little something to do with its level of stupidity.

Consider just this line:

“While the U.S. defense industrial base is dependent on the American-owned automotive sector for the development of high-tech products and capabilities, the U.S. commercial automotive industry is unable to survive solely by supplying the DOD.”

Who knew?

(Probably everyone.)

Is It About the Drive?

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People are spending more on things related to their vehicles

By Gary S. Vasilash

Taken all together, automotive loan or lease payments, insurance and gas had a collective increase of 18% in May compared to the start of the year, according to Morning Consult.

What’s more, the research firm found that when faced with cutting back on car travel—including such means as using public transport—or paying more to stay in one’s own vehicle, U.S. consumers opted for the latter approach.

In its monthly survey of household finance data, Morning Consult looks at 11 categories of spending, ranging from gasoline to utilities.

While the percentage increase from January to May for medical care was 19% and 17% for restaurants, the increases for gas and car insurance were 27% and 16%, respectively.

When it comes to monthly spending averages, the car lease/loan payment in January 2021 was $140 and it saw a marginal increase of $18 through May. Car insurance was $105 and got a $17 bump. Gasoline had a notable comparative increase, from $91 in January to an add of $24 through May.

But the spending for public transportation was $59 in January. And there was a $0 marginal increase through May.

Is this an issue of people liking the drive—or simply not wanting to share transportation space with strangers?

The Cost of “Refueling”

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Turns out that EVs are significantly less expensive to power

By Gary S. Vasilash

Although electric vehicles tend to be more costly than comparable gasoline-powered vehicles, when it comes to “refueling,” EVs can save a whole lot of money compared with gasoline-powered vehicles, according to the U.S. Department of Energy.

As much as about 60%.

The agency developed what it calls an “eGallon.”

That is a comparison of what it would cost to buy equivalent energy to power an EV the same amount as it would cost a gasoline powered vehicle to travel on one gallon of gas.

So, based on the national average of $2.85 for a gallon of gas (as of March 31) and the equivalent price of electricity at a national average of $1.16 for an eGallon, this means the average fuel savings of approximately 60%.

In Washington state the difference was much larger: the cost of a gallon of regular was $3.13 and the cost of an eGallon was $0.89, so the fuel cost savings was about 72%.

So for those who pay attention to what they’re paying for their miles per gallon, it appears that EVs may be advantageous.

Of course, it takes longer to recharge an EV than it does to fill up a tank with liquid fuel.

So if time is money. . . .