Ford & Tesla: Go Figure

By Gary S. Vasilash

Jim Farley, Ford CEO, said to the assembled audience on hand for the production launch of the all-electric F-150 Lightning on April 26, “We plan to challenge Tesla and all comers to become the top EV maker in the world.

“That’s something that no one would have believed just two years ago from us. They’re going to look at this truck and believe it.”

That’s something I have a hard time believing right now.

Not that Ford doesn’t have a shot at becoming the lead EV builder at some unspecified time in the future. It probably will. Electric pickups and full-size crossovers will undoubtedly roll out of its dealerships in huge numbers one Ford has them.

But that a company that has pretty much been synonymous with “auto industry”–as it was established in 1903 and has had factories churning out cars, trucks and crossovers the world over for more than a century–uses Tesla as the point of comparison.

This is not to diminish the accomplishments of Tesla in any way. In 2021 it delivered more than 936,000 the world over.

While Tesla doesn’t break out its numbers by country, Cox Automotive estimates that the U.S. sales of its vehicles were 352,471 in 2021.

Ford had one EV in 2021, the Mustang Mach-E. It sold 27,140.

It’s not like Tesla just started selling cars last year. It has been on the market for more than 10.

Yes, it started out small.

And so was ignored by the traditional OEMs like Ford.

But Team Tesla kept at it and the traditional OEMs kept doing what they were doing by and large their efforts toward producing EVs were simply to meet regulations, not customers.

Now these companies (and know that it isn’t just Ford and GM, but even other stalwarts like Mercedes and BMW) have recognized that not only is Tesla selling a lot of vehicles, but that customers really want them, which is a good characteristic for products to have in a market.

It is sad that Farley (yes, he gets something of a pass as he didn’t become Ford CEO until October 2020) has to compare what the Ford Motor Company will do with Tesla.

One would like to think that the company founded by a guy who was certainly more advanced than many of his contemporaries would be the one other companies would be comparing themselves to, not Tesla.

Hertz Getting More EVs: Good for Them. Tricky for Renters.

The Polestar 2, when plugged into a DC fast charger, can go from 10 to 80% of charge in 33 minutes. If using a Level 2 charger, it is about eight hours to get to 100%.

Imagine the clock running. . . .

Rental car company Hertz and Polestar have announced that during the next five years the vehicle manufacturer will be selling Hertz some 65,000 vehicles, starting with the Polestar 2.

Hertz announced in October 2021 that it would be sourcing 100,000 Model 3s from Tesla.

Clearly the company is making a commitment to electric vehicles.

The company reported that in Q4 2021 it had a total of 470,900 vehicles, of which 384,492 are in the Americas.

Here’s the thing: Whether it is someone who has rented a vehicle for making business calls or who has one for a family vacation, isn’t is almost always the case that in order to avoid paying exceedingly high refueling rates there is a last-minute run to a gas station before dropping the vehicle off, even if that station is one of those that is on the edge of the airport and so has comparatively high per-gallon prices?

Further, isn’t it almost always the situation—vocational or avocational—that people are running to the edge of the time schedule for the flight departure? (Let’s not even go to the baggage check and the TSA process.)

Imagine the clock running. . . .

How are EVs going to work out for those people?

Probably not very well.

Has Tesla Distorted the EV Market?

Everyone wants to have their cake and to eat it, too.

And said cake will be delicious. And although said cake will have an exceedingly high number of calories (after all, it is delicious), there will be no added weight to everyone who eats their cake.

Are electric vehicles ecologically oriented or are they performance vehicles?

Well, given that performance numbers are something that Tesla has been able to post, many people think both.

Of course, going Plaid also means going to the Supercharger more frequently. And the electricity that comes out of the units doesn’t get generated by magic.

Still, people are snapping up Teslas to the extent that the traditional purveyors or luxury vehicles can only look on with sublimated horror and try to determine what it is that they can do to get their piece of the market.

And the answer seems to be to opt for performance.

Nice green background, eh? (Image: Mercedes)

Or as Philipp Schiemer, Chairman of the Board of Management of Mercedes-AMG GmbH, puts it about the forthcoming Mercedes-AMG EQE sedan:

“With the new model, we are expanding our range with a purely electrically powered performance vehicle and are thus addressing additional target groups. The AMG EQE focuses on sportiness and impressive driving dynamics. And that’s not the end of our Future of Driving Performance: After performance hybrids and all-electric AMG derivatives based on EVA2, stand-alone AMG electric vehicles will follow in the not too distant future. These are based on AMG.EA, our new, completely in-house-developed platform.”

The Mercedes-AMG EQE with the AMG DYNAMIC PLUS package produces 677 hp and 738 lb-ft of torque. It is said to be able to go from 0 to 60 in 3.2 seconds and has a top speed of 149 mph.

Mercedes has AMG in its portfolio, so it might as well use it wherever and whenever it can.

What’s more, there is something to be said for getting more electric vehicles on the road so as to increase the public’s level of comfort with the technology.

And while the two permanently excited synchronous motors that the car uses are certainly more efficient than an equivalent gasoline engine would be, let’s face it: The only green this car is about is the color of the traffic signal when the accelerator is mashed.

Perhaps the person who buys an AMG EQE can feel noble about their environmental footprint. Perhaps.

Electrify America Tops in Charging Analysis

By Gary S. Vasilash

Electrify America, the company that was established by Volkswagen as part of its penalties associated with “Dieselgate,” is the network calculated to be best by umlaut, an organization that performs benchmarking, and Charged, an EV magazine.

Electrify America scored highest, with 702 of a possible 1,000 points.

Tesla came in second, at 649.

There were two primary categories:

  • Digital Platform
  • Charging Location

The people performing the analysis drove some 2,100 miles in Connecticut, Maryland, Michigan, New Jersey, New York, Ohio and Pennsylvania. They drove in a Mustang Mach-E and a Tesla Model 3.

In the Digital Platform category, which looks at things like the website and the app, Electrify America came in with 275 points. Tesla was well behind, at 165.

In terms of Charging Location, which is about the actual act of charging, Electrify America scored 426.75 points while Tesla came in at 484.25.

So the biggest difference is not out there plugging in at a station but while on one’s phone.

Guess it comes down to what is more important, especially when you just want to get the damn thing charged and on your away.

The other charge point providers and their scores are: Charge Point (611), EVgo (578), Greenlots (548), Blink (505) and EV Connect (472).

Who Knew?

“Manufacturing is Tesla’s core competency.”—Tesla Q4 and 2021 Update

It is interesting to note that in its Fremont plant it has the capacity to produce 100,000 Model S/Model X and 500,000 Model 3/Model Y. In Shanghai, >450,000 Model 3/Model Y.

And it has Berlin and Texas on tap.

Yes, there is a lot of manufacturing capability at Tesla that sometimes gets overlooked by, well, everything else.

Premium Vehicle Perspective: Depends Where You Look

When looking at charts developed by French auto analyst firm Inovev of the sales of premium vehicles in the U.S., China and Europe for the first 11 months of 2021, there are a few surprises.

As in sales of 2 million in the U.S., 3 million in China and 2.5 million in Europe.

It’s not surprising that the number is higher in China than in the other two regions. After all, it has a population of 1.4 billion.

It is a little surprising that the numbers break as they do, given that the population in Europe is 748 million, which is about half of that in China and slightly more than twice the population in the U.S. The 500K increments seem strange given that.

Clearly wealth is not evenly distributed, with the U.S. having a higher proportion of its population capable of affording a premium vehicle.

But the surprising thing is the relative sales of the premium brands in the three markets.

The five three brands in the U.S. during this period are BMW, Lexus, Tesla, Mercedes and Audi. Then there is a slight falloff in numbers.

The top five brands in China are BMW, Mercedes, Audi, then a big decline (Audi is at over 600,000 units) to Tesla (at 240,000) and Cadillac.

In Europe it is BMW, Mercedes, Audi, then a big drop to Volvo (Audi: >500K; Volvo: 245K) and Tesla.

While there is consistency with BMW, Mercedes and Audi, and while Tesla is certainly on a roll, Lexus is something of an outlier. It doesn’t show up at all in the listing of sales in China and in Europe it is in ninth position, behind Lancia and just ahead of Jaguar, all of which are well below 100,000 units.

Lancia doesn’t show up at all in the sales tracking for the U.S. and China, and in the U.S. Jag is in last place and it is third from last in China.

Seems as though the German brands are consistently solid around the world while for everyone else it is somewhat random.

Elon Musk: Rocket Man

And then there’s that car business. . .

By Gary S. Vasilash

Time has named Elon Musk 2021 Person of the Year.

Presumably if nothing else it will help the publication move some issues as Tesla fanfolk snap up copies with their hero on the cover.

A double win.

One of the interesting things about the extensive story about the selection in the magazine—positive but not hagiography—is that it is primarily a story about Musk and SpaceX.

This is not to say that the terrestrial transportation products are completely overlooked, but in the context of a classic ink-on-paper newspaper it could be said that the coverage of the cars is below the fold. Well below the fold.

And an exchange quoted in the piece puts this in context:

“Musk’s toddler, X Æ A-Xii (pronounced ‘X’), has recently started saying car, to which his father responds, ‘Rocket!’”

Innovation, Static Practices, & How Tesla Has Disrupted the Industry

There are certain things that traditional OEMs care about that Elon Musk and his team will get to—after they accomplish the important things

By Gary S. Vasilash

In 1997 a book by Clayton Christensen was published that had a thesis that was not something that many people in companies really wanted to accept:

It essentially says that there are incumbent companies—think of the long-in-business vehicle manufacturers—who basically provide incremental improvements to their products. Things get better. Just a little bit better. Other companies are doing the same thing, so a given company really doesn’t need to concern itself with doing anything but slightly adjusting the dial. They may improve their existing processes to make their production more efficient, the production of their existing (though improved to some degree) product.

Then a new entrant comes into the field. A new entrant that can pretty much be ignored. (Or so it seems.) That’s because they’re in a space that isn’t particularly valuable (e.g., low margin). Or they provide a product that underperforms the existing. Or they are providing a product that no one has asked for.

The concept, and the title of the book: The Innovator’s Dilemma.

Actually, the one who has a dilemma is the one who isn’t innovating but trying to continue the existence of the status quo.

No one ever got fired to trying to improve margins on an existing product, so that’s pretty much what executives do: invest in improving the existing product. After all, there are all of those sunk costs in equipment and process and knowhow that have to be taken into account.

But then, not immediately, but eventually, the product that could otherwise be ignored, is transformed such that it becomes something to be reckoned with.

Case in point: Tesla.

When it introduced the Roadster in 2008, a essentially a Lotus Elise with an array of lithium-ion batteries that were otherwise found powering laptop computers back then, a two seater that had a price of over $100,000, Tesla was pretty much considered to be a company that was a niche of niche: after all, roadsters don’t have a whole lot of demand, and in 2008 a roadster with an electric powertrain was simply ridiculous.

As time went on, the incumbents looked at what Tesla was doing and didn’t think much. Yes, the Model S may have had remarkable performance, but what about the build? The Model X had doors that were visually impressive but functionally not up to snuff. The Model 3 was impressive, but as everyone knew, Tesla wasn’t profitable, so anyone could build unprofitable vehicles. The Model Y had interior fits that were not the sort of thing that one would expect from a vehicle with its price point.

But also as time went on, more and more OEMs began to realize that not only was Tesla immensely popular among consumers in a way that was beyond the wildest dreams of anyone in the car industry, but that it wasn’t going away.

So they began to roll out an EV here and an EV there, all of which were claimed—publicly or implicitly—to be “Tesla fighters.”

Seemingly that hasn’t worked out.

The innovator’s dilemma in action.

Jeff Stout is executive director for Yanfeng Automotive Interiors and a student of The Innovator’s Dilemma.

On this edition of “Autoline After Hours” Stout joins “Autoline’s” John McElroy, Craig Cole of Roadshow by CNET and me in a spirted discussion that largely focuses on what Tesla does and doesn’t do, which leads to a variety of related subjects including whether electric vehicles will become the dominant type on the roads and whether autonomous vehicles are going to occur in a meaningful way in a bounded amount of time.

And you can see it all here.

Auto Numbers: Something to Consider

The math is. . .surprising

By Gary S. Vasilash

A few numbers.

In the first three quarters of 2021, these are the U.S. sales numbers of the leading luxury brands:

  • 259,237 BMW
  • 245,864 Lexus
  • 230,855 Tesla
  • 213,708 Mercedes

That’s right: Tesla outsold Mercedes.

And then there is this, the market capitalization (on 11/11/21) of the three companies that were once known as the “Big Three”:

  • GM: $89.14 billion
  • Ford: $77.5 billion
  • Stellantis: $64.21 billion

(It is worth noting that in addition to Chrysler, Dodge, Jeep, Mopar and Ram, Stellantis includes Abarth, Maserati, Open, Alfa Romeo, Citroen, DS Automobiles, Fiat, Fiat Professional, Lancia, Peugeot, and Vauxhall. Meaning it is a much larger company back when it was part of the Big Three.)

Here’s the kicker:

  • Tesla: $1.068 trillion

Tesla could buy all three.

But then what would become of its value?

Let Musk Put You in the Driver’s Seat

With its Hertz deal, Tesla continues to defy us skeptics

By Todd Lassa

Contributor

Electric cars are the future. No matter how attracted you are to the charms of the internal combustion engine, it should be obvious by now we need to stop burning fossil fuels ASAP and begin to try and reduce greenhouse gases, if it’s not already too late.

When the transition finally comes, when internal combustion engines are powering only a few collectible cars out for a cruise on warm summer days – and two or three of them may be mine, I’m afraid – it will be right and appropriate to celebrate Tesla’s contribution to the shift. Full disclosure here: I’ve long been a Tesla skeptic, not so much because of the cars, which are undeniably state-of-the-art in their battery chemistry (until solid-state batteries become the order of the day), but mostly because of its CEO, Elon Musk.

(Image: Tesla)

From the beginning, I was skeptical about Telsa’s ability to make money. Most of the few profitable quarters since Tesla’s 2012 IPO were from selling zero-emissions vehicle credits in California to automakers whose sales of vehicles were anything but zero-emissions.

Then there’s Musk’s techie hucksterism and his faked astonishment at the value of the company’s shares. He’s long been known for unveiling new products with ridiculously short development schedules. The vehicle is introduced. The stock goes up. And in many cases, the vehicle is nowhere to be seen after it has left the stage. The Cybertruck has been delayed again and again. As has the Roadster. No matter, it seems. The Tesla faithful will wait.

Were it a brand from Detroit or Stuttgart, these delays would be derided. Not so for Musk.

When Hertz announced in October that it has signed a contract to buy 100,000 Tesla Model 3 EVs, one-fifth of its rental fleet, conventional auto business wisdom might have been, “why would Musk do that?”

“Heritage” automakers historically relied on rental fleets to take as much as one-quarter of the production of their mainstream compact and midsize models. A Nissan Sentra sold to a retail customer will make a razor-thin profit for both the automaker and the dealer – and even less when leased to Hertz or Enterprise and then sold after a couple of years at another huge discount, damaging resale values even more for those who drive these models every day. 

Many of the mainstream automakers have been talking for years about reducing their rental fleet business because of the negative effect those sales had on residual values. But when the Hertz-Tesla deal was announced, Tesla Inc.’s shares shot up by 9.6% to make it the latest tech firm to top $1-trillion in market cap. Musk may soon pass Amazon’s Jeff Bezos as the world’s wealthiest human. As I write this, one share is worth $1,096.02, or $1.1 trillion in market cap. GM is at $79.1 billion and Ford Motor is worth $68.53 billion.

Bloomberg News explains that Hertz will pay “full price” for the Teslas, worth $4.2 billion in revenue to the automaker. Citing a Hertz spokeswoman, the report says the Model 3 rental rates will be “similar” to other luxury car rates, and charging will be covered by the rental company through January of next year. Tesla will deliver all 100,000 Model 3s within the next 14 months.

What is interesting about the Hertz-Tesla deal is another individual: Hertz acting CEO Mark Fields. Fields had been the CEO of Ford, but “retired” from the company in 2017. Fields is 60. One of the rumored reasons why he departed Dearborn was because he wasn’t doing enough to message to Wall Street the OEM’s mobility vision.

Seems that what he’s contributed to Tesla’s valuation underscores his mobility vision.

What worries me about the Hertz-Tesla arrangement is this detail, also from the Bloomberg News report: You will be able to re-load your smartphone with the Hertz app, for on-demand access to Supercharger credits and to the car’s Autopilot system.

Autopilot is Tesla’s “autonomous driving” system, which Musk has promoted as the car being able to drive itself. It is not self-driving, and by most accounts it’s less sophisticated than the GMC Super Cruise commercials you might have seen on television, lately with the Queen hand-claps.

In case you rent a Tesla from Hertz and choose to download the Autopilot system on your smartphone, I’m going to give you a piece of advice I would never otherwise give for a rental car: You might want to take the supplemental insurance from Hertz.