May 23 – Joe White Global Autos Correspondent [email protected]
Greetings from the Motor City!
I took a couple of days off. What could possibly go wrong? Sure enough…
Today, let’s look at the latest turns in Elon Musk’s three-ring drama, size up Rivian’s delivery woes and break down Detroit’s latest strategy for powering up combustion SUV profits.
Here we go –
* Elon Musk’s Chaotic Twitterverse
The Techno-king of Tesla and the sometime-world’s richest person never takes a break.
On May 19, Musk tweeted that “Tesla is on my mind 24/7 https://www.reuters.com/markets/europe/tesla-investor-calls-share-buyback-after-musks-twitter-deal-hurts-stocks-2022-05-19 ” and accompanied that message with an image of a young man ogling a woman in a red dress while his girlfriend looks disgusted.
That same day, he denounced as “utterly untrue” https://www.reuters.com/world/us/musk-denies-he-sexually-harassed-flight-attendant-private-jet-2022-05-20 claims in a news report that he sexually harassed a flight attendant on a private jet in 2016. Again on Twitter, he made a ribald joke about the uproar https://twitter.com/elonmusk/status/1527525498460508160, declared he intended to vote Republican and then flew off to Sao Paolo to meet with Brazil’s President Jair Bolsonaro https://www.reuters.com/world/americas/elon-musk-meet-with-brazils-bolsonaro-says-report-2022-05-20.
Since Friday, Musk’s jet has traveled https://twitter.com/ElonJet to Brazil, Houston, Austin, Hawthorne, California and, as of this morning, was back in Austin, according to the Twitter account @elonjet https://twitter.com/ElonJet/status/1528487009144254464 which tracks the public records of the aircraft’s journeys.
During all this, Musk and his advisers continued their war with Twitter https://www.reuters.com/markets/europe/do-claims-against-musk-raise-legal-issue-his-companies-twitter-deal-2022-05-23 over how much of the company’s traffic is generated by automated spam accounts.
Musk has made clear his goal is to get a lower price for the social media company than the $44 billion he agreed to on April 25, when Tesla’s share price was about 33% higher than it was at today’s open. Twitter is just as adamant that the deal will go through at the agreed price.
Yes, what about Tesla? The world’s leading electric car company has lost 46% of its value from its 52-week high – shedding roughly $580 billion in market value.
S&P Global last week dropped Tesla from its ESG Index https://www.reuters.com/business/sustainable-business/tesla-removed-sp-500-esg-index-autopilot-discrimination-concerns-2022-05-18 – used by investment funds that want to put money into companies with superior scores on environment, social issues and corporate governance. S&P officials said Tesla’s scores had slipped on concerns https://www.reuters.com/business/sustainable-business/musks-esg-attack-spotlights-35-trillion-industry-confusion-2022-05-20 about its handling of claims of workplace racial discrimination and vehicle safety probes. Musk raged that ESG investing is a scam.
Also, out of the blue, Musk tweeted that Tesla is “building a hardcore litigation department” https://twitter.com/elonmusk/status/1527748229470646272 that will report to him, and “initiate & execute lawsuits.”
There was good news from China for Tesla shareholders today: The company is planning to restore production at its largest assembly plant to pre-pandemic levels by Tuesday, Reuters reported. https://www.reuters.com/business/autos-transportation/tesla-plans-ramp-up-pre-lockdown-output-shanghai-by-tues-memo-2022-05-23
The headlines about Tesla come with risks, especially for a company that has built its brand image https://www.reuters.com/technology/tesla-brand-threatened-by-musk-harassment-claim-criticism-democrats-2022-05-20 on environmentally progressive innovation. Ask Detroit’s automakers how difficult it can be to repair damage to a corporate reputation https://www.reuters.com/business/autos-transportation/ford-recalls-39000-us-suvs-after-engine-fire-reports-2022-05-19.
* Can Rivian deliver?
Rivian is rebuilding its ordering and customer delivery system https://www.reuters.com/business/autos-transportation/ev-maker-rivian-delivery-headache-hits-market-shuts-down-coffers-2022-05-23 to deal with its supply chain problems. That effort comes at some cost to customer satisfaction as people who ordered Rivian electric trucks and SUVs months ago see others behind them in line get vehicles while they wait.
Rivian’s struggle to match customer orders to what can be built with the parts available illustrates the pressure all of the post-Tesla crop of EV startups face. Investors have largely shut off the funding faucets, except at high prices. The costs of ramping to sustainable mass production are soaring. Investors and analysts agree that Rivian is one of the best of the EV companies to go public during the past two years. And yet its shares are down 72% since January.
* Detroit’s SUV Adventures
Someday, Ford aims to be a leading seller of electric vehicles https://s23.q4cdn.com/799033206/files/doc_presentations/2021/05/Delivering-Ford-Presentation.pdf. But right now, Ford is expanding its lineup of combustion-powered SUVs to cash in on consumer demand for vehicles outfitted for wilderness adventures somewhere west of Laramie https://www.thehenryford.org/collections-and-research/digital-collections/artifact/240458.
Ford is promoting new “Timberline” versions of its Expedition and Explorer SUVs https://media.ford.com/content/fordmedia/fna/us/en/products/crossovers—suvs/expedition/2022-expedition.html. The Timberline Expeditions come with off-road ready hardware such as a “Trail Turn Assist” for negotiating tight corners between rocks, four-wheel drive systems with seven different drive modes and underbody armor borrowed from the Ford F-150 Raptor offroad pickup.
Ford managers say the target customers for the new Timberline models are Gen X’ers and Millennials. Wait! Weren’t Millennials going to be the generation that did not own cars? https://www.smartcitiesdive.com/ex/sustainablecitiescollective/new-study-millennials-prefer-car-access-over-ownership/32723 Never mind. Millennials now represent 28% of the customers buying large SUVs, said Ford Expedition brand manager Devin McParlane.
Not to be left out, Stellantis has two new large Jeep SUVs ramping up this year: The Wagoneer and the Grand Wagoneer.
General Motors has been less overt than its cross-town rivals about jumping on the off-road adventure bandwagon alongside Ford’s Bronco brand and the Jeep lineup. But the GMC Hummer EV with its crab-walking mode and insane Watts to Freedom (WTF) acceleration is a big step in that direction.
What’s behind all this Westward-ho marketing? Here’s a clue: An Expedition Timberline has a sticker price of just over $77,370, excluding freight. A regular Expedition starts at $52,620.
* America becomes Havana
The average sedan or compact car on the road in the United States is now 13.1 years old https://www.reuters.com/business/autos-transportation/average-age-us-cars-hits-record-high-due-tight-supplies-report-2022-05-23, a new record, according to S&P Global. Light trucks on the road are younger, but still hoary at an average age of 11.6 years. Overall, the U.S. car and light truck fleet is a record 12.2 years old, up from 10.9 years in 2011.
S&P Global said the supply chain crunch and resulting price spikes for used and new vehicles have led consumers to hang on to vehicles longer. The pandemic also pushed many people to ditch public transportation and rely on old vehicles instead.
S&P predicted a “notable increase in repair revenue” as drivers try to keep their clunkers on the road.
* Automakers become energy companies
BMW said it is exploring investments in solar, geothermal and hydrogen https://www.reuters.com/business/sustainable-business/bmw-exploring-energy-investments-reduce-dependence-natural-gas-2022-05-23 to replace natural gas as a source of energy for its operations. The company’s production chief said BMW has to diversify to blunt the risk that Russia will cut off natural gas supplies to Western Europe.
Tesla early on took the view that it was an energy company as well as an automaker. The Ukraine war and investor pressure to cut climate emissions are leading rivals to dig deeper into their own energy supply chains.
* Daimler Truck expands its battery drive
Daimler Truck said it will buy 9% of battery production equipment maker Manz. https://uk.sports.yahoo.com/news/daimler-truck-9-stake-germanys-105454256.html As part of the deal, Manz will build a pilot production system for batteries Daimler will use in electric trucks.
Why does it matter? Because in these times of scarcity, securing access to the sophisticated equipment needed to build EV batteries is just as critical as locking down supplies of lithium and other raw materials.
* Hyundai, Biden and unions
During a visit by U.S. President Joe Biden to Seoul, South Korean automaker Hyundai promised to invest more than $10 billion in the United States by 2025 https://www.reuters.com/business/autos-transportation/hyundai-motor-group-invest-5-billion-us-through-2025-2022-05-22 to build a new EV factory and invest in other transportation projects such as flying cars.
Hyundai clearly hopes to benefit as the U.S. tries to build ties with Asian economies https://www.reuters.com/breakingviews/us-china-divide-creates-fast-lane-hyundai-2022-05-23 outside of China.
One off note: The new EV plant will go to Georgia, a state where unions are weak. Biden pitched Hyundai Chairman Euisun Chung on the benefits of collective bargaining. Chung did not reply.
* Tiny EVs for Japan
Alliance partners Nissan and Mitsubishi said they will develop electric versions https://www.reuters.com/business/autos-transportation/nissan-mitsubishi-motors-unveil-light-evs-japan-2022-05-20 of the micro-compact kei cars that account for about 40% of the Japanese market. Tiny, inexpensive “city cars” have not caught on in the United States, but automakers are betting that electric micro-cars could be viable in Asia’s congested cities.