This is Autoline Daily reporting on the global automotive industry.
TRUMP THREATENS TO INCREASE TARIFFS ON CHINA
President Trump sent chills down the spines of auto executives when he threatened to more than double import tariffs on Chinese goods by this Friday. He also threatened to add another $350 billion worth of Chinese goods to the list that get hit by those tariffs. Automakers import a lot of parts and components from China, and this would drive their costs higher. A full-blown trade war between the U.S. and China would also hurt global economic growth. When Trump first imposed tariffs, China retaliated by slapping an additional 25% tariff on U.S. made vehicles, but it suspended that late last year as part of its trade negotiations. That tariff particularly hurt BMW and Mercedes-Benz, which export a lot of American made SUVs to China.
Here’s our Autoline Insight. Trump’s threats are the way he negotiates, and all this could get resolved this week. However, automakers hate uncertainty. It makes it difficult to plan ahead. And with the USMCA going nowhere, which is the replacement for NAFTA, there is a lot of uncertainty in the automotive industry right now.
TESLA TO RAISE $2 BILLION IN CASH
Elon Musk managed to reduce some of the uncertainty about Tesla’s finances. The company is going to raise over $2 billion by issuing more stock and selling more bonds. That will give it more than enough cash to get through the year. But Moody’s still rates Tesla’s debt at six levels below investment grade. Moody’s says the average Model 3 costs $55,000 and that Tesla will need to get that down to $42,000 to increase sales.
WEEKEND RACE RESULTS
In racing news over the weekend, Juan Pablo Montoya and Dane Cameron combined to win the Acura Sports Car Challenge at Mid-Ohio for Acura Team Penske. In NHRA, Steve Torrance won in the Top Fuel category in Atlanta. And the NASCAR race at Dover speedway was postponed due to rain and has been rescheduled for this afternoon.
DIESEL MARKET GETTING STRONGER IN U.S.
Last week we showed you how sales of hybrids, electrics and plug-ins are doing. BEVs and hybrids are going great, while plug-ins are sinking. But how are diesels doing? Better than you might think. Automakers sold 176,000 vehicles with diesels in the U.S. market so far this year, up more than 3% while the overall market is down 2%. And last month automakers sold over 46,000 diesels, up 9.5%, so it looks like the diesel market is getting stronger.
MOPAR SELLS OUT OF HELLEPHANT ENGINES
Speaking of piston engines, the possibility of getting their hands on a 1,000-horsepower engine proved to be too enticing for some customers. Mopar sold out of the $30,000 Hellephant crate engines in just 48-hours. It’s rumored to have built 100 examples and as of right now, there’s no word if it’s going to make any more. But with that kind of demand at that price, we say, what are they waiting for?
FORD & VW TRUCK PARTNERSHIP IN TROUBLE?
Ford and Volkswagen have talked loudly and boldly about how they’ll collaborate on commercial vans and midsize pickups. But it sounds as though the truck partnership could be in trouble. Wards spoke to VW of America’s senior VP of product strategy and he says the situation is “still a little bit hazy to be quite honest… There is some sort of opportunity that maybe a pickup collaboration could happen. That is something that’s still in the cards” The agreement could be seen more like, “Hey, let’s partner up, let’s share ideas.” He says VW would have to build a vehicle on a Ford platform, but it would have to look totally different, so Ford would still be competitive in the segment.
LA PROPOSES BOLD NEW EV GOALS
Los Angeles Mayor Eric Garcetti says he’s going to take on climate change. He set bold new targets to increase the number of electric or zero-emission cars in the city to 80% by 2035, up from 1.4% last year. The plan would increase the number of public charging stations from 2,100 today to 28,000 by 2028. And it would encourage citizens to drive fewer miles by increasing public transportation and charging drivers “congestion pricing” to drive through busy areas.
MAY MOBILITY LAUNCHES SERVICE IN PROVIDENCE
Along those lines, autonomous ride sharing is slowly but surely starting to spread. May Mobility, an autonomous startup based in Ann Arbor, Michigan, is launching a self-driving shuttle service in Providence, Rhode Island. It kicks off on May 15, will operate seven days a week and is free. The state is paying May Mobility $800,000 to operate the service. The company launched a similar service in Detroit and Grand Rapids, Michigan last year. These shuttles operate on a fixed route and only travel at low speeds, and for now they have a safety driver on board who can take over if there are any problems.
But that’s it for today, thanks for watching and please join us again tomorrow.
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Comments (26)
May 6th, 2019 at 12:00 pm
Moody’s might be smoking somethin’. I follow that Tesla sales would increase with the use of a dealer network and not scrubbing off 13K in cost.
could diesels be selling well due in part by fears of electric truck sales? I can not help but wonder if the forced electrification will not only drive petro vehicles up in price, but not provide the serviceability the current ICE engines offer towards ranchers and the like.
May 6th, 2019 at 12:09 pm
Sean,
When you quote Moody’s as saying “the average Model 3 costs $55,000 and that Tesla will need to get that down to $42,000″, do they really mean what it costs Tesla on average to make a Model 3, or how much the average Model 3 is selling for today? Totally different things. If it is what it sells for, with the huge influx of $35k model 3s, they will soon reach that $42k average. If it is the cost, I doubt it is accurate, since Sandy Munro claimed they make a 30% profit on the Model 3.
May 6th, 2019 at 12:10 pm
I guess those diesels are mostly pickup trucks, with a few SUVs. Without the VWs, there wouldn’t be many, if any diesel cars.
May 6th, 2019 at 12:12 pm
1 diesels. What you say makes zero sense. If a buyer is ‘forced’ to switch from diesel to EV, how is it possible that this will “drive petro vehicles up in price”? That is the exact opposite than one would expect from Econs 101, supply and demand. You reduce demand, the price DROPS, unless you drop the SUPPLY even more.
May 6th, 2019 at 12:18 pm
LA area EV goals. Having lived in the LA area for seven weeks in summer 2003, and commuted from my Long Beach sublet to Anaheim at the Boeing research facility (26 miles each way if I remember well), I would think that this area will NEVER be any good for mass transit, biking, or walking.
People will always need to use their cars in the LA area, which is like a wheel with 40 spokes linking the tiny downtown area to 40 different satellite cities and towns.
LA is the exact opposite of the old big cities in the NE, where you are better off walking or even using mass transit, and a car is a huge hassle and a very expensive one.
Fortunately, a pure EV with a 300 mile range will meet every need there, for local travel, even for those with poor enough taste to take it to Las Vegas, and sure for those like me, who want to visit friends in San Diego or Santa Barbara on weekends.
May 6th, 2019 at 12:22 pm
PS 5 I thought the current EV penetration of the LA area market is far higher than 1.4%, even if you only consider pure BEVs and no dirty plug-ins or hybrids.
Also, did the good mayor specify how he will actually PAY for those 28,000 EV chargers? Anybody knows how much one of these costs? Even a ball-park estimate? and how many of them will be offered by VW per its agreement/settlement, as ‘penance’ for “dieselgate”?
May 6th, 2019 at 12:26 pm
Finally, While I may agree that these tariff threats are Trump’s way to negotiate, he may be scaring the bambini (as in Hedge fund managers) into silly actions, such as this morning, when the markets opened 2% down because of these threats, but since recovered and stabilized at 1% down from their (up) close on Fri. And these negotiations are becoming a bit long in the tooth. China’s economy is not doing well, and they have the most to lose in this, by far, but, on the other hand, losing face is far more important there than here, and they may decide to take more pain than agree to a deal.
May 6th, 2019 at 12:32 pm
#4 your in the weeds… Ford, GM, and others will at some point be forced into manufacturing and selling electric PU trucks. diesels with their longevity will if bought today will far exceed known service life of batteries and no lead fueled PU trucks. Given the shaky natural of when emissions will kill of diesels, Some may well be getting ahead of the curve and purchasing now. There is a trend currently of spending large dollars to rebuild entire trucks sold in the early 2000′s because the vehicle isn’t offered. And diesels will run off darn near any oil.
May 6th, 2019 at 12:34 pm
#4 you presume demand for ICE will go down. I did not state that..quite the opposite and ECON 101 says this is so, but you already knew that.
May 6th, 2019 at 12:38 pm
‘your’ (SIC) in the weeds? It seems besides Econs 101 you need English 101 as well. Also, you are preaching to the choir re the longevity of Diesels. My taxi driver overseas put 4 million KM on he 1990s E class 3 lt diesel. That’s 2.5 mill miles. But while you know that, you don’t know much about battery life and most data point that it is far, far lengthier than most people fear. Tesla also has said its vehicles are designed to go an unreal number of miles. We will know how correct it is in 5-10 years, but already in Europe those E diesel cabs are replaced by Tesla Ss that do 100,000s of KMs or even miles every year.
May 6th, 2019 at 12:39 pm
9 I did not presume anything, I used YOUR post and your assumptions.
May 6th, 2019 at 1:45 pm
Yeah! If FCA can pull in 3 Million by selling just a 100 engines. Then they would be foolish to not offer more. No extra tooling or cost to be incurred as they are producing the motor anyway. I don’t believe they can sell a bunch more but why not sell as many as you have takers? BTW its 30k for the motor and a few grand more if you want the computer and wire harness. Which I would think you need.
May 6th, 2019 at 1:57 pm
The model S went on sale in June 2012, been out almost 7 years. How many of the original cars are on the road presently? And what is the average range they can still go? How many times have the batteries been replaced? I think these are the questions to ask of Tesla now to see long term prospects.
May 6th, 2019 at 1:59 pm
5 I also lived in L.A for about a year and the thing about L.A that’s different from other major cities is it is spread out. Most people still commute miles not blocks. So even though the weather is basically perfect everyday and would allow you to ride a bike or walk to work 95% of the time. I don’t know many people that would want to arrive to work sweaty from walking or riding a bike a few miles in 80 deg weather. So it sounds great in theory but the reality is people want to leave directly from their home sit in the A/C and arrive at work and not a few blocks away. That is the biggest problem with mass transit or biking. I did find a lot more people using bikes is San Francisco but that city isn’t as spread out. No need to even mention the Midwest as we all know riding a bike to work in the snow just isn’t going to work. So yeah EVs will probably be L.As best option but that wont resolve their traffic or parking problems.
May 6th, 2019 at 2:26 pm
If large factories put up self contained Hi-Rises in walking distance to work ,and factor free rent into the pay scale, Traffic problems would be greatly reduced
May 6th, 2019 at 2:28 pm
12 Yeah, if people will buy them, they should keep making them. Maybe I’ll see one this summer in a ’32 Ford at a car show.
May 6th, 2019 at 2:34 pm
14 I agree with most of your points. Yes, SF is not at all like LA, it is more like the old cities in the NE, and in fact I did not have to rent a car when I was invited there for a whole Friday of presentations and meetings at Chevron and stayed for the weekend, and was able to walk to all the sights.
In the Midwest, where I have lived for more than 35 years, some people do all kinds of things. Just limiting to my colleagues ( less than 15-20 in my Dept.), one walked to the office every day snow or rain, and used it as his exercise. I thought he would live to 100 and he came close, was widowed at 89, remarried a 65 year old a year later, and died at 99. Another one biked to work, also every day. In my first year here I also bought a new 10 speed Rayleigh bike and had no car from Sept to April, but we had a milder winter that year. The bike has been in my garage, unused since 20 years or more.
15 they had this in Eastern Europe, even in some W Europe places. I guess VW at Wolfsburg, this must be a tiny company town and workers would walk to work.
May 6th, 2019 at 2:38 pm
Re the longevity of Teslas, Musk has been telling tall tales about it, but there is a way to tell without actually testing them.
For example, back when people debated if the MD aircraft were safer than their Boeing rivals, did one need to do a full engineering-structural test to find out? One did not even need to listen to the evening news for the accidents. You only had to look at the insurance rates, and if the rate for the MD was much higher, it was much less safe.(assuming insured for same amount)
Similarly for the old Tesla Ss, all you have to do is look at their prices used, and they hold their value extremely well, IMO ridiculously well, a 7 year old with 100k miles still goes for $35k-40k.
May 6th, 2019 at 2:47 pm
that hemi crate motor looked amazing,and sounded even better
May 6th, 2019 at 3:12 pm
Trade relationships are complex things. You may have a lot of clout and force the other country to sign something which they can’t feel good about, but it will come back to bite you.
It’s not just the Chinese that don’t want to lose face. One will discover that a lot of previously easy cooperation on thousands of other topics becomes very difficult very quickly.
Trade is but one part of two countries relationship.
May 6th, 2019 at 5:40 pm
That Hellephant crate motor would be perfect in my upcoming Miata project. Fingers crossed for more production. Lol
May 7th, 2019 at 8:11 am
21 Here is a hellcat Miata and in the video they say its a bit scary to drive. Not sure another 300 hp is needed.
https://www.youtube.com/watch?v=4XZtpLHNbzg
May 7th, 2019 at 10:20 am
22 Krrazy. Looked for a few mins. Being so lightweight, one would think that they would have to strengthen quite a few components to handle all this extra HP
May 7th, 2019 at 10:56 am
23 Yeah I think they said they used a Pontiac Solstice rear end. They said it was an easy install which would be a good thing as I’m guessing it wont last long.
May 7th, 2019 at 10:59 am
24 cont- Although I have an uncle with a 1928 model A with a blown 289 that runs the 1/4 mile in the 11′s and he is using a Ford Maverick or Pinto rear end. Also because it was an easy install and proper width, but he has destroyed a couple already.
May 7th, 2019 at 5:48 pm
when the industrial revolution started in the UK, the fabric mills and coal-steel plant owners built and rented homes to the workers. Problem was if you lost your job, you lost your home and the owners had lots of leverage. Hence the invention of unions to combat employer pressure. London builds homes for emergency workers so they can afford to live in expensive areas and get to work without massive commutes.
As for EV longevity- how many buyers of used cars presume their ICE engine will last 100K+ (insurance premiums don’t). Some parts will last longer (brakes etc) while others may fail as weather patterns equals hotter-wetter-colder snaps that put components under more pressure.
As to LA- electric bikes exist and mass-transit has Air-Con. The real issue is respect- who wants to say they don’t own a car. It will happen when smog starts making whole neighbourhoods toxic to live in (like China-India-London city) and start taking the local council to court for health related damages. It doesn’t happen in China-India as they have few if any legal rights (or can’t pay a lawyer).
Moodys must be waiting for the Ford-GM fees. Tesla can still sell plenty more cars to sell into the SUV and a bigger ModelS to to compete with the BMW7/S-Class/Audi8. Lots more German sales to convert. Note Model3 is still in very tight supply into Europe and even less to Asia