AD #3433 – Toyota Backtracks on Hybrid Strategy; China Faces EV Price War; Tesla Changes Build Strategy
October 24th, 2022 at 11:57am
Listen to “AD #3433 – Toyota Backtracks on Hybrid Strategy; China Faces EV Price War; Tesla Changes Build Strategy” on Spreaker.
Follow us on social media:
Runtime: 9:41
0:08 China Faces EV Price War
1:19 Nissan Pushes Renault For Equality
2:36 Toyota Backtracks on Hybrid Strategy
4:14 AVs Burn Through Tons of Capital
5:09 Renault Uses OTA for After Sales Upgrades
5:58 Arrival Shifts Production from UK To U.S.
7:32 Tesla Changes Build Strategy
8:31 Continental’s Display Business Explodes
Visit our sponsors to thank them for their support of Autoline Daily: Bridgestone, Intrepid Control Systems, and Schaeffler.
This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.
CHINA FACES EV PRICE WAR
Tesla cut the prices of its Model 3 and Y in China by 9% or nearly $2,000. That’s triggering worries that an EV price war could break out in the world’s largest market. Analysts say it’s also a sign that the growth of EV sales in China, though still strong, is slowing. Tesla told Reuters that it was able to cut prices because its Shanghai plant is hitting higher levels of capacity utilization and that supply chain issues are getting resolved. Here’s our Autoline Insight. One of the problems that automakers face in China is that there are so many car companies, literally hundreds of them. New EV models keep pouring into the market every month and more are on the way. At some point, you’d expect to see most of them get bought up or go out of business. But so many of these companies are owned by municipalities and provinces that see them as important sources of jobs. And they’re going to keep those plants open to protect those jobs no matter what. And that’s why the pressure is building that could trigger a price war.
NISSAN PUSHES RENAULT FOR EQUALITY
Despite Nissan owning less of Renault than Renault owns Nissan – 15% vs 43% – the Japanese automaker might hold the upper hand as the two are trying to renegotiate their alliance partnership. Renault is splitting its business in two; the EV side will be called Ampere and the legacy side will be called Horse. In order for Renault to pull this off it’s going to need a lot of capital and it wants Nissan to invest in the new EV side. Bloomberg reported that Nissan could invest $500 to $700 million in Ampere for a 15% stake in the company, but Nissan also wants Renault to lower its stake in Nissan to 15% to help balance out the relationship. As the two sides try to work this out Reuters reports that technology-sharing has become a sticking point in the negotiations. Renault doesn’t care so much about Nissan’s old tech, but it does about its intellectual property, engineering and common projects related to future stuff, especially the all solid-state batteries that Nissan is developing. So, it looks like Renault might have to give a little to get a little.
TOYOTA BACKTRACKS ON HYBRID STRATEGY
Just a couple of weeks ago Akio Toyoda doubled down on his defense of hybrids, saying they represent a better strategy for carbon reduction than electric cars do. But behind the scenes it’s a different story. Reuters reports that the giant automaker is considering doing a strategic U-turn. It already suspended work on several future EVs as it considers what to do. Toyota currently uses its e-TNGA platform for its EVs, but that’s a modified ICE platform. So now it’s considering going with a clean-sheet EV platform instead. That could take 5 years to develop, but it would give Toyota a more efficient platform that is cheaper to manufacture. Toyota miscalculated how popular electric cars would become. And over the last 5 years’ battery costs came down faster than it expected. And all of this is forcing the company to reconsider a strategy that was heavily weighted towards hybrids.
AVs BURN THROUGH TONS OF CAPITAL
While there are some examples of autonomous vehicles operating in the real-world, like Waymo and Cruise’s robo-taxi services, it’s still unclear when most companies will start generating revenue from AVs. Bloomberg reports that automakers, suppliers and startups have spent $75 billion combined on autonomous driving technology. But investors are getting impatient. AV companies Aurora, TuSimple and Embark Technologies have seen their stock drop by at least 80% this year. Intel downgraded the targeted valuation of its self-driving business, Mobileye, from $50 billion just ten months ago to $16 billion last month. And Morgan Stanley analyst Adam Jonas recently said that autonomy could be a 10 or 20-year proposition.
RENAULT USES OTA FOR AFTER SALES UPGRADES
Renault has said that it wants to keep its vehicles more up to date over a longer period of time, even across multiple owners. One way it plans to do that is with over-the-air updates. But as we know a vehicle will go through changes and maybe some modifications over its lifetime. Renault is now taking this into account. The software system in the all-electric version of the Megane can perform automatic updates but it will also save information related to after sales upgrades, like an alarm system or getting bigger wheels. Bigger wheels can impact things like GPS data or range estimates and it would be nice to not have to reprogram that kind of stuff after every update.
ARRIVAL SHIFTS PRODUCTION FROM UK TO U.S.
Commercial EV startup Arrival, which is based in the UK, announced it’s going to re-focus its business on the U.S. market with a family of van products. Instead of producing vehicles in large plants that can cost hundreds of millions of dollars and take years to build, Arrival is opening manufacturing sites in warehouses, what it calls microfactories, that only cost $40-$50 million and take six months to set up. But Arrival says scaling production at its UK microfactory requires significant further investment in tooling and working capital, so it’s going to shift its business to its microfactory in Charlotte, North Carolina. But it will continue to make a small number of vehicles at the UK factory. A big reason Arrival is moving to the U.S. is to qualify for tax credits under the new Inflation Reduction Act, which provides up to $40,000 in subsidies for commercial vehicles.
TESLA CHANGES BUILD STRATEGY
Ever wondered why Tesla was in a mad scramble at the end of every quarter to deliver cars to customers? Here’s the answer. Tesla would batch produce cars in Fremont and Shanghai by geographic region, and then ship them out in big groups. Batch producing cars can streamline assembly operations and reduce costs. But it also caused costs to go up in other areas, like logistics. Even Tesla admits it caused “extreme concentrations of outbound logistics.” And then it ran into problems with “ships from Shanghai to Europe and local trucking within certain parts of the U.S. and Europe.” So now Tesla will stop batch production and will smooth out the build across each quarter to reduce peak loads for outbound logistics. That will cut overall costs, and probably get vehicles to customers faster.
CONTINENTAL’S DISPLAY BUSINESS EXPLODES
Here’s a stat that helps show just how gaga automakers are going over big display screens. The supplier Continental says that its display solutions have generated 7 billion euros over their lifetime. But its new OLED and pillar-to-pillar displays, which was first introduced last year, have already brought in 2 billion euros worth of orders. And it won’t stop there. Conti expects to build more screens and generate even more sales. But because the pillar-to-pillar display is about 5 times bigger than a conventional digital instrument cluster it’s also having to expand its production facilities.
But that brings us to the end of today’s show. Thanks for tuning in.
Thanks to our partner for embedding Autoline Daily on its website: WardsAuto.com
Share
Permalink
Comments (34)
October 24th, 2022 at 12:01 pm
you heard seen on autoline daily, its not rocket science STOP! buying prices will come down.
October 24th, 2022 at 12:02 pm
close your wallets, let things cool off.
October 24th, 2022 at 12:23 pm
75 Billion invested in AV tech and investors are getting impatient with their bad investment. Too bad! I say. We shouldnt release more before the technology is ready just so investors can get some returns. Yes, AV is a good 20 years out for a level 5 in anything more than select areas. There are huge hurdles to still be overcome, even in the states with good weather conditions. I’m not sure they have even begun to tackle the challenges with snow, fog , sleet, freezing rain, and salt covered roads where all the pavement blends in with the white lines.
Not saying they should stop development but maybe investors were fed a little more optimism than reality.
October 24th, 2022 at 12:24 pm
Sean, Any word on what is happening with the car assembly plants in the UK? Many of them were talking about closing now that the UK has left the EU. However, with the UK currency dropping, doesn’t it look more attractive as an assembly site?
October 24th, 2022 at 12:24 pm
We all better rush out and buy that EV we so richly deserve before the price drops. Looks good on Tesla with their customer unfriendly pricing.
October 24th, 2022 at 1:08 pm
4 BMW is still building the Mini 3- and 5-door hatch and Clubman in the UK. I don’t know about their future plans.
October 24th, 2022 at 1:58 pm
@4 the recent drop of the British Pound certainly lowered U.K. production cost for exported vehicles. Decisions on production footprint are made on longer term currency exchange rate trends, not on what is happening this year and next, though. If the decision has been made to close, the OEMs may decide to close a year or so later.
October 24th, 2022 at 2:33 pm
7 Wouldn’t part of the decision be based on issues, both tax and otherwise, of getting parts from the EU to the UK, and cars from the UK to the EU?
October 24th, 2022 at 2:36 pm
@7 oh, yes, those and additional factors. Those are high-stakes decisions with a lot of work needed to have the highest probability of the best decision. And some luck, too, because as much work as is put in, not everything can be foreseen and predicted
October 24th, 2022 at 3:01 pm
great show, fun way to kick off another week of autoline
October 24th, 2022 at 3:10 pm
So Tesla is starting to behave more and more like a traditional OEM…
October 24th, 2022 at 3:10 pm
So Tesla is starting to behave more and more like a traditional OEM…
October 24th, 2022 at 3:13 pm
Um, a 9% price drop or about $2,000 for Tesla in China? My 6th grade math skills say that would mean a Tesla there would cost about $22,000. That can’t be right!
October 24th, 2022 at 3:16 pm
2 – “Not saying they should stop development but maybe investors were fed a little more optimism than reality.”
You got that right! I can’t recall a more overhyped technology where the development timeline was so badly exaggerated. However, there have been some very intelligent voices that have been telling people for nearly ten years that it will take much, much longer to get to Level 5 than companies were saying.
October 24th, 2022 at 3:19 pm
The Arrival announcement is so lame. It doesn’t cost appreciably more to outfit a plant in the UK than it does in the US. I think Sean is right. Its all about the incentives.
By the way, I have been hearing about the six month build on their micro assembly plants for at least 3 years now. Another startup with a story that is much more talk than substance.
October 24th, 2022 at 3:33 pm
I’ve been in queue for a model Y which was scheduled to be delivered in Jan – Mar. It’s now predicting in the next few days. I went to a Tesla store to ask for a test drive and general questions, was very surprised how dismissive / rude the person was. Caused me to back out, I got a Volvo recharge instead. If my experience is happening to others, I would not be surprised Tesla sales will cool off soon. Competitive landscape and service of dealers are things that come to mind.
October 24th, 2022 at 3:57 pm
13 The price of the Model Y was reduced 9%, but that is 3855 US dollars drop, not 2000. The cheapest Model Y is now almost $40,000 US.
https://www.reuters.com/business/autos-transportation/tesla-cuts-starting-prices-model-3-model-y-china-2022-10-24/
October 24th, 2022 at 4:00 pm
16 Interesting. I had a relatively good experience getting a test drive of a Model 3 about a year ago, and I told them up front that I wouldn’t be buying, since I don’t have home charging. They were reasonably pleasant, and I got a 30 minute “solo” test drive. This was in Merritt Island, FL. I don’t know if I could have test driven a Y, S, or X.
October 24th, 2022 at 4:10 pm
@16 I drove a friend of mine from Detroit to Columbus, OH, to pick up his Model X. I was a bystander, but I thought my friend received mediocre service for picking up an expensive vehicle. They knew he came over from Detroit to pick it up and still the battery was half-full, so barely enough to make it to his home.
It may not be too bad for TESLA: the dealerships of their competitors are also bad. We bought two Mach-e’s last year and have had “mixed experiences”, so to speak. My son’s Mach-e GT needed repair of the electrical system which has taken three weeks. When he asked for a loaner they told him they could give him a rental car. His budget was $35/day without insurance. Just for the fun of it he took home the Toyota Yaris they offered him. And drove the E 300 of his wife, who works from home. When he picked up his $80k vehicle he had to stop at the nearest charging station and got their with 3 miles of range left. The vehicle was pulling to the left but he could not make it back to the dealership. He needed to charge it first and work from his car. They tried to correct the pulling and it is still pulling. You can’t make this up. My son considers the dealers such amateurs that he just laughs about it. It is very sad, actually. And it would be a horror show if you have to be able to count on your vehicle for work.
I have never understood why many car dealerships are so bad. In my personal experience the more expensive the car the worse the dealership was. My low point was buying a new S Class (clueless Sales “Manager”), while I had top-notch experiences when buying Chevrolet Trax, GMC Terrain and Buick Regal for my kids. My wife’s Lincoln purchase experiences were also from high quality sales persons.
October 24th, 2022 at 4:35 pm
#19.) I’m sorry to hear that you have had such bad experiences from dealerships. I’ve purchased a number of vehicles, from different manufacturers and have only had a couple of bad experiences from dealerships. The thing that is most frustrating regarding dealerships, is that those from the legacy OEMs are privately owned and it’s only so much the automaker can do to try and “fix” them! While the issue that your son had with his vehicle (which seems like it could be rectify by a competent technician), only is only made 1000 times worst, because of the service that he was provided; which has nothing to do with the vehicle! Smh
October 24th, 2022 at 4:55 pm
It’s pretty clear that Toyota has some major decisions to make. Yet, working with an existing ICE platform doesn’t necessarily have to be as bad as it seems! Car and Driver did a story, where it compared a EV Genesis G80, with the new EQE sedan. The BEV G80 was a manufacturer retrofit ICE platform, while as we know, the new EQE is a ground up platform! With the models that were used for the comparison, the retrofitted G80, in their opinion, bested the purpose built EQE on efficiency, range, power and subjective appearance. The biggest advantage the EQE has, as new platform, Mercedes has something to build on for the future. While the retrofitted G80 was probably as good as an EV could get, working from an architecture that was originally designed for Internal combustion vehicle and all the related ‘scar tissue’!
So, the fact that Toyota may have to work around their current ICE platform, may not necessarily be a bad thing. The problem will be the amount of investment! For, it will be expensive to retrofit their existing hardware, while at the same time, building a clean sheet BEV platform that will cover multiple vehicle classes, sizes, purposes and brands! And that’s just the hardware! The software is a whole different side to this, plus work AV side to this proposition. For the company that did the most to introduced electrification into the modern vehicle, for them to be this far behind the EV revolution is it head scratching.
October 24th, 2022 at 5:03 pm
@20 Well, we have had many good experiences. Just not with the “high-end” vehicles. Having to explain an Audi salesperson that blue A8′s exist and looking up the color code on his computer is frustrating for me. I just look around the office to see if I am filmed by the “Candid Camera” team which is waiting for me to lose my patience.
I especially respected the Terrain/Trax/Regal salespersons for getting my kids enthusiastic about the features of fairly simple vehicles and make them proud to get one. And as I said, my wife’s Lincolns were not luxury vehicles, but the dealership made it a luxury experience.
My friend sold his company and drove to the Ferrari dealership the next day. He owned a Maserati at that time, so he was not parking a Yaris in front of the dealership. The Ferrari “Sales” person told my friend, who was thinking this would become the best day of his life, to stay away from the vehicles and was condescending to him. My friend had dreamt for decades about being able to go to a Ferrari dealership one day and just buy whatever he wanted. His dream was shattered, he capitulated and left. He continued to drive his eight-year-old Quattroporte.
October 24th, 2022 at 5:34 pm
Brexit has been very hard on smaller businesses that aren’t highly specialized and add a lot of value to a product.
Some have relocated to continental Europe, some have closed shop, and many are struggling to compete simply because timely access is now impeded by forms and regulations, whereas competitors from the EU can ignore internal borders.
October 24th, 2022 at 6:41 pm
19 That is crazy with the S-Class. That is about the ultimate luxury car, short of a Rolls-Royce or Bentley, and you’d think the dealer would have at least one person properly prepared to deal with the customer.
Regarding your son’s Mach-Es, I’ve had four Toyotas, and one thing that helps the mediocre dealers, is that the build quality of the cars is good. They piss me off when getting my “free” oil changes, when they leave greasy hand prints and foot scuffs in the car which I take to them with an immaculate interior, but there is no pulling in the steering, because they get that kind of stuff right when they build the car. It kind of makes up for some sloppiness at the dealer, if the car, basically, works as it should.
October 24th, 2022 at 6:46 pm
22 It seems that Ferrari are notoriously jerks. They even have mega-wealthy, mega-car nut Jay Leno to where he will never buy a Ferrari, because they require that you buy a few “lesser” cars before you are allowed to buy the more “desirable” ones.
October 24th, 2022 at 6:52 pm
21 When Toyota wants to make a lot of EVs, they can, if they have the battery suppliers lined up. The software for EV powertrains is very, very simple, technically, compared to the excellent hybrids Toyota now sells.
October 24th, 2022 at 7:48 pm
13,17 Using the yuan figures stated in the article, by my calculations the discounts for Model 3 are right around 5% and the Model Y at 8.8%.
October 24th, 2022 at 10:02 pm
27 Yeah, that’s about what I found. I got the current dollar price of the Y by googling “288,900 yuan to USD.”
October 24th, 2022 at 10:13 pm
Interestingly, the exchange rate between the yuan and USD is not a lot different from when I was in China 28 years ago.
October 25th, 2022 at 7:23 am
Typical design to launch time for a vehicle now is between 3 and 4 years. So if Toyota throws resources at it they are likely only 3 years away from being able to launch a couple BEV designed from the ground up. Plenty enough time for this 2035 deadline. They gambled that hybrids would play a bigger part as they should. But the folks pushing the regulations want pure BEV’s. Which to me just means for those people who refuse to get an Electric car or live/work where a BEV doesnt meet their needs. They’ll just hold onto the ICE vehicle for as long as they can. Where maybe a hybrid would have met their needs they’ll stick with gas alone.
I wouldnt worry too much about Toyota. They’ll have the vehicles they need to support the demand. IMO
October 25th, 2022 at 7:47 am
The linked Reuters article about Toyota didn’t really say that the company was backing off of their hybrid strategy, but that they were changing their way of building EVs. In fact, the article said “hybrid” only once, and not in regard to backing off from them. Hybrids will continue to be an increasing percentage of Toyotas that burn gas.
October 25th, 2022 at 7:47 am
25 When I was deciding to build a kit car, there were many kits on the market. Now I do like the Ferrari designs, I mean I grew up watching “Magnum PI”. So who didnt? But I’ve always loved the Lamborghini’s and “Cannonball Run” was another great inspiration. I have done the hotrod thing and built a 36 Ford coupe and a 35 Chevy Sedan. I have family with a few Cobra kits and I wanted something unique. As I was reading the background behind Lamborghini I knew this was what I was after. The arrogance that surrounds Ferrari just always rubbed me the wrong way. I mean yeah you build beautiful fast cars but when I can take a 1970 Nova and dump 10K into a SBC and gap your Ferrari its not that special. So speed aside it was down to the body design and yeah thats always in the eye of the beholder. I just found Lamborghini’s to be more eye catching. Plus I just didnt want to be associated with the snob mentality that comes with a Ferrari. I guess I root for the underdog.
If you dont already know the story here is a short summary of their rivalry.
https://www.thevintagenews.com/2016/06/23/story-behind-ferrari-lamborghinis-rivalry/
October 25th, 2022 at 7:53 am
31 As it should. I think many know that BEV’s will just not work for everyone in every application and a hybrid is a great middle ground. I wasnt trying to say Toyota would back off Hybrids but I think they were banking on them being a much bigger part of going electric. Which still may happen. But for now it just seems that everyone thinks we are ready to jump from gas to full BEV is a single bound. I dont think most will go that route and before BEV ever see 50% of the market I bet the other 50% will already be Hybrids. These regulations and banning of ICE vehicles will be pushed back and I just dont see Toyota being in a bad position.
October 25th, 2022 at 8:39 am
32 Interesting. Lamborghini’s car business is newer than I realized, with the first cars sold in 1964. They still have some of the best true exotics, and the almost ultimate VW Touareg. Bentley probably has the ultimate Touareg. I guess Lamborghini plans to make their sports cars hybrid, and then electric by about 2030.