AD #3615 – Ford Sees Slower EV Adoption; Audi Healthy Despite Poor EV Sales; Congress Moves Forward On AM Mandate

This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.

FORD BOOSTS EARNINGS
Ford posted its second quarter earnings yesterday and the numbers sure do look a whole lot better than they did a year ago. The company sold 1.1 million vehicles, up 8%. That brought in $45 billion in revenue, up 12%, and it put $1.9 billion on the bottom line, which was more than double the $700 million from last year.

FORD SEES SLOWER EV ADOPTION, MUCH HIGHER LOSSES
But the real interesting info came from the earnings call that company executives held with Wall Street analysts. Here are some of the nuggets that came out of that conversation:

• Ford is really putting a heavy emphasis on hybrids. 10% of all F-150s and 56% of all Mavericks sold in the U.S. are hybrids, and Ford expects to quadruple its hybrid sales in the next five years.
• It’s also going to unveil that all-new F-150 and F-150 PowerBoost hybrid at the Detroit Show in September.
• Ford Pro, which handles all the company’s commercial trucks and vans is a $50 billion business with the potential to become a high-margin, software, and service company like John Deere.
• Ford Pro already has 550,000 paid software and services subscribers, with 50% gross profit margins.
• That’s the good news. The bad news is that CEO Jim Farley says near-term EV adoption is going to be slower than they expected. CFO John Lawler says they’re not going to see a contribution margin breakeven for EVs this year. In fact, they see much higher losses coming. Ford originally thought it would lose $3 billion on EVs this year. Now it expects to lose around $4.5 billion. But it still believes it can deliver 8% margins in 2026.

BIDEN ADMIN REJECTS OEM OPPOSITION TO NEW CAFE RULES
The Biden Administration is getting heavy pushback from automakers about its proposal for stricter vehicle emission standards. To meet the standard, EV market share would have to be 67% by 2032. General Motors warns that the new rules could cost the auto industry anywhere from $100 to $300 billion in penalties from 2027 to 2031. That’s about $1,300 to $4,300 per vehicle. But the Administration calls that “pure speculation and inaccurate.” It says the rules will cost about $3 billion by 2032, and will save consumers more than $50 billion in fuel savings over a vehicle’s lifetime and that overall the benefits will exceed costs by more than $18 billion. NHTSA is expected to release its formal proposal for new Corporate Average Fuel Economy or CAFE targets later today.

HYUNDAI USES AI TO HELP SUPPLIERS CUT CARBON EMISSIONS
All the major automakers have initiatives to reach carbon neutrality at some point, which includes slashing emissions from the companies that they get parts from. That means suppliers have to agree to these terms to be awarded new contracts and then they have to report carbon emission data back to the automakers. As you can imagine, that can be a huge time and cost burden for suppliers. So, Hyundai and Kia are turning to AI and Blockchain technology to help. They developed a new system that is able to compute carbon emissions at every stage of a company’s supply chain, down to the raw materials, and use that to predict future emissions. The Group can then use that information to decide if it needs to make changes or not, while saving suppliers a bunch of time and money.

AUDI HEALTHY DESPITE POOR EV SALES
Even though we’ve kind of been bagging on Audi for poor EV sales, it’s actually doing really well overall with its ICE vehicles. In the first half of the year, VW’s luxury brands Audi, Bentley and Lamborghini sold nearly 920,000 vehicles around the world, which is up over 15% from last year. And Audi accounted for more than 907,000 of those nearly 920,000 vehicles. Porsche is not included because it’s now an independent brand. Audi also saw its sales go up 2% in the first half of the year in China, which was fueled by a more than 20% increase in the second quarter. In total for the first half of the year, VW’s luxury brands generated 34.2 billion euros in revenue.

VW BUYING ELECTRONIC ARCHITECTURE FROM XPENG
We’ve got more details of that deal by Volkswagen to buy EV technology from XPeng in China. VW is going to get XPeng’s electronic architecture, the smart software that travels on that architecture and the hardware that goes along with it. Remember, this is all the stuff that VW’s software group called Cariad was supposed to have done. But Cariad stumbled badly, which is why VW is buying the technology from another automaker. XPeng will get fees and part of the profits for each unit sold, once VW models on the platform start hitting the market. But it also turns out that XPeng really needed a deal like this. Its SUV, called the G9, has been a flop in the marketplace, and XPeng had a lot riding on it. So VW gets the tech that it needs and XPeng will get some badly needed cash flow.

BMW BRINGS L3 TO CHINA
Level 3 autonomous driving, which is hands off and eyes off, keeps making inroads in the US and Europe. Now BMW is gearing up to introduce Level 3 driving in its vehicles in China. Gasgoo reports that BMW has started taking steps to make sure it meets all regulatory requirements and that it will launch the technology in China by the end of the year or early 2024.

INDIA SAYS NO TO BYD PLANT
Geopolitics is killing BYD’s deal to build electric vehicles in India. Earlier this year, the Chinese automaker and its joint-venture partner in India, Megha Engineering and Infrastructures, submitted a $1 billion proposal to the Indian government to produce EVs in the country starting in 2025. But several agencies said they’re opposed to it over security concerns. And even though a formal decision hasn’t been made, Reuters reports that BYD wants to drop the deal entirely. India has stepped up scrutiny of Chinese investments because of border disputes between the two countries. And it also rejected a $1 billion investment from Great Wall Motors to build vehicles in the country.

MUSTANG DARK HORSE R IS PURE TRACK CAR
Ford is pushing the new Mustang into racing more than ever before. It’s now coming out with a track-only version of the car that it expects to compete in Mustang-only racing series. Under the hood is a 5.0L V8, similar to the one found in the Mustang Dark Horse. It will make 500+ horsepower and is mated to Tremec manual transmission. The car also comes with a host of performance and safety upgrades that make it suitable for the track. But as many of you probably know, those upgrades don’t come cheap. The Mustang Dark Horse R starts at $145,000 and deliveries start next year.

CONGRESS MOVING FORWARD ON AM RADIO MANDATE
Automakers would love to get rid of AM radio in their cars. Automotive News reports that BMW, Mazda, Polestar, Rivian, Tesla, Volkswagen and Volvo do not offer AM radio in their EVs. But bipartisan bills in the U.S. Senate and House are moving forward that would mandate AM radio as standard equipment. A lot of people seem to believe that AM radio is passe and that no one listens to it anymore. But according to the Nielsen Report, 58.8 million people listen to AM radio every week and about 82 million listen every month and there are well over 4,000 AM radio stations in the U.S. AM radio is considered a key communication outlet during emergencies like hurricanes or other severe weather, which is why Congress wants to mandate it as standard equipment.

But that brings us to the end of today’s show. Thanks for tuning in and I hope you have a great weekend.