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Runtime: 9:48
0:00 Germany Bleeding ICE Jobs
1:07 VW, Renault, Stella Talk About Joining Forces
2:08 Autos Pushing Down U.S. Inflation Rate
3:13 Ford Slashes Mach-E Prices
3:50 EV Battery Prices Dropping Fast
5:03 No, Cybertruck Doesn’t Rust
6:01 Germany Cuts Truck EV Incentives
6:47 J.D. Power Could Sell For $8 Billion
7:24 GM Stops Colorado/Canyon Sales Over Software
8:09 Rivian Says $48,000 Is Sweet Spot for EVs
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This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.
GERMANY BLEEDING ICE JOBS
Germany’s auto industry is reeling. At its peak in 2016, it built 5.7 million vehicles. That fell to 4.7 million in 2019 and it dropped again last year to only 4.1 million. That’s having a big impact on jobs, especially at suppliers. In 2018 and 2019, German auto suppliers employed 310,000 workers. That’s down to only 270,000 and according to one expert it will fall to 200,000 jobs by 2030 or about a quarter fewer than there are now. He says the shift to electrification is causing the decline and there won’t be enough new jobs created related to EVs to offset it. And the decline has already started. German suppliers Bosch, Continental and ZF have announced they are considering getting rid of tens of thousands of jobs.
VW, RENAULT, STELLA TALK ABOUT JOINING FORCES
And it’s not just European suppliers who are worried. Volkswagen, Renault and Stellantis are so concerned about competition from Chinese automakers that they’re talking about joining forces to make electric vehicles. Bloomberg reports it would kind of like Airbus, where various European aircraft companies joined forces to compete against Boeing. But they’ll need to move fast if this is going to happen. A BYD Dolphin already costs €7,000 less in Germany than a comparably equipped Volkswagen ID.3. It’s unlikely that VW, Renault and Stellantis would merge or even form a joint venture. But it’s very likely they would collaborate on common platforms and combine their purchasing power to bring down costs significantly. The fact that these three companies would even talk about this possibility shows that the EV transition is re-writing the rules of how this industry operates.
AUTOS PUSHING DOWN U.S. INFLATION RATE
When inventory got tight in the U.S. because of Covid shutdowns and the chip shortage, car prices zoomed upwards. Most car dealers were charging well above the MSRP, the manufacturer’s suggested retail price. And that became a major contributor to the spike in inflation we saw from 2020 through 2022. But just as autos helped push inflation up, now they’re helping to bring it down. Kelley Blue Book reports that the average transaction price was down 3.5% in January compared to the year before, with the average transaction at $47,401. Big pickups and luxury cars were discounted the most, while mid-size pickups had the fewest incentives. In fact, Ford is offering incentives on the F-150 Lightning of up to $12,500. And we may see even more discounting coming up soon. KBB says that the sales rate in January actually slowed down despite the drop-in prices.
FORD SLASHES MACH-E PRICES
And talk about Ford cutting prices, it also just took an ax to the MSRP of the Mach-E. Depending on the model, prices are coming down by $3,000 to $8,000. There’s several reasons why Ford’s doing this. For one thing, sales of the Mach-E fell 50% in January in the U.S. market. Also, Tesla cut the price of the Model Y by $1,000 last week. And the Mach-E no longer qualifies for the full $7,500 EV sales credit, it only qualifies for half. So Ford had to respond to these developments.
EV BATTERY PRICES DROPPING FAST
But there’s something else going on here, too. As we reported Monday, the prices of the raw materials needed for batteries are plunging. BloombergNEF reports that lithium was selling for $85 per kilogram in 2022. Now, it’s only $16, an 80% drop. And Cobalt and nickel are down 40%. Bloomberg says that the average price of a battery pack is now $139 per kilowatt-hour, and is down to only $126 in China. So the cost of making EV batteries is coming down fast. And that’s allowing automakers to cut the price of EVs. But make no mistake. They’re only cutting prices to try and boost sales. They would much rather use those lower costs to boost profits, instead of needing them to sell more EVs.
NO, CYBERTRUCK DOESN’T RUST
No doubt you’ve seen headlines about the Cybertruck rusting, but there’s nothing wrong with the truck. It’s related to an issue that’s been around for decades. Fine metal particles that get kicked up during manufacturing, or metal particles from train tracks and rail cars during shipping, often called rail dust or rust dust, stick to the body panels. And when it gets wet they rust. White cars are particularly prone to having this happen. Unfortunately for both painted and unpainted cars like the Cybertruck, it can’t just be wiped away. You need some kind of mild abrasive to cut through it. So, it would be similar to waxing an entire car and it could take a few tries to remove all the dust. Tesla also recommends immediately cleaning things that could corrode the Cybertruck’s stainless steel panels like dead insects and bird poop. Glass cleaner would probably work for that as well as take care of those pesky finger prints.
GERMANY CUTS TRUCK EV INCENTIVES
As we said at the top of the show, the German auto industry is reeling and that may extend to medium and heavy-duty vehicles. The country is dropping its subsidy program for buying an electric truck or bus because it says it needs to consolidate the budget and focus on more essential projects. The program was launched in 2021 and was supposed to last until 2025. Germany also cut its EV incentive program for passenger cars a year early back in December after a decline in electric sales. However, the cut on electric trucks and buses might also be due to high demand. It already started denying applicants for this year. Germany will instead focus on building a charging infrastructure.
J.D. POWER COULD SELL FOR $8 BILLION
J.D. Power may be up for sale, and you won’t believe what it’s going for. Power is best known for its annual automotive reports on quality and is currently owned by the private equity firm Tomas Bravo, which bought it in 2019. Bloomberg reports that it could go for $8 billion. The late Dave Power started the company with his wife Julie in 1968, literally working from their kitchen table. I’m sure he never had any idea it would one day grow to be an $8 billion empire.
GM STOPS COLORADO/CANYON SALES OVER SOFTWARE
General Motors is still having serious software issues. It had to stop selling the Blazer EV, and now it slapped a stop-sale on the Chevy Colorado and GMC Canyon pickups. GM didn’t reveal what the problem is but says it’s not safety related and will affect about 15,000 trucks. GM says once a software fix is tested and validated it will start to ship pickups to customers, which should happen shortly. To help fix its software issues, GM hired Mike Abbot from Apple last year and he’s since brought in engineers from Apple, Google and Meta to change the way GM does software development. But they still have to fix the old software.
RIVIAN SAYS $48,000 IS SWEET SPOT FOR EVs
Rivian’s cheapest model is $70,000 but its CEO says the sweet spot is $48,000. RJ Scaringe told Forbes that the average price of any vehicle, ICE or electric, is about $48,000 and that’s where Rivian needs to be to create a viable option for ICE customers. And as we reported the other day, the EV startup is coming out with a lower priced model, called the R2 that is supposed to compete with the Tesla Model Y.
CAR CRITICS ON AAH
They literally drive every new car that comes into the market. I’m talking about Mark Phelan and Henry Payne. They’re the car critics for the Detroit Free Press and Detroit News, respectively. They’ve got strong opinions on what’s good and what’s not, and they have no problem heaping praise or talking trash. You can hear what they’ve got to say on Autoline After Hours tomorrow, so be sure to join us then.
But that brings us to the end of today’s show. Thanks for tuning in.
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On display for us today from Rivian is the trap every automotive CEO gets into. They take the average transaction price and falsely believe that this should be the starting price. This is why the Chinese OEMs will come in and mop the floor with Rivian and others. Cheap cars are a necessity to stay relevant if you are a mass market brand. If you are a luxury brand, which Rivian most certainly is not, then you can command higher transaction prices. As it stands though, Rivian is a cheap truck with a big price tag and the Chinese will simply undercut them at every turn and this CEO will just be sitting in his office scratching his head in wonder.
Merkur- Well said!
Sean- As these ICE supplier companies start to cut back and no doubt this will cause some to close their doors. I really have to wonder how this will affect ICE service parts. Sure, they are under contract to supply parts for a certain number of years after production but there are a ton of aftermarket manufacturers that will also start to see this decline. My gut tells me those dealer only items are going to get really hard to find and some parts you just wont be able to get making salvage yards a great investment right now.
Rivian has a better chance than the other “startups” of being around in a few years. It sounds like their next vehicle will be a CUV, which is the type vehicle that dominates the US market.
Maybe they should separate themselves from Tesla, in a good way, by removing silliness like using the center tablet for mirrors, air vents, and other things. At least the current Rivians have proper turn signal and wiper controls.
I’d think ZF could be doing a lot of shrinking, as 8- and 9-speed automatic transmissions are replaced by simple one-speed gear reduction units.
There are lots of iron particle removal sprays available. The product is sprayed on the surface and allowed to dwell. The particles will turn purple and can then be washed and rinsed away. Not all are safe on SS, however.
Example: https://www.griotsgarage.com/iron-fallout-remover/
I do not recall any complaints of rusting on the DeLoreans when they were being sold. This issue has come up so soon after launch that I think there is more to it than rail dust and dead insects. There are many variations in stainless steel, depending upon the mix of the elements that it is made from. Each has its own level of rust resistance. My suspicion is that Tesla simply selected a less expensive grade and sacrificed some imperviousness in the process. They do have a long-established attitude of letting their customers be their product testers. I would not be surprised if, in time, they remedy this with a clear coat type of treatment at the plant. One report said that their Tesla Center offered a coating treatment to address the problem but it cost several thousand dollars and the owner passed on it.
If the current owners can get anywhere near $8 billion, they should take it and run. Power’s relevance has been fading fast in the automotive industry, which is one of the few industries that were willing to pay the huge sums they charged for their reports and analysis. Since the days of eradicating serious quality issues are well behind us, (the type of problems that would strand you on the side of the road), these surveys just don’t command the kind of attention from OEM management the way they once did. I don’t even bother reading the press releases from their surveys anymore because they muddled them so much that the results are nearly useless. Consumers don’t seem to pay much attention to them anymore either. So the owners should do as Steve Miller advised, and take the money and run!
GM Veteran, DeLoreans may have been shipped with covers, as are Corvettes and some other cars. That should keep the iron dust off during shipping. Cybertrucks use some kind of 300 series stainless steel, which should be very corrosion resistant.
To me, JD Power and Consumer Reports reliability survey information is interesting, but it doesn’t have much bearing on what I buy. I’ve had cars with high, and fairly low CR reliability ratings, but haven’t had a “lemon” since a 1982 Pontiac J-2000, the first year for J cars.
The problem with the volatility in battery component prices is that there is not enough raw materials being mined for the future volume of EVs. Miners are not interested in a highly volatile price like lithium has. Mines, particularly in western countries have many hoops to jump through for approvals and it takes time. To find your product sells for less than the cost of production is bad news. So, unless miners get supply contracts at a reasonable price, they won’t be opening new mines.
Average transaction price is a fools game. All it takes is some very expensive cars to move the average out of whack. Better to look at the median price of new cars adjusted for volume, which I bet is a lot lower.
The Cybertruck is becoming less and less truck and more and more a showoff vehicle. We should be seeing them at gala events carrying those that want to play at being rich and famous.
I noticed that the brand new Chevy Traverse still has Carplay and A Auto, so there is hope for GM yet.
304 stainless steel rusts, 316 doesn’t. Guess which is cheaper.
I understand if your stainless won’t hold a magnet it’s better. I guess we have a good fridge…
What I’ve read, is that Cybertruck uses a secret formula 30X. I suspect cost and bendability are the top priorities there. I remember that when I was working in a silicon wafer fab, the tubing we used for corrosive gases was 316. Of course, even that will corrode when used for HCl and other highly corrosive substances, especially if there is moisture in the gases.
Good to hear that Traverse still has CarPlay and A Auto. I hope GM reconsiders doing away with them in other models.
While auto prices did increase inflation from 2020 to 2022, the current reduction in prices isn’t lowering inflation, it is just slowing inflation. Unless those prices fall back to pre-2020 levels, you’ll never see a real reduction; it’s just not as bad as it was.
Yep, there’s deflation in car prices, but not enough to reduce overall inflation to zero, or make it negative.
My fridge is painted non-stainless steel, but the 35 year old kitchen sink must be good stuff. No hint of attraction from a magnet.