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Runtime: 12:12
0:00 Tavares Tells Suppliers to Cut Prices…Or Else
1:02 Manchin Urges Automakers to Sue Treasury Department
1:50 Li Auto Slashes Sales Forecast…Again
2:53 Nio Gets Approval For 3rd China Factory
3:52 Volvo Kicks Off Production of Electric EX90 In U.S.
4:53 Musk Asks Nvidia To Send Chips to X & xAI Instead of Tesla
5:59 Ford’s EV & Hybrid Sales Up 65% In May
6:21 BAIC & Zeekr Get Approval to Test L3 Systems in China
7:02 BMW Unveils New 1 Series
7:46 VW Expands ID.7 Lineup in Europe
9:05 Autoline’s 2024 Industry Report Card
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TAVARES TELLS SUPPLIERS TO CUT PRICES…OR ELSE
Stellantis CEO Carlos Tavares is giving his supply base an ultimatum: either cut your prices or we’re going to make your parts in-house. Tavares says suppliers aren’t moving fast enough to cut costs on electric cars, and believes Stellantis can move faster. He’s been warning that Chinese EV makers have a 30% cost advantage and that’s how much he wants suppliers to cut costs. He also stopped construction of a battery plant with Mercedes-Benz in Europe so it can change over to making cheaper battery cells. Making things in-house can be very profitable, but it’s also capital intensive. Last year Stellantis spent $9.7 billion on cap-ex, and if he wants to increase vertical integration, Tavares better be ready to spend a lot more than that.
MANCHIN URGES AUTOMAKERS TO SUE TREASURY DEPARTMENT
Well, here’s an interesting twist on what’s happening with EVs in the U.S. Senator Joe Manchin, who played a major role in getting government subsidies for electric vehicles, is encouraging automakers to sue the U.S. government over those rules. He said the U.S. Treasury watered down the legislation by allowing more battery materials and parts to be sourced from China than the law required. He said the legislation was written to reduce America’s dependence on China, but the Treasury’s action means the U.S. will continue to rely on China for years. Manchin says this will hurt domestic automakers, but we doubt very much automakers will sue the U.S. Treasury. After all, they’re the ones buying those Chinese materials.
LI AUTO SLASHES SALES FORECAST…AGAIN
Chinese automaker Li Auto really overshot expectations for its first all-electric vehicle, the Mega van. Last year it sold about 376,000 vehicles, all of them extended range EVs. But it expected to sell 8,000 Mega vans a month, so Li Auto increased its sales target this year to 800,000 units. However, the launch of the Mega ended up being pushed back to March of this year and Li Auto only sold 3,200 that month and a little over 1,100 in April. So, now the company is slashing its sales forecast for a second time. First it went from 800,000 down to a range of 560,000-640,000 units, but now it’s been cut to 480,000 vehicles. You might think that’s because EV demand is slowing in China like most major markets, but that’s not really the case. NEV sales were up an expected 30% or more last month and several EV makers had massive jumps in sales.
NIO GETS APPROVAL FOR 3RD CHINA FACTORY
One of those companies was NIO, who saw its sales go up over 233% to more than 20,500 vehicles. But could it suffer the same over-expectations as Li Auto? Last year NIO sold about 450,000 vehicles, but it just launched a new more affordable brand, called ONVO, and also got approval for a new plant that would bring its production capacity to 1 million units. However, NIO only confirmed it would build 100,000 units a year on one shift – out of a total expected plant capacity of 600,000 units – and the company claimed it won’t have any overcapacity. NIO is also benefiting from expanding its battery swapping partnerships. It has deals with GAC, FAW, Changan, Geely, JAC, Chery, and Lotus and now has well over 2,000 swapping stations in China.
VOLVO KICKS OFF PRODUCTION OF ELECTRIC EX90 IN U.S.
Volvo announced that it has kicked off production of its fully-electric EX90 SUV in South Carolina. The model features a 111-kWh battery that provides 600 kilometers or 372 miles of range based on the WLTP cycle. And its two electric motors provide 380-kW or 517 horsepower. Volvo didn’t say how many electric EX90’s it will build in South Carolina. But the plant already makes the S60 sedan and as we said yesterday, Polestar will make the Polestar 3 there as well. That plant has the capacity to build 150,000 cars a year.
MUSK ASKS NVIDIA TO SEND CHIPS TO X & xAI INSTEAD OF TESLA
Earlier this year, Elon Musk said he was “uncomfortable” further developing AI and robotics at Tesla unless he has 25% control over the company. And there’s all kinds of headlines today saying he might be willing to follow through on that threat. That’s because CNBC reports Musk told chipmaker Nvidia to prioritize shipments of processors to his other companies, X and xAI, instead of Tesla. The automaker is using the processors to develop a supercomputer to help train its autonomous vehicles and humanoid robots. But Elon Musk responded to the report on X and defended the decision, saying that Tesla wasn’t ready to use the chips yet and they would have just sat in a warehouse. He also said that he expects Tesla to spend $3 to $4 billion on Nvidia chips this year. Tesla shareholders will vote next week on whether or not to reinstate Musk’s $56 billion pay package, which was voided by a Delaware judge earlier this year.
FORD’S EV & HYBRID SALES UP 65% IN MAY
Ford posted its sales for May in the U.S. and it had a pretty good month. It sold just over 190,000 vehicles, up more than 11% from a year ago. And the growth came from EVs and hybrids, both of which were up 65%. Ford sold nearly 9,000 EVs and well over 17,000 hybrids.
BAIC & ZEEKR GET APPROVAL TO TEST L3 SYSTEMS IN CHINA
Level 3 autonomous systems are making progress in China. BAIC joined a new intelligent connected vehicle consortium that’s focused on expanding the technology and it already has approval to test L3 systems on expressways. And Zeekr just got the same approval. It will test Level 3 on highways and expressways in Shanghai. However, we’re not sure how capable these systems are. For example, Mercedes has the only approved for sale L3 system that we’re aware of, which also operates on the highway, but only up 40 MPH or about 64 kmh.
BMW UNVEILS NEW 1 SERIES
BMW revealed the new 1 Series. It’s the same model underneath, but it’s been heavily reworked and is a little longer and taller. Under the hood is a range of gas and diesel engines with the top four-cylinder gas pumping out 300 horsepower. Combined with AWD, it will do 0-100 km/h in 4.9 seconds. Since this is BMW’s entry-level car the interior looks cheaper than your usual BMW, but it’s still got a clean, modern appearance with some color accents that add a little youthful flair in my opinion. The new 1 Series will start launching in Europe this October, followed by other markets like Japan.
VW EXPANDS ID.7 LINEUP IN EUROPE
While Volkswagen is delaying the launch of the ID.7 electric sedan in North America indefinitely, it’s expanding the model’s lineup in Europe. The GTX sees a power boost to 250-kW, up from 210-kW for the standard model, which gives it a 0-100 km/h time of 5.4 seconds. It has a range of 595 kilometers or 370 miles based on the WLTP cycle. There’s a wagon version of the GTX as well but that extra weight slows it down by a tenth of a second from 0-100 km/h and it gets 10 less kilometers of range. The ID.7 is also getting a longer-range model called the Pro S with a 709 kilometer or 440-mile range. The wagon version gets 690 kilometers or 428-miles range. All of the new models are equipped with an 86-kWh battery instead of the standard 77-kWh pack. Pre-orders for the models start tomorrow in Europe. The GTX starts just over 63,000 euros or nearly $69,000 while the Pro S starts at about 59,000 euros or about $64,000.
AUTOLINE’S 2024 INDUSTRY REPORT CARD
What do you think is the best car company in the world? You probably have a personal opinion, but let’s look at the facts. And our 2024 Industry Report Card ranks the top automakers in the world strictly by the numbers. You can find our video about it on the Autoline website at www.Autoline.tv, or on our YouTube channel. The Report Card looks at seven different categories that include revenue, operating profit, operating margin, profit per unit, vehicle sales, R&D spending and quality. Then we rank the car companies by who did the best in each category, and then we combine all that to pick the best run automaker in the world. I think most of you will be surprised by who came out on top. And sorry, no hints, you’re going to have to look it up yourself.
But that’s the end of today’s show. Thanks for tuning in.
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How many years worth of Tesla’s profits is Musk asking for as a bonus? Even 1 year’s profits is too much!
Tavares may find most supplies choosing the “or else” option. Looking for a 30% cut in prices is a joke and they know full well that suppliers don’t have that kind of margins on products. Although there can be savings by vertical integration it also comes at a cost. When you have a lighting supplier that does nothing but lighting, they get very good at it. They spend money on R&D and typically have figured out how the be very efficient at what they do. Not to mention utilizing equipment to full capacity as they likely build lights for various manufacturers. Where Stellantis may have to invest in equipment for a low production EV product and will not be able to produce a similar lamp as cheaply as it was being bought from the supplier. End result you may save some money and you might not depending on the product and cost of the equipment. You also may not get the latest technology and or best designs doing it in house rather than using the experts that do nothing but build that component. Having a good relationship with your suppliers can go a long way. Cutting them off at the knees will usually end up hurting you in the end. My 2 cents.
I’m a little confused on the second story in today’s show. Since when does the treasury dept have anything to do with legislation? How exactly did they water down that legislation? Seems that if congress set the requirements that needs to be followed or they should take actions over the treasury dept. Not ask automakers to sue a federal department for not following the rules. How about do your job Senator Joe Manchin and make sure the Treasury dept is following the legislation. Seems like Congress could cut the funding if the criteria aren’t being adhered.
I don’t know about the rest of you, but I find the styling of the VW EVs to be very boring – not something VW has been known for. I can’t find a single design feature that stands out or makes them interesting. Kind of like a 90’s Camry, they just fade into the background.
Anyone else have thoughts on this?
$54 billion is an awfully big number. It’s a very small percentage of all of the companies in the world that have annual sales that reach or exceed that number. I am certain that you could count on one hand the number of CEOs that were paid even $1 billion dollars last year. Mr Musk certainly has high ambitions. Then again, the board agreed to the package at the time, and he delivered the growth necessary to trigger that payday. So, as ridiculous as the figure is, they should pay him. A deal is a deal.
@GM Veteran:
1 yes, I also think the VW EVs are very, very boring. Refrigerators on wheels.
2 yes, a deal is a deal, whether the Board of Directors likes it or not.
@Zeekr: the Zeekr looks very similar to the LUCID Air, doesn’t it?
The “industry report card” was interesting. I was surprised the Stellantis was so high in revenue, operating profit, and operating margin, given that most of their brands are low-mid market, rather than luxury. It looks like all of that profit, and a lot of the revenue was from Ram and Jeep. I doubt that Fiat generated much profit.
The VW EVs are boring, but VW has a history of being very successful with “boring.” Golf was the top seller in Europe off and on for decades, and they never had very flashy styling. Golf is the 2nd best selling car in the world in total sales, after Toyota Corolla, but Corolla shouldn’t count, given all of the totally dissimilar cars using the Corolla name.
@Kit: I thought the TESLA Model Y is the best sold vehicle. Right, wrong?
Since we are talking about my money, I say that Elon should get his pay and that’s how I voted. If you don’t own any shares you don’t get a say.
Wim, I was talking about cumulative sales. Model Y was best selling in 2023.
I suppose Elon should get his money, but the whole thing is obscene, one person getting a “paycheck” of 50, 000 times my wealth, which should get me comfortably through my retirement.
I find it weird that the head of Stellantis is demanding Suppliers to cut their costs 30%, because Chinese vehicles have a 30% price advantage on Total vehicle cost (price reductions that i doubt they will pass on to customers, but I digress)! Yet, if he took 30% less as a salary, could it not cover the saving that he’s demanding? I’m not saying he doesn’t deserve his compensation, but the cost to do the work that supplies ARE doing, may cost them more, especially, as this report and others have said, if they have to develop that content from scratch! Then there is the question of the quality of the product produced? Wasn’t there a report recently that Stellantis suppliers were holding back on delivery of Stellantis products, due to none payment? If so, now Stellantis is demanding they cut costs, or they will build them themselves?! “The behind the scenes, dark side of the auto industry”! Not the place for the faint of heart.
I’m about the same age as Tavares and he has been in the auto industry his whole career like I have. So he should know how this works but here’s a short but true short story about how cost cutting your suppliers can go. About 25 years ago one of the manufacturers (not named) decided that suppliers were just making too much money and could afford to give some of that money back. Even though work was sent out for bid awarded and contracts signed for a certain amount per piece price. A young go getter in charge of purchasing decided during the July shutdown the company would just cut all invoices by 30%. Thinking that the company is so big and so much of the work keeping these suppliers afloat they would basically have no choice but to bend over and take it. They wouldnt risk being black balled. They need the work that bad.
Many suppliers were placed in a tough situation. They relied heavily on this one manufacturer and refusing to take the cut meant loss of almost all their business and certainly any future business. A lot of them without many options bent over and took it. However, a few suppliers like one I was aware of told them to come get their tools. They made engine dampers for Ford, GM, Dodge, Honda and few others. This would be about 40% of their business but were not in the business to lose money and at the new pricing they would be making parts at a loss. Years earlier when they tried to get their foot in the door with this manufacturer they bid on some jobs at basically at break even or even a slight loss to just become a supplier to them. (not uncommon) The manufacturer knew they were getting these dampers at a really good price so they agreed they would come get some of their tooling but said they could keep these first few jobs at the current pricing. The supplier held firm and told them NO! come get all your tooling. For a year the manufacturer fumbled with other suppliers and a mountain of quality issues and got so frustrated that after a year of product delays quality spills and vary little money savings after multiple tool transfers. They came back to the original supplier and begged them to take the business back. At this point the supplier told them they would need to requote all the jobs. They did and added 5% to the old price and 15% to the jobs they were originally breaking even on. In the end the purchasing manager looked like a fool at least with this supplier. In the end instead of a 30% cut it cost them about 10% more. Plus a year worth of headaches and questionable parts. The auto industry is a crazy environment where suppliers have to give money back each year just for doing business with the manufacturer. They have to have cost reductions each year. The contracts only really hold the supplier responsible as the manufacturers will break the contracts leaving the supplier in fear of being banned from any future business if they sued for the contract to be upheld. Leaves me with very little sympathy for the manufacturers and purchasing departments.
As for VW styling. If you can call it that. They could run an ad to replace the old Fahrvergnügen slogan which was (Driving pleasure). To Alltägliches Fahren. (Mundane driving). I’ve never found any VW to be inspirational or exciting. The original bug can be modified into something worth having but I never found anything else to be very desirable. Sorry but that brand is the epidemy of purpose-built transportation. You look at it and say, Yep it’s a car!
VW has abandoned their former enthusiasts, with the Golf GTI and Jetta GLI the only remaining enthusiast models, and manual transmissions are going away on those. Their other offerings, in addition to the so-so EVs, are a few so-so CUVs. They have the nice, but pricey Arteon hatchback, but I suspect most potential buyers would rather have an Audi A5 sportback for about the same price. According to C&D, at least VW is improving the fairly awful controls on the GTI for 2025.