AD #4080 – Is GM Trying to Torpedo Ford Battery Plant?; U.S. Tariffs Will Raise Car Prices by $1,760; Zoox Starts Building AVs in California

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

U.S. & JAPAN STUMBLE OVER CARS
The U.S. and Japan can’t seem to reach a trade deal. And it’s all about cars. According to a Japanese government official, the U.S.’s auto trade deficit with Japan is holding up the negotiations. Japan’s trade surplus with the U.S. last year was nearly $60 billion and 82% of that gap was Japan’s surplus of cars and parts. But with Trump’s 25% tariff on imported cars and parts, Japan is worried it could harm its auto industry. Japan’s car sector employs 5.6 million people and accounts for 10% of the country’s gross domestic product. And without a deal, Japan is concerned the tariffs could send the country into a recession.

BRAZIL WANTS HIGHER TARIFFS ON CHINA NOW
Brazil’s auto industry is lobbying to speed up tariffs on imported EVs to stop the flood of Chinese cars coming into the country. Industry and labor groups say Chinese automakers are taking advantage of Brazil’s lower tariffs which are currently 10%. It plans to gradually raise them to 35% next year, but Brazil’s auto industry wants the higher rate to hit this year. Chinese automakers control 80% of Brazil’s EV market and this year imports are expected to increase 40% to 200,000 vehicles. Even so, Brazil is open to Chinese automakers building vehicles in the country, which several have already pledged to do.

MOST CHINA PLANTS OPERATE UNDER 50% CAPACITY
We’ve been talking for years about all the manufacturing overcapacity in the Chinese auto industry. And now we’ve got some hard numbers, which were reported by the Gasgoo Automotive Research Institute based in Shanghai. Last year the Chinese auto industry made a little over 31 million vehicles. But it has the capacity to make 55.5 million. Most auto factories are operating at less than 50% capacity utilization, meaning they’re losing money. However, there are a number of automakers operating well over 80%, which is generally the break-even point for an assembly plant. BYD, Li Auto, FAW-Hongqi and Chery all operate over 80%. While Xiaomi and Tesla operate at 95% and 96%, respectively. That means those plants should be solidly profitable. But the overall situation is a mess. And it will be politically difficult to resolve, because closing plants will eliminate jobs, and the Chinese government sees the auto industry as a means to create employment.

TRUMP TARIFFS ON CARS BY COUNTRY
We’ve also got some hard numbers on what the tariffs are going to cost automakers in the U.S. Alix Partners calculates the tariffs will add $30 billion a year in costs and that automakers will pass 80% of those costs onto consumers. It says that on average, prices of vehicles will go up by $1,760. But that’s the average. Cars and trucks made in the U.S. will go up by $500. If they’re imported from Mexico, they’ll go up $1,120. From Canada they’ll go up $880. But everything else, from Japan, South Korea, Europe and the rest of the world will go up by $4,400.

AAH ON HOW TO COMPETE WITH CHINA
Speaking of Alix Partners, we’ve got Mark Wakefield from Alix coming on Autoline After Hours later today. One of the key topics we’ll get into is the new business operating model that Chinese automakers are using, and what automakers in the U.S., Europe, Japan and South Korea need to do to compete with them. Interestingly, it’s not so much about using new technology. It’s more about their product development process. For all of you working in the industry, here’s a great opportunity to get some competitive intel. So join John and Gary when the show goes live at 3 pm eastern time.

IS GM TRYING TO TORPEDO FORD BATTERY PLANT?
Ford Chairman, Bill Ford says the company knows that other automakers are trying to “submarine” its efforts to open a new $2.5 billion battery plant in Michigan. And according to a report in Automotive News, GM has spent six times more than any other automaker on lobbying expenditures in the first quarter of the year. In fact, the $8.2 million it has paid out is more than it’s ever spent in a single quarter since they started tracking these figures in 1998. The main sticking point for Ford’s battery plant seems to be that it’s licensing technology from Chinese battery giant CATL and since CATL isn’t directly involved it was going to allow Ford to receive tax credits for the plant. A source says GM’s support of tighter restrictions on businesses that have ties to China is all about leveling the playing field and some of its lobbying efforts may have paid off. The U.S. House proposed a budget bill that would take away those tax credits, which Bill Ford says “imperils” the project from moving forward. And this would be a highly important battery plant for Ford. It plans to make LFP or lithium iron phosphate cells, which are cheaper and would allow it to lower its EV prices.

BUICK ELECTRA E5 HAS 500,000 MILE BATTERIES
And we find it somewhat funny that GM is lobbying for legislation that will make it harder for Ford to use batteries with tech from CATL when Buick’s refreshed Electra E5 crossover in China is now using battery cells that were co-developed with CATL. They say the cells have lasted up to 800,000 kilometers or nearly 500,000 miles in tests and also helped increase charging speed in the E5 by 30%. The will also be the very first model from SAIC and GM to get an AI voice assistant, which can provide up to 10 responses in a row and will integrate with other AI systems. The new Electra E5 is on sale now with a starting price of just under $21,000.

ZOOX STARTS BUILDING AVs IN CALIFORNIA
Autonomous startup Zoox, says it opened its first plant in the U.S. that’s dedicated to building robotaxis. The facility is located in the Bay Area in California, and once it’s up to full scale, it will have the capacity to produce 10,000 robotaxis a year. However, the plant isn’t set up for welding, cutting or painting on-site. So instead, Zoox has partnered with suppliers to preassemble major parts of the vehicle, which it says streamlines the manufacturing process and lowers energy costs. Zoox will launch its robotaxis in Las Vegas first later this year, followed by San Francisco. It also plans to expand to Austin and Miami within the next few years.

HELM.AI USES VISION-ONLY FOR L4
Tesla has been criticized for using a vision- or camera-based system for its hands-free driving tech because it doesn’t perform as well in low-visibility conditions compared to systems that also use lidar. But Tesla’s not the only one taking this approach. While AI software company Helm.ai says its system will work with other sensors, its main focus is vision-based solutions. And it just introduced Helm.ai Driver, a real-time neural network that only requires input from its surround-view vision perception stack. So, no HD maps, lidar or additional sensors. It says the system can provide Level 2 to Level 4 autonomous driving on the highway and city streets and plans to license the software as well as integrate it into production vehicles. Honda is one of Helm.ai’s investors and is expected to use its tech in the Honda Zero series, which is scheduled to start launching next year. Helm.ai says it’s also in talks with many OEMs and we’ll note that VW is one of its other investors.

But that brings us to the end of today’s show. Thanks for tuning in and I hope to see you later today.