Joe White Global Autos Correspondent
Greetings from the Motor City!
In the Carpathian mountains of Romania, there’s a mountain road with fantastic twists and turns that is regarded as one of the best drives in the world. But today, the Transfagarasan highway’s kinks will serve as a visual metaphor for the state of the auto industry, and especially its most valuable player, Tesla.
There’s no way around it: Today’s news from the World of Cars is dominated by Elon Musk’s efforts to plug China into his AI Machine, and the turmoil at Tesla as it struggles to sell more EVs.
There’s also breaking news from Europe, where Reuters reports that Volkswagen and Renault have scuttled a plan to develop low-cost EVs together.
And in Alabama, Mercedes and the United Auto Workers are waiting for the results of a pivotal vote.
One more thing: Next week, I will be in Munich for the Reuters Events Automotive Europe conference. I am looking forward to interviewing Stellantis CEO Carlos Tavares, Volkswagen CFO Arno Antlitz and other senior industry executives.
The Auto File will hit your in-box on Monday and Thursday next week – a concession to the conference schedule and the timing of trans-Atlantic travel.
Have a great weekend! Let’s go mobile!
Today -
* Musk’s Chinese AI deal
* VW, Renault scrap their BYD-fighter
* The UAW’s win streak on the line in Alabama
* Can AI cure Tesla’s Detroit Blues? Elon Musk told investors last month that Tesla’s future depends not on selling EVs, but on deploying artificial intelligence in robots with legs and wheels. Musk is running fast to prove this strategy is for real.
Reuters reported Friday that Musk is working on a deal to use data from Teslas tooling around China to feed his Full Self Driving artificial intelligence machine. Tesla could set up a new data center in China, export Chinese data to its existing AI training computers, or both.
Video captured from car cameras is gold for training AI, Musk has said.
Musk is trying to negotiate a path around Chinese government restrictions on collecting and exporting vehicle data, and U.S. government efforts to clamp down on the transfer of advanced AI technology to China by U.S. companies.
Rising tension between China and the United States over EV trade won’t make Musk’s task easier.
Reuters also reported Friday that the government of Shanghai, home to Tesla’s Chinese factory and other operations, has signaled it will ease restrictions on transferring certain data – including connected car data - outside the country. If the Shanghai plan becomes fact, that would be a win for Tesla and other foreign companies.
Musk’s apparent progress toward the goal of feeding giga-truckloads of Chinese data into Tesla’s AI training computers comes at a critical moment. Because in other ways, Tesla is becoming more like a Motor City Three automaker – though Elon Musk’s management style puts a unique spin on things.
Reuters revealed new details this week of how Musk abruptly fired the entire staff that supported Tesla’s Supercharger EV charging network, putting the future of one of Tesla’s most valuable assets in question.
Musk is slashing jobs and scaling back product plans as he tries to match Tesla’s operating and capital spending costs to a diminished growth outlook for EVs. That’s just what the legacy companies are doing.
Elon Musk is the Henry Ford of electric vehicles. But not all chapters in Henry Ford’s story are upbeat.
Tesla is now losing ground in the EV market it invented – just as Ford did in the 1920s when General Motors pioneered the concept of cars as stylish status symbols, and Old Henry refused to accept that the aging Model T’s days were done.
Here is new data from the U.S. market that illustrates Tesla’s problems.
Tesla’s U.S. registrations fell by 4.1% during the first quarter to 131,754 vehicles, mainly because of a 47% collapse in demand for the Model 3 after the sedan lost eligibility for a $7,500 federal tax credit, according to new data from S&P Global provided to Reuters Auto File.
Overall, U.S. EV registrations grew – that’s right, grew – by 8.7% to 236,774, according to the S&P data.
Models from legacy auto brands drove that growth, including several launched during the past 12-18 months.
South Korea’s Hyundai and Kia together registered 9,291 more EVs in Q1 than a year ago - equivalent to 38% of the overall EV sales gain. The Korean brands have launched EVs that are both fresher looking and more affordable than the comparable Teslas.
Ford, Cadillac, BMW and Mercedes also had big numeric and percentage increases in EV sales. Lexus went from registering just 79 EVs in Q1 2023 to 1,630 in Q1 2024.
Tesla’s direct-to-consumer sales model gave it an advantage when the company’s vehicles were in high demand. Tesla’s distribution costs were $2,000 a vehicle less than Ford’s, according to Ford CEO Jim Farley.
With sales slowing, Tesla is now stockpiling cars, according to a report from the Jalopnik auto enthusiast website that has ricocheted around the internet. This is an old-school, Detroit tactic – ask your favorite search engine for a history of the term “Sales Bank.”
Tesla is now offering Detroit-style cut rate leases and financing. “Finance Model Y from 0.99%” was the headline on one offer sent via email during the past week.
Hurry! The deal is only good until May 31 – unless it’s extended.
* Essential Reading
* China trolls Biden over tariffs
* The U.S. consumer lending watchdog can carry on
* Trouble at Musk’s brain implant company
* VW and Renault scrap their BYD fighter Volkswagen and Renault have abandoned talks to develop a low-cost EV together that would take on Chinese rivals like BYD, Reuters reported.
The companies did not comment. Sources told Reuters Volkswagen walked away from the negotiations.
The breakdown of the VW-Renault plan to share an EV comes as rival Stellantis is gearing up to launch a 20,000 euro ($21,720) electric city car in Europe developed with Chinese partner Leapmotor.
Chinese EV makers are gaining ground in Europe and planning new assembly plants inside the EU.
The rapid increase in EVs sold in Europe that are built using Chinese supply chain costs very likely changed the calculations for a Volkswagen-Renault EV project. Like Stellantis, VW has Chinese partners with ambitions to build vehicles in Europe. Stay tuned.
* Honda’s EV investment blitz Honda said it will double spending on software and electrification through 2030 to $65 billion, going big while rival automakers – including Tesla – slow capex as Chinese competition and EV overcapacity crush pricing.
Honda had held back on EV spending relative to its peers. Now, CEO Toshihiro Mibe is betting he will get better battery technology for his money than did rivals who went “all in” during their last product cycles on what turned out to be money losers.
As for software, Mibe said he has realized the outlays mapped out two years ago weren’t enough. He joins other legacy automaker CEOs who have concluded the software element of the electrification challenge could be tougher to crack than battery costs.
* The UAW, Mercedes and what’s next United Auto Workers President Shawn Fain should know later today whether the union has succeeded in organizing workers at the Mercedes-Benz assembly plant in Alabama.
A victory would extend the UAW’s winning streak that began with last fall’s record contracts at the Motor City Three and continued with the organizing victory at Volkswagen’s Chattanooga assembly plant last month.
Win or lose, tough challenges lie ahead for Fain’s $40 million campaign to organize non-union U.S. factories owned by Tesla, Toyota and other Asian and European automakers in the union unfriendly American South.
Fain has said he wants to build on the momentum of the UAW’s hot streak. So far, the union has not identified another auto plant where 70% of workers have shown support for the UAW – the threshold for triggering a federally-sanctioned organizing vote.
* The ICE Age isn’t over yet Here’s a sign of how the outlook for electric vehicles has changed: Phinia, the combustion engine hardware supplier spun out of BorgWarner, is now one of the hottest stocks in the U.S. automotive sector – up 46% for the year. That’s better than Tesla (-26%), GM (+28%) or Aptiv, a leader in EV and automated driving technology (-8%) It’s even better than Toyota (+33%)
Remember when internal combustion engine (ICE in AutoSpeak) companies like Phinia were deemed unworthy of Wall Street’s attention because they were cruising to the Great Junkyard in the Sky?
Now, the median U.S. auto supplier stock is down 8%, but Phinia is up 46% and was a featured stop on a bus tour of Detroit auto manufacturers this week arranged for investors by Morgan Stanley’s auto analysts.
Phinia’s moment in the sun comes thanks in part to U.S. consumers who are going electric – but doing so by buying hybrids that still have gasoline motors with fuel injectors and other gear Phinia manufactures.
* Fast Laps
Toyota is testing
an electric version of its HiLux pickup truck in Thailand.
Tesla lost a round in its fight with Swedish unions when a court allowed unions to keep making it tough for Swedish Tesla buyers to get license plates through the mail.
GM and LG Energy Solution will create a $150 million fund to compensate Chevrolet Bolt owners inconvenienced by defective batteries supplied by LG.
Daimler and Volvo, rival truck makers, are forming a joint venture to share the costs of developing advanced software.
Volkswagen’s ID.Buzz electric micro-bus will plug in to the legacy of the Grateful Dead – whose followers made the original VW microbus an icon - at a Las Vegas casino hotel. What a long strange trip indeed.
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(Editing by Susan Fenton)
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