Al Root
Your car is now an instrument of politics. Go figure. Investors should beware of the rhetoric -- and encourage auto makers they hold stock in to address it.
Tuesday, The New York Post reported that unionized workers at Stellantis fear that electric vehicles mean fewer jobs for them in the future. That belief is a problem for Kamala Harris and car companies.
The most pressing problem might be that it isn't true.
Relatively speaking, Harris, of the two Presidential candidates, is the pro-EV one. President Biden enacted purchased tax credits for electric vehicles and Former President Donald Trump, who is facing off against Harris, has promised to repeal some EV subsidies.
What's more, Michigan -- and its 15 electoral college votes -- qualifies as a toss-up, based on recent polling. If auto workers, retirees, and their families vote against EVs, it's a clear win for Trump.
Objectively, EVs are just one form of personal transportation that, when done right, lower total costs for consumers, and have no tailpipe emissions. They aren't any more good or bad for the auto industry, or the U.S. economy, than any other vehicle models.
It may be possible to argue EVs are a positive. Total employment in U.S. car and car parts manufacturing is up more than 20% over the past decade -- a period spanning multiple administrations that can claim credit for gains.
Trump, for instance, renegotiated free trade agreements with Mexico and Canada, making it a little more beneficial to manufacture in the U.S. Joe Biden can claim some credit for incentivizing new EV battery plants being built across the U.S. -- in both red and blue states.
The industry deserves some credit, too. Tesla sold about 32,000 cars in 2014. It will sell about 1.8 million in 2024. Most of that growth happened without the help of Washington.
There is little evidence that EVs mean more jobs. An EV doesn't have a gasoline-powered engine or transmission. But it does have batteries, and electric motor along with more power electronics and software.
Tesla has roughly 120,000 employees making those 1.8 million vehicles. Toyota Motor has roughly 330,000 employees making closer to 10 million cars annually. Toyota, which is famously efficient, makes roughly 50% more cars per employee than the leading manufacturer of all-electric vehicles.
Still, U.S. auto makers not named Tesla have to contend with low demand and losses for their EVs, though. Ford Motor's $2.5 billion loss on EVs in the first half of 2024 is often cited. That works out to about $68,000 a car.
The problem with that number is scale. Ford expenses billions of dollars on R&D and plant investment on what is a very small EV business. Total sales in the first half of 2024 were about 2.2 million vehicles, of which only about 36,000 were EVs.
Tesla wasn't consistently profitable until it was selling about 100,000 cars per quarter.
Ford doesn't have anyone to blame for becoming the paragon of EV losses. It decided to report them. General Motors, Stellantis, and most other traditional automakers don't break out profitability by powertrain.
Barron's has asked Ford executives a few times about that decision. They believe the explicit losses impose discipline on the company. Transparency is a good thing.
As for worker anxiety at Stellantis, recent stress has almost nothing to do with EVs.
For starters, the company's U.S. sales fell 16% in the first half of 2024, from a year ago. Jeep sales dropped 20%, while Ram sales dropped 26%.
Then in August, Stellantis announced it would stop producing the Dodge Ram 1500 Classic pickup truck, necessitating some 2,500 layoffs. The "classic" was simply the old Ram model that Stellantis decided to keep making after launching an updated version of the truck in 2018.
The layoffs and slow sales have created some employee tensions with the United Auto Workers Union which filed grievances against the company which could pave the way for a strike. Wolfe Research analyst Emmanuel Rosner wrote Monday that the odds of a strike are "less than 50%." Even if the grievances don't culminate in a walkout, they still highlight the escalating tensions.
Whether or not Stellantis workers are right to blame EVs is hardly the point. The industry continues to have a significant perception problem.
Barron's has long argued that the politics of EVs should be directly addressed by auto makers, with efforts to secure support from both sides. The auto makers, for the most part, insisted that customers would adopt EVs that were right for them when models and charging infrastructure proliferated.
The 2024 election rhetoric belies that view. That's a problem for auto makers planning models years in advance based on ever-tightening emissions regulations while spending billions on new model development. If nothing else, securing support for all types of cars from politicians can be like taking out an insurance policy on that spending.
No matter who wins the election in 2024, the job of securing political support for investors plans will remain in 2025 and beyond. Failing to do so means slower EV sales, more uneven investment returns, additional uncertainty for investors, and lower stock prices.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
September 18, 2024 13:39 ET (17:39 GMT)
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