Intel Report: The Weekly Mobility News That Matters

BY AUTOMOTIVE VENTURES | AUG 26 2024 | VIEW ONLINE ➡️

We are hiring an Investment Analyst. Are you ready to join our team? Automotive Ventures

What We're Reading

🚗 Automotive

The average U.S. franchised dealership saw net pretax profit slip 33.4% in the first half of 2024, according to the latest dealership performance benchmark report from The Presidio Group and NCM Associates. Pretax profit for the typical franchised dealership has declined roughly 50% from its peak in 2021. Still, it remains 1.7 times the 2018 level. | Automotive News ($)BMW now offers adaptive suspension for 25 Euros or about $27.50 per month. The automaker does offer a lifetime price of just 460 euros or about $505. A spokesperson said it’s not a subscription service, and owners can test it for free for a month. | CarscoopsCDK Global has agreed to pay $100 million to settle a class-action antitrust lawsuit alleging it colluded with a rival to inflate dealership management system prices to stifle competition. The class-action lawsuit alleged, in part, CDK Global and The Reynolds and Reynolds Company essentially formed a duopoly to corner the market for data integration service programs that extract information from dealership management systems that is then used by application vendors. | Automotive News ($)General Motors and OnStar are up first in what is likely to become a series of lawsuits brought by the state of Texas against companies sharing data about consumers' driving habits with insurers. The petition alleges companies collected and sold the data of more than 1.5 million drivers to insurance companies without their consent. | Property Casualty 360 ($)Salesforce has launched an application that will allow automakers to monitor telematics data, offer drivers personalized services and support payments through a vehicle's infotainment system. The application will also allow service teams to monitor vehicle performance, remotely lock doors and control cabin temperature during a service appointment, among other actions. While automotive software, services and data revenues are projected to hit $200 billion by 2030, the total revenue generated by connected services and paid updates currently is about $6 billion, according to S&P Global Mobility. | Automotive News ($)

⚡️ Electric Vehicles (EVs)

The plug-in hybrid, long a fringe technology in the car business, is gaining some traction. As automakers slow-walk plans to roll out more fully electric vehicles in response to lighter-than-expected consumer interest, more are embracing plug-in hybrids, which run on battery power for about 20 to 40 miles before reverting to a gas engine. The technology has been on the market for more than a decade, but sales hadn’t taken off until recently. Some automakers shied away from offering them because of the added cost and engineering complexity—they essentially require two ways to power the car, packed under one hood. The relatively small number of models available also were pricier than gas-powered cars, limiting their appeal. Now, car companies are finding more reasons to offer plug-in hybrids, which provide another path beyond full EVs to meet tougher U.S. tailpipe pollution rules. | The Wall Street Journal ($)

Toyota may be one of the slowest legacy automakers to develop electric vehicles but it could be the first to jettison cars powered only by gasoline. Almost three decades after launching the Prius, its pioneering gasoline-electric hybrid, Toyota is moving to convert most, and eventually maybe all, of its Toyota and Lexus line-up to hybrid-only models. Toyota's stubborn focus on hybrids over EVs is part of a broader challenge by the world's biggest automaker to the prevailing industry and regulatory orthodoxy that all cars will be electric in the near future. Toyota Chairman Akio Toyoda said in January that he believed the global share of EVs would top out at just 30%. The Japanese automaker instead touts a "multi-pathway" strategy that includes EVs along with hybrids, hydrogen fuel-cell vehicles, green fuels and, potentially, other technologies yet to emerge. | Reuters ($)Ford, General Motors, Volkswagen, Mercedes-Benz and other automakers have curbed their electric vehicle (EV) ambitions in recent months. Taken together, the walked-back plans are an acknowledgment that the big investments outlined at the start of the decade got ahead of the consumer’s appetite for a full switch to EVs. While surveys have shown that as many as half of U.S. consumers are open to buying an electric car, their relatively high prices and concerns over charger availability are dissuading many. EV sales in the U.S. and other regions are still growing, but the pace of the increase has decelerated sharply, despite many new models hitting the market. Delaying some EV investments will conserve cash and buy automakers time to lower their battery costs and other EV-related expenses. The moves also will hurt major parts suppliers, which have to adjust their businesses. | The Wall Street Journal ($)Some automotive suppliers are cutting jobs because of slowdowns in automakers' electrification plans, often reluctantly because of how difficult it can be to fill roles to begin with. Automakers are rolling back their electric vehicle plans in the face of lower-than-expected sales growth in North America, creating ripple effects throughout the supply chain. Many programs that parts makers expected to supply have been delayed or altered, putting a dent in suppliers' earnings outlooks and forcing them to make adjustments to their own plans. | Automotive News ($)

Ford is revamping its money-losing electric vehicle business, retreating from some plans for all-electric vehicles and instead prioritizing the development of hybrid technology. The automaker’s EV division has been losing money, but pivoting from all-electric vehicles to hybrid technology could cost Ford up to $1.9 billion more. The announcement underscores the challenges facing U.S. automakers as they seek to boost sales of EVs, a crucial technology in the fight against climate change, despite flagging consumer demand, supply chain challenges and increased competition with Chinese carmakers. | The Washington Post ($)Donald Trump said that if elected he would consider ending a $7,500 tax credit for electric vehicle purchases and that he would be open to naming Tesla CEO Elon Musk to a cabinet or advisory role. "Tax credits and tax incentives are not generally a very good thing," Trump told Reuters in an interview after a campaign event here when asked about the EV credit. Asked if he would consider naming Musk to an advisory role or cabinet job, Trump said he would. "He's a very smart guy. I certainly would, if he would do it, I certainly would. He's a brilliant guy," Trump said. | Automotive News ($)

There are about 170,000 vehicle fires in the U.S. every year, according to the National Fire Protection Association, with EVs making up a tiny portion of that number. In the U.S., EVs caught fire at a rate of 25 per 100,000 sold, compared with 1,530 for gasoline-powered vehicles and 3,475 for hybrids, according to a study conducted by insurance company AutoInsurance published in 2023 using data from the National Transportation Safety Board. | Automotive News ($)

Electric Vehicle (EV) depreciation is a hot topic right now, and for good reason. On one hand, there are some fantastic deals to be had on the secondhand market, but on the other of course, there’s the thorny issue of some EVs losing half of their value in a single year. Why is this happening? Factor in the even higher costs of electric cars and their optional extras, plus the omnipresent concerns of EV range and charging infrastructure—then look at how quickly EVs are improving with every facelift, with new models gaining extra range, performance, and charging speed over their predecessors—and soft residuals are bound to occur. The best advice? Buy secondhand, unless you can truly afford to not care otherwise, and enjoy your bargain EV—complete with its low running costs and minimal maintenance requirements—for the half-decade or more still on the battery warranty. | WiredGlenn Mercer explores the ownership experience between Tesla vs. non-Tesla EV owners over their first 90 days of ownership (courtesy of a recent J.D. Power survey). The differences almost perfectly reflect the strengths and weaknesses of two fundamentally different approaches to the design of a car. | Glenn Mercer

The push for solid-state batteries could lead to extra-long battery ranges as soon as 2027. | Inside Climate News

🇨🇳 China

Michael Dunne notes that never before has America or its allies faced up to a bigger, faster, stronger competitor:

Never before have we seen the scale – China produces 30 million vehicles a year. That’s twice as many as North America builds.
Never before have we witnessed this much capacity - 48 million units - enough to supply half of global demand.
Never before have we encountered such cost advantages: China makes cars at 25% to 30% lower cost than any other country.
Never before has the production of batteries – the ascendant energy for powertrains - been so highly concentrated in one nation. China accounts for 76% of global EV battery production.
Juicing? China does that bigger, too. China’s subsidies are 4-5 times higher than those in the West. They include low-interest loans, free land, discounts on energy to power plants, cash back to consumers, and much more.
Then there is “China speed.” It’s real. Chinese automakers develop new cars in half the time of traditional automakers in the West.

| Dunne Insights

Nearly 51% of dealerships in China experienced losses in the first half of the year amid an intensified price war in the new-car market. The share of unprofitable dealers was much higher than for all of 2023, when 43.5% of surveyed dealerships reported losses. Because of the fierce price war, new-car sales produced an average loss of 1.78 million yuan ($250,000) for dealerships in the first six months of the year. Despite steeper price cuts, only 28.8% of stores achieved their new vehicle sales targets. | Automotive News ($)

🤖

Robotics & Autonomy

China dominates the market for electric vehicles. Now it's chasing Tesla in the race to build battery-powered humanoids expected to replace human workers building EVs on assembly lines. At the World Robot Conference this week in Beijing, over two dozen Chinese companies showed off humanoid robots designed to work in factories and warehouses, with even more displaying the made-in-China precision parts needed to build them. China's push into the emerging industry draws from the formula behind its initial EV drive more than a decade ago: government support, ruthless price competition from a wide field of new entrants and a deep supply chain. | Reuters ($)

Goldman Sachs Research anticipates autonomous vehicle (AV) adoption rates to be the highest in China, where Level 3 or higher AV sales could account for 90% of all sales by 2040. Nearly 80% of all car sales in Europe and roughly 65% of all car sales in the U.S. could be advanced AV vehicles by 2040. A large number of these vehicles are expected to be deployed by ridesharing companies. Increasingly, the cost model makes it compelling for rideshare firms to switch to self-driving cars. Goldman Sachs Research finds that vehicle driving costs are currently an estimated $3.13 per mile for robotaxis but may decrease to less than $1 a mile by 2030 and 58 cents a mile by 2040. Robotaxi costs that factor in corporate overhead and research and development are significantly higher — but that’s poised to fall from an estimated $184 per mile for a vehicle in 2024 to about $12 a mile in 2030 (and close to $1 in 2040). | Goldman SachsUber plans to start offering self-driving Cruise cars to customers on its ride-hailing platform next year. Once the multiyear partnership between Uber and Cruise begins, an Uber rider requesting a qualifying ride will have the option of choosing a Cruise autonomous vehicle. | Bloomberg ($)

🚂 Rail

If you ride on the newest commuter trains from San Francisco to San Jose, the first thing that you might notice is how quiet they are: Instead of the rumble of a diesel engine, the trains now run on 100% electricity. By switching to electric trains, Caltrain, the rail service, can eliminate 250,000 metric tons of CO2 emissions a year, roughly as much as the pollution from 55,000 cars. But it’s also just a better experience for riders. That might convince more commuters to stop driving to work, cutting emissions even further. The electric trains run faster than the diesel trains that they’re replacing. Because the train can start and stop faster, Caltrain can add more stops to its express trains, and still shave minutes off the route. The new express route between San Jose and San Francisco will stop at 11 stations instead of seven, and take 59 minutes instead of an hour and five minutes. | Fast Company

✈️ Aviation

The potential market for Advanced Air Mobility could be $1 trillion by 2040, Morgan Stanley has estimated. If that prediction is even close to accurate, in not much more than a decade, the world will be spending more on flying-car trips carrying people and goods — many of them with no pilot — than it currently does on conventional air travel. The competition to corner these revenue streams of the future has inevitably drawn aviation’s dominant manufacturers, including Boeing. But the riches potentially up for grabs have also attracted startups and established names with little aviation expertise. Hyundai, Toyota, Stellantis and even Chinese technology giant Tencent have all committed money, manufacturing capacity or know-how in this emerging market. But, with billions of dollars already spent, questions hang over the sector’s viability. | Bloomberg ($)

🚘 Car of the Week

Our Automotive Ventures "Cars of the Week": a 1984 Ferrari 512 BBi. | Bring a TrailerHave a great week,Steve Greenfield

Forwarded this email and not yet a subscriber?

Subscribe Now

Steve's new book, The Future of Mobility, will be out soon! (LINK)

Notable & New

🎤

Great interview with Winnie Lai, the CEO/Founder of Auriga Space (an Automotive Ventures portfolio company). “Rockets are highly inefficient machines, right? Less than 2% of the total rocket mass is what gets into space, and over 90% of that is fuel. So, I’ve been fascinated with solving that problem, figuring out alternative ways of getting into space [that are] a lot more efficient,” Auriga CEO Winnie Lai told Payload. | Payload

🎤

On this week's "Future of Automotive" segment on CBT News: we explore whether Chinese automakers may use strategic partnerships with Waymo and Uber to bypass tariffs and get their autonomous vehicles onto U.S. soil. | CBT News ($)

Enjoying this newsletter? Please share with others!

Companies to Watch

🌟 BeyondMath Simulating the real world is a tremendously complex problem if you want to do it at any useful level of fidelity. Traditional techniques are holding back design teams at vehicle and aerospace companies, but BeyondMath is putting AI on the task with a new way of simulating the world that could save them days or weeks of waiting. | BeyondMath

Upcoming Industry Events