Intel Report: The Weekly Mobility News That Matters

BY AUTOMOTIVE VENTURES | Dec 30 2024 | VIEW ONLINE ➡️

The latest in our series of "What we've learned" as VC investors. This week's topic: Maintain as much ownership as possible, by supporting your winners.

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What We're Reading:

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Automotive

After years of depressed inventory stemming from pandemic-era supply chain problems, U.S. dealers’ new vehicle inventory levels have largely recovered. That has put pressure on retailers and automakers to more aggressively price their unsold vehicles. Car buyers received about $3,400 in discounts and other incentives on average during the busy December shopping season, up more than 25% from a year earlier, according to J.D. Power. The offers have included low- and zero-percent interest rates, cash-back offers and cheap leases, especially on electric vehicles. Industrywide U.S. sales rose by about 7% in December. For the year, U.S. vehicle sales are expected to rise 3%, to about 16 million vehicles sold, decelerating from 12% growth in 2023. Industry forecasters expect sales to edge slightly higher again next year. | The Wall Street Journal ($)TechCrunch recaps the biggest flops and fizzles in 2024 transportation, from Apple Car to Fisker. These failures highlight shifting market demand and challenges in sustaining innovation in transportation. | TechCrunchThreats from China, stalling vehicle sales, slower than expected electric vehicle adoption, inadequate lobbying, wasteful product development practices and aggressive regulatory pressures are all adding up to one thing—the U.S. automotive industry at risk. That’s the title of a blunt and revealing “white paper” created by senior auto industry officials at October’s 2024 SAE Detroit Section Global Leadership Conference, or GLC, shared in the seven-page document. | ForbesAfter decades of relatively stable business in Europe, legacy automakers – Stellantis, Volkswagen, Renault, BMW and Mercedes-Benz – are watching their profitability and workforces come under significant pressure from an influx of Chinese automakers appealing to European customers with lower prices and high value. European automakers are reducing capacity to cope with falling business while improving competitiveness and efficiency. It is not easy. European governments have long worked with their automakers to optimize employment. Tariffs are in place to buy the automakers time to better compete against Chinese EVs, but Chinese automakers seem poised to buy some of the excess manufacturing capacity of Western companies. What can European automakers do in the next five years to minimize loss of share in the European market? They are re-emphasizing more affordable EV models, significantly investing in local battery production, streamlining their supply chains, aggressively promoting their EVs and potentially collaborating with other European manufacturers to achieve economies of scale, while also advocating for continued tariffs, continued charging infrastructure development and tax incentives for EV purchases. | Wards AutoVolkswagen Group has reached an agreement to restructure its operations, aiming to become the technology leader in volume manufacturing by 2030. This includes reducing production capacity by 734,000 units, cutting over 35,000 jobs in Germany, and lowering labor costs by €1.5 billion annually. The agreement, expected to save over €15 billion annually, will help Volkswagen invest in future products while maintaining competitiveness. The company aims to ensure job security and continued production in Germany. | VolkswagenAndy Palmer, the "godfather of EVs," opines on China OEM competitiveness vs. legacy automakers: "Hybrids are a road to hell. They are a transition strategy, and the longer you stay on that transition, the less quickly you ramp up into the new world," Palmer said. "If you just delay transitioning to EVs by diluting it with hybrids then you are more uncompetitive for longer, and you allow the Chinese to continue to develop their market and their leadership. I honestly think it's a fool's errand," he added. "My experience with tariffs is it just makes your indigenous industry lazy. The gap becomes even bigger," he said. | Business InsiderThe California New Car Dealers Association (CNCDA) is demanding that Volkswagen Group and Scout Motors stop taking deposits for a planned electric truck and pickup, claiming the companies are in violation of a amended state law that prohibit direct sales to consumers. In a Dec. 20 letter to Scout Motors General Counsel Neil Sitron and Volkswagen Group of America General Counsel Antony Klapper, the California New Car Dealers Association said the two companies’ plan to sell Scout vehicles direct to consumers “wrongfully cuts new and existing VW dealers out of an opportunity” and directly violates a section of California’s law covering new-vehicle sales. | Automotive News ($)

S&P Global Mobility forecasts 89.6 million new vehicle sales worldwide next year, up 1.7%, reflecting cautious recovery growth. Automotive forecasts have been downgraded across the board, reflecting expected post-election US policy shifts. Resulting impacts to vehicle demand will be significant, especially interest rates, trade flows, sourcing, and BEV adoption rates. | Financial Times ($)

Finding an affordable car in the U.S. has already become a challenge for many budget-constrained Americans. New import tariffs on Mexican-built vehicles threaten to make the problem worse. Today, nearly one-third of all vehicles priced below $30,000 and sold in the U.S. are built in Mexico, according to an analysis by car-shopping website Edmunds. A decade ago, Mexico was responsible for one-fifth of the affordable cars sold in the U.S. The border country has long been a go-to for automakers looking to defray the hefty expense of manufacturing a car, particularly on smaller models that sell for lower price points and have slimmer profit margins than larger trucks and SUVs. President-elect Donald Trump has threatened to upend this strategy, pledging in November to impose 25% tariffs from Mexico and Canada, a move that could mean undoing the free-trade agreement he negotiated in his first term. Any new tariff-related costs are likely to be passed along to the consumer—at least in the near term—and would hit the most affordable cars and SUVs the hardest, analysts and dealers say. | The Wall Street Journal ($)Asked what makes Nissan a strong business partner, Honda CEO Toshihiro Mibe struggled to find the right words. “That’s a difficult one,” Mibe, having just announced plans to bring the two firms together under a single holding company, mused earlier this week before a packed room of journalists. His remark raised a few chuckles, but on a serious note, it spoke to real and present qualms over why Honda would ever agree to such a risky deal with Nissan, and what it could gain by folding the flailing Japanese carmaker into its business. The rapid rise of electric vehicles in China and in parts of Europe, coupled with a resurgence in the popularity of hybrids, is pushing legacy brands to band together. At the very least, by assuming Nissan’s resources such as factories, manpower and intellectual property, Honda may gain access to the heft it needs to keep its own head above water.| Bloomberg ($)A bipartisan group of senators is calling out the auto industry for its “hypocritical, profit-driven” opposition to national right-to-repair legislation, while also selling customer data to insurance companies and other third-party interests. In a letter sent to the CEOs of the top automakers, the trio of legislators — Sens. Elizabeth Warren (D-MA), Jeff Merkley (D-OR), and Josh Hawley (R-MO) — urge them to better protect customer privacy, while also dropping their opposition to state and national right-to-repair efforts. For years, the right-to-repair movement has largely focused on consumer electronics, like phones and laptops. But lately, the idea that you should get to decide how and where to repair your own products has grown to include cars, especially as more vehicles on the road have essentially become giant computers on wheels. | The Verge

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Electric Vehicles (EVs)

Global Battery Electric Vehicle (BEV) adoption forecast. | Financial Times ($)

Owners of electric vehicles (EVs) have a lot to brag about. Their cars are quieter, smoother and nippier than petrol counterparts. Low running costs and environmental impact of EVs are also part of their appeal. But how cheap and green they are varies significantly by country. The price of energy and the share of it produced by renewables will determine whether EVs have advantages over the standard car. | The Economist ($)

Battery electric vehicles (BEVs) will play a central role in the pathway to net zero; McKinsey & Company estimates that worldwide demand for passenger cars in the BEV segment will grow sixfold from 2021 through 2030, with annual unit sales increasing to roughly 28.0 million, from 4.5 million, in that period. For producers of battery cells and raw materials, ensuring a reliable and ample supply of sustainable and affordable materials will be crucial to their competitiveness, the ongoing rollout of BEVs, and the net-zero transition overall. The industry is likely to confront persistent long-term challenges; it will need to address them to keep up with demand in 2030. | McKinseyWhen temperatures drop, EV owners face a physics problem: Reduced battery performance and increased charging times. Fuel economy is 8% lower at 20 degrees than it is at 75 degrees in EVs ‒ and range can drop about 12%, according to the U.S. Department of Energy (DOE). When you turn on the interior heat, that increases to as much as a 41% drop in range. The reason: Cold slows down the chemical process that electric vehicle batteries use to store energy. | USA TodayOnly a small portion of the roughly $350 billion in new lending authority for the U.S. Department of Energy (DOE)’s Loan Programs Office under the Inflation Reduction Act is earmarked for truly innovative investments. In the past two years, over 90% of the department’s funding for batteries has gone to the current generation of lithium-ion batteries (often used in electric vehicles or grid-scale energy storage), a field in which China has already built a nearly insurmountable lead. A paltry 1% has gone to next-generation, solid-state technologies in which the United States has a better path to competitive advantage. | The New York Times ($)

🇨🇳 China

The main appeal of a Chinese electric vehicle (EV) to foreign buyers is obvious: high quality at prices Western carmakers cannot match (even allowing for import tariffs on Chinese vehicles). But Chinese EVs do not just offer lower prices. They also have more impressive features. The styling and technology in their 2025 models show where cars, as a whole, may be heading. | The Economist ($)Profit margins in China’s automotive industry were squeezed even further in 2024 as cut-throat competition continued to claim weaker electric vehicle makers. Industry-wide margins for car manufacturers in the world’s largest market averaged 4.4% in the January through November period, data released Friday by China’s Passenger Car Association show. They averaged 5% in 2023. For at least the last two years, China’s car market, and particularly its EV sector, has been characterized by intense rivalry that’s spawned price cuts and deep discounting in an attempt to lure buyers. As BYD has consolidated its grip, smaller players have gone out of business. | Bloomberg ($)

Oil producers that rode the coattails of China’s economic boom could face a crude awakening. China’s oil demand is nearing a turning point as electric vehicles take a growing share of its vehicle market, the world’s largest. China imported 11.3 million barrels of oil a day in 2023, more than 10% of global production. Its structural decline in demand could hurt oil producers' upstream divisions through pressure on prices. Meanwhile, its excess refining capacity could then pinch the downstream margins of those supermajors. Those divisions have been a traditional financial counterweight during times of low oil prices. | The Wall Street Journal ($)

Electric vehicles are expected to outsell cars with internal combustion engines in China for the first time next year, in a historic inflection point that puts the world’s biggest car market years ahead of western rivals. China is set to smash international forecasts and Beijing’s official targets with domestic EV sales — including pure battery and plug-in hybrids — growing about 20% year on year to more than 12 million cars in 2025, according to the latest estimates supplied to the Financial Times by four investment banks and research groups. The figure would be more than double the 5.9 million sold in 2022. At the same time, sales of traditionally powered cars are expected to fall by more than 10% next year to less than 11 million, reflecting a near 30% plunge from 14.8 million in 2022. | Financial Times ($)The U.S. and China are in a high-stakes race, with the energy security of America and its allies hanging in the balance. It involves batteries made from the same sodium found in table salt. In both countries, researchers and companies are working furiously to make batteries that rely on a very different starting material than the lithium-ion batteries currently powering everything from our cellphones to our power grids. Such a battery could break China’s near monopoly on crucial battery-making elements at a time when trade tensions and America’s electric storage needs are on a collision course. Instead of lithium, this nascent battery tech uses a sodium compound called soda ash, which can be produced using table salt. Unlike lithium, sodium is easily accessible everywhere. Even better for the U.S. is that China must synthesize soda ash from salt, while it is cheap and plentiful here. In fact, with 92% of the world’s reserves, you might even say that the U.S. is the Saudi Arabia of the stuff. | The Wall Street Journal ($)

🛴 Micromobility

Glenn Mercer finds a real gem: sizing the global market for 2-wheel vehicles. | Glenn MercerShared micromobility operators are finding profitability through strategic approaches like high vehicle utilization, efficient operations, and advanced technology. Companies like Swing, Ryde, and Tier-Dott highlight success through durable scooters, focused growth, and strong user experiences. Segway supports this shift with AI solutions, long-lasting vehicles, and sustainable practices, reducing costs and environmental impact. Experts predict major players could achieve profitability by 2025, signaling a scalable and sustainable future for shared micromobility. | ZAG Daily

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Aviation & Space

China has unveiled a new futuristic fighter jet. Viral images on Chinese social media show the sophisticated jets flying at low altitude. Analysts say it could mark a breakthrough in Beijing’s military modernization. | The Washington Post ($)

America’s most popular domestic air route in 2024 has been between Atlanta and Orlando with 3.48 million scheduled seats. | SherwoodAmazon first teased drone delivery more than a decade ago, when Jeff Bezos went on “60 Minutes” to declare the start of Prime Air, an experimental drone delivery service that the company hoped would one day deliver millions of packages to customers in 30 minutes or less. Amazon remains undeterred. The company believes that the convenience of drone delivery will outweigh any concerns people have about the drones themselves. | The New York Times ($)Big names like Stellantis and Toyota have poured money into Silicon Valley eVTOL companies like Archer and Joby Aviation. Boeing and Airbus are developing their own versions. All are betting that quieter, greener and battery-powered aircraft can revolutionize the way people travel. Major U.S. airlines including American, Delta, Southwest and United also are building relationships and planting seeds for deals with air taxi companies. Business success is by no means assured for these craft, called electric vertical takeoff and landing aircraft, or eVTOLs. Scaling the industry from a novelty ride for the wealthy to a broadly available commuter option will take billions more in start-up money, executives said, including building out a network of takeoff and landing areas (called vertiports) and charging stations. | The Washington Post ($)

🌡️ Climate

The energy transition sustained an electoral trauma as 2024 drew to a close. The incoming administration of President-elect Donald Trump promises to undo at least some of the progress made on decarbonization under President Joe Biden. But the energy market is its own beast, subject to politics but also beholden to economic, technological, environmental and international forces. | Bloomberg ($)

📚 Investing

Peter Walker at Carta shares 2024 Seed stage valuations by company segment. | Carta

Jason Lemkin provides sound advice to startups to improve their odds of getting VC funding. | SaaStrDavid Cummings provides best practices for startup updates to investors and key stakeholders.

| David Cummings

"This year the median software multiple ended at 6.1x (next 12-month revenue). At the start of the year it was 6.3x. Throughout the entire year there was very little multiple expansion or contraction." | Jamin Ball

🚘 Car of the Week

Our Automotive Ventures "Car of the Week": a 1966 Porsche 910-001 (the First Porsche 910 Produced, Driven by 3-time Formula 1 World Champion Niki Lauda). | Mecum Auctions

Have a great week,Steve Greenfield

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Notable & New

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Steve caught up with Paul Daly from ASOTU to discuss trends in 2025. | ASOTU

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Companies to Watch

🌟 Maple Materials has developed a breakthrough process that uses electricity to split carbon dioxide into graphite and oxygen. Their process is faster, cleaner, and lower cost. | Maple Materials

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