Weekly Intel Report: Mobility News

BY AUTOMOTIVE VENTURES | OCT 2 2023 | VIEW ONLINE ➡️

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What We're Reading:

Tesla is pushing most of the legacy automakers into unprofitable, low-volume EV niches. Few EV models, besides Tesla's Model Y and Model 3, are selling at high enough volumes to support a full-scale assembly plant. (💲Link)It's becoming increasingly difficult for carmakers to turn a customer into a repeat customer, according to a recent study by J.D. Power. An unexpected side effect of the chip shortage is that drivers who keep their cars for longer than they're used to are going to the competition to try something new. (Link)Today, US auto shoppers have nearly 450 vehicle nameplates to consider. Within five years, that number will grow considerably. With the arrival of electric vehicles across every mainstream and luxury brand, approximately 650 models will be competing for showroom space, lot space, digital space, marketing budget and most importantly, customer attention. (💲Link)Reviewing the auto industry's product pipeline, it's easier to list all the non-EVs on the way (more than 80% of all new models arriving in the U.S. within the next five years will be battery-electric). Although some brands have yet to join the EV frenzy, a number have set dates later this decade when they plan to no longer sell products containing a gasoline engine. EVs still account for a small fraction of sales today, but automakers are counting on that percentage to rise quickly as they flood the market with hundreds of battery-powered models in the near future. (💲Link)UAW President Shawn Fain has criticized the Big Three automakers for the raises given to their CEOs in the past few years, saying wage gains for rank-and-file employees haven’t kept pace. In 2022, the three CEOs earned around 300 times what the median or average employee earned. (💲Link)The United Auto Workers union wants to emerge from its strike against Detroit’s three major automakers with at least a 30% pay raise. That’s the level, which is lower than the around 40% hike it initially proposed, that the union believes will allow it to satisfy existing members and organize non-union plants. It takes into account a cost-of-living allowance, or COLA, and a general wage increase. (💲Link)Elon Musk said on his social-media platform X that the combination of a 40% pay rise and a 32-hour working week was a “sure way to drive GM, Ford and Chrysler bankrupt in the fast lane.” But a bigger bankruptcy risk comes from the EVs that Musk pioneered. While the traditional pickup trucks and sport-utility vehicles Detroit churns out today are profitable enough to absorb a good chunk of the UAW’s demands, the EVs it is just starting to produce can’t even cover today’s pay, let alone the package under negotiation. (💲Link)However the UAW strike is resolved, it's going to make the EV transition more costly for the Detroit 3 compared with Tesla, which only makes EVs. Deepwater Asset Management estimates that once the Detroit 3 and the UAW reach an agreement, Tesla's labor costs will be 48% lower compared with the Detroit automakers. (💲Link)Wedbush Securities analyst Daniel Ives: "40%+ cost increases (current UAW proposal) to the union workforce would make the move to electric vehicles an Everest-like uphill battle. We estimate the average EV vehicle will go up in price by $3k-$5k to pass these costs onto the consumer and would ultimately be a torpedo to the future business models of the 313 area code." (Link)Auto retail is finally shifting from a seller’s market to a buyer’s market: Dealers’ car lots are looking fuller, while higher interest rates are making consumers choosier. (💲Link)Tesla is valued as a tech company, not a carmaker. Try your hand at this widget to figure out what Tesla should be worth. (💲Link)Elon Musk owes his influence not to the control of oil, capital or private armies, but of technologies vital to economic competitiveness, national security and public opinion. NASA and the Pentagon depend heavily on Musk-owned SpaceX to get into space. After Russia knocked out Ukraine’s other satellite service in the early hours of its invasion in February 2022, Ukrainians credit Musk’s provision of Starlink terminals with restoring connectivity on the battlefield and helping Ukraine avoid defeat. Tesla isn’t the world’s only electric vehicle manufacturer, but it is the most advanced and prestigious. Finally, while Musk’s purchase of X has proved immensely dilutive financially, it has been accretive politically, granting him say over who gets heard, amplified, filtered or banned on the world’s most influential social-media platform. (💲Link)From around 2020, Ford looked to follow Tesla's direct sales model by bypassing dealers to sell its cars directly to consumers in the Chinese market. The plan didn't work out very well for Ford. In August, Ford pulled the plug on its direct-sales business. Ford posted a loss of about $600 million in China last year. (💲Link)Prohibitive tariffs are just the first hurdle for a Chinese automaker looking to crack the US market. Most Chinese cars haven’t been engineered with U.S. safety regulations in mind; just going through those protocols is an expensive and elaborate process. Then there’s the cost of building a retail network and some sort of safety net for servicing cars and backstopping warranties. (💲Link)CDK Global's new "The State of Dealership Cybersecurity" report is eye-opening. (Link)Volvo Group believes unlocking a southern tier of freight routes from Southern California to Florida would create an annual $42 billion market for autonomous trucking. Customers would pay the truck unit to move goods via autonomous vehicles between highway-adjacent cargo transfer centers. Such a service could speed up goods shipment by 40%. One advantage: Trucks wouldn't be subject to the 11-hour federal limit for human drivers. (Link)With thousands of Ukrainian and Russian drones in the air along the front line at a given time, from cheap quadrocopters to long-range winged aircraft that can fly hundreds of miles and stay on target for hours, the very nature of war has transformed. (💲Link)The K5 robot, designed by California-based Knightscope, describes it as a “fully autonomous outdoor security robot.” It is currently used in hospitals, malls, airports, warehouses and casinos, and will soon be deployed in the NYC Times Square subway station, the city’s busiest underground transit hub. (💲Link)The “spider dog” is an unmanned ground vehicle made by Ghost Robotics, with its capabilities developed by the Defence Science and Technology Agency (DSTA). The Singapore Army is currently trialling it as part of Exercise Forging Sabre in Idaho, to give soldiers an edge before they conduct urban operations. (Link)The case for and against self-driving "robo-taxis". (💲Link)Our "Car of the Week": a 1995 Porsche 911 Type 993 GT2 with only 12.840 km. (💲Link)

Have a great week,Steve Greenfield

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Notable & New

🗞️ The October Intel Report is out: Get a preview of Steve's new book, The Future of Mobility. (Link)🎥 On this week's Future of Automotive segment on CBT News we explore a few interrelated themes playing out with EVs. (💲Link)🎤 Justin did an outstanding job on stage at the MOVE America conference in Austin this week, outlining the Automotive Ventures investment thesis. (Link)📢 Automotive Ventures portfolio company eDRV, an API platform for enterprise electric vehicle (EV) charging management, announced its Plug&Charge API solution. (Link)🎥 It was great seeing Automotive Ventures portfolio company Go Eve demo their DockChain EV Charger product at the MOVE America show in Austin. (Link)Steve was on a Mobility panel at the MOVE America conference in Austin. (Link)Steve was on an "Automotive State of the Union" panel at ASOTU-CON in Baltimore. (Link)🗞️ Automotive Ventures was featured two weeks in a row in the WSJ! It was a pleasure being interviewed for this Wall Street Journal article to discuss the evolving dynamics of online car shopping and some of the intangibles that consumers can only accomplish during the dealership visit. (💲Link)📢 Thanks to C.J. Moore at Automotive News for the great coverage of our "Economists Panel" at the National Auto Auction Association conference in Chicago this week. It was an honor sharing the stage with Jonathan Smoke, Patrick Manzi and Tom Kontos. (Link)

Companies to Watch

🌟 ScoutIT is a one-stop shop for EV batteries at end-of-life, providing one complete platform for battery tracking, storage, shipping, recycling, reuse or repurposing. (Link)

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