Auto Makers Call for Timeout

[Morris Minor]

Yes it's in China, but this is the first public indication of what I've been thinking about for a while: automakers are hemorrhaging money on their EV products and price cutting is now making things worse.  Chinese auto manufacturers want order and stable prices so they can keep margins high on what, for them, are expensive-to-produce products with slim-to-none margins.
I expect the narrative from other manufacturers in the US and Europe to change. They'll be calling for brakes on the rush to EVs because the present aggressive ICE phaseout targets will put them into the red long term.

With the possible exception of Ford. It's really interesting that it seems to be on top of this, breaking out the financials from its three main businesses: EVs, ICE, & Commercial. Resegmenting. My wild guess is that Jim Farley wants policy makers, unions, and shareholders to see the cold reality of the numbers.

https://cnevpost.com/2023/03/22/caam-calls-for-return-to-normal-order-china-auto-price-war/
snippet: "With the accelerated pace of transformation of the auto industry, traditional car companies are under the dual pressure of maintaining stable operations and making the transformation, with weaker profitability, the CAAM said."

Here's the membership of the China Association of Automobile Manufacturers:
http://en.caam.org.cn/Index/lists/catid/9.html

One conspicuous absentee.

[Eye of the Tiger]

China will adapt. Not sure about 'merica.

[GoCougs]

Ford just gave guidance that its EV unit is expected to lose $3B. Wouldn't be surprised if GM will be worse.

Again, the "timeout" I've predicted is at the very least that government (esp. US) getting into the auto loan business just as it did the mortgage business.

[Morris Minor]

Ford just gave guidance that its EV unit is expected to lose $3B. Wouldn't be surprised if GM will be worse.

Again, the "timeout" I've predicted is at the very least that government (esp. US) getting into the auto loan business just as it did the mortgage business.

They lose about $22,000 on every EV sold. But the idea is that 'Ford e' should be viewed as a startup.
Anyway - good to see the transparency: props to Ford for doing this. Wonder if Mary Barra will return Farley's serve.

[Laconian]

They lose about $22,000 on every EV sold. But the idea is that 'Ford e' should be viewed as a startup.
Anyway - good to see the transparency: props to Ford for doing this. Wonder if Mary Barra will return Farley's serve.

Huge losses per unit, but isn't that Ford's fault? Maybe they should've started smaller instead of jumping headfirst into a product segment that requires 131kWh(!!!!) of battery and then hoping that things somehow scale better in the future? Blitzscaling is common for startups, but usually those startups have "get acquired" as their exit strategy. Don't think that's in the cards for Ford.

[SJ_GTI]

Huge losses per unit, but isn't that Ford's fault? Maybe they should've started smaller instead of jumping headfirst into a product segment that requires 131kWh(!!!!) of battery and then hoping that things somehow scale better in the future? Blitzscaling is common for startups, but usually those startups have "get acquired" as their exit strategy. Don't think that's in the cards for Ford.

I suspect it is the opposite. The big automakers are tiptoeing into the EV market whereas Tesla dove in headfirst (since it was their only business) and is so Tesla is making a killing. If EV's were inherently more expensive to produce Tesla should be losing money, but they have some of the best margins in the business.

It's a lot easier to absorb overhead when you have a manufacturing facility making 500k units a year rather than ~20-30k units per year. In the ICE segment manufacturing 500k units within a single factory is normal and expected.

Entrenched corporations and their bureaucracy are incentivized to make all decision based on past precedent. There wasn't much precedent for high volume EV sales until the last couple of years so no one (except Tesla) invested enough into manufacturing facilities to actually be able to make EV's as volume.

[r0tor]

I did see Ford breaking EV profitability out and that is definitely by design to start a conversation.  In the EU, Germany voted to block the ICE ban by allowing synFuels to be allowed in existing ICE engines. 


With anything, sometimes the pendulum needs to swing way past the optimal point to get change started, but does need to be allowed to swing back to the more optimal point once momentum is started.  I think we are there.  Product wise we finally have some good options and a solid buyer base has been created.


I love the environment a much as the next tree hugger, but I do think a pause is needed for a few years until non rare earth metal battery tech reaches a production ready state.  Raping the earth for the 5-10 years that it will take just does not seem wise... Not to mention the infrastructure issues that still exist.

[AutobahnSHO]

Tesla wasn't super profitable at first either

https://www.macrotrends.net/stocks/charts/TSLA/tesla/net-income-loss

https://www.npr.org/2023/01/25/1151317322/teslas-profits-soared-to-a-record-but-challenges-are-mounting#:~:text=Tesla%20reported%20record%20profits%20and,the%20expectations%20of%20most%20analysts.

[Morris Minor]

Absolutely. In 2017 Tesla's losses per vehicle were broadly equivalent to what Ford's dealing with now. I hope they can make the turn. 

[GoCougs]

But shouldn't Ford be benefiting from the same advancements as Tesla, esp. lower battery costs? (Yes.). Plus Ford's WAY better (and more cost efficient) at manufacturing vehicles than Tesla.

Other automakers; new or old; will very likely not duplicate Tesla's irrational performance (just as with Apple iShit, MS Windows, and extremely few other examples) and it has nothing to do with product - it's entirely emotional.

[Morris Minor]

But shouldn't Ford be benefiting from the same advancements as Tesla, esp. lower battery costs? (Yes.). Plus Ford's WAY better (and more cost efficient) at manufacturing vehicles than Tesla.

Other automakers; new or old; will very likely not duplicate Tesla's irrational performance (just as with Apple iShit, MS Windows, and extremely few other examples) and it has nothing to do with product - it's entirely emotional.

Actually it's the other way around. Tesla builds EVs at far lower unit cost than Ford. Which was a core point at Ford's Teach-in yesterday.
(Herbert Diess made the same point when he was in charge of VW & got kicked out for his impertinence.)

[AutobahnSHO]

I would say Ford is stuck in their pricing structure a little too much. They should have put the Maverick several thousand more than the intro price.

All the US car makers now have too many similar models (SUVs). I understand the Maverick/ Ranger/ F150/ F250 difference but the GM SUVs are just a mystery.

And why Escape, Bronco Sport, Bronco, etc...

[FoMoJo]

Bronco Sport makes sense.  Much more appealing to some than the Escape.

[Morris Minor]

I would say Ford is stuck in their pricing structure a little too much. They should have put the Maverick several thousand more than the intro price.

All the US car makers now have too many similar models (SUVs). I understand the Maverick/ Ranger/ F150/ F250 difference but the GM SUVs are just a mystery.

And why Escape, Bronco Sport, Bronco, etc...

Actually that was another point Ford's CFO made yesterday: they want to drastically cut the complexity of their model & trim lineup. Just a very few platforms and just a few "top hats" (as he put it) on each platform.
If you exclude the low-volume S & X, Tesla's currently killing it with just two models on basically a single platform.

[r0tor]

Actually it's the other way around. Tesla builds EVs at far lower unit cost than Ford. Which was a core point at Ford's Teach-in yesterday.
(Herbert Diess made the same point when he was in charge of VW & got kicked out for his impertinence.)

Look at that Tesla Manufacturing System shining... Lol

[MrH]

Actually it's the other way around. Tesla builds EVs at far lower unit cost than Ford. Which was a core point at Ford's Teach-in yesterday.
(Herbert Diess made the same point when he was in charge of VW & got kicked out for his impertinence.)

Or their reported costs are artificially low.

[shp4man]

Go woke...Go Broke.

[GoCougs]

Actually that was another point Ford's CFO made yesterday: they want to drastically cut the complexity of their model & trim lineup. Just a very few platforms and just a few "top hats" (as he put it) on each platform.
If you exclude the low-volume S & X, Tesla's currently killing it with just two models on basically a single platform.

Or their reported costs are artificially low.

I forgot that Tesla is non-union; that no doubt saves plus having only a few models each, with few variations and virtually no options is probably another factor. The manufacturing quality is decades behind legacy automakers however - the rework costs must be substantial.

[Rich]

I forgot that Tesla is non-union; that no doubt saves plus having only a few models each, with few variations and virtually no options is probably another factor. The manufacturing quality is decades behind legacy automakers however - the rework costs must be substantial.

I'm not sure they are even reworking 

[AutobahnSHO]

True, what are the differences in Tesla between model years? ANYTHING?

As seen by the homogenity (sp?) of all the electric platforms though, there's not a TON of variation/ evolution available- for the most part the auto industry figured out optimal seating/ space configurations and manufacturing a few decades ago.

[veeman]

I'm sure Tesla's lack of paid advertising and their direct to consumer sales model without the middleman of the dealership also substantially increases their profit per vehicle.  Plus no haggle pricing.  Plus mostly they are targeting a financially well off clientele with few competitors until recently means they haven't had the price competition that the traditional mainstream manufacturers have always had. 

Also sit inside a 100 grand German luxury car and it feels and looks very different than a sparse Model S.  That boosts Tesla profit. 

[Morris Minor]

True, what are the differences in Tesla between model years? ANYTHING?

As seen by the homogenity (sp?) of all the electric platforms though, there's not a TON of variation/ evolution available- for the most part the auto industry figured out optimal seating/ space configurations and manufacturing a few decades ago.

https://tesla-info.com/blog/tesla-model-history.php

[FoMoJo]

Sort of like the Beetle, changes you don't really see.

[Morris Minor]

Yup - they don't do a lot of the model year, trim options, and packages thing, a little bit but not much. (I think the 3 is getting a pretty substantial makeover later this year.) 

[giant_mtb]

Yup - they don't do a lot of the model year, trim options, and packages thing, a little bit but not much. (I think the 3 is getting a pretty substantial makeover later this year.)

Honestly I think car buying could be made a lot easier from the big legacy automakers if there weren't so many options and packages and other BS that makes finding/selecting a vehicle somewhat of a needle in a haystack situation.

Yes, options are good. But there's also a thing called decision paralysis.

[Laconian]

It sounds like the Model 3 is being decontented with the next revision. Sensors removed, interior materials replaced with cheaper ones, etc.

[Morris Minor]

Reading these posts of people trying to buy Mustang Mach Es & finding marker penned-in "Market Adjustment" on the window stickers of $5,000, $10,000 etc. One guy found an F150 Lightning with a $35k markup.

This is all profit that would belong to Ford in a normal world. State auto dealer associations & state politicians have car buyers in a spit roast. I'm not surprised Jim Farley is fucked off.

[Laconian]

This insane markup situation seems specific to Ford, and it's not just electric cars. They do the same to Broncos too.

[FoMoJo]

This insane markup situation seems specific to Ford, and it's not just electric cars. They do the same to Broncos too.

Could be that other manufacturers don't have anything that people want that bad.

[CaminoRacer]

Or Ford buyers have low IQ?