Always amuses me when I read EV sites talking about the imminent demise of "legacy" automakers because it's just oh-so-impossible to shift from manufacturing ICE to EVs.
Sure they may have dragged their feet, but GM, Ford, Hyundai are definitely there and selling EVs in China. Just not at the same price point as BYD, or other Chinese OEMs which is likely a much bigger driver in the decline of sales of non-Chinese cars.
The -40% margin is not a (per) unit margin; it's a business measure that includes generally all expenses related to running the business (including R&D, marketing, capital expenditures, etc.)
So a -40% operating profit margin on a newly formed capital-intensive business line isn't a bad thing.
Ford has always had a hard on for product line consolidation.
The guys who were junior MBA fly on the wall during the "global Ford" push of the 90s (which was a mixed bag but left them less screwed in 08 than everybody else) are "real decision making authority" now.
I don’t disagree with this but they also went all in on trucks thinking a future would come where they would still get to sell combustion trucks with fat margins. And then Tesla and Co came along, proved EVs were feasible, which allowed nation states to comfortably start setting future new combustion vehicle sales bans.
As the Indiana Jones quote goes, “They choose poorly.” They thought no one would ever hold them accountable to actually innovate, and they may face a corporate death penalty for the hubris and shortsightedness.
They can start making cars again no problem, that their current offerings are scored as light trucks doesn't mean that they are all in. They can stick a mass market electric sedan or compact in their lineup whenever it makes sense.
Did you read the article? It's not about manufacturing, it's about an imminent change in Chinese regulations that will literally make it illegal to sell many cars sitting in a lot today.
... Because foreign legacy manufacturers aren't fast enough to the EV transition, is the thesis posted by the author. Such as in this quote where he ignores foreign car companies who are marketing EVs in China and not once mentions price. Nor does he mention the potential role the growing US-China tensions may be playing in the decisions of Chinese consumers
"while foreign companies like Toyota and Volkswagen are manufacturing and selling mostly petrol and diesel cars in China."
"Please don't comment on whether someone read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that.""
Of course they can make EV's. They're easier to make than gasoline vehicles. What's hard is to make them profitably and to sell them.
I don't think people realize what a shock wave is coming for the auto industry.
1. The transition is expensive. VW is spending $200B. $200B of debt in this high interest rate environment is going to make profitability tough.
2. High interest rates make cars a lot more expensive, suppressing demand.
3. The inventories on dealership lots have been rebuilt over the last 6 months, hiding a drop in consumer demand.
4. EV's take much less labor to manufacture than combustion engines. Take a look at the regularity of an EV compared to a combustion vehicle. That regularity makes robotic assembly more feasible. Firing workers kills morale in a company.
5. The bulk of the transition is going to happen faster than most expect. Most are expecting a linear progression, but you all know what an S curve looks like. Right now we're in the low slope bleeding edge phase. Very soon we'll transition to the high slope mass-market phase. The low slope laggard phase will sustain a few niche manufacturers but won't be enough for those who depend on volume for profits.
6. The transition is creating a large group of hesitant buyers. Many people are unsure what their next vehicle purchase should be, so they delay the decision. They keep maintaining their current vehicle, purchase a used car as a stop gap, or keep relying on their current alternative -- bus, Uber, mooching rides off friends, whatever.
In other words, demand for combustion engines will drop faster than demand for EV's will rise.
7. The other points mean that manufacturing capacity is higher than demand, which means lower prices. Which means shrinking of already low profit margins, perhaps even into the negative.
8. And EV's won't be a panacea. Their price is dropping too. Tesla will be blamed for leading the price drops, but it's really the Chinese leading that charge. BYD has an €8200 vehicle coming soon, the Seagull. It's not a golf cart, it meets full Euro safety specs. Geely has a stable of European brands (Volvo, Polestar, MG and Lotus) that it can and will use to sell Chinese cars at Chinese prices without the Chinese stigma. (cf MG4).
The Chinese have been ignoring overseas markets for a while now since they could sell everything they make domestically, but now that prices are cratering in China they're going to look to export to keep profits up. Most Chinese manufacturers will fail, but there are >100 of them, and even if a couple succeed it'll be massive.
9. Look up the "Altman Z score", and then take a look at this: https://cleantechnica.com/files/2023/03/Graph-Tony.png A score below 3 predicts upcoming bankruptcy. People complain that Tesla is over-priced, but IMO it's that the others are underpriced -- their price includes a significant bankruptcy risk. Not all of them will go bankrupt: once the survivors lose the bankruptcy risk discount, their value should go up.
10. The usual risks of large companies riding a significant technology change, coupled with significant supply chain challenges.
11. HN is highly skeptical about autonomous driving, but if it does happen it will have a significant unpredictable change on the market.
12. The uncertainty of the Inflation Reduction Act. Manufacturers are betting heavily on the subsidies in the IRA, but the chances of a rug pull in 2024 are high. OTOH, those not betting on the subsidies will lose heavily if the rug isn't pulled.
13. 80% of Lithium refining is done in China, and the odds of a trade war with China seem high.
14. Many legacy manufacturers make a surprising proportion of their volume and profit selling into China. That's vulnerable.
15. Carmakers have a lot of debt backed by consumer leases. High interest rates make that a lot more expensive.
I'm sure I'm wrong about some of those points, but even just a few could be devastating to a low margin business like automotive manufacturing.
Right, now look at this (I wanna call it an infographic) image: https://xkcd.com/605/
Reporting 100% growth because you sold 1 banana last month and 2 bananas this month is misleading.
Tesla's growth of +60% since 2015 is impressive only because they were selling so few cars in 2015. Were they selling the same as Renault, or any other well-recognised brand it would be impressive.
Also, look up the book "How to lie with statistics", get it and then read it.
> China released its rule for stage 6 light-duty vehicle emissions limits in December 2016, so manufacturers have had 7 years to bring their vehicles into line.
Don't feel too sorry for them if they couldn't read the laws in the country they were selling in.
The electric F-150 is a niche vehicle and Ford is only pretending it is for the mass market. Their massive Tennessee factory, currently under construction, will be producing their mass market truck:
Depends on what you mean by safer. If you are hitting an F-150 you will be safer in a F-150 yourself than a smartcar. If you are a pedestrian you would rather be hit by a smartcar.
Many of these Chinese vehicles have the safety features of a 1950's era vehicle, so without airbags, good construction techniques for absorbing force, etc. I imagine they would all get horrible safety ratings by Consumer Reports.
However, if energy scarcity pushes us globally toward a situation where we need more essential cars for slower, shorter routes, then it would make sense to downgrade a bit those tests, as the typical use would be closer to a Topolino driving 70km/h on a country road than an M8 dashing at 170km/h on the highway.
Well, that doesn't really matter, does it? Vehicles provide transportation from A to B for occupants and cargo. If a small vehicle suffices, then larger ones shouldn't be necessary. Of course, this is also a challenge for planning infrastructure in a way that large vehicles are not necessary in population centers (which should, by definition, be built for people, not large cars).
I’ve been in China recently, one of the most popular forms of transport is the electric scooter. They outnumber cars around me. Many people just don’t bother with cars.
The list of top cars by model is quite interesting. Some of the Chinese cars are golf carts but most would decently sized and attractive by US standards.
So.. its switching from petrol to coal?
Unless they really ramp up nuclear and solar. Which they did not so far..
And dont forget, the first 100.000 kilometers of energy are already spent driving of the lot, building a new car. So fading away old cars as slow as possible is the most energy efficient strategy?
> And dont forget, the first 100.000 kilometers of energy are already spent driving of the lot, building a new car. So fading away old cars as slow as possible is the most energy efficient strategy?
No it is not a good strategy. It is better to replace oldest cars first, because they are usually least efficient, but even if you replace new ICE car, that car does not disappear - it will probably be sold and replace old, less efficient ICE car.
Coal is awful, but also keep in mind that it’s shipped to centralized locations to be burned.
Gas for cars is shipped to a distribution center, loaded onto trucks that are immensely heavy and require loads of fuel to haul, shipped to a local distribution center, loaded onto trucks, driven somewhere else, pumped into a station, then those trucks drive back, and people often drive out of their way for gas instead of just charging at their destination. (Nobody has a gas station at their house and few desirable stores include gas stations)
It’s entirely possible that this process ends up using more energy than just burning coal.
That would still be a win for cities there.
But it looks like coal and non-renewables' share of electricity there is now declining too, from roughly 4/5 to 2/3 in the last decade* (a lot of that is due to wind energy, which is rapidly ramping up there.
China is building and planning new coal power plants more than the rest of the world combined.
Share it's droppibg but China alone will pollute much more than everyone else combined.
> The first 100.000 kilometers of energy are already spent driving of the lot, building a new car
China is the leader of electric 2-seater cars (Wuling Mini, Geely Panda Mini).
Comparison between a Wuling Mini and a Tesla Model 3:
- battery weight: ~100 kg vs. 500+ kg
- total weight: ~600 kg vs. 1,600+ kg
- retail price: ~5,000 EUR vs. ~50,000 EUR
I doubt it takes as much energy to break even on a Wuling Mini than it does on a Model 3.
A better question would be - why should Europeans be excluded from affordable electric Chinese cars because of the political chess between the US and China?
Assuming they never move away from fossil fuels, it's still a win. Electricity is far more efficient at converting energy into movement than fossil fuels (roughly 75% vs 15%)
>Electricity is far more efficient at converting energy into movement than fossil fuels (roughly 75% vs 15%)
This metric could also be described as: "what percentage of the total energy content of your car's fuel tank will be converted into kinetic energy?"
What is the point of this metric?
Solar panels are less efficent at converting incident sunlight into electricity, than fossil-fueled power stations are at converting hydrocarbons into electricity. The same applies for wind turbines converting kinetic energy into electricity.
Blindly taking the "efficiency" of one tiny step in the process of converting an energy source into automotive propulsion will lead to some absurd conclusions.
Took me most of the article before I could work out whether "inventory crisis" was too much or too little inventory. Apparently it's too much, which I guess is the bounceback from the too little inventory of the COVID period.
There needs to be some way out of this that doesn't result in scrapping freshly produced cars.
I suspect China implements these measures for geopolitical, not environmental reasons, but still.
I suppose a penalty function of the same type the EU employs for exceeding CO2 limits (€95 per gram over the limit, per kilometer, per car) should help - assuming there is no foul play similar to what VW (and others really) did a decade ago.
> China released its rule for stage 6 light-duty vehicle emissions limits in December 2016, so manufacturers have had 7 years to bring their vehicles into line.
If manufacturers knowingly create stranded assets why would they need to be bailed out?
An OEM kit to replace the engine in existing cars with an electric one and batteries would be good. There are plenty of TV programmes showing custom conversions of classic cars but we need something larger scale.
> There needs to be some way out of this that doesn't result in scrapping freshly produced cars.
They aren't going to scrap those cars.
For one thing, like all EV-biased articles, facts are thin. The article says "millions", then "hundreds of thousands" cars would fall foul of the new legislation. Whichever it is, at those numbers I can all but guarantee that those cars will be sold at a profit.
I assure you, no government is going to willingly kill off 8000[1] domestic businesses just to make a point on behalf of foreign interests, especially not China who is well known for prioritising their economy over almost everything else.
Those cars are going to get sold, and will be driven for a normal lifetime.
This site will conveniently omit reporting that, though.
No. Most systems in a ICE car are designed to be run off the belt of an idling engine. An electric car is only running when you put your foot on the accelerator. So cooling, climatisation, power steering, braking assistance will all need an electric retrofit in addition to the drive train. Ford tried to retrofit an electric PHEV in its Escape and Fusion. Most of the useful cargo space was taken away to retrofit the relatively small battery.
It looks to be very aligned to EURO7 standards - so great to see these coming in earlier in China than Europe, and will also mean that engines and set-ups can be reused.
Sure they may have dragged their feet, but GM, Ford, Hyundai are definitely there and selling EVs in China. Just not at the same price point as BYD, or other Chinese OEMs which is likely a much bigger driver in the decline of sales of non-Chinese cars.