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.
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.