1st Gear: It’s Hard Out There For A Startup
We’ve seen this time and time again: new startups and tech giants think they can do car manufacturing. How hard can it be, they must wonder, until they discover that everything from overhead to supply chain management to having a viable sales network actually makes everything extremely hard. Yes, there’s Tesla, but even Elon Musk will tell you they are the exception and not the rule.
It could be argued that making electric vehicles should lower the barrier of entry into cars, as you don’t have to deal with the insanely complicated task of designing an internal combustion engine. Then again, not really!
Here’s more from Automotive News about how breaking into this industry may be the most difficult business venture of all:
Even for outfits that have vast piles of cash — and most don’t — the odds of creating a sustainable business selling high-quality vehicles at a profit year after year are somewhere between very slim and none, depending on whom you ask.
“What makes Faraday think they can produce an electric vehicle cheaper than Tesla?” asked Bob Lutz, the longtime industry executive who has been involved with several small automotive ventures since retiring in 2010 as vice chairman of General Motors. “And Tesla is losing their shirts.”
[...] Said Lutz: “It’s gotten easier to do an electric vehicle because you can go to companies who will [sell] you the complete battery pack; you can go to others that will [sell] you the complete power electronics and so forth.
“But still, while a smaller company would never spend what General Motors, Ford or other OEMs would spend, you are still looking at $200 million to $300 million for projects that in my considered opinion are doomed from the outset.”
I don’t always agree with Bob Lutz but he’s objectively right here about the near impossible cost of entry and success into this field.
2nd Gear: Does Tesla Have A Welding Problem?
Speaking of startup problems, while Tesla has upended the industry so far, the real test is here now with the Model 3 and whether or not they can successfully mass produce a car. So far early production has had its problems; Musk himself called it “production hell.”
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So why is it so hard to make the Model 3 when the company is already building the S and X? Automotive News posits it has to do with welding. The other two cars are primarily made of aluminum, but the smaller sedan also has steel, and welding is tough to get right:
The Model 3's aluminum and steel body requires more welding rather than the adhesive and rivets in aluminum bodies, experts say.
Harbour described the difference between the body of the Model 3 and those of the Model S and Model X as “partly cloudy vs. partly sunny.” The change in materials would require processes new to Tesla.
“There’s a big difference there. They haven’t been doing a lot of spot welding on the first two vehicles because they’re all aluminum,” Harbour said. “The learning curve is pretty steep.”
After the Journal report, Musk tweeted a of the Model 3 production line, which was operating at one-tenth of its potential speed. In the video, sparks fly as two robotic arms assemble parts of the vehicle frame. He followed with another on Wednesday, Oct. 11, showing body panel stamping at full speed.
“Resistance welding should make a little smoke, but when you see stuff popping out like that, that’s called expulsion,” automotive manufacturing consultant Michael Tracy of Agile Group in Howell, Mich., said of the first video. “It’s symptomatic of weld spots getting too hot because they’re poorly planned, or in this case, the metal not being pulled all the way together.”
A company spokesperson told AN that “it will take time to fine-tune the line for higher volumes, but as we have also said, there are no fundamental issues with Model 3 production or its supply chain.”
3rd Gear: Our National Equinox Nightmare May Soon End
Meanwhile in Canada, General Motors and that country’s auto workers union may today sign a deal to end a strike that threatened the supply of Equinox crossover vehicles, a truly devastating blow to all of us. One more from Automotive News:
Ontario Premier Kathleen Wynne issued a statement expressing hope that the tentative deal will end the strike, which she says has been felt throughout the province’s auto supply chain.
Unifor had demanded the plant be named the lead producer of the Equinox. That meant if GM needed more of the compact crossover, CAMI would be first to get the work but if sales slowed, production would be scaled back first at a pair of plants in Mexico.
The Mexican plants had combined to build 40,017 Equinoxes between April, when overflow Equinox production began there, and Aug. 31. Meanwhile, CAMI had produced 132,288 Equinoxes this year through August, according to the Automotive News Data Center.
4th Gear: A Daimler Breakup?
Daimler is a huge German conglomerate, but since this summer it’s been looking into spinning off some of its divisions into separate legal entities. This has created speculation about a possible breakup down the line. Via Reuters:
CEO Dieter Zetsche said in July that Daimler was considering putting parts of its business into separate legal entities, spurring talk of a possible break up as the group looks to fund big investments in autonomous and electric cars.
The company said in a separate statement on Monday that it was not pursuing any savings, efficiencies or job cuts related to the reorganisation.
Separating Daimler’s divisions could make it easier to value them and create a higher figure than for the current combined whole, with trucks and buses on their own worth 31 billion euros, analysts at Evercore ISI have said.
5th Gear: Toyota And Mazda Want That Big Corporate Welfare Check
Toyota and Mazda are planning a big new joint factory in the U.S., and several states including Michigan, Ohio, Indiana, Texas, Alabama, North Carolina and South Carolina are vying for the chance to give it a home. But these two automakers want a seriously big check first: a reported $1 billion state incentive package, reports Bloomberg:
Toyota and Mazda plan to brief their boards on a short list of states contending for the plant in the coming weeks and announce a final selection by the end of year, said the people, who asked not to be identified because the talks are private. Scott Vazin, a Toyota spokesman, and Jeremy Barnes, who represents Mazda, both declined to comment.
The tax breaks and other support Toyota and Mazda are said to be asking for could rival the package Nevada approved for Tesla Inc.’s Reno battery factory in 2014 that was valued at as much as $1.25 billion. The Japanese carmakers have positioned themselves to drive a hard bargain with states by pledging to create as many as 4,000 jobs.
“There haven’t been any big prizes like this in a while, and there isn’t expected to be any more for some time as overall auto production plateaus,” said Kristin Dziczek, director of industry research at the Center for Automotive Research in Ann Arbor, Michigan. “The competing states may be willing to put more on the table than they would have previously.”
It’s insane how that works, but I guess an auto factory is a better use of taxpayer money than a sports stadium.
Reverse: Bring It Back
Neutral: How Do You Make The Auto Industry More Accessible To New Players?
I don’t think the car game should be closed off to people with new ideas, but the cost of entry is incredibly high and the chance of success remarkably low.