It's Not The Chips BMW Is Worried About

BMW has a lot of problems but microchips aren't one, the victims of America's lithium gold rush are coming into focus, and rallying figures to offer a proving ground for sustainable fuels. All that and more in this Friday edition of The Morning Shift for May 7, 2021.

While pretty much every automaker on the planet is preoccupied with finding semiconductors, BMW says it's got that issue mostly sorted. The German automaker says it has another concern: the rising cost of raw materials like rhodium, palladium and steel.

BMW estimates the price hikes could cost it as much as $1.2 billion throughout 2021, but balances that with favorable currency exchange rates that might make the final cost somewhere in the neighborhood of $600 million, according to Reuters by way of Automotive News.

All told, BMW is emerging from the pandemic doldrums as well as anyone could expect — even figuring out a way to sell cars despite there not being many cars to sell:

BMW in April reported a 370 percent jump in pre-tax profit for the quarter as it bounced back more strongly than expected from a pandemic-ravaged first quarter last year.

Vehicle sales during the quarter surged more than a third to almost 637,000 cars as deliveries in China almost doubled. Quarterly results also received a boost from the sale of previously leased vehicles, in particular in the U.S. market. Vehicle sales in North America rose 17 percent.

Sales of its electrified vehicle models more than doubled in the quarter, when the company also benefited from higher sales of its lucrative X5 and X6 SUVs.

Of course, BMW — like many luxury brands — is helped by its high profit margins. That's also the reason why every other new EV announced today is some absurdly expensive six-figure behemoth nobody asked for.

The latest chapter in Tesla and China's contentious relationship will see the California-based automaker promising a database for Tesla owners in the region to access vehicle data at will, Bloomberg reports. The system isn't expected to be in place until the end of the year and what, precisely, that database will include isn't yet known.

This seems to have been prompted, at least in part, by last month's protest at the Shanghai Auto Show, when a woman stood on top of a Model 3 attempting to bring attention to a brake malfunction that she said endangered her family in an accident. From Bloomberg:

Days after the embarrassing event, Tesla released the data logs of the car in question. It had held out for several months but acquiesced after the regulator in Zhengzhou, Henan, where the crash occurred, ordered Tesla's branch there to unconditionally provide the woman with complete driving data for the 30 minutes before the incident.

There's also China's possible enforcement of laws requiring carmakers to store vehicle data collected on servers within its borders. Earlier in the year, Tesla's products were banned on Chinese military grounds out of fear the cars' cameras would capture something the government would prefer they didn't. Taken altogether, it seems Tesla is making moves to appear more conciliatory toward officials in one of the world's most competitive markets for EVs.

I'd like to call attention to a fascinating article from the New York Times centered around the race to mine lithium in the United States, the competing methods that each come with their own ramifications for the environment, and the indigenous communities and local livelihoods being threatened in the process.

Edward Bartell runs a 50,000-acre ranch in Nevada that happens to be located just miles away from a site where Lithium America soon plans to carve an open pit mine. Here's what that means for his business, nearby wildlife and individuals of the Fort McDermitt Paiute and Shoshone Tribe who also reside there, from the NYT:

Mr. Bartell's biggest fear is that the mine will consume the water that keeps his cattle alive. The company has said the mine will consume 3,224 gallons per minute. That could cause the water table to drop on land Mr. Bartell owns by an estimated 12 feet, according to a Lithium Americas consultant.

[...]

A December assessment by the Interior Department found that over its 41-year life, the mine would degrade nearly 5,000 acres of winter range used by pronghorn antelope and hurt the habitat of the sage grouse. It would probably also destroy a nesting area for a pair of golden eagles whose feathers are vital to the local tribe's religious ceremonies.

"It is real frustrating that it is being pitched as an environmentally friendly project, when it is really a huge industrial site," said Mr. Bartell, who filed a lawsuit to try to block the mine.

At the Fort McDermitt Indian Reservation, anger over the project has boiled over, even causing some fights between members as Lithium Americas has offered to hire tribal members in jobs that will pay an average annual wage of $62,675 — twice the county's per capita income — but that will come with a big trade-off.

"Tell me, what water am I going to drink for 300 years?" Deland Hinkey, a member of the tribe, yelled as a federal official arrived at the reservation in March to brief tribal leaders on the mining plan. "Anybody, answer my question. After you contaminate my water, what I am going to drink for 300 years? You are lying!"

Go give the full story a read — it's well worth it.

Carvana, a business I'm still not entirely sure adds anything useful to used car buying yet persists anyway on a childish gimmick and hedge fund money, is running out of cars to sell, like all used car vendors. But that hasn't mattered much, as the startup still managed to grow retail sales in the first quarter of 2021. From Automotive News:

The online used-vehicle retailer doubled its revenue for the period, while reporting another loss, albeit a narrower one.

The company narrowed its net loss to $82 million for the period, compared with a loss of $184 million in the first quarter of 2020.

Revenue doubled to $2.25 billion. Gross profit more than doubled to $338 million.

Carvana has been dealing with sale-ready inventory constraints since the onset of the coronavirus pandemic. The company's average available inventory for sale was down 27 percent on average in the first quarter, when compared with the fourth quarter of 2020, the company said in a letter to investors Thursday.

"Demand continues to outpace our ability to fulfill it, and we are taking many steps to ramp up production capacity in the near-term to support accelerated growth in 2021," Carvana said in the letter.

Another reminder that fewer of the things you want to buy is great for the businesses that sell them.

Synthetic fuels are expensive to produce and thus, might not make the most sense as an alternative fuel source for consumer cars. But they are gaining favor in motorsport. Formula 1 has signaled it will make them a major facet of its 2025 engine regulations, but the World Rally Championship has beaten it to the punch as the FIA's first global series to commit to adopt them, starting next year. From the WRC's press release published today:

In line with the introduction of the new generation of power units, which integrate the hybrid technology in Rally1 class vehicles, the FIA will introduce a 100% sustainable fuel in the FIA World Rally Championship from next season.

The World Motor Sport Council has approved P1 Racing Fuels as the exclusive provider for the series under a three-year agreement commencing in 2022 by an e-vote on April 19, 2021.

P1's industry partners and in-house experts have worked to produce a fossil-free hydrocarbon-based fuel, with a blend of synthetic and bio-fuel components. It will be the first of its kind to be used in a FIA World Championship series, powering the high-performance engines.

All this echoes the optimism luxury and sports car manufacturers like Porsche have for synthetic, sustainable fuel. It might be too pricey a solution for road cars, but perhaps it could keep a small number of performance-focused ICE vehicles on the road — for those who can afford them anyway. Motorsport should provide a good trial by fire for the technology, as it always does.

The soundtrack of my week has been a lot of Japanese jazz fusion, particularly T-Square and Casiopea. T-Square's "Truth" was the intro music for Fuji TV F1 broadcasts from the late '80s well into the 2000s — it's hard to imagine a more hype racing tune. T-Square is also responsible for the Gran Turismo theme "Moon Over The Castle," which actually appeared on one of the band's albums as "Knight's Song." And if any of that sounds appealing to you, you should probably also check out this album of official Gran Turismo rock arrangements that's been hiding on Spotify for I don't know how long.