People are flying less so cobalt is getting cheaper, California is imposing a strict zero-emissions mandate on heavy-duty trucks, and Amazon is reportedly investing in an autonomous car company. All that and more in The Morning Shift for June 26, 2020.
Most major electric carmakers use either Lithium Nickel Manganese Cobalt Oxide (NMC) battery cell chemistry or Lithium Nickel Cobalt Aluminum Oxide (NCA) batteries. Both of these battery types tend to offer high energy density, but the problem is that cobalt is not only expensive, but it also has a gloomy history of reportedly being mined with child labor.
In fact, costs associated with cobalt procurement are so high that Tesla is apparently switching over to Lithium Iron Phosphate (LFP) for its China-built cars specifically to reduce costs affiliated with Cobalt. LFP is less energy-dense than NMC or NCA, but the automaker is reportedly making up for this by use cell-to-pack technology, which eliminates the use of cell modules to cram more batteries into the same battery pack volume.
The point is that cobalt is expensive, and represents a major bottleneck and human rights question in the EV industry, which is why it’s worth mentioning a recent Reuters story about how reduced air travel (a product of the coronavirus pandemic) has brought cobalt pricing to a 10 month low. In part, it comes down to turbine blade replacement, as Reuters mentions:
Airlines such as Australia’s Qantas (QAN.AX), Qatar Airways and Singapore Airlines are looking to defer plane deliveries from Airbus (AIR.PA) and Boeing (BA.N) and this means postponed demand for cobalt and nickel alloys used in jet turbine blades.
“The harsh high temperature and pressure environments of the jet engine necessitates regular replacement of turbine blades,” said CRU analyst George Heppel. “But planes are grounded, turbine blades aren’t being used and don’t need replacing.”
The story goes on:
Heppel expects cobalt demand for aerospace rotating parts to total 4,442 tonnes this year, a drop of 18% from 2019 and the lowest since 2011. Overall, he forecasts a 6,300 tonne surplus this year and global consumption at 131,800 tonnes.
Prices of cobalt metal, at around $30,000 a tonne, are down more than 15% since early February and are the lowest since last August. As surpluses become more visible lower levels are expected.
Of course, the drop in demand for EVs (which, per Reuters, represent 20 percent of Cobalt demand) has also deflated the element’s pricing, though the article mentions that EV demand is expected to recover “at a faster pace than from aerospace due to government incentives to promote clean air initiatives.”
The California Air Resource Board (CARB) just passed a mandate that will require manufacturers of large trucks like big-rigs, construction machines, and heavy-duty pickups to ensure that an increasing percentage of sales fall into California’s “Zero Emissions Vehicle” category. CARB defines a ZEV as “a vehicle with a drivetrain that produces zero exhaust emission of any criteria pollutant (or precursor pollutant) or greenhouse gas under any possible operational modes or conditions.”
Reuters breaks down the rules of the new “landmark” mandate:
The proposed mandate is expected to start in the 2024 model year and initially require 5%-9% zero emission vehicles (ZEV) based on class, rising to 30%-50% by 2030. By 2045, all vehicles should be ZEVs “where feasible.”
The regulation would apply to pickup trucks weighing 8,500 pounds or more [GVWR], but not to light-duty trucks, which are covered by separate zero emission regulations.
CARB plans a separate rule in early 2021 that will require large fleet owners to buy some ZEVs.
That 8,500 pound GVWR rule means this mandate should apply to vehicles like the Ford F-250, Chevy Silverado HD, and Ram 2500.
The rule is called the Advanced Clean Trucks Regulation, and the California Air Resources Board has everything broken down online. Here’s a more detailed snapshot of the requirements:
• Class 2b-3 group (consisting mainly of full size pickup trucks and vans) and Class 7-8 tractor group (consisting of on-road semi-trucks that haul trailers) ZEV sales begin at 3 percent of California sales in 2024 and increase to 15 percent by 2030 (Class 2b-3 pickups would be excluded until 2027)
• ZEV sales for all other vehicles in the Class 4-8 group begin at 7 percent of California sales in 2024 and increase to 50 percent in 2030
• The ZEV sales percentage requirements remain constant past 2030 Credits
• Manufacturers can earn credits starting with the 2021 model year (MY) •
Compliance would be tracked via a credit system, which allows plug-in hybrids to contribute towards the ZEV goal. From the ARB:
Compliance would be based on a credit and deficit system to provide flexibility for manufacturers to sell more ZEVs in one weight category and fewer in another and credits may be banked and traded
• Near-zero-emission vehicles (Plug-in hybrids with some all-electric range) would earn partial credits, and could be used to offset up to half of each manufacturer’s annual deficits through the 2030 MY
Manufacturer Reporting • Manufacturers would need to report annually to demonstrate compliance, to earn credits, and to report details about credit trade transactions
Mary Nichols, Chair of CARB, described why this new regulation is so important, saying per Forbes:
``Diesel vehicles are the workhorses of the economy, and we need them to be part of the solution to persistent pockets of dirty air in some of our most disadvantaged communities,’’ Nichols said in a statement after the vote. ``Now is the time — the technology here and so is the need for investment.’’
Jalopnik has been writing about autonomous vehicle company Zoox since 2013, calling some of the company’s claims “vaporware horseshit” and the happily eating crow when it built prototypes and named those prototypes “VH1,” “VH2,”... “VH5,” with “VH” standing for—and this is no joke—“vaporware horseshit.” (Zoox was also involved in a lawsuit in which Tesla accused former employees of using proprietary information to support their new employer, Zoox. Zoox recently settled the matter with Tesla.).
Now Jalopnik can eat some more crow, because the company is apparently legit enough to be purchased by Amazon for $1 billion. That information comes from the tech-focused website The Information, which writes:
Amazon has agreed to pay more than $1 billion to buy Zoox, an early developer of autonomous vehicles, marking the entrance of one of the world’s most deep-pocketed companies in the long race to develop driverless cars, according to people with knowledge of the deal.
The deal, which could be announced as early as Friday, would give Amazon control of a nearly 1,000-person startup that has designed a prototype vehicle to ferry passengers in urban areas.
Amazon has wanted to deliver packages to customers via robot for years; whether that was the impetus for the investment, we don’t know for certain, but it seems logical.
We keep reading about the resurgence of car sales following the gradual re-opening of states after the coronavirus led to mass shutdowns. In some markets, we’ve heard of “V-shaped” curves, with the trough of the “V” representing the coronavirus disruption, and the steep right part of the curve representing the recovery.
Will the U.S. see a V-shaped curve? That’s the big question. After talking with analysts from Cox Automotive, the Detroit News paints a skeptical picture. From the news site:
...the industry that represents nearly 4% of the national economy could be in for a long recovery more like Nike’s swoosh than a “V” or “U,” said Jonathan Smoke, Cox’s chief economist.
There’s just a lot of uncertainty in the air right now, with high unemployment and an election coming up. And uncertainty is never good for car sales:
“We know we’re in for a rocky road on unemployment, consumer credit, consumer sentiment and oh, yeah, election politics,” he said. The contentious circumstances of the election are sure to be a “wet blanket” because of the contributing uncertainty.
Then there are worries about the supply side of things, even though automakers are rapidly getting back up to pre-COVID output:
On the retail side, constantly fluctuating market conditions may challenge the automakers, he said. Inventory in mid-June was lower than a year ago with roughly 600,000 fewer units and 71 days of supply.
“This limited supply we have now may constrain the market recovery. It’s extremely low, far below levels we were at last year,” Chesbrough said. “As sales continue and supply continues to sputter as factories get back to 100% utilization or at least 100% of the levels they were at before, this number can go back even further.”
Cox predicts that automakers will sell a total of 12.9 million new vehicles in the U.S. this year, or about 24 percent fewer than last year. This is in contrast to what we reported yesterday, with another analyst optimistically predicting 14 rather than 12.
The Detroit News mentions fleet sales being a contributor to this drop, since overall travel and car rental demand has waned as a result of the coronavirus.
Fiat Chrysler and PSA agreed on a merger back in October, but a lot has happened since then, leading some to wonder whether the merger will go through to completion as originally drafted.
A new story from Automotive News suggests that PSA’s CEO Carlos Tavares is still onboard, and wants to keep the terms the same as what the companies agreed upon before the COVID crisis. He talks about why the merger is so important, especially now:
The deal has become even more vital because of the crisis and to speed up cost savings, Tavares told PSA’s annual shareholder meeting on Thursday. “The merger with FCA is the best among the solutions to cope with the crisis and its uncertainties,” he said.
But when an investor suggested that the terms of the merger be altered, Tavares was having none of it, as Auto News writes:
A French investor in PSA, Phitrust, said this week that the merger terms should be modified to reflect the impact of the COVID-19 pandemic and FCA’s declining prospects.
“We have to act as professionals. We have signed a binding agreement,” Tavares said on Thursday in response to a question from Phitrust on whether the terms should be changed.
“The agreement is based on a balance on which we have worked hard and for a long time. It’s a fine, relevant balance vis-a-vis the two companies, the shareholder base and the countries. Today is not the time to look at things you raise in your question,” Tavares said.
FCA’s Chairman John Elkann, back in May, also noted the binding nature of the two companies’ agreement:
FCA Chairman John Elkann has said the terms of the deal “are set in stone as binding contracts in their nature are.” Elkann was speaking on May 20 in a conference call after the annual shareholder meeting of Exor, the Agnelli family holding company which controls FCA.
There’s a lot going on right now that could affect how this merger moves forward, including an investigation by the EU antitrust regulators, so it’s anyone’s guess what these two companies will look like by the end of the year.
Instead of the Bennett cup race...”Le Grand Prix” (the grand prize) contest was substituted. It took place on the Sarthe circuit in France June 26-27, 1906. The total distance was 774 miles, 387 being covered each day. The race was won by Francois Sisz in 12:14:05 2/5, an average of 63.35 miles an hour. Nazaro was second and Clement third. There were thirty-two starters.
Here’s some context on that “Bennett cup race.” It was a series of races, arguably the first series of international car races, started by the son of the man who started the New York Herald newspaper. Before there was grand prix racing, there was the Gordon Bennett Cup. From Grandprixhistory.org:
James Gordon Bennett arrived in Paris in 1887 and had established a Continental edition of his father’s New York daily, The Herald. This being the same Bennett that sent Stanley in search of Livingstone had an eye for publicity. In July 1899 he established a series of races that bore his name. The six international motor races held between 1900 and 1905 came to be known as the Gordon Bennett Cup Race but within the pages of the New York Herald and its Paris offshoot it was always referred to as the Coupe International. Gordon Bennett himself never drove a motor car and in fact never witnessed any of his races.
What’s it going to take to get you onto an airplane given the current status of COVID-19 in the U.S.?