Tesla may be learning how to not shoot itself in the foot, Aston Martin really needs the DBX crossover to work out, Volvo’s autonomous trucks are starting to generate revenue, and China car sales continue to slip. All that and more in the Morning Shift for Wednesday, July 10, 2019.
1st Gear: Tesla: Things Are Going Good, We Just Won’t Say How Good
In yet another allegedly “leaked” email from Tesla management to staff, Automotive President of Tesla Jerome Guillen promised a strong increase in output at the company’s Fremont factory, Automotive News:
Tesla is getting ready to increase electric-vehicle production, according to an internal email, after achieving record deliveries in the second quarter.
The company is “making preparations” to raise output at its plant in Fremont, California, Tesla’s automotive president, Jerome Guillen, said in an email to employees on Tuesday. “While we can’t be too specific in this email, I know you will be delighted with the upcoming developments.’
After an abysmal first quarter, Tesla saved itself and its plummeting stock price with a record-setting production output in the second quarter of this year. It’s no coincidence that it’s now promising even stronger production capacity and performance going into the third quarter, considering its share value has dropped 31 percent so far this year, as Autonews reports.
But the vague language of Guillen’s email is noteworthy in itself, as it shows the company is maybe finally learning not to release specific figures or estimates that box them in when it comes time to release actual results. Instead, the nature of the “leak” is that things are going to get better (are you listening, investors?), without giving anything tangible that can be measured and weaponized against Tesla later.
We always pick on Tesla and Elon Musk for how much they overpromise, so this is an improvement. But the whole “leaked” email to boost expectations practice, which has suddenly become a regular thing this year, is becoming nearly as silly.
2nd Gear: Volvo Found a Way To Package Autonomous Trucks To Actually Make Money
We are years away from giving autonomous shipping trucks free rein on public roads, but companies like Volvo have to find a way to develop a return on their massive investments into the technology as soon as possible.
For Volvo, that involves a package deal on short, direct, repetitive routes with its customers, the first of which is with a mining company, as Reuters reports:
The truck maker said last month that its first commercial autonomous transport package will involve seven trucks transporting limestone for Norway’s Broennoey Kalk AS from a mine to a nearby port starting this winter.
“We are in the early stages when it comes to implementing autonomous solutions, so we’re trying to learn and we’re open to different setups. But in general it is more and more talk about services and solutions that is coming into play,” Cuklev said.
The deal with Broennoey bundles together the provision of the autonomous trucks with a virtual driver, control tower system, maintenance, repair and insurance, with Volvo paid per tonne transported.
Boston Consulting Group expects autonomous transportation services to generate up to $150 billion in revenue for the industry by 2035, according to Reuters, and small commercial deals like this one will define a package that can be scaled as the regulatory and infrastructure setbacks are eventually adjusted for larger scale business.
I still can’t help but think of the most terrifying scene in 2017's Logan, though! Weaponized autonomous trucks! No thanks.
3rd Gear: China Sales Going From Bad To Worse
The China Association of Automobile Manufacturers has lowered its forecast for end-of-year results from zero-growth, or no change year over year, to an actual decline, Reuters reports:
China is likely to see vehicle sales drop again this year as opposed to earlier expectations for zero growth, the country’s biggest auto industry association said, after it unveiled data showing the sector contracted for a 12th straight month in June.
Despite continued strength in new-energy vehicle (NEV) sales, overall auto sales in China have stayed bleak in the first half of 2019, with 12.3 million vehicles, or 12.4% less from a year earlier being sold over the period, CAAM data shows.
Sales in June fell 9.6% to 2.06 million vehicles.
China is the world’s biggest car market, so a decline there is bad news for the entire industry, especially for companies like Jaguar Land Rover and Tesla that were late to the game establishing a strong footing there.
But it’s also the broader trend in other car markets, as the first half of U.S. car sales were also pretty bad. It’s not looking good for the cars, I’m afraid, and that doesn’t look good for the economy.
4th Gear: It’s DBX Or Die, Maybe
Aston Martin wanted the stock value and clout of Ferrari and instead the stock price has dropped 45 percent from the initial public offering last year. But after a big show at this year’s Goodwood Festival of Speed, Aston Martin just wants everyone to relax and wait for the DBX crossover, via Automotive News Europe:
“The narrative of the plan, the DBX, de-risking and the luxury market is not a story you can tell through newspaper headlines, so we will take every opportunity, every touch point with investors,” [CEO Andy Palmer] said, adding that the task has not been made any easier by the fact that the company is the first automaker to feature on Britain’s benchmark FTSE-100 index in 30 years.
Palmer said the share price decline does not mean investors have lost confidence, and that the bulk of backers from the company’s listing remain. Shorting of the stock has diminished and the share price should begin to benefit, he said, especially as the DBX moves toward its sales debut next year.
I mean, of course the introduction of a crossover is going to boost sales. It’s what people want right now. But Aston is only about a year out from the DBX actually going on sale and its stock is in the trash.
It’s starting to look like everything will need to go perfectly, with Brexit still a threat and with everything hinged on one model in the lineup, for Aston to make it out of this decade without being in a critical position.
5th Gear: Three Fuels For the Brazilian Corolla
Gasoline, electricity, and ethanol. These were the ingredients chosen to create the perfect Brazilian market Toyota Corolla, apparently.
Electrified vehicles have made little headway in Brazil, in part because of anemic charging infrastructure and taxes of up to 120% on imports such as the Toyota Prius. Of the country’s 44 million cars and trucks, only 11,000 or so were electric as of the end of 2018.
These days, however, almost all new cars in Brazil can burn ethanol or gasoline. Last month, Brazilian policymakers further primed that market for the new Toyota, making tax concessions that will lower the price of hybrid vehicles by as much as 3% for cab drivers and fleet companies. With that sweetener, a hybrid electric vehicle that also burns ethanol could make up 10% of the fleet by 2025, according to some estimates.
The hybrid Corolla will be able to run on any of the three fuels or two at the same time. Toyota will make the car with engines from Japan at its Sao Paulo plant, a factory that can churn out as many as 70,000 vehicles a year. The automaker has yet to release pricing or mileage-efficiency estimates for the car.
As Bloomberg points out, an ethanol-powered hybrid works for the Brazilian market because of the crazy tax on imports, and because of the available infrastructure for ethanol-fueled cars that isn’t shared in other markets like Europe or much of the U.S.
There are some downsides, though, again from Bloomberg:
Meanwhile, ethanol has fueled a long-simmering debate. Scientists point out that it’s not as clean as it’s been made out to be, considering the energy required to grow the plants ethanol is derived from and to refine the end product. What’s more, ethanol typically emits more smog than conventional gas and produces fewer miles per gallon.
Still, it’s interesting to see Toyota adapt to such a specific market, and the adaptability of the technology is fascinating. Toyota hopes to expand the model to Argentina, Chile, Colombia, Paraguay, Peru and Uruguay markets, and would consider expanding beyond that to Europe, according to Bloomberg.
Reverse: Three Points For Safety
Neutral: Would You Buy An Ethanol Corolla?
I love the idea of a car that can effortlessly run on more than one fuel. If you could buy a Toyota Corolla with the option of running on ethanol fuel, would you? Even if you didn’t have the infrastructure for it just yet?