The GM Strike continues to roll along into its second month, the economy is bad, but VW is optimistic they can still make bank on EVs, and Chevy thinks they’ve “cracked the code” with the new Bolt. All this and more in The Morning Shift for Monday, October 14, 2019.
1st Gear: The UAW Is Not Screwing Around
The GM strike is heading towards its second month, and UAW just sent a signal it is in it for the long haul. The WSJ reports the union upped strike pay to $275 from $250 per week. This may not sound like much, but when you’re on strike every dollar counts.
Perhaps even more importantly, UAW also said it would “lift a restriction on members seeking part-time work, so now they can get a temporary job and still receive full strike pay.”
More from the WSJ on the move:
The union’s strike fund exceeded $750 million heading into contract talks this summer, giving it a sizable amount of money to pay workers during the work-stoppage.
UAW leaders increased strike pay in March to $250 a week and had planned to raise it again to $275 a week in January, an early sign the union was preparing for a walkout.
That said, there may be reasons for optimism:
As the union prepares workers for a longer strike, UAW Vice President Terry Dittes signaled progress in a letter to members Friday night, saying the sides were close to a tentative agreement. The UAW that day had provided a counter-offer to a deal GM presented Monday, wrote Mr. Dittes, the union’s lead bargainer with GM.
The Detroit auto maker, having received the union’s offer, was discussing the proposal with UAW bargainers Saturday, an indication that talks were moving again after stalling earlier in the week, according to a person familiar with the talks.
Trying to read the tea leaves through union measures and public statements is always a questionable endeavor. It’s also the best we got. Strikes are a classic case of preparing for the worst while hoping for the best.
2nd Gear: German Economy In ‘Stagnation,’ Still Barely Holding On
The German economy is expected to contract slightly in the third quarter as it did in the April-June period as exports weaken on uncertainties linked to Britain’s planned departure from the European Union as well as trade conflicts.
The technical recession expected in the third quarter will come after nine successive years of growth, fueled by an export boom mainly to China and more recently a consumption-driven cycle supported by low interest rates in the euro zone.
“A stronger slowdown or a pronounced recession are not to be expected at the moment,” the ministry said. “The export-oriented German industry is facing weak global trade, stagnating global manufacturing and falling demand for cars.”
The ministry concluded the German economy remains “in stagnation,” which, well, is what it is. That stagnation is closely tied to the German car market, as cars represent the country’s biggest exports by some margin.
Speaking of bad economic news...
3rd Gear: China Auto Sales Fell For 15th Straight Month
China’s auto industry is really struggling. From Reuters:
Auto sales in China fell for a 15th consecutive month in September, data from the country’s biggest auto industry association showed, dampening hopes for a second-half turnaround in the world’s largest auto market.
Total auto sales fell 5.2% from the same month a year earlier to 2.27 million vehicles, the China Association of Automobile Manufacturers (CAAM) said on Monday.
That followed declines of 6.9% in August and 4.3% in July. Car sales in 2018 declined from a year earlier, the first annual contraction since the 1990s against a backdrop of slowing economic growth and a crippling trade war with the United States.
Part, but not all, of this slowdown has to do with subsidy cuts to electric, plug-in, and hydrogen fuel cell cars, which has stalled growth in that sector that had previously been explosive. Nevertheless, the larger economic trends across the globe remain worrying. Gird your loins for another recession, folks.
4th Gear: VW Boss Says They Still Plan To Rake In The Dough Selling EVs
Reuters ran a curious little nugget today summarizing remarks VW Chief Executive Herbert Diess made in an Italian newspaper that’s light on details but sure does sound provocative on its face.
Anyways, Reuters quotes Diess as saying:
“We do not expect a deterioration in margins. Our advantage is that all our brands have the same platform for electric products and the same batteries that we buy in China,” Diess said in an interview with daily la Repubblica’s Monday supplement A&F.
Diess further predicted Audi would sell “nearly” 20,000 e-Trons this year, which...is a number! Whether you think that is a number worth bragging about, I’ll leave that to you in the comments (I lean towards no).
In any event, the implicit assumption in Diess’s remarks is that VW can keep costs low thanks to their economies of scale and unified platform, which will, in turn, lower prices, but not lower prices so much that they don’t still take a healthy margin from you, the car-buyer.
5th Gear: Let’s Poke Fun Of Chevy For A Minute
In Auto News’s write-up of a press drive for the 2020 Bolt, the car’s marketing manager claims his company has “cracked the code” with the Bolt:
The 2020 Bolt EV has a range of 259 miles, about 20 miles more than the 2019 version, at a base price of $37,495 including shipping, about $1,000 more than the 2019 version.
Offering long range at an affordable price is every EV automaker’s goal. Chevy feels it has “cracked the code” with the Bolt, Mike Hayes, the Bolt’s marketing manager, said during a media drive of the 2020 model.
In 2016, when the first-generation Bolt launched, “you basically had two ends of the spectrum. You were either long range and expensive or you were low range and affordable,” Hayes said. “It was kind of this bimodal scenario where you had this big ocean out there of long range and affordable. Nobody had been able to touch that space.”
How did Chevy accomplish this monumental feat of adding 20 more miles of range while increasing the price by $1,000? They added six kWhs to the battery by making it more efficient.
On the one hand, marginal improvements to unsexy stuff like battery chemistry tends to drive the innovation necessary that, over the years, turns EVs from expensive curiosities to (hopefully) mass-market products.
On the other hand, this “crack the code” stuff is objectively silly. A range of 240 versus 260 miles sounds basically the same to most people. In fact, there’s probably a not-insignificant chunk of the market that would rather save a thousand bucks and sacrifice those extra 20 miles of range.
Then there’s the “nobody has been able to touch that space” remark. Readers of this site will know I am hardly a Tesla stan, but the Model 3 starts at $38,990 with 240 miles of range before incentives. And the Leaf Plus, while creeping into the $40,000-plus range, also boasts 220+ mile range.
So, yeah, sure, “nobody has been able to touch that space,” except for all the other cars that have.
Neutral: What’s The Minimum Range You’d Need To Buy An EV?
I’m still giggling to myself about Chevy’s “crack the code” remark, so let’s keep on that theme. At least for me, all EV ranges over 200 miles sound about the same, because they all indicate plenty of range for day-to-day driving so that I don’t have to think about it. And it is enough for a day trip somewhere in my metro area without needing to stop and charge. I really don’t care if it’s 220 or 240 or 260 or 299. But that’s just me.