Ever wanted $400 million to feel like a tiny amount of money? Just read up on the car business. It’ll start looking like pocket change. All this and more in The Morning Shift for Wednesday, February 26, 2020.
If you’re ever looking for evidence that driverless cars may not ever happen, just follow the money. Or rather, the lack thereof.
Driverless cars, as we all sort of generally understand the technology as it has been pitched to the public, is meant to be totally revolutionary. All commutes will be stress-free nap opportunities and cars will zip around sans traffic. That’s been the pitch. The reality has been a somewhat rockier road, with at least one driverless test car killing somebody already.
But my opinion isn’t important. I’m just some schmuck! Look at Toyota, though, the most indomitable force in the automotive industry, and you’ll see what I mean.
Building a car isn’t cheap. Developing a single car can cost a car company more than a billion dollars. Ford spent $6 billion developing the Mondeo, and that was in the early 1990s, just to pick one example.
So how much did Toyota throw at driverless car startup Pony.ai? A billion? Two billion? Not quite, as the Financial Times reports:
Toyota has invested $400m in Chinese start-up Pony.ai as the world’s second-largest carmaker joins forces with technology rivals in the race to develop self-driving vehicles and new mobility services.
The latest funding, which totals $462m, values the Chinese company at $3bn, giving Toyota a 13 per cent stake and a seat on Pony.ai’s board.
It follows a flurry of investments by the Japanese carmaker over the past two years in ride-hailing groups including Uber, China’s Didi Chuxing and south-east Asia’s Grab aimed at building alliances outside the traditional automotive sector.
The investment also bolsters Toyota’s recent efforts to boost its presence in China, which consultancy McKinsey reckons has the potential to become the world’s largest market for autonomous vehicles.
Toyota and Pony.ai have been together since the end of last year, if you’re curious.
I’ll take driverless cars seriously when carmakers do, too.
The saga of Lordstown Motors, the plant that GM gave away to an absolutely tiny startup to make ugly electric conversions of the Chevy Silverado, at least got one piece of good news: someone committed to buying some of these things. The Detroit News reports that this “someone” isn’t actually a person, though:
Electric utility company FirstEnergy plans to purchase 250 of Lordstown Motors Corp.’s electric pickup truck, the start-up company said Tuesday.
Lordstown Motors purchased the former General Motors Co. Lordstown Assembly complex in northeast Ohio last fall and has since been working to prepare the plant, the product and to persuade customers to purchase the Endurance electric truck.
Akron, Ohio-based FirstEnergy, with customers in Ohio, Pennsylvania, New Jersey, West Virginia, Maryland and New York, will deploy the Endurance trucks to provide service to its customers.
If you have followed the history of EVs before the age of Tesla (that is, before car companies made EVs that people wanted to buy so much as made EVs that governments forced them to build) you’d know that this is the lowest bar to clear, and there are lots of oddball EVs that never quite make it out of the “just selling to utilities” zone. The 1990s Nissan Altra springs to mind.
Peugeot made its mark on the world with conservative but well-made vehicles, trusty and dependable. What is Peugeot-Citroën-Opel-Fiat-Chrysler doing these days? Cutting costs and raising stock prices, as the Financial Times notes in its report “Peugeot-owner PSA enjoys record profits as it cuts costs:”
PSA’s group revenues rose 1 per cent over the previous year to €74.73bn, just above analyst expectations of €73.95bn, while operating margin rose to a record high of 8.5 per cent, from 7.7 per cent last year.
Free cash flow from the core cars business came in at €3.26bn while group net income reached €3.2bn, up 13 per cent on the previous year, as PSA cut costs following its acquisition of Opel-Vauxhall in 2017 and introduced new brands in Europe.
PSA chief Carlos Tavares notes that the car market is constricting and not everyone we know today will survive. How cutting costs and making dull cars will help with that, I don’t know.
We now have full numbers for the Chinese car market for January and it does not look good, as Reuters reports:
Auto sales in China fell 18.7% in January, more than expected and marking the industry’s 19th consecutive month of sales decline, data from the country’s biggest auto industry association showed on Wednesday.
The China Association of Automobile Manufacturers (CAAM) posted on its official WeChat account that new energy vehicle sales during the month fell 51.6% year-on-year, adding that declines in China’s automotive production and sales levels will be more significant in February due to the coronavirus outbreak.
So it’s bad and getting worse. Tight.
Panasonic has long been one of the few major establishment companies to stick with Tesla, but that business connection has not always been the smoothest one. And it may not be getting better, as Reuters reports that the relationship “frays” as Panasonic pulls out of solar cell production with the California not-a-startup-anymore:
The move increases uncertainty over Tesla’s solar business which is already under scrutiny, having been drastically scaled back since the U.S. firm bought it for $2.6 billion in 2016.
Tesla has informed New York that Panasonic’s withdrawal “has no bearing on Tesla’s current operations”, the state said in a statement. The company employs over 1,500 jobs in the city of Buffalo, clearing its 1,460 commitment before April - and thereby avoiding a $41 million penalty - the state said.
Panasonic said in a statement on Wednesday that it would cease production by the end of May and exit the factory by the end of September.
The withdrawal comes as Panasonic scrambles to divest of unprofitable businesses as its strategic shift to components from consumer electronics struggles to drive profit growth.
At least the automotive battery side of things is still going.
Watching the saga of Faraday Future reminds me, always, just how much money you need to get a car into production, and a billion dollars goes real fast in the car world. At some point, you have to assume that some car company is going to dump five or 10 billion into a driverless startup, or a driverless setup of its own. But which one?