U.S. Automakers Are Rapidly Approaching A Supply Crisis

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Mexican suppliers are struggling to meet U.S. automaker output, Tesla is wiping the floor in the local Chinese EV market, and the Netherlands will sue Russia for human rights violations for the downing of Malaysia Airlines MH17. That and more in The Morning Shift for Friday, July 10, 2020.

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1st Gear: Mexico Is In Trouble And So Are We

With attendance at some Mexican supplier factories at just 50 percent still as the country struggles to recover from the COVID-19 pandemic, U.S. automotive production that’s been trying to get back to 100 percent operation is going to run into shortages soon.

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Ford seems to be the first to admit it, from Automotive News:

“Due to COVID-19, the State of Chihuahua in Mexico has limited employee attendance to 50 percent, a region in which we have several suppliers,” Galhotra said in the statement. “With our U.S. plants running at 100 percent, that is not sustainable. While we do not expect any impact to production next week, we are continuing to work with government officials on ways to safely and constructively resume remaining production.”

Judging from the statement from Ford President of the Americas Kumar Galhotra, it sounds like Ford only has maybe a couple of weeks to sort out its supply issues before it has to begin throttling back production again.

What sort of impact a supply shutdown would have is unclear, but with a resurgence of the virus spreading in the U.S. and the rest of North America, the supply problems are going to last as long as people ignore quarantine.

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2nd Gear: Tesla’s Targeted EV Execution

All things considered, Tesla has done a great job building an entire factory in Shanghai in record time and subsequently dominating the local Chinese electric vehicle market in just six months. So much so, startups are already closing shop. From Auto News:

Byton is at least the third sizable EV upstart to throw in the towel since Elon Musk started his made-in-China offensive, after Bordrin Motors and Jiangsu Saleen Automotive Technology Co. wound their operations down earlier this year.

[...]

Yet Tesla, in just half a year, grabbed a hefty slice of that shrinking pie — and its portion keeps getting bigger. The market leader’s sales now approach a quarter of the total tally for EVs, the China Passenger Car Association said Wednesday, as wealthier buyers are drawn to Tesla’s brand cachet. That’s making life difficult for the slew of local contenders and risks exposing the multibillion-dollar Chinese EV push as a bubble.

“It is more and more difficult for EV startups to raise funds,” said Cui Dongshu, secretary general of PCA. “New-energy vehicles have not yet been popularized on a large scale — so it is like the situation where there is not enough food in the temple, and some of the monks are forced out.”

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Essentially, the issue for startups in China is now that nobody in their home market knows who they are, but everybody knows what Tesla is. And ironically enough, Tesla itself is now the large-enough automaker to block out potential innovation from startups, a position it found itself in just 10 years prior.

It should also be noted that there is an unfair weight to American vehicles in the Chinese market. While no Chinese companies currently build or sell cars in the U.S. market, most major global automakers have dominated the Chinese market.

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As desperate as China is for EV sales, I wonder how long it will take for the government to regret giving Tesla a wave over its usual rules of forcing outside companies to partner with local Chinese automakers as its own startups continue to topple.

3rd Gear: Global Emissions Could Lower 12 Percent By 2030

The COVID-19 outbreak shut down most non-essential society around the world. An immediate reaction to that is emissions dropping, since people aren’t commuting, factories are closed, etc.

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While a global drop of up to 12 percent sounds nice, especially in our era of climate crisis, it will have essentially no effect on the rate of climate change and will not be worth the human cost of the virus, Bloomberg reports:

The drop is likely to continue through the year and even the decade, with climate pollution anywhere from 2% to 12% lower than estimated by 2030, depending on the disease’s spread and economic damage. The impact of the pandemic on greenhouse gas emissions will be “far more” than the shift to solar power or more climate-safe agricultural practices, the Rhodium analysts conclude.

Still, Rhodium and other climate analysts have emphasized that the temporary emissions drop doesn’t outweigh the devastation wrought by the coronavirus.

“The emission reductions associated with our scenarios, while sizable, are certainly no cause for cheer,” the group wrote. “The economic damage and human suffering of COVID-19 has already been substantial and will likely continue for some time.”

The Rhodium study casts the problem in economic terms, finding that each ton of avoided CO₂ cost the economy between $3,200 to $5,400. That’s roughly 100 times higher than some proposals for a U.S. carbon tax.

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4th Gear: Netherlands Blames Russia For MH17 In Court

Six years after Malaysia Airlines flight MH17 was shot down over the Ukraine, the Dutch government has announced it will bring charges of human rights violations against Russia in a world court, from Reuters:

The Dutch government on Friday said it would file a suit against Russia at the European Court of Human Rights over the downing of Malaysia Airlines passenger flight MH17 over eastern Ukraine six years ago.

The Netherlands, home to roughly two-thirds of the victims, holds Russia responsible for the crash on July 17, 2014. The Kremlin has consistently denied involvement.

A letter to parliament said the Netherlands was filing the case at the European court to achieve “truth, justice and accountability” for all 298 victims.

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Evidence indicates the weapon that shot down the plane was sourced from Russia, and that some Russian officers were involved and even allegedly working with the Ukrainian separatists who supposedly fired the missile.

5th Gear: Bye Bye Biofuel?

To my mind, the prospect of biofuels—being able to generate powerful fuel in a lab—sounds like the impossible myth of infinite energy! But I know it’s much more complicated that, and I’m much too ignorant to understand it. The prospect has always been exciting.

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But the technology has also been severely hindered by the Silicon Valley startup mentality and the rapid evolution of other alternative fuel options, Bloomberg reports:

The price of renewable energy has plummeted over the past decade. Solar and onshore wind prices dropped 90% and 70% per megawatt-hour, respectively, according to BloombergNEF, and they’re now the cheapest form of new energy generation for two-thirds of the world. The price of lithium-ion battery packs fell 87%, and BloombergNEF predicts electric cars will become cost competitive with gasoline vehicles by the mid-2020s.

One form of renewable energy, however, has been noticeably lagging: biofuels.

The first flight using blended biofuel took place in 2008, yet the fuel accounts for only a tiny fraction of global jet fuel consumption—less than 0.1% in 2018, according to the International Energy Agency. Even if petroleum prices skyrocket, biofuel consumption is predicted to increase to just 13.5% by 2050.

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While Bloomberg is frustratingly shy on detailing exactly what went wrong and when, it does cite a lack of government involvement and incentive, with most governments throwing their investment, rebates, and focus into electric and solar technology.

Industry experts at major suppliers who I’ve interviewed personally believe electric vehicles will be a two-decade stopgap for Hydrogen, which is more ideal for fleet services, and that’s the direction many companies seem to be headed with the promise of theoretical autonomous technology.

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I can’t help but wonder if, when we get to the point where Hydrogen is supposed to be viable again and then it probably isn’t, if we’re going to look back and be like, “Damn, that algae farm we didn’t build is looking pretty nice right now.”

Reverse: The Chaos Hasn’t Stopped

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Neutral: What Fuel For You?

Which future alternative fuel would you prefer? Electricity, hydrogen, gasoline, diesel, or biofuel? To me, again, biofuel just sounds like a smart move? Like some science-fiction shit.

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DISCUSSION

Many sectors simply won’t work properly without the energy density of hydrocarbons. A 2500ton airliner simply won’t fly, or if it does be too large for any airport. Same problem for road- and seafreight.

The questions left open are where the HC fuel are going to come from, and what influence it is going to have on the passenger car market. If someone were to produce competitively priced E-fuel or algae-based biofuel tomorrow, electric cars would be done, in 10 years proabably not.

Also please note the difference between biofuel and e-fuel. One uses plants like sugar, corn or algae and turns them into fuel, basically fossil fuel sped up a million times, while the other uses fuel cells to convert CO2 directly without the intermediate step. I think E-Fuel are more promising as they are not in conflict with food production, but research into both concepts seems to be grossly underfunded compared with the current subsidies for luxury cars.