Tag Archives: automakers and manufacturing

Business

GM shares surge after record earnings and new stake in lithium company

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New York
CNN
 — 

General Motors reported a much stronger than expected fourth-quarter profit, lifting full-year results to record levels for the second straight year.

The largest US automaker also said Tuesday it is buying a $650 million equity stake in Lithium Americas, which will give it access to the raw material needed to build batteries to power 1 million electric vehicles a year in the first phase of production.

For the quarter, GM earned adjusted earnings of $3 billion, or $2.12 a share, up from $1.35 a share a year earlier and far better than forecasts of $1.69 a share from analysts surveyed by Refinitiv. That lifted full-year adjusted income to $11 billion, up from the $10.4 billion it earned in 2021, which had been its previous record.

The company said it expects strong earnings in 2023, though it expects it to slip a bit from the just posted levels, coming in at between $8.7 billion to $10.1 billion. But company CFO Paul Jacobson said its automotive business is expected to remain strong, with much of the decline likely to be at GM Financial. That’s due to the hit it will take from higher interest rates and the sinking value of used cars, as well as the higher interest rates resulting in an accounting hit to pension earnings.

“Actually that [guidance] is a strong statement about where we see things going, stronger than others” he told journalists on a call Tuesday.

Jacobson told journalists that GM does not expect to follow Tesla and Ford in cutting the prices for its electric vehicles.

“I don’t think there’s any surprise there’s increasing competition in the EV space,” he said. “Our customers are saying we’re priced well based on the demand that we’re seeing.”

The company’s investment in Lithium Americas is part of the company’s efforts to lock-up the supply of raw materials it will need to convert from traditional gasoline powered cars to electric vehicles. The Lithium Americas deal will not supply any lithium to the company until 2026, but Jacobson told media that “we’ve already achieved all the lithium we need through 2025.”

GM expects to build 70,000 EVs this year, a small fraction of its overall vehicle output. It sold 5.9 million vehicles in 2022, down about 6% from 2021 due to the shortage of parts needed to build all the vehicles for which there was demand.

“We continue to face some supply chain and logistics issues, but overall, things remain trending in the right direction,” said Jacobson.

But the company expects to be rapidly increasing its EV supply and offerings, with a new battery plant that opened last year, two more under construction and a fourth planned soon. GM has a target to build 400,000 EVs through the middle of 2024, and 1 million annually by 2025.

CEO Mary Barra predicted there will be more deals like the Lithium Americas one to be announced soon.

“We continue to pursue strategic supply agreements and partnerships to further secure our long-term needs,” she told investors.

GM said it will reduce its staff in 2023, part of its effort to cut $2 billion in costs over the next two years. But unlike a number of major companies that have announced layoffs in recent months, company officials stressed GM would not be shrinking through layoffs. Instead the reduction would be handled through attrition.

GM did not disclose how many jobs might be trimmed, with Jacobson saying the company would end this year “slightly lower” in headcount.

GM has 167,000 employees globally, with 124,000 in North America. That includes more than 42,000 members of the United Auto Workers union. Those workers will get profit sharing bonuses of an average of $12,750 for the year, up nearly 25% from the $10,250 they received a year earlier.

Shares of GM

(GM) soared more than 5% in pre-market trading on the results.

This story is developing and will be updated.

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Business

Mustang Mach-E: Ford drops the price of its Tesla competitor

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CNN
 — 

Ford is boosting production of its popular Mustang Mach-E electric SUV and dropping its sticker price weeks after Tesla dropped prices of its vehicles. The move represents a substantial roll-back of price hikes Ford announced last summer on the 2023 models – but buyers may still be paying somewhat more than before the increases.

The Mustang Mach-E, a midsize electric family SUV, was the first serious electric effort for the Dearborn, Michigan-based automaker. Priced and aimed squarely at the Tesla Model Y, which has its own starting price of $53,490, the Mach-E is Ford’s bet to get new car buyers to dip their toes into the battery-powered future. it has since been joined in the electric Ford lineup by the workhorse Ford F-150 Lightning. But the company still considers the Mach-E a crucial step for the company’s electric-powered growth.

Late last year, Darren Palmer, Ford’s vice president of electric vehicle programs, told CNN Business that the Mach-E was completely sold out and the automaker was holding off on launching it in more global markets in order to catch up with US demand.

“We could sell it out at least two or three times over,” he said a the time.

The price cuts Ford announced Monday were biggest on the most expensive versions of the SUV, just as the increases had been biggest on those models. The base sticker of the Mustang Mach-E GT Extended Range, a high-performance version of the SUV, dropped to about $64,000 from $69,900 before, a decrease of $5,900. But that model had been about $62,000 before price increases last August.

When it announced those price bumps, Ford also said it was putting more standard features into the vehicles, including advanced driver assistance features.

The price of the least expensive Mach-E, the rear-wheel-drive standard range model, was cut $900, going from about $46,900 down to $46,000. The price of the extended range battery pack option, by itself, dropped from $8,600 down $7,000.

Tesla announced price cuts of as much as 20% on its electric vehicles earlier this month, after raising prices in 2022.

When Ford announced the price increases last summer, citing supply chain issues, the automakers indicated it would continue monitoring market conditions throughout the upcoming model year.

Ford announced last summer that it was increasing production of the Mach-E as it added capacity for more battery production. The automaker also announced in late August that it was reopening order banks for the Mach-E which had been closed as the company worked to meet existing orders.

Customers who complete the transaction for their Mach-E after today’s announcement will pay the new lower price, Ford said. Ford will reach out directly to Mach-E customers with a sale date after January 1, 2023 who already have their vehicles, the automaker said.

At least some versions of both models are currently eligible for federal electric vehicle tax credits, according to the Internal Revenue Service, but both are treated as cars, not SUVs, under the tax rules, unless equipped with a third row of seats.

That means that tax credits are available for the two-row only Mach-E and two-row Model Y only if the sticker price is below $55,000. For versions of the Model Y with a third row of seats, a $4,000 option, buyers may get tax credits with a sticker price up to $80,000. For the Mustang Mach-E, a third row of seats isn’t offered.

The final amount of the tax credit may depend on when the vehicle is actually delivered to the customer and, also, whether the customers themselves meet annual income requirements.

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Business

Elon Musk’s Twitter obsession isn’t the core reason for Tesla stock’s plunge

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New York
CNN
 — 

A popular misconception has emerged about Elon Musk and Tesla: The megabillionaire’s love affair with Twitter is the main reason Tesla shares have lost so much value this year. But Tesla’s steep stock selloff this week proved that the problems at Musk’s car company go well beyond Twitter.

Even as Musk signals he may give up his CEO title at Twitter, investors became concerned that the outlook for Tesla’s sales and profit is taking a turn for the worse. A sign of the weakening demand: Tesla has announced a rare sale. The company offered two rebates for buyers who take delivery of a vehicle before the end of the year, initially offering a $3,750 discount earlier this month. Tesla then doubled that rebate to $7,500 Thursday.

“Tesla clearly is starting to see demand cracks in China and in the US at a time that EV competition is increasing across the board,” said Dan Ives, tech analyst with Wedbush Securities and a Tesla bull who cut his price target for the stock Friday from $250 to $175. “The price cuts that Tesla enacted was the straw that broke the camel’s back on the stock.”

Another reason Tesla’s stock is sinking: The US economy could tip into recession next year, hurting car sales. Musk said on an Twitter Spaces call Thursday he foresees the economy will be in a “serious recession” in 2023.

“I think there is going to be some macro drama that’s higher than people currently think,” he said, according to Reuters, adding that homes and cars will get “disproportionately impacted” by economic conditions.

Part of the problem with Tesla’s stock price is that critics question whether it was ever worth the trillion-dollar valuation it had at the start of the year. At its peak, Tesla was worth more than the 12 largest automakers on the planet combined, despite having a fraction of the sales of any of them. Today it is worth $399 billion.

“It got ahead of itself in the near-term,” said Gene Munster of Loup Ventures, another Tesla fan. “I still believe this can be a much bigger company. I think it will see those kinds of numbers again. But it could take a long, long time to get there.”

Tesla’s growth prospects – a target of 50% sales growth annually, helped drive that valuation. It conceded in October that it will miss that sales target for this year.

The stock’s climb to dizzying heights – rising 743% in 2020 alone – was driven by Musk’s reputation as a genius who would disrupt the massive global auto industry.

“Tesla was viewed as a disruptive technology company, not as an automaker, and a large part of that premium is related to Musk,” said Ives.

Critics of Tesla said much of its sky-high valuation was based on promises that Musk made about future products, many of which came years after they were originally promised.

A prime example is the Cybertruck, the Tesla pickup truck, first unveiled three years ago with promises that production would start in 2021. Now it is slated to start production next year, with a ramp-up in production in 2024, putting it years behind other electric pickup offerings from Ford and upstart EV maker Rivian, both of which have electric pickups available for purchase today. It could also trail planned electric pickup offerings from General Motors.

“Elon Musk has a pathological problem with the truth,” said Gordon Johnson, one of the largest critics of Tesla among analysts. “When people say he’s a genius and innovator, it’s based on all his promises he never lives up to.”

Johnson said Tesla shares will have a much steeper fall ahead, once it starts being priced like other automakers rather than on its promises. He said that for Tesla to hit its growth targets it needs to be building new plants almost every year, but that new factories in Germany and Texas that opened in spring are still not operating at full capacity. And he said that its plant in China has had to scale back production due to weak sales in the market in the face of the Covid restrictions.

“Demand in the US has collapsed,” he said. “Two months ago, your wait time was two or three months. Now you can get one immediately. They’re going to build more cars than they sell for a third straight quarter. It’s the definition of excess capacity.”

Tesla is still by far the largest EV maker worldwide, although that title is being challenged in some key markets, by Volkswagen in Europe and by BYD in China. And more competition is coming from established automakers such as Ford and GM.

That’s not to say Twitter has played no role in Tesla’s stock price demise this year: Tesla shares have lost 66% of their value since Musk’s interest in Twitter was first disclosed in April, with a 45% decline since he closed on the deal in late October.

Investors have been disappointed that Musk appears to be paying for so much of his $44 billion purchase of Twitter by selling Tesla stock. Musk, Tesla’s largest shareholder, has sold $23 billion worth of Tesla shares since his interest in Twitter became public in April.

On Thursday’s Twitter Spaces call, Musk promised he was done selling shares of Tesla stock until at least 2024, if not beyond. But he hasn’t lived up to a previous promise in April that he was done selling Tesla shares, selling $14.4 billion of that stock since that time.

“It’s been a Pinocchio situation for Musk saying he is done selling stock. Investors want to see him walk the walk and not just talk the talk,” said Ives.

Another Twitter factor: Musk named himself CEO of Twitter, the third major company he leads, along with Tesla and SpaceX. So, many people assumed that Musk’s loss of focus on Tesla has spooked its former fans on Wall Street.

But this week began with Musk running a poll – on Twitter of course – asking if he should give up the CEO title at his social media plaything. He promised he would comply with the result, and 57.5% of those who voted said they want him gone.

That departure may take a while – Musk tweeted he will resign “as soon as I find someone foolish enough to take the job!” And the same tweet he cautioned that even if he gives up the CEO title at Twitter, he’s not walking away totally, saying that he plans to “just run the software & servers teams” after finding a new “fool” to be CEO.

The poll results late Sunday were enough to lift Tesla shares in early trading Monday, but the shares ended the day slightly lower, and have lost significantly more ground every day since. Tesla shares fell 9% Thursday, and it ended the week down 18% after another 2% drop on Friday.

And then there’s the question of how much damage the debacle at Twitter has done to the Tesla brand. Musk has fired thousands of employees, banned journalists while allowing Donald Trump and other previously banned accounts back online, called for the prosecution of Dr. Anthony Fauci, embraced conspiracy theories and made anti-trans statements in his short tenure as CEO.

It may have endeared him to some but angered other potential buyers, including liberals who might be willing to pay a premium for a more environmentally friendly vehicle.

“I think it was measurable damage,” said Munster, who believes the publicity over his time at Twitter cost Tesla 5% of its sales.



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Business

Tesla officially opens its charging network to non-Tesla cars

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CNN
 — 

One of Tesla’s biggest competitive advantages in North America has been its network of chargers that, for the most part, can charge only Tesla vehicles.

Tesla chargers outnumber so-called CCS chargers, the sort used by Ford, General Motors, Audi, Rivian and others, by a factor of two to one, according to Tesla. Now, Tesla has invited other automakers to build cars with charging ports that can work with Tesla’s charging format and for other charging companies, like EVGo, ChargePoint and Electrify America, to add Tesla-style plugs to their chargers.

It’s not yet clear if any other companies might take Tesla up on the offer, though, or if any ever will.

Tesla drivers have long been able to use CCS chargers with a simple adapter that fits over the charging plug. But actually having a Tesla style charging cord – Tesla has now dubbed it the “North American Charging Standard,” or NACS, though that is not any sort of official governmental designation – would make the process easier and wouldn’t require purchasing an adapter.

For non-Tesla vehicles, the ability to use a Tesla Supercharger – the company’s name for its fast chargers – has been more complicated and requires, at best, a special adapter purchased from some other company. Even then, it may still not work because of differences in how cars communicate with the charger.

Driving a car with a Tesla-style NACS charging point will make that much easier. But no automakers and no charging companies have, so far, announced any plans to take Tesla up on the offer that was announced in a blog post on Friday.

The company and its CEO, Elon Musk, have talked before about opening up its charging network to non-Tesla vehicles. The company has begun doing so in Europe where Tesla vehicles are equipped with a European version of the industry-standard CCS-style charging ports.

On the same day Tesla announced its offer for other companies to use its charging format, the charging company EVGo announced a temporary offer for Tesla drivers with a CCS adapter to use EVGo fast charging stations wiithout paying monthly subscription fees.

Under EVGo’s existing plan, called Autocharge+, Tesla drivers can use the EVGo phone app to plug in and quickly start a charging session. The timing of EVGo’s promotional announcement was coincidental, said EVGo Commercial Officer Jonathan Levy, and EVGo does not currently have plans to start putting Tesla charging cables at its stations.

In the past, Tesla has offered to allow other companies to use various Tesla-patented technology, but doing so meant companies had to abide by Tesla’s “Patent Pledge.”

Under the terms of that agreement, companies that wanted to use any Tesla technology had to agree not to sue Tesla for any sort of patent infringement or to help any other company to do so, essentially making Tesla’s offer of patent sharing a two-way street.

It’s unclear if Tesla’s Patent Pledge applies to the use of the NACS charging standard. Tesla, which generally does not respond to questions from the media, did not answer emailed questions on the topic.

Bill Visnic, editorial director for the Society of Automotive Engineers or SAE, said he did not think automakers would take Tesla up on the offer. CCS is a standard developed by the SAE along with a consortium of automakers.

“There’s a lot of important work and collaboration that went into that,” he said.

Even Visnic admitted, though, that Tesla chargers tend to be more reliable and easier to use than other public chargers.

In terms of the charging companies, Visnic said, it’s likely that they will want to keep their chargers using the CCS standard since Tesla already has a larger network of chargers and many Tesla drivers can easily use an adapter. (Some Tesla vehicles do not work CCS adapters.)

But charging companies may want to add these cables because it could bring in new customers, said Jim Burness, CEO of National Car Charging, a wholesaler of equipment to the EV charging industry. Burness owns a Tesla as his personal vehicle.

“This will help owners of the older Teslas that would have to otherwise not only buy an adapter, but also pay for a retrofit of their car if the plug is right there on the station,” he said.

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Business

Rivian has both good and bad news at end of tough day for EV stocks

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New York
CNN Business
 — 

Electric truckmaker Rivian delivered a mixed bag for investors in its third-quarter earnings report, after a brutal day for its shares and those of other electric vehicle makers.

On the one hand, Rivian reported a smaller than expected adjusted loss of $1.4 billion, less than the $1.7 billion loss forecast by analysts surveyed by Refinitiv. And it said that net reservations increased to 114,000 from 98,000 in its second-quarter report.

But its revenue of $536 million, while up 47% from second quarter revenue, fell short of analysts’ revenue forecast of $552 million.

The gain in reservations was notable after electric car maker Lucid reported late Tuesday that the number of reservations for its EVs had fallen to 34,000 from 37,000 in the previous quarter’s report.

That news sent Lucid

(LCDX) shares tumbling 17% for the day and helped drag down shares of both Rivian and Chinese EV maker Nio

(NIO) by 12% each in regular hours US trading.

Leading EV maker Tesla

(TSLA) also had shares fall 7%, though that could well have been more influenced by news that CEO Elon Musk had sold nearly $4 billion worth of Tesla

(TSLA) shares since he closed the deal to buy Twitter two weeks ago.

Rivian also reaffirmed its goal of ramping up production to build 25,000 vehicles this year, a bullish target as other automakers, including Tesla, who have had to trim sales targets for the year due to supply chain issues.

In the first three quarters of this year Rivian has built just more than 14,000 vehicles, so hitting the 25,000 production target for the year would mean a 45% increase in production in the final three months of the year over the 7,400 it built in the just completed quarter.

But while it says it remains on target to hit that 25,000 goal for 2022, it pushed back its target date for the availability of its smaller R2 model to 2026. It had previously forecast a 2025 rollout for that model.

Shares of Rivian swung wildly on the report in after-hours trading, first gaining 3%, then falling to trade slightly lower, then rising 5%.

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Business

Why BMW really decided to make batteries in the US

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CNN
 — 

BMW recently announced a $1.7 billion investment to help prepare its huge Spartanburg, South Carolina, factory to produce electric cars and SUVs. That sum included $700 million for the construction of a battery manufacturing plant nearby.

Spartanburg is BMW’s largest factory anywhere in the world. It employs 11,000 people and produces 40,000 SUVs a year, only 40% of which are sold in North America. The rest are exported to 120 other countries.

It’s one of a number of such announcements in recent months and years as automakers gear up to start producing more electric vehicles. Mercedes, Hyundai, Honda, and others have also announced battery plant construction projects in recent months. BMW’s announcement came after the passage of the Biden administration’s Inflation Reduction Act, which limits tax incentives for electric vehicles to those with largely US-based battery manufacturing and raw materials supplies.

The rules allow consumer tax credits only for electric vehicles that meet increasingly strict goals for US-based manufacturing of the vehicles themselves, as well as their batteries. They also require US sourcing for battery raw materials and they place caps on the cost of the vehicles and the income of the buyers. Buyers can get full tax credits only if they, and the vehicles, meet the requirements.

But that sort of regulation had no impact on BMW’s decision to locate battery production in South Carolina, BMW chairman Oliver Zipse said in an interview with CNN Business. Simple logistics were a far more important factor.

“You will not fly hundred of kilograms of batteries around the world or put them on a ship,” he said. “You’re not going to do it. You’ll localize anyway.”

Not only were the IRA’s rules pushing American manufacturing unneeded, said Zipse, they also risk negative repercussions for the very American jobs they’re designed to protect, he said.

The IRA provides no benefit for vehicles, regardless of how “American made” they are, if they aren’t sold inside the US. More importantly, though, protectionist regulations attempting to wall off American-made vehicles for American buyers can spark retaliation, endangering valuable export business, said Zipse.

“You can never make a regulation without looking at the consequences from other regulators,” he said. “And I only warn that we get a tit-for-tat regulation.”

And, simply, as a practical matter, it’s difficult to wall off automaker’s supply chains in the way the IRA would seem to demand, Zipse said.

“The assumption that you can incentivize an industry which is completely from A to Z inside one region in the world, in such a complex industry, like the car industry is a wrong assumption,” he said.

Zipse also warned of the possible unintended consequences of regulations, like those in some US states and in Europe, that ban sales of non-zero-emission vehicles after a certain date. For one thing, it could mean overall industry sales will decline.

“We do not believe that this one drivetrain will make up the complete market of today’s size,” he said.

Not all consumers will be able to have electric vehicle chargers at home, Zipse said, so many could decide, instead, to keep their gasoline cars longer or buy used gas-powered cars.

Some automakers, like BMW competitors General Motors and Mercedes-Benz, are apparently not worried about that possibility of shrinking sales and have announced plans to go all-electric by a set future date. BMW has never said publicly that it intends to make only electric vehicles after any certain time.

Unlike some automakers, such as GM and Volkswagen, that make electric vehicles on distinct engineering platforms entirely different from their gasoline cars, BMW engineers its vehicles so they can be produced as electric, plug-in hybrid, or purely gasoline-powered. BMW executives tout this sort of flexibility to respond to market demands for different types of vehicles.

Instead, he said, regulators should impose gradually more stringent emissions restrictions while leaving it up to automakers how best to reach those targets, as regulators have done in the past. To date, that approach has not halted increasing global warming.

Zipse insisted that BMW can manage whatever regulators decide, however.

“We can easily ramp them up,” Zipse said of increasing regulatory demand for electric vehicles. “All our factories are qualified for building EVs. We have a flexible approach.”

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