Tag Archives: Automotive

Business

Tesla, GM Among Car Makers Facing Senate Inquiry Into Possible Links to Uyghur Forced Labor

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WASHINGTON—The Senate Finance Committee has opened an inquiry into whether auto makers including

Tesla Inc.

and

General Motors Co.

are using parts and materials made with forced labor in China’s Xinjiang region.

In a letter sent Thursday, the committee asked the chief executives of eight car manufacturers to provide detailed information on their supply chains to help determine any links to Xinjiang, where the U.S. government has alleged the use of forced labor involving the Uyghur ethnic minority and others.

The U.S. bans most imports from the region under the Uyghur Forced Labor Prevention Act. The letter to car companies cited a recent report from the U.K.’s Sheffield Hallam University that found evidence that global auto makers were using metals, batteries, wiring and wheels made in Xinjiang, or sourcing from companies that used Uyghur workers elsewhere in China.

According to that report, some car manufacturers “are unwittingly sourcing metals from the Uyghur region.” It said some of the greatest exposure comes from steel and aluminum parts as metals producers shift work to Xinjiang to take advantage of Chinese government subsidies and other incentives.

The U.S. ban on products linked to Xinjiang has already caused disruptions in the import of solar panels made there.

China has called Washington’s claim baseless. It disputes claims by human-rights groups that it mistreats Uyghurs by confining them in internment camps, with Beijing saying its efforts are aimed at fighting terrorism and providing vocational education.

Besides

Tesla

and GM, the letter signed by Finance Committee Chairman

Ron Wyden

(D., Ore.), was sent to

Ford Motor Co.

,

Mercedes-Benz Group AG

,

Honda Motor Co.

,

Toyota Motor Corp.

,

Volkswagen AG

and

Stellantis

NV, whose brands include Chrysler and Jeep.

GM said its policy prohibits any form of forced or involuntary labor, abusive treatment of employees or corrupt business practices in its supply chain.

“We actively monitor our global supply chain and conduct extensive due diligence, particularly where we identify or are made aware of potential violations of the law, our agreements, or our policies,“ the company said.

A Volkswagen spokesman said the company investigates any alleged violation of its policy, saying “serious violations such as forced labor could result in termination of the contract with the supplier.” A Stellantis spokesperson said the company is reviewing the letter and the claims made in the Sheffield Hallam study.

Other companies didn’t immediately provide comments.

“I recognize automobiles contain numerous parts sourced across the world and are subject to complex supply chains. However, this recognition cannot cause the United States to compromise its fundamental commitment to upholding human rights and U.S. law,” Mr. Wyden wrote.

The information requested includes supply-chain mapping and analysis of raw materials, mining, processing and parts manufacturing to determine links to Xinjiang, including manufacturing conducted in third countries such as Mexico and Canada. 

General Motors says its policy prohibits forced or involuntary labor, abusive treatment of employees or corrupt business practices in its supply chain.



Photo:

mandel ngan/Agence France-Presse/Getty Images

The lawmakers are also asking the auto makers if they had ever terminated, or threatened to terminate, relations with suppliers over possible links to Xinjiang, and if so, provide details of the cases.

The committee’s action comes as the Biden administration and bipartisan lawmakers increase their focus on alleged forced-labor practices in China as a key component of their confrontation with Beijing over its economic policy. The United Auto Workers has called on the auto industry to “shift its entire supply chain out of the region.” 

The State Department has said more than one million Uyghurs and other minorities are held in as many as 1,200 state-run internment camps in Xinjiang. Chinese authorities “use threats of physical violence” and other methods to force detainees to work in adjacent or off-site factories, according to the department.

The U.S. Customs and Border Protection investigated 2,398 entries with a total value of $466 million during the fiscal year ended September, up from 1,469 entries in the previous year and 314 cases in fiscal 2000.

Analysts expect the CBP’s enforcement activity to further increase this year, with a strong bipartisan push for a tougher stance on the forced-labor issue.  

The researchers at Sheffield Hallam University found that more than 96 mining, processing, or manufacturing companies relevant to the auto sector are operating in Xinjiang. The researchers used publicly available sources, including corporate annual reports, websites, government directives, state media and customs records.

Write to Yuka Hayashi at Yuka.Hayashi@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Dow falls nearly 500 points after strong data, bearish comments by David Tepper

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U.S. stocks traded lower on Thursday, erasing most of their gains from their biggest rally in three weeks after a round of upbeat economic data and a warning from hedge-fund titan David Tepper that he was “leaning short” against both stocks and bonds on expectations the Federal Reserve and other central banks will continue tightening into 2023.

Positive economic news can be a negative for stocks by underlining expectations that monetary policy makers will remain aggressive in their efforts to quash inflation.

What’s happening
  • The Dow Jones Industrial Average
    DJIA,
    -1.51%
    fell 472 points, or 1.4%, to 32,903.
  • The S&P 500
    SPX,
    -1.99%
    shed 71 points, or 1.8%, to 3,807.
  • The Nasdaq Composite
    COMP,
    -2.84%
    fell 272 points, or 2.5%, to 10,437.

A day earlier, all three major indexes recorded their best gain in three weeks as the Dow advanced 526.74 points.

What’s driving markets

Investors saw another raft of strong economic data Thursday morning, including a revised reading on third-quarter gross domestic product which showed the U.S. economy expanded more quickly than previously believed. Growth was revised up to 3.2%, up from 2.9% from the previous revision released last month.

See: Economy grew at 3.2% rate in third quarter thanks to strong consumer spending

The number of Americans who applied for unemployment benefits in the week before Christmas rose slightly to 216,000, but new filings remained low and signaled the labor market is still quite strong. Economists polled by The Wall Street Journal had forecast new claims would total 220,000 in the seven days ending Dec 17.

“Jobless claims ticking slightly up but coming in below expectations could be a sign that the Fed’s wish of a slowing labor market will have to wait until 2023. While weekly jobless claims aren’t the best indicator of the overall labor market, they have remained in a robust range these last two months suggesting the labor market remains strong and has withstood the Fed’s tightening, at least for the time being,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office, in emailed comments.

“While weekly jobless claims aren’t the best indicator of the overall labor market, they have remained in a robust range these last two months suggesting the labor market remains strong and has withstood the Fed’s tightening, at least for the time being,” he wrote. “It’s no surprise to see the market take a breather today after yesterday’s rally as investors parse through earnings data, and despite some beats this week, expectations that earnings will remain as resilient in 2023 may be overblown.”

Stocks were feeling pressure after Appaloosa Management’s Tepper shared a cautious outlook for markets based on the expectation that central bankers around the world will continue hiking interest rates.

“I would probably say I’m leaning short on the equity markets right now because the upside-downside doesn’t make sense to me when I have so many people, so many central banks, telling me what they are going to do, what they want to do, what they expect to do,” Tepper said in a CNBC interview.

Key Words: Billionaire investor David Tepper would ‘lean short’ on stock market because central banks are saying ‘what they’re going to do’

A day earlier, the Conference Board’s consumer confidence survey came in at an eight-month high, which helped stoke a rally in stocks initially spurred by strong earnings from Nike Inc. and FedEx Corp. released Tuesday evening. This optimistic outlook helped stocks clinch their best daily performance in three weeks.

Volumes are starting to dry up as the year winds down, making markets more susceptible to bigger moves. According to Dow Jones Market Data, Wednesday saw the least combined volume on major exchanges since Nov. 29.

Read: Is the stock market open on Monday after Christmas Day?

In other economic data news, the U.S. leading index fell a sharp 1% in November, suggesting that the U.S. economy is heading toward a downturn.

Many market strategists are positioned defensively as they expect stocks could tumble to fresh lows in the new year.

See: Wall Street’s stock-market forecasts for 2022 were off by the widest margin since 2008: Will next year be any different?

Katie Stockton, a technical strategist at Fairlead Strategies, warned clients in a Thursday note that they should brace for more downside ahead.

“We expect the major indices to remain firm next week, helped by oversold conditions, but would brace for more downside in January given the recent downturn,” Stockton said.

Others said the latest data and comments from Tepper have simply refocused investors on the fact that the Fed, European Central Bank and now the Bank of Japan are preparing to continue tightening monetary policy.

“Yesterday was the short covering rally, but the bottom line is the trend is still short and we’re still fighting the Fed,” said Eric Diton, president and managing director of the Wealth Alliance.

Single-stock movers
  • AMC Entertainment Holdings 
    AMC,
    -14.91%
    was down sharply after the movie theater operator announced a $110 million equity capital raise.
  • Tesla Inc. 
    TSLA,
    -8.18%
    shares continued to tumble as the company has been one of the worst performers on the S&P 500 this year.
  • Shares of Verizon Communications Inc. 
    VZ,
    -0.53%
    were down again on Thursday as the company heads for its worst year on record.
  • Shares of CarMax Inc. 
    KMX,
    -6.60%
    tumbled after the used vehicle seller reported fiscal third-quarter profit and sales that dropped well below expectations.
  • Chipmakers and suppliers of equipment and materials, including Nvidia Corp.
    NVDA,
    -8.60%,
    Advanced Micro Devices 
    AMD,
    -7.17%
    and Applied Materials Inc.
    AMAT,
    -8.54%,
    were lower on Thursday.

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Business

Elon Musk Seeks Additional Funds for Twitter

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Elon Musk’s

team has reached out for potential fresh investment for Twitter Inc. at the same price as the original $44 billion deal, according to one shareholder who said he was contacted about the proposal.

Ross Gerber,

president and CEO at Gerber Kawasaki Wealth & Investment Management, said a representative for Mr. Musk contacted him about offering more shares Thursday.

Mr. Gerber said his firm had previously put up less than $1 million to back Mr. Musk’s takeover of Twitter, which was completed in late October at a price of $54.20 per share.

Semafor earlier reported the new outreach to investors.

Elon Musk has warned of dire financial challenges facing Twitter, the social media company he took over for $44 billion in October. WSJ’s Mark Maurer explains how the company is trying to fix its finances and avoid a potential bankruptcy. Photo Illustration: Laura Kammermann

Twitter didn’t immediately respond to a request for comment. 

Additional equity investments would likely dilute existing Twitter shareholders. The potential extent of the dilution from the latest fundraising effort couldn’t immediately be determined.

Mr. Musk this week sold more than $3.5 billion worth of

Tesla Inc.

TSLA -4.72%

stock. It was his second round of sales since buying Twitter Inc. Mr. Musk sold nearly 22 million Tesla shares over a three-day period ended Dec. 14, according to a regulatory disclosure made public Wednesday.

Mr. Musk’s ownership of Twitter has gotten off to a tumultuous start. Last month, Mr. Musk said Twitter had suffered “a massive drop in revenue” and was losing $4 million a day. He later invoked the specter of bankruptcy.

As part of the acquisition, Twitter took on around $13 billion in debt. That could leave the social-media company owing annual interest payments of more than $1 billion, analysts have estimated, compared with around $51 million in 2021.

Mr. Musk’s focus on Twitter has irritated some Tesla investors as the company tracks for its worst annual stock-price performance on record.

Mr. Gerber said he was reviewing the proposal, but had some questions about how Twitter was being run. Those include how long Mr. Musk intended to act as chief executive and any transition plan, he added. 

Last month, Mr. Musk said he expects to find someone else to run Twitter, without giving a specific timeline for when the appointment might happen. 

Twitter has been in turmoil since Elon Musk took over. To get a sense of what’s going on behind the scenes, The Wall Street Journal spoke with former Tesla and SpaceX employees to better understand how Musk leads companies. Illustration: Ryan Trefes

Mr. Gerber, who also is an investor in Mr. Musk-run electric car maker Tesla Inc., said he wasn’t concerned about how Twitter is doing so far, but said he wanted more communication. “I think they just need to be clear with everybody about what’s going on. Not just with Twitter, but Tesla,” he said.

Several Tesla investors, including Mr. Gerber, have expressed frustration recently that Mr. Musk’s involvement in Twitter might be to the detriment of the auto maker. Tesla’s stock is down more than 57% this year. 

Mr. Musk on Friday tweeted that “Tesla is executing better than ever” and that he had earlier that day gone over production progress at the company’s plant in Texas.

Write to Alexa Corse at alexa.corse@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the December 17, 2022, print edition as ‘Musk Seeks Additional Funds for Twitter.’

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Business

TuSimple Plans Layoffs That Could Cut at Least Half Its Workforce Next Week

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Self-driving trucking company

TuSimple Holdings Inc.

TSP -3.75%

plans to cut potentially at least half of its workforce next week, people familiar with the matter said, as it scales back efforts to build and test autonomous truck-driving systems.

A staff reduction of that size would likely affect at least 700 employees, the people said. As of June, TuSimple had 1,430 full-time employees globally. It has operations in San Diego, Arizona, Texas and China.

The retrenchment follows a dramatic series of events, including the removal of the chief executive in October after a board investigation concluded that TuSimple had shared confidential information with a Chinese startup. TuSimple faces multiple federal investigations into its relationship with the Chinese startup, Hydron Inc.

TuSimple President and Chief Executive

Cheng Lu,

who previously held the CEO job and returned to the position in November, said on Friday, when asked for comment on the planned layoffs, that he intended “to right the ship, and this includes ensuring the company is capital efficient.”

The company plans to scale back significantly its work on building self-driving systems and testing self-driving trucks on public roads in Arizona and Texas, the people familiar with the matter said. As part of the downsizing, much of TuSimple’s operation in Tucson, Ariz., where it does a lot of its test driving, will be eliminated, and the team that works on the algorithms for the self-driving software will be pared back significantly, the people said.

TuSimple will focus on building out a software product that matches self-driving trucks with shippers that have freight to haul, with the aim of offering freight transport at a lower cost than human-driven trucks, the people said.

This month, TuSimple and Navistar International Corp. said they had jointly ended a two-year-old partnership. TuSimple had planned to incorporate its self-driving systems into Navistar trucks that would be sold to freight haulers starting in 2025. TuSimple doesn’t build trucks itself.

Employees have been bracing for the layoffs. Early this month, Mr. Lu sent an email to staff that said management was reviewing “our people expenses, the biggest part of our cash burn,” according to a copy viewed by The Wall Street Journal. He advised employees “to focus on the work at hand.”

TuSimple, based in San Diego, told employees this week that offices would be closed Tuesday and Wednesday, the people said. The job cuts are expected to be announced on Tuesday, they said.

TuSimple is cutting costs and scaling back its ambitions as it reels from a string of crises this year, including a crash of one of its self-driving trucks in April, the loss of key business partnerships, two CEO changes, a plummeting stock price and concurrent government investigations. Federal authorities are probing whether TuSimple improperly financed and transferred technology to Hydron, the Journal reported in October.

TuSimple has struggled to generate significant revenue as its technology remained in a testing phase; in the first half of the year, it reported $4.9 million in revenue on $220.5 million in losses. That revenue largely came from hauling freight for shippers in trucks while keeping a human driver behind the wheel. In recent weeks, some of those partners, including McLane Company Inc., have moved to distance themselves from TuSimple, according to people familiar with the matter.

“McLane is aware of the recent leadership, operational and route changes at TuSimple and is in communication with their team. We are in the process of assessing the business relationship with TuSimple and will determine the next course of action in due time,” said Larry Parsons, McLane’s chief administrative officer.

In October, following a board investigation and the day after the Journal reported that the Federal Bureau of Investigation, Securities and Exchange Commission, and Committee on Foreign Investment in the U.S., or Cfius, were investigating TuSimple, the company’s board fired then-CEO

Xiaodi Hou.

After being ousted, Mr. Hou joined forces with fellow co-founder Mo Chen, who is also the leader of Hydron, to fire the board. Together they brought Mr. Lu back to run the company. Mr. Chen now controls the company with 59% of the voting power, while Mr. Hou has 30%, according to securities filings.

Last month, accounting company KPMG LLP said in a letter to the SEC it had resigned as TuSimple’s auditor as a result of the board firing, which also involved dismissing TuSimple’s audit committee.

TuSimple has announced leadership changes in an effort to get back into compliance with regulators and public stock market rules. This included adding two independent board directors and a security director to its board. Cfius had required the security director role as part of a national-security agreement with the company, but TuSimple fired the previous security director.

TuSimple’s stock closed at $1.54 on Friday, a 75% decline over the past two months and down 96% from its 2021 initial public offering price.

Write to Heather Somerville at heather.somerville@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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Business

Elon Musk Has Deep Regrets

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It is very rare for Elon Musk to be apologetic. 

The CEO of Tesla  (TSLA) – Get Free Report, SpaceX and Twitter rarely admits a mea culpa.

Admitting his mistakes is not part of his repertoire. In a recent example, Musk retweeted an article from the Santa Monica Observer, which attributed a violent attack on Paul Pelosi, the husband of House speaker Nancy Pelosi, to a conspiracy theory. 

The Santa Monica Observer has been known for publishing false information on a number of occasions, including a story about Hillary Clinton passing away and her body double being sent to debate Donald Trump in one of the 2016 presidential debates. 

Musk deleted the tweet but never publicly apologized.

He’s sure of his influence and his power. The richest man in the world and boss of a multitude of companies never retreats even when he has made a mistake.

It is often the opposite. Musk likes to counter attack. He has followed this strategy since he took control of Twitter, the town square of our time.

Margin Loan

He hits hard against those he considers to be his enemies or adversaries: the Democrats, the woke culture supporters, the press, the giants of Silicon Valley. According to him, what these supposed enemies have in common is that they oppose free speech, of which he describes himself as an “absolutist” defender.

He also did not hesitate to mock the press coverage of his first actions as boss of Twitter. Musk is looking for new sources of revenue to make the platform profitable as soon as possible. 

The problem he has now is that he went into debt to the tune of $13 billion to finance the acquisition of the platform. This was a margin loan, where he put up some of his Tesla shares as collateral.

The way a margin loan works is that, once the value of the collateral decreases vs. the borrowed amount, the borrower must provide additional collateral to make up for the difference.

‘Avoid Using Margin Loans’

As it took six months to complete the purchase of Twitter, it is not easy to pinpoint when the loan was finalized between May, in the early days of the Twitter acquisition negotiations, and October, when the acquisition was completed. During this period, the Tesla shares traded above $200, reaching as high as $317.54 on May 4. What is certain is that, with the share price closing at $179.05 on Dec. 9, the collateral shares have lost approximately between 10% and 40% of their value, possibly requiring Musk to post additional collateral to make up for the value decrease.

According to Bloomberg News, his advisers are reportedly pressuring him to use his Tesla shares as collateral for new loans to replace Twitter debt. Musk’s bankers are considering replacing some of the high-interest debt he layered on Twitter with new margin loans backed by Tesla stock that he would be personally responsible for re-paying. The discussions have so far focused on how to refinance $3 billion of unsecured debt on which Twitter pays an interest rate of 11.75%.

It is in this context that the tech mogul has just made a rare admission and expressed his regrets. Musk suggested that he should never have taken out a margin loan on his Tesla shares because, no matter what the group’s long-term potential is, in an uncertain economic environment the stock’s value is likely to go down in the short term.

“When there are macroeconomic risks, it is generally wise to avoid using margin loans on any company,” the billionaire posted on Twitter on Dec. 8. “As stocks may move in ways that are decoupled from their long-term potential.”

The tweet suggests that even companies with strong fundamentals like Tesla aren’t immune in times of economic uncertainty, as is the case today. Investors tend to give in to fear and panic, which results in a widespread stock sell-off, no matter how strong the company is. 

Musk therefore seems to advise against taking a margin loan during such periods. In doing so, he seems to be expressing his regret for doing it himself.



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Technology

Android Automotive is getting its 38th app: Waze

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Enlarge / Waze for Android Automotive.

Waze

Google’s other big navigation app, Waze, is coming to Android Automotive. Today the company announced the move on the Waze blog, saying, “The new dedicated Waze app for cars brings the best of Waze real-time navigation, routing and alerts feature[s] right in the car’s display. When you drive, you can experience safer and more convenient journeys while eliminating the hassle of using a smartphone.”

Google has two different car products with really confusing branding. The first is Android Auto. This is Google’s version of CarPlay—an app that runs on your phone but projects a special car interface to your vehicle’s dashboard display, showing off Google Maps and compatible Android Auto apps on your phone. Waze has been on Android Auto since 2017. Today’s announcement is for Android Automotive, a different product from Android Auto. Automotive, the fully spelled-out version, is a full operating system instead of an app. Cars have infotainment computers in them, and Android Automotive OS (AAOS) has the car run Android. Even if there’s an iPhone in your pocket, your car runs Android on the car’s internal computer instead of something like Linux or QNX. AAOS has a car version of the Play Store, where you can download apps directly to your car, and it’s this platform that Waze is arriving on. Android Automotive is pretty rare out there in the world, but you’ll see it on new Volvo/Polestar, Ford, and GM cars, mostly. Sometimes Google or car manufacturers will call AAOS “cars with Google built-in.”

The app situation on Android Automotive is tough. In-car infotainment systems are heavily regulated due to safety concerns to the point that every app and individual interface needs to be vetted by regulatory bodies around the world. This is incredibly difficult, expensive, and time-consuming for app developers, which is a big reason Android Automotive only has 37 apps right now. You can see the full list here. AAOS only allows for media and navigation apps, and even the media apps don’t get a custom interface—you just plug into Google’s interface with your own branding and audio stream, which alleviates the regulatory burden but limits what apps can do.

Waze’s car app looks a lot like the phone app, but bigger, with the all-important report button and tons of icons detailing user reports for police, construction, and other road hazards. The screenshot even shows a “Still there?” prompt, asking the user to confirm that a previously reported hazard is still active.

Despite building an app for Google’s car OS, Waze is limiting the rollout to certain vehicles for now. The company says the app is exclusive to “the new Renault Austral Hybrid and Renault Megane E-Tech electric vehicles in Europe.” The weird rollout might have to do with all those regulatory issues car apps have to deal with, and Waze says it will bring the new app to “more users across the globe in 2023.”

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Business

Ford Unveils Big Electric Vehicle Surprise in November

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Jim Farley has made no secret of his desire to win.

The Ford  (F) – Get Free Report CEO has made it clear that he wants his company to be the top gun in the electric vehicle sector.

In April, he threw down the gauntlet to Tesla  (TSLA) – Get Free Report, the world’s largest EV company, and “all comers to become the top EV maker in the world.” 

“That’s something that no one would have believed just two years ago from us,” Farley said;

The company announced on Nov. 30 that it had built the 150,000th Mustang Mach-E since production began almost two years ago despite supply chain challenges and a spike in raw material prices.

The accomplishment even impressed Tesla  (TSLA) – Get Free Report CEO Elon Musk who tweeted to his congratulations to Farley and company.

“Thanks, @elonmusk,” Farley responded. “Lots of work ahead.” 

And Ford said on Dec. 1 that it planned to invest another $153 million in its U.K. manufacturing plant to boost EV production.

Ford sold a total of 6,255 vehicles in November, soaring nearly 103% compared with a year ago, and “making Ford America’s second best-selling brand and manufacturer of electric vehicles behind Tesla.”

F-150 Lightning sales totaled 2,062 and since its first sale at the end of May, F-150 Lightning sales totaled 13,258 trucks.

“Ford’s sales of electric vehicles expanded at approximately twice the rate of the overall electric vehicle segment in November as Ford prepares to increase production next year to meet U.S. demand,” Ford said in a statement.

Ford beat out Hyundai-Kia to earn the No. 2 EV position, but it wasn’t all good news, as the company posted a 7.8% decline in total U.S. sales for the month. Retail sales fell 15.8%.

Ford

‘Tesla’s Position is Changing’

Truck sales were down 1.2% and SUV sales dropped 15% from a year ago.

And there is still a lot of work to do in the EV sector. Tesla reported global deliveries of more than 908,000 EVs through the third quarter.

But Tesla, which delivered the first its long-promised electric semi trucks on Dec. 1, can’t afford to rest on its laurels, according to the S&P Global Mobility Study.

The study said much of Tesla’s share loss is to EVs available in a more accessible Manufacturer Suggested Retail Price (MSRP) range – below $50,000, where Tesla does not yet truly compete.

“Tesla’s position is changing as new, more affordable options arrive, offering equal or better technology and production build,” the report said. “Given that consumer choice and consumer interest in EVs are growing, Tesla’s ability to retain a dominant market share will be challenged going forward.”

The study predicted that the number of battery-electric nameplates will grow from 48 at present to 159 by the end of 2025, “at a pace faster than Tesla will be able to add factories.”

Tesla currently holds a 65% share of the EV market, with Ford in second place with 7% market share, Kia next at 5% and Chevrolet and Hyundai tied for fourth with 4% each, according to S&P Global Mobility data. The remaining 15% share is split between all other EV makers.

Tesla Developing Lower-Cost EV

During a recent earnings call, Musk again confirmed that the company is working on a vehicle priced lower than the Model 3, “though market launch timing is unclear.”

“Tesla’s model range is expected to grow to include Cybertruck in 2023 and eventually a Roadster, but largely the Tesla model lineup in 2025 will be the same models it offers today,” the report said.

“Before you feel too badly for Tesla, however, remember that the brand will continue to see unit sales grow, even as share declines,” said Stephanie Brinley, associate director, AutoIntelligence for S&P Global Mobility. 

“The EV market in 2022 is a Tesla market, and it will continue to be, so long as its competitors are bound by production capacity,” Brinley said.



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Business

Crypto Entrepreneurs Fail to Capture Elon Musk’s Attention With $600,000 Goat Statue

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AUSTIN, Texas—Even as a cold night started to settle outside

Tesla

‘s headquarters here on Saturday, a group of cryptocurrency entrepreneurs had no plans to leave until

Elon Musk,

the man they named their currency after, accepted a 12,000-pound sculpture of a Mr. Musk-headed goat riding a rocket.

It is the latest stunt in the cryptocurrency space, where jokes and memes about digital currencies regularly flood social media. But a 6-ton sculpture as a marketing gimmick isn’t so common.

The creators of Elon GOAT say the name of their cryptocurrency was inspired by their respect for Mr. Musk. They and his other fans think he is the “greatest of all time,” or a “GOAT.” They took the admiration literally, spending $600,000 to create a sculpture of Mr. Musk’s head, wearing a gold-plated dogecoin necklace on a goat’s body. The rocket can move, pointing to the sky as if it is taking off. Gas lines run through it so that flames can shoot out of the back.

They trucked it to

Tesla Inc.’s

headquarters, in hopes Mr. Musk would accept the gift. The creators are calling called the event “GOATSgiving.”

Elon Musk has warned of dire financial challenges facing Twitter, the social-media company he took over for $44 billion in October. WSJ’s Mark Maurer explains how the company is trying to fix its finances and avoid a potential bankruptcy. Photo Illustration: Laura Kammermann

But about two hours after the co-founders of Elon GOAT parked the sculpture right outside the Tesla building, there was no sign of Mr. Musk.

Dustin Dailey, a security officer at Tesla, walked over to a group of about 15 people and said they couldn’t accept the sculpture on Mr. Musk’s behalf, but would find a spot for it on their property if Mr. Musk gave the thumbs-up.

But so far Mr. Musk hasn’t given any indication he would accept it or whether he knew the sculpture was there. Tesla didn’t respond to a request for comment

“I am fairly certain he does know about it,” said Mr. Dailey of the sculpture. “It’s all over Twitter.”

SHARE YOUR THOUGHTS

What do you think of the Elon Musk goat sculpture? Join the conversation below. 

Alec Wolvert, an Elon GOAT co-founder and chief marketing officer, said they were planning on camping out on a piece of public land off a toll road that overlooks the headquarters until Mr. Musk accepted the sculpture.

“We’re gonna stay here as long as possible,” Mr. Wolvert said. “I even heard some people say they were going to strap themselves to it.”

The idea of the sculpture came together last year. “It was an evening joke that kind of just came to fruition,” said

Ashley Sansalone,

an Elon GOAT co-founder.

Metal sculptor Kevin Stone spent nearly six months working on the sculpture of Elon Musk.



Photo:

Kevin Stone

The cryptocurrency entrepreneurs asked Kevin Stone, a metal sculptor in British Columbia, Canada, to make the giant sculpture with Mr. Musk’s head. The goal: to get Mr. Musk to tweet about the sculpture to his more than 118 million followers and draw attention to their cryptocurrency, the Elon GOAT.

“Elon tweeting us would legitimize the token,” said Mr. Sansalone, 40 years old.

Mr. Sansalone said he works on the token full time and previously ran a construction company and traded energy. Unlike bitcoin, ether or dogecoin, the Elon GOAT token is far from a household cryptocurrency name. It is ranked well outside the largest cryptocurrencies by market value, according to CoinMarketCap.

Mr. Musk’s head, which took nearly six months to complete was made by Mr. Stone. The goat body and rocket were made by others in Phoenix to speed up the project, Mr. Sansalone said. Then all the pieces were put together and attached to the back of a 70-foot long semi-truck trailer.

“When I first saw the statue my jaw dropped,” said DeMarco Hill, 51, who spotted it in September in Goodyear, Ariz., where he lives. He grabbed his 12-year-old son and they followed it. “It was something you’ve never seen before in your life.”

Mr. Hill, a trucker who owns his own company, Stay Ready Trucking, thought the stunt was so entertaining that he found Mr. Sansalone and asked if he could participate. Mr. Sansalone said Mr. Hill was needed because only someone with a special license could drive around the heaping pile of metal.

He has since driven the sculpture through California, Arizona and Washington, before bringing it to Texas. People who drive by honk their horns or give a thumbs-up, Mr. Hill said. 

“If I pull up to the side of the road it’s like people crowding around,” he said. “It gets crazy.”

Mr. Sansalone said the sculpture has mostly gotten a positive response. He hasn’t heard anyone mistaken Mr. Musk’s face for someone else. “I would say he is probably the most relevant person on the planet right now,” Mr. Sansalone said about Mr. Musk, the world’s richest person who recently bought Twitter Inc. for $44 billion.

In September, the sculpture sat in front of Tesla’s office in Palo Alto, Calif., during the company’s artificial-intelligence conference. Tesla employees crossed the street to take pictures with the sculpture, Mr. Sansalone said. Mr. Musk was at the conference, according to Twitter posts he made, and Mr. Sansalone assumes the billionaire saw the sculpture. 

“All there was to look at was a lit-up rocket erected in the middle of the street,” he said. 

On Saturday night, the group remained hopeful.

At one point in the evening, a group of about 20 people who were waiting outside started to chant “Elon claim your goat” in the hopes that the god of crypto, as one co-founder put it, would hear them.

“I’m a huge fan of Elon and I want to give this man his flowers while he’s alive,” said Aamir Manzoor, a 36-year-old from Toronto who is a holder of Elon GOAT. “He’s done a lot for the world.”

Write to Joseph Pisani at joseph.pisani@wsj.com, Alyssa Lukpat at alyssa.lukpat@wsj.com and Adolfo Flores at adolfo.flores@wsj.com

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Business

Carvana Faces Cash Crunch From High Debt, Rising Interest Rates

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Carvana Co.

CVNA -3.13%

, the used-car dealer that was a pandemic winner, is rushing to conserve cash as once-plentiful financing options dry up and business deteriorates.

On Friday, Carvana laid off about 1,500 people, its second round in six months. Its weakening finances mean raising funds would be difficult and costly, and it could run out of cash in a year, analysts say.

Few companies have been hit harder by rising interest rates than Carvana. The company’s interest expense nearly doubled early this year when it paid up to get financing for an acquisition. Its cost to finance car purchases is up by three-quarters this year, and some of its real estate has lost value. Car buyers, meanwhile, are holding off purchases in the hope that rates fall.

In a memo to Carvana’s employees announcing the layoffs, Chief Executive

Ernie Garcia III

blamed an uncertain economic environment that he said was particularly tough on fast-growing companies that sell products affected by higher interest rates. “We failed to accurately predict how this would all play out and the impact it would have on our business,” he said.

The company said it has millions of satisfied customers, and that disrupting the auto industry isn’t easy. “We have seen many e-commerce companies written off early in their journey only to become market leaders. We plan to follow suit,” a spokesman said. Earlier this month, Carvana executives said cash flows and profitability are the strategic focus now.

WSJ’s Ben Foldy explains the factors that helped drive Carvana’s growth and why investors are now questioning its future. Illustration: Preston Jessee

Carvana became wildly popular among car buyers, with heavy advertising and haggle-free cars delivered to their doors. Investors bought in, driving the shares up more than sixfold. The stock has fallen more than 97% from its peak last year. Carvana’s bonds are trading at distressed levels. 

“They built an infrastructure across the enterprise with the assumption that the growth would be there,” said Daniel Imbro, a managing director at Stephens Inc. 

The ratings firm S&P Global Ratings warned that Carvana’s liquidity likely would erode faster than expected, and changed the outlook on its CCC+ rating to negative earlier this month. It said the company’s standing to raise more cash from stock and bond investors has deteriorated.

Less than a year ago, Carvana was still trying to keep up with demand. In February, it agreed to buy a car-auction business that would help boost inventory. Car sales slowed, though. 

The day the deal was completed in May, Mr. Garcia said it had overshot on growth and laid off 2,500 workers. Days earlier, it had issued a $3.275 billion bond with a 10.25% coupon to fund the purchase. The high coupon almost doubled Carvana’s annual interest expense and reflected investors’ fears of a recession and rising inflation. 

Carvana CEO Ernie Garcia III and his father, Ernest Garcia II, when the company went public in 2017.



Photo:

Michael Nagle/Bloomberg News

Carvana thrived when interest rates were low because it could borrow cheaply to buy cars and make loans to customers. Its credit line from

Ally Financial

to buy cars had an average 2.6% interest rate last year, compared with 4.5% at the end of September. Ally required Carvana to set aside 12.5% of the amount borrowed as of late September, up from 7.5%, further tightening its cash situation. An Ally spokesman declined to comment.

Carvana earned big profits selling its car loans to investors who were hungry for yield. Gains from the loans help Carvana offset the losses it makes selling cars. When investors turned choosier on these securities in the spring, Carvana sold many of the loans to Ally instead, on less-favorable terms. The gains it books from loan sales fell by around one-third in the third quarter from the year-earlier period.

Mr. Garcia told analysts on a call Nov. 3 that the company would keep cutting costs and that it has access to around $4 billion in liquidity, in addition to its $316 million cash and some other assets. The amount includes what it can borrow on credit lines to buy cars and make loans. It also included around $2 billion of real estate, which isn’t typically considered a liquid asset.

The company’s chief financial officer said Carvana could borrow against the real estate, which includes sites it bought this year. It previously raised around $500 million from selling some sites where it inspects cars and then leasing them back for 20 or 25 years. 

That step might work, analysts said, but would also add expenses. They said any real-estate deals would likely occur piecemeal over time, or involve high rent payments because of Carvana’s credit troubles. 

Scott Merkle, a managing partner at SLB Capital Advisors, which specializes in sale-leaseback transactions, said the long-term leases in the space generally rely on financially sound tenants that can be expected to make their lease payments for years. He said that overall conditions for sellers have softened in that market because of higher interest rates, but that sale-leasebacks still provide a better cost of capital for companies than other financing. 

Carvana said it is testing ways to make more from its car sales, such as having customers pick up cars from its vending machines.



Photo:

USA TODAY NETWORK/Reuters

Some Carvana-leased properties have received a tepid response on the market. A 12-story “flagship” car-vending machine in Atlanta that Carvana sold and leased back in December was relisted this summer. It is still on the market, and the asking price has since been lowered.

Carvana said it is testing ways to make more from its car sales, such as taking payment before delivery and having customers pick up cars from its vending machines. 

“We’ve got a bunch of committed liquidity. We’ve got a bunch of real estate, and I think that we feel like that puts us in a good position to ride out this storm,” Mr. Garcia told analysts on the Nov. 3 call.

—Ben Foldy, Will Feuer and Ben Eisen contributed to this article.

Write to Margot Patrick at margot.patrick@wsj.com and Kristin Broughton at Kristin.Broughton@wsj.com

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Business

Collapse of Carvana, the ‘Amazon of Used Cars’, Continues

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The sky is not clearing up for Carvana. 

On the contrary, big clouds continue to gather over the company which was one of the big winners of the covid-19 pandemic, with a massive growth. 

Since announcing its quarterly results on Nov. 3, Carvana  (CVNA) – Get Free Report shares have lost 44% of their value and are currently trading at $8.06 versus $14.35 on that day. This translates into a decline in market capitalization of approximately $1.1 billion in two weeks. Carvana currently has a market value of $1.43 billion.

The company, founded in 2012 and based in Arizona, took advantage of favorable conditions to market its new way of buying a car. The group’s car vending machines stuck well with the pandemic, a period during which consumers wanted to avoid contact as much as possible, to limit their exposure to the virus. 

The federal government had also flooded consumers with money via stimulus programs. Interest rates were almost zero, which meant that financing the purchase of a vehicle cost practically nothing. 

Added to this, the supply chains of car manufacturers were disrupted, which made the production of new vehicles difficult. Faced with these challenges, consumers turned to the second-hand market as the waiting times for new vehicles were long. Used car prices therefore jumped, making it a good deal for Carvana. 

Basically, all the winds were blowing in the right direction for the company.

New Car or Used Car?

But coming out of the pandemic, Carvana’s fortunes seem to have turned completely. The used car market remains hot. But all the other factors have reversed. There is no more stimulus money. The central bank is aggressively raising interest rates and inflation is at its highest in 40 years. The economy is also close to a recession more than ever, and the waves of job cuts follow one another. Used car prices remain high but financing the transaction has become very expensive for consumers. Supply chains have improved significantly, facilitating the production of new vehicles.

This was felt in the latest quarterly results from Carvana: In the third quarter, Carvana’s revenue fell 2.7% year-on-year to $3.4 billion, while net loss jumped to $283 million from just $32 million in the third quarter of 2021, the company said in a letter to shareholders.

Used car sales in the U.S. fell almost 13% year-on-year, in the third quarter of 2022.

“If you’re looking at newer used cars — models in the 1 to 3-year-old range, you may find that prices are still relatively close to what they sold for new,” Consumer Reports said. “If you have to borrow money to buy the car, it may be better to find a new car that can qualify you for a lower interest rate, to say nothing of the benefit of a fresh factory warranty. Many manufacturers subsidize financing and may offer interest rates that are much lower than normal to qualified buyers.”

All this complicates the affairs of Carvana, which had to go into $3.3 billion of debt to finance the acquisition of auctioneer Adesa’s physical auction business this year.

Carvana

Elimination of 1,500 Additional Jobs

The group is therefore under enormous financial pressure.

“Significant nearer-term operational and financial risks for Carvana have emerged and are likely to cloud the CVNA investment story for the foreseeable future,” Oppenheimer analyst Brian Nagel said in a note on Nov. 15, downgrading the stock.

He added that “we do not envision investors bidding CVNA meaningfully higher until prospects for a manageable and sustained capital base become clearer.”

Nagel seems to confirm that Carvana has a liquidity problem which the group must address fairly quickly if it wants to stop the collapse. The company has between $6 billion and $7 billion in debt net of the cash on the balance sheet, according to FactSet. 

But Carvana is not profitable: its adjusted EBITDA margin loss increased by 6.2% in the third quarter. EBITDA refers to earnings before interest, taxes, depreciation and amortization, which helps investors to gauge the financial health of a company.

The company is struggling to try to change things and delay as much as possible raising equity capital or adding more debt. Carvana, for example, is determined to drastically reduce costs. After cutting 2,500 jobs in May, the company has just announced an additional wave of layoffs which affects 8% of its workforce, or 1,500 employees.

“It is fair to ask why this is happening again, and yet I am not sure I can answer it as clearly as you deserve,” Chief Executive Officer Ernie Garcia told employees in an email on Nov. 18. “I think there are at least a couple of factors. The first is that the economic environment continues to face strong headwinds and the near future is uncertain. This is especially true for fast-growing companies and for businesses that sell expensive, often financed products where the purchase decision can be easily delayed like cars.”

In addition, “we failed to accurately predict how this would all play out and the impact it would have on our business. As a result, we find ourselves here.”

The new cuts will affect “many corporate and technology teams as well as some operations teams where we are eliminating roles, locations or shifts to match our size with the current environment,” Garcia wrote.

Reached by TheStreet, Carvana didn’t comment.

The new job cuts come after ratings agency S&P Global Ratings warned it was likely to downgrade Carvana in the near term, changing the outlook from stable to negative.

“GPU [gross profit per unit] is expected to remain weak due to higher used car depreciation rates and lower returns from selling loans and other products,” said the rating agency. “Carvana generates over 50% of its GPU from selling loans and other products. With rising interest rates, it is more difficult for Carvana to compete with the large banks that can keep loan rates low, which will reduce the number of loans allocated to Carvana.”

Garcia ruled out the option of raising capital on Nov. 3. 

“Our goals are going to be on driving down expenses and trying to get positive EBITDA as quickly as we can,” he told analysts. “We’ve got a bunch of committed liquidity. We’ve got a bunch of real estate. And I think that we feel like that puts us in a good position to ride out this storm. And we’re making great moves inside the company.”

But apart from these financial difficulties, Carvana also faces legal challenges. The company is facing lawsuits from customers in multiple states involving alleged issues over titles and registration and over purchasing vehicles.

Michigan Secretary of State Jocelyn Benson also suspended the retailer’s license, with Carvana suing in return.

Carvana has said the lawsuits are without merit and called the decision in Michigan “arbitrary.”



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