Tag Archives: Toyota Motor Corp

EV carmakers work to fit auto dealers into their future plans

Customers wearing protective masks looks at the interior of a vehicle for sale at a Ford Motor Co. dealership in Colma, California, Feb. 1, 2021.

David Paul Morris | Bloomberg | Getty Images

DETROIT — As automakers chase Tesla-like profits on new electric vehicles, they face an existential question: how best to bring franchised auto dealers along with them as they transition to EVs.

Some, such as General Motors, are asking luxury dealers to go all-in on EVs or get out of the business. Others like Ford Motor are offering dealers different “EV-certification” levels, while most other carmakers, or OEMs, know they need to change the sales process to fit the evolving industry, but are still try to figure out how to do it.

“I think we’re all building this airplane as we fly,” Michael Alford, president of the National Auto Dealers Association, a trade association that represents more than 16,000 U.S. new franchised dealers, told CNBC. “Depending on the OEM, the level of engagement or the intensity of the engagement varies.”

Automakers and franchised dealers have a complex relationship that is backed, in many states, by laws that make it difficult, if not illegal, to bypass franchised dealers and sell new vehicles directly to consumers. (Tesla and other newer EV startups have worked around such regulations to cut costs.)

Both automakers and franchised dealers want to maximize profits, but they’re separate businesses that heavily rely on one another to succeed. Dealers rely on automakers for product to fill and move off lots, and the carmakers in turn rely on dealers to sell and service vehicles as well as serve as concierges for customers. 

How that historical relationship fits into an all-electric future is expected to be at the forefront of discussions between automakers and dealers at the National Auto Dealers Association Show occurring through Sunday in Dallas. The event attracts thousands of franchise dealers annually to hear from their respective automotive brands.

For dealers — from mom-and-pop shops to large publicly traded chains — EVs will mean new employee training, infrastructure and substantial investments in their stores to be able to service, sell and charge the vehicles. Depending on the size of the dealer, those upgrades could easily cost hundreds of thousands, or millions, of dollars. Of course, they want to make sure their investments will pay off.

“The tone and tenor of this subject matter has evolved, and I think it’s very, very clear this year that our legacy OEMs absolutely realize that we are essential going forward,” said Alford, who runs Chevrolet and Cadillac dealerships in North Carolina.

Competing with Tesla

As more automakers introduce EVs, they’re rethinking the sales process, including selling new vehicles largely, if not fully, online. Tesla was among the first automakers to embrace online sales for a large portion of its business, though it still has physical dealerships, information sites and service shops.

A greater shift online may limit the role of dealers to strictly processing, maintenance and as delivery centers going forward and eliminate the need for large lots of cars that they then sell to consumers.

“By and large, the franchise system remains in place even for EVs by traditional automakers, although they all seem to be looking at ways to tweak it to be more competitive, so they say, with the Teslas of the world,” said Michelle Krebs, Cox Automotive executive analyst.

Automakers believe doing so will provide consumers a more streamlined and cohesive sales process, but they also consider the dealers to be their partners and to offer “strategic advantages” when it comes to other sales and maintenance issues.

A Tesla dealership in Colma, California, on Wednesday, Jan. 26, 2022.

David Paul Morris | Bloomberg | Getty Images

Honda Motor has said it plans to move more sales online, including 100% online sales for its luxury Acura brand for EVs. Mamadou Diallo, American Honda vice president of sales, said the plan is to facilitate the ordering process online, but with the vehicle being picked up or delivered by dealers. Those procedures are still being worked out, though, he said.

“We want to proceed with ensuring that we provide convenience with what customers are looking for, with no intention of bypassing our dealer body,” Mamadou said Tuesday during a media call.

Jay Vijayan, who assisted in building out Tesla’s digital and IT systems, doesn’t believe selling EVs exclusively online will pan out. He said a mix of sales points is best, which is why Tesla and newer EV startups are selling online as well as opening new showrooms and service centers.

Apple still opens new stores, right? And every company you think is going to go direct is also opening new stores in the automotive space,” said Vijayan, founder and CEO of Tekion, a cloud-based dealer service provider.

Wall Street analysts have largely viewed direct-to-consumer sales as a means to optimize profit. However, there have been growing pains for Tesla when it comes to servicing its vehicles.

Ford CEO Jim Farley has said he wants the automaker’s dealers to cut selling and distribution costs by $2,000 per vehicle to be competitive with Tesla’s direct-to-consumer model.

Automaker approaches

Ford is among the automakers receiving the most pushback from dealers for its EV push, which includes EV-certification tiers that could cost more than $1 million per store, depending on the size of the dealership.

The Detroit automaker is facing legal challenges to the certification program from dealers who argue that the plan violates franchise laws. A group of 27 dealerships in Illinois filed a protest with the state’s motor vehicle review board, and four dealers in New York filed suit against the automaker last month, according to Automotive News.

Ford dealer Marc McEver said he signed on for the highest EV-certification tier at his dealership near Kansas City, Kansas, but he worries about the cost and timing of the program.

“I think we’re all concerned that what they’re having us put in now, by the time we really get some vehicles, will be outdated and need to be upgraded or replaced,” McEver, who also owns a Lincoln dealership, said.

Aside from the investments, dealers who opt into selling Ford EVs will need to abide by five standards to stay within good standing: clear and nonnegotiable pricing; charging investment; employee training; and improved vehicle purchasing and ownership experience for customer, both digitally and in person.

Ford on Saturday plans to outline some changes to its EV-certification tiers, according to two people familiar with the plans. The changes, as first reported by Automotive News, would narrow the differences between the program’s two tiers. The bottom tier comes with lower capital investment but also a smaller allocation of EVs from Ford.

Ford, though, unlike archrival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s gas-powered cars.

GM has offered buyouts to its Buick and Cadillac dealers that don’t want to shell out to sell EVs. About 320 of Cadillac’s 880 retailers took buyouts. Buick’s buyouts are ongoing, according to a spokesman.

Toyota Motor, for its part, has no plans to overhaul its franchised dealership network as it invests in electrified vehicles, CEO Akio Toyoda told dealers to resounding applause in September.

“I know you are anxious about the future. I know you are worried about how this business will change. While I can’t predict the future, I can promise you this: You, me, us, this business, this franchised model is not going anywhere. It’s staying just as it is,” said Toyoda, who will step down as CEO to become chairman in April.

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10 auto industry predictions for 2023

A customer looks at a vehicle at a BMW dealership in Mountain View, California, on Dec. 14, 2022.

David Paul Morris | Bloomberg | Getty Images

DETROIT — Wall Street and industry analysts remain on high alert for signs of a “demand destruction” scenario for the U.S. automotive industry this year as interest rates rise and consumers grapple with vehicle-affordability issues and fears of a recession.

Since the onset of the coronavirus pandemic in early 2020, automakers have experienced unprecedented pricing power and profits per vehicle amid resilient demand and low inventory levels due to supply chain and parts disruptions affecting vehicle production.

Those factors created a supply problem for the auto industry, which Cox Automotive and others believe may switch to a demand problem — just as automakers are slowly improving production.

“We’re swapping a supply problem for a demand problem,” Cox Automotive chief economist Jonathan Smoke said Thursday.

Cox has 10 predictions for the U.S. auto industry this year that point to such an outcome. Here they are along with reasons why investors should be mindful of them.

10. Federal incentives will encourage more fleet buyers to consider electrified solutions

While electric vehicle tax credits under the Inflation Reduction Act have not been finalized, incentives for commercial vehicles and fleet owners promise to be a major benefit.

Unlike consumer vehicles that qualify for credits of up to $7,500, fleet and commercial vehicles do not need to meet stringent U.S. requirements for domestic parts and batteries.  

“This is actually where we think the majority of growth will be in new vehicle sales in ’23,” Smoke said.

Cox forecasts U.S. new vehicle sales will be 14.1 million in 2023, a slight increase from nearly 13.9 million last year.

9. Half of vehicle buyers will engage with digital retailing tools

The coronavirus pandemic forced franchise auto dealers to embrace online retailing more than automakers ever could, as consumers demanded it and many physical dealerships were shuttered due to the global health crisis.

That trend is expected to continue for years to come, as many automakers have vowed to better align production with consumer demand.

8. Dealership-service operations volume and revenue climb

Due to a lack of available new vehicles and higher costs, consumers are keeping their vehicles longer. This is expected to increase back-end service business and revenue for dealers compared to their sales. Dealers make notable profits from servicing vehicles. The increase is expected to assist in offsetting potential declines in sales and financing options.

“We see this as one of the silver linings for dealers,” Smoke said. “The service department usually does well [and] is somewhat counter-cyclical during economic downturns.”

7. All-cash deals will increase to levels not seen in decades

High interest rates are making vehicle purchasing far more challenging for mainstream buyers and less economical for more wealthy consumers. Such conditions are expected to push those who have the cash to purchase a vehicle to buy it without financing it.

Smoke said the average loan rate for a new vehicle is more than 8%. For used vehicles, it’s close to 13%.

6. Vehicle affordability will be the greatest challenge facing buyers

Vehicle affordability was already a concern when interest rates were low. This issue has grown to be more concerning as the Federal Reserve pumps up interest rates to battle inflation. Cox reports vehicle affordability is at record lows.

The increases have led to upticks in average monthly payments of $785 for new cars and $661 for leases, Cox said. The average list price of a new vehicle remains above $27,000, while average transaction prices for new vehicles ended last year at about $49,500.

“The longer-term concern is that this causes what is produced to skew even more towards luxury and away from affordable price points, which means even the U.S. vehicle market has a long-term affordability issue,” Smoke said.

5. Used-vehicle values will see above normal depreciation for a second straight year

Used vehicle prices skyrocketed during the first two years of the coronavirus pandemic due to the low availability of new cars and trucks. The wholesale pricing peaked in January 2022. It declined 14.9% last year and is expected to fall another 4.3% by year-end.

The declines are still not enough to offset the 88% rise in index pricing from April 2020 to January 2022.

Inventory of used vehicles is stabilizing at nearly 50 days — close to 2019 levels before the coronavirus pandemic depleted supply.

4. Sales of electric vehicles in the U.S. will surpass 1 million units for the first time

Cox reports all-electric vehicle sales increased by 66% to more than 808,000 units last year in the U.S., so it’s not too much of a leap to hit 1 million amid dozens of new models scheduled to hit the market. EVs represented about 5.8% of new vehicles sold in the U.S.

Add in hybrid and plug-in hybrid electric vehicles that pair with a traditional engine, Smoke said about 25% of new vehicles sold this year to be “electrified” vehicles. That would be up from 15% to 16% in 2022.

3. Total retail vehicle sales will fall in 2023, as new vehicle sales grow, used sales decline

Automakers are expected to rely more heavily on sales to commercial and fleet customers such as rental car and government agencies than they have in recent years to increase total sales.

Carmakers prioritized the more profitable sales to consumers amid the low inventories in recent years. But with consumer demand anticipated to fall, companies are expected to turn to fleet sales to fill that demand gap.

2. New vehicle inventory levels will continue to increase

Expectations for lower demand come as the automotive industry is slowly increasing its production of vehicles, leading to higher inventory levels.

Inventory levels the past two years were at record lows due to supply chain and parts problems affecting production.

Cox reports inventory levels greatly differ based by brand, with the Detroit automakers — specifically Stellantis — having an ample supply of vehicles. Toyota has the lowest days of supply of vehicles, according to Cox.

1. A slow-growing economy will place pressure on the automotive market

Combine all of the prior predictions in addition to the economic concerns and that’s a lot of pressure on the U.S. automotive industry in the year ahead.

This is also happening during a time when automakers are investing billions in electric vehicles and new technologies such as advanced driver-assistance systems and autonomous vehicles.

“We hope for an economic soft landing but ether way we believe the auto market is going to be held back in the year ahead,” Smoke said.

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GM is the top car seller in America, retaking the title from Toyota


New York
CNN
 — 

One year after losing the title it held for nearly a century as the top car seller in America, General Motors is back on top.

GM

(GM) reported Wednesday US sales of 2.3 million vehicles. Strong fourth quarter sales, up 41% from a year ago, allowed it to end the year with sales up nearly 3% from the 2.2 million US vehicles it sold in 2021, when it suffered a 13% decline.

Meanwhile Toyota

(TM), which had captured the top sales spot in 2021, had its full-year sales fall nearly 10% to 2.1 million, despite posting a 13% increase in fourth quarter sales.

In each of the last two years, industry-wide auto sales were limited by a shortage of parts, primarily computer chips, needed to build the cars and trucks consumers wanted. Total US new vehicle sales are expected to be down to just less than 14 million vehicles when the final sales results are reported across the industry later this week.

That would be the lowest sales total since the country was just climbing out of the Great Recession more than a decade go. Sales bottomed out at 10.5 million in 2009, the year GM and Chrysler declared bankruptcy and received federal bailouts, and had only climbed back to 12.7 million by 2011, the last year the industry sales fell below 14 million.

Sales had been 17 million in 2019, the year before the pandemic upended both the economy and supply chains.

Most forecasts say the supply chain problems are getting better, and that should allow automakers to increase production in 2023. They point to the better sales that took place in the fourth quarter than earlier in the year as a proof of that, even with higher car prices and rising interest rates making it more expensive for buyers than in the past.

That in turn has led them to forecast a modest increase in sales this year to just north of 14 million vehicles once again.

But many experts caution that their forecast of increased sales depend on the US economy not falling into recession, and instead simply experiencing slower growth. And uncertainty about what will happen to the economy is making the outlook for car sales far more uncertain than in years previous, they say.

“I’ve been forecasting the car market for decades now. This next year is the most challenging,” said Charlie Chesbrough, chief economist for Cox Automotive. “Normally we an idea which way it is headed. But this year it could be up or down.”

There are a number of factors supporting new car sales in the coming year, even if the economy stumbles. One is the fact that car rental companies have not be able to buy the supply of new cars they need in the last two years, as automakers limited the supply of cars available for lower priced fleet sales, selling all or virtually all the cars they had to consumers instead.

“Rental companies have been running at half of the purchases that they’re accustomed to,” said Ivan Drury, director of insights at Edmunds.

And Drury said if automakers start to see weakness in consumer demand, they can bring back incentives, including lower rate financing, that they haven’t had to offer in recent years when there was more demand than supply.

“The incentives recently have been virtually nothing,” he said.

So far demand is still strong, as there is pent-up demand from potential buyers who have delayed purchases because they couldn’t find the vehicle they wanted. But both Drury and Chesbrough say the higher average prices and higher interest rates are already driving buyers out of the market.

A turn in the economy, especially if historically low unemployment rates start to rise, could quickly result in lower new car sales.

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General Motors (GM) sales Q4 2022

2022 GMC Sierra 1500 Denali Ultimate

GM

DETROIT – General Motors reclaimed its U.S. sales crown from Toyota Motor last year as the Detroit automaker eked out a slight gain in annual U.S. vehicle sales despite supply chain problems.

GM said Wednesday it sold 2.27 million vehicles in the U.S. in 2022, up by 2.5% over 2021, including a 41.4% increase during the fourth quarter. Analysts expect overall U.S. auto industry sales to have declined by 8% and 10% last year compared to 2021.

Toyota said it sold 2.1 million vehicles in the U.S. last year, down 9.6% from 2021. The company was able to manage supply chain problems, specifically with semiconductor chips, better than others.

Toyota edged out GM in sales by 114,034 vehicles in 2021 – dethroning the Detroit automaker for the first time since 1931 when it surpassed Ford Motor. Toyota executives previously said the top sales spot was unattainable, but CEO Akio Toyoda last year told dealers he did a “happy dance” when he heard the news.

Jack Hollis, executive vice president of Toyota Motor North America, on Wednesday said the Japanese automaker remains focused on retail sales, which are traditionally more profitable than commercial or fleet sales. Toyota has led those sales for several years.

EVs

Despite recent criticism of its all-electric vehicle strategy, Toyota on Wednesday touted that it leads the country in electrified vehicle sales. Those include hybrid, plug-in and all-electric cars and trucks.

GM, in contrast, largely ditched hybrids for an all-electric vehicle strategy but has been slow to ramp up production. GM’s U.S. EV sales represented less than 2% of its sales in 2022.

In a release Wednesday, GM called EVs “growth opportunities.” It’s expected to release more mainstream models such as the Chevrolet Blazer and Chevrolet Equinox EV crossovers.

GM was able to achieve record U.S. sales of 38,120 Chevrolet Bolt EV and EUV models in 2022. However, it sold fewer than 1,000 units of its luxury GMC Hummer EV and Cadillac Lyriq, combined.

GM said production of the Bolt models is expected to increase to more than 70,000 units this year to meet strong global demand. The company last year pushed back plans to produce 400,000 EVs in North America through 2023 to mid-2024.

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Toyota Isn’t Quite Ready to Boost EV Output

Photo: Toyota

Toyota says it still isn’t going to really boost production of its first mass-market electric vehicle for a few more years, Faraday Future is slashing salaries because the start-up EV maker is running out of cash, and Mercedes-Benz is the latest manufacturer to quit the Russian market. All that and more in The Morning Shift for Wednesday, October 26, 2022.

1st Gear: Toyota Needs Time to Boost bZ4x Production

Toyota is reportedly considering a huge jump in bZ4X production, but not before 2025. It’s said to be part of a broader strategy rethink from the Japanese company.

The automaker is mulling over the decision to increase production of its first mass-market EV by either six or 12 times its current monthly output. Right now that stands at about 1,000 cars per month. But, this isn’t happening overnight. The move would happen in 2025 if components (including semiconductors) can be secured in time. From Reuters:

The car is produced at Toyota Motor Corp’s Motomachi plant near its headquarters on a shared assembly line with gasoline cars and hybrids. Both the current and potential production numbers include those of the Subaru Corp Solterra, which is made on the same platform.

The increase would see Toyota add production at another plant near its headquarters, the Takaoka factory, said the three people, who spoke on condition of anonymity because the information was not public.

[…]

The potential ramp-up in production comes as the automaker has faced criticism for not moving faster to embrace all-electric cars and pushing hybrid technology instead. It has launched a review of its EV strategy, Reuters reported this week.

As part of that review – which could result in a more aggressive roadmap for future electric vehicles based on technologies that promise to lower cost and improve performance – it has also suspended development work on some of the 30 new EV models it announced last year and planned to launch by 2030, Reuters reported.

Toyota recently restarted bZ4X production after a couple of recalls hampered it. At the peak of the planned production increase, Toyota would be producing over 190,000 EVs per years.

2nd Gear: Faraday’s Bleak Future

Faraday Future is reportedly slashing employee salaries by 25 percent starting next month. The move is being done in an effort to save some cash (since it is nearly out) while the company looks for new capital in order to finally launch the FF91.

In an email sent to employees last week, Faraday said the salary cuts expect to last from November 1st through the end of the year. Earlier this month, the company also laid off a few dozen employees. From Bloomberg:

Faraday has seen its cash reserves dwindle rapidly. It recently reported having $39 million in cash as of Sept. 21, down from around $47 million at the end of August.

The company said in the emailed memo, which was viewed by Bloomberg News, that employees will be granted restricted stock units, or RSUs, equivalent to the amount being cut from their salary and which will vest in December. Faraday also offered employees the option of taking a larger salary cut in exchange for more valuable RSUs, though it noted that any RSUs granted will be forfeited if the employee is terminated.

Faraday delayed the launch of its first vehicle until at least 2023. Things are not looking too hot for the Los Angeles-based company right now, though they never really have been.

3rd Gear: Mercedes-Benz Leaves Russia

Add Mercedes-Benz to a growing list of automakers who are pulling out of the Russian market. The company is reportedly selling shares in its industrial and financial service subsidiaries to a Russian investor: car dealer chain Avtodom. From Reuters:

Mercedes Chief Financial Officer Harald Wilhelm, while presenting third-quarter results, said the transaction was not expected to give rise to any further significant effects when it comes to the group’s profitability and financial position beyond those reported in previous quarters.

“Final completion of the transaction is subject to the authority’s approval and the implementation of contractually agreed conditions,” he added.

[…]

“The main priorities in agreeing to the terms of the transaction were to maximize the fulfillment of obligations to clients from Russia both in terms of after-sales services and financial services, as well as preserving jobs of employees at the Russian divisions of the company,” Natalia Koroleva, CEO of Mercedes-Benz Russia, said in a statement.

Mercedes suspended manufacturing in Russia in early March.

Mercedes now joins Volkswagen, Toyota, Nissan and Renault in leaving the Russian market. Other companies like Mazda and Kia are also considering moves out of the country.

4th Gear: $1 Billion for Busses

The U.S. Environmental Protection Agency has announced that it is allocating nearly $1 billion for about 400 school districts around the country to buy zero or low-emission school busses.

The funding will lead to the purchase of 2,463 buses. Over 95 percent of those will be electric, and a “very small number” will be powered by compressed natural gas. Another 100 will be propane-fueled buses. From The Detroit News:

School districts to receive funding were chosen through a lottery system and 99% of the projects are in districts serving low-income, rural or Indigenous students. EPA initially planned to allocate $500 million in the first round of funding, but the agency expanded it to nearly $1 billion after receiving “overwhelming demand” from districts.

Millions of children ride the bus to and from school every day, said EPA Administrator Michael Regan. “It’s a quintessential part of being a kid in America.”

“But we all know that traditional vehicles that rely on internal combustion engines emit toxic pollutants in the air,” he added. Thanks to this funding, “we are forever transforming school bus fleets across the United States.”

Right now in the U.S., over 90 percent of all school buses run on diesel. The outlet reports that the $1 billion allocation is part of a more than $5 billion plan for zero and low-emission school buses though the Infrastructure Investment and Jobs Act. A further $1 billion will be available next year.

School districts that applied and received funding will put in purchase orders with manufacturers, which will be paid directly by EPA, [Karl] Simon [director of the transportation and climate division of the EPA] said. That must be finished by April.

5th Gear: Hyundai’s EV Expansion Starts in Georgia

Hyundai broke ground Tuesday on its $5.54 billion electric vehicle and battery manufacturing project that will build vehicles for Hyundai, Kia, and Genesis.

The factory — called the Metaplant — is set to build up to six different models and has the capacity to produce as many as 500,000 vehicles per year on its 2,800-acres of land located about 30 miles northwest of Savannah, Georgia. From Automotive News:

“We are making the current investment to get to 300,000 vehicles in phase one, and then 500,000,” Munoz said at a media roundtable after the groundbreaking ceremony.

[…]

Munoz did not say which models the Metaplant will produce, but a new three-row Hyundai EV crossover called the Ioniq 7 is expected to be the first. Munoz also said Hyundai is still examining what models it will export from the new plant.

The project also will see the construction of an adjacent battery plant that will be built through a joint venture with a battery supplier that Hyundai has not identified yet.

A new supply chain also will be established to support the EV factory, Munoz said.

Because of this move, Hyundai should be back in a position to for its buyers to get federal EV tax credits under President Biden’s Inflation Reduction Act.

Right now, Hyundai/Kia/Genesis EVs aren’t eligible for the credit because they are imported from Korea, and that doesn’t jive with the criteria laid out in the IRA.

Reverse: Bad!

Neutral: Good!

Ok I Love You

Did you guys know Jackie Chan sings? Me neither. Awesome.

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Elon Musk says Tesla has made over 3 million cars

17 May 2021, Brandenburg, Grünheide: Elon Musk, Tesla CEO, stands on the construction site of the Tesla factory and greets with his hard hat.

Picture Alliance | Picture Alliance | Getty Images

Tesla has made over three million cars, CEO Elon Musk tweeted on Sunday. Of that total, Tesla’s Shanghai factory has made one million cars, according to the tweet.

“Congrats Giga Shanghai on making millionth car! Total Teslas made now over 3M,” Musk tweeted.

Musk’s announcement comes after months of lockdowns and parts shortages in China that threatened Tesla’s vehicle production, and suggests that Tesla’s Shanghai factory is producing a significant number of new vehicles after opening in 2018 and subsequent years of investment.

The total vehicles achievement celebrated by Musk on Sunday comes after Tesla’s reported deliveries, the closest approximation for sales, have been rising in recent quarters. In July, Tesla said that it delivered 254,695 vehicles in the second quarter, a 26.5% rise year-over-year.

But the milestone also highlights how small Tesla is compared to automotive giants. For example, Toyota delivered over 10 million vehicles in 2021 alone. Tesla said earlier this year it plans to increase vehicle deliveries by 50% annually.

In addition to its Shanghai plant, Tesla produces cars at factories in Fremont, California; Austin, Texas; and near Berlin in Germany. Musk said in July that the Fremont factory, the company’s first, had made 2 million cars.

In June, Musk said he wanted to get the Shanghai plant “back in the saddle” and lamented that Tesla’s Berlin and Austin factories were “money furnaces” losing “billions of dollars” because of supply chain and production issues.

Tesla stock is down nearly 25% in 2022 as investors have been reassessing fast-growing companies in the face of inflation and macroeconomic concerns. Musk sold over 7 million shares of Tesla last week worth about $6.88 billion as he is simultaneously tied up in litigation over his efforts to terminate an agreement to buy Twitter for $44 billion.



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Automakers investing in the South as EVs change the auto industry

Jack Weaver, an 82-year-old retired dairy farmer whose house sits on a Civil War battlefield, lives near General Motors’ Spring Hill plant in Tennessee.

Michael Wayland / CNBC

SPRING HILL, Tenn. – Jack Weaver can point to a cannon on a Civil War battlefield from the comfort of a shaded bench in his backyard — a visible marker of his land’s rich past. As he speaks about his small town, it’s over the loud rumble of cars and trucks at the intersection in front of his farmhouse red home.

The 82-year-old retired dairy farmer has lived in Spring Hill nearly his entire life. He’s watched the once-quiet town in middle Tennessee grow into a burgeoning Nashville suburb. The evolution of Spring Hill has come in conjunction with a population boom in the state as well as the introduction of new industries — in particular, auto companies — that have poured billions of dollars in new investments into the state.

“It’s good and it’s bad,” says Weaver, who complains about cars hitting his fence and the traffic General Motors’ Spring Hill plant has brought since it opened in 1990. “I’m not against development at all. I’m not. I think a man outta do what he wants with his own land.”

Detroit is the city that “put the world on wheels,” but it’s towns like Spring Hill and others in neighboring states that are attracting the most investments from automakers in recent years, as production priorities shift to a battery-powered future with electric vehicles.

Companies more than ever want to build EVs where they sell them, because the vehicles are far heavier and more cumbersome to ship than traditional models with internal combustion engines. They also want facilities for battery production to be close by to avoid supply chain and logistics problems.

Among the first to invest in southern states was Ford Motor in the 1950s and 1960s in Kentucky, followed by foreign-based, or transplant, automakers starting with Nissan Motor, which established a plant in Smyrna, Tennessee, in 1983. Others such as General Motors, Subaru, Toyota Motor and BMW followed suit through the 1990s. More have followed since then, including recent announcements by Hyundai Motor and Rivian Automotive to build multibillion-dollar plants in Georgia.

As more companies look to the American South, the investments are changing the landscape of towns across the region and of the automotive industry’s workforce, supply chain and logistics. Companies first to set up shop in the South earn early advantages over their northern competitors, and future newcomers, according to officials.

Auto executives say they’re investing in the South for a combination of reasons: lower energy costs, available workforce and livability among them. Many southern states also come with other benefits, potentially controversial, such as all-in lower pay for workers, millions in tax breaks and a largely non-unionized workforce in many of the Republican-controlled, right-to-work states.

But the shift brings unique challenges, too. As the Motor City moves and expands south, it has to grapple with preservation of historic plantation farms, unearthing of slave burial grounds and pushback from citizens and local politicians who aren’t used to the traffic or industries.

Investments shifting

Automakers have announced $45.9 billion of investments in southern states since 2017, according to The Center for Automotive Research, a nonprofit think tank based in Ann Arbor, Michigan. That’s the first year the South outpaced the Midwest, or Great Lakes region, for announced investments since at least 2010.

Midwest states such as Michigan, Ohio and Indiana saw $39.9 billion in announced investments in that same timeframe.

Most of the money heading south – $34.2 billion, or 74% – has come in since last year from traditional automakers such as GM, Hyundai and Ford Motor as well as EV startup Rivian. Others such as Volkswagen and Nissan continue to invest and expand their operations in the South, largely for new electric vehicles.

“We are basically undergoing the single biggest industrial transformation, I would say, not to understate it, in the history of America,” Scott Keogh, CEO at Volkswagen of America, told CNBC in June at the automaker’s new battery lab in Chattanooga, Tennessee. “It’s happening right now in this area.”

Scott Keogh of Volkswagen of America at the VW plant in Chattanooga, TN, June 8, 2022.

Michael Wayland | CNBC

Keogh singled out energy capacity and costs as the top priority for the company’s investments in Tennessee, including the potential for new assembly and battery facilities that the company is “actively” scouting locations for. He and other executives have also cited incentives, tax support, labor and workforce training as other key elements.

Ford CEO Jim Farley put a similar emphasis on the cost and availability of energy in September, announcing an $11.4 billion investment in new vehicle and battery plants in Tennessee and Kentucky.

“We want to work with states who are really excited about doing that training and giving you access to that low energy cost,” Farley told the Associated Press then.

Tennessee has among the lowest electricity prices in the country, according to the most recent data from the U.S. Energy Information Administration. The state’s average industrial price of electricity per kilowatt-hour was 6.31 cents as of May. Michigan’s industrial energy cost was 8.72 cents per kilowatt-hour, and the national average was 8.35 cents.

Mississippi and South Carolina were under 7 cents, while Georgia was 9.05 cents – among the highest in area, according to the U.S. Energy Information Administration.

While those cost differences seem minimal, they add up quickly. Ford’s new battery plants will have an annual capacity for 43 megawatt-hours of production. There are 1,000 kilowatt-hours of electricity in a megawatt-hour, meaning tens of thousands of dollars in savings per year.

The expansion south is expected to continue for years to come, according to AlixPartners. The global consulting firm expects investments from automakers and suppliers in southern states such as Alabama, Georgia and Kentucky to total $58 billion for electric vehicles between 2022 and 2026. That’s nearly four times the $15 billion that’s expected in Midwest states, and $20 billion elsewhere in the country.

“It definitely will change but right now there’s a lot more interest and activity happening in the Southern states, particularly with all these automakers making investments on the EV front,” said Arun Kumar, a managing director in the automotive and industrial practice at AlixPartners.

Southern hospitality

State economic development officials from Tennessee and Georgia say their states have made the automotive industry a priority because of the supply chain jobs that typically follow. They also say electric vehicles have helped to level the playing field for new investments.

“This is almost like a seed field of opportunity, as this industry changes because we’re building the supply chain in the United States for electrification from scratch,” said Pat Wilson, commissioner of Georgia’s economic development unit. “There’s a huge amount of opportunity.”

As of July, EV-related projects contributed more than $12.6 billion in investments and more than 17,800 new jobs in Georgia since 2020, officials said.

Tennessee reports automotive companies have added more than 43,800 new jobs and invested $16.5 billion in private capital in the state since 2012, representing nearly 30% of private capital investments during that time.

Nissan’s Smyrna Vehicle Assembly Plant opened in 1983, marking Tennessee’s first major auto facility. The plant employs more than 7,000 people are produces a variety of vehicles, including the Leaf EV and Rogue crossover.

Michael Wayland / CNBC

With billions of dollars on the line and tens of thousands of new jobs, states have offered enormous incentive packages for the companies in the forms of land, tax abatements/incentives and other support such as installation of utilities and roadways.

For example, Tennessee approved an $884 million incentive package for Ford’s plans to spend $5.6 billion in the state, as well as in-kind services and a $2 million grant for training services. Ford’s investment includes a new electric truck plant and battery facility with supplier South Korea-based SK Innovation.

Bob Rolfe, who oversees The Volunteer State’s economic development, said such actions are needed to compete with others. He said to attract Ford last year the state spent years accumulating enough land for an “electric vehicle mega site” ahead of securing the automaker’s commitment.

“We tell our team every day to continue to recruit. Is enough, enough?” Lewis said ahead of a trip to Japan for automotive recruitment in June. “The more great companies that call Tennessee home, the softer the landing when we do hit the next wind shear that’s going to be developed around the next recession.”

Unique issues

But not all agree that the automotive industry should be expanding South into rural areas. Rivian has faced notable pushback since announcing plans last year to build a $5 billion plant about 45 miles east of Atlanta, Georgia.

While hailed by many politicians, including Gov. Brian Kemp, local news outlets report residents of the rural area are concerned with how it will impact their community. Others, including politicians, oppose a $1.5 billion in tax breaks and other incentives that state and local officials have offered Rivian.

Haynes Haven is a historic landmark in Spring Hill, Tennessee that has been maintained by GM since the automaker built an assembly plant near the site in the 1980s.

“[Union Army General] Sherman and his troops destroyed our community. Now this supposedly green company is coming to destroy it again,” JoEllen Artz told NBC News in May. Artz is president of the grassroots No2Rivian group, which says it has raised over $250,000 and hired Atlanta lawyers to fight the plant. “We want to keep it just like it is.”

Building massive assembly plants in traditionally rural areas can also involve a unique set of challenges.

Decades ago, when GM was building its Spring Hill plant, the company unearthed an unmarked slave graveyard. GM paid for the remains to be moved to a nearby burial site.

“When we invest in properties, we’re also investing in communities, their history and culture,” GM said in an emailed statement to CNBC. “With any building or renovation project, we expect to encounter the unexpected, and we try to work with community members to find solutions to fit the unique needs of each situation. In many cases, like in Spring Hill, the unexpected finds become intertwined in our own history, as well.”

It wasn’t the first time GM has operated around such a site. On the property of its Detroit-Hamtramck plant, there’s an active Jewish graveyard that the company agreed to build around when it built the plant in the 1980s.

And, Nissan is reported to have similarly moved a graveyard in Smyrna, Tennessee – located about 28 miles northeast of Spring Hill – when the automaker built its plant and railroads were installed there in the early 1980s. Nissan did not return request for comment.

GM maintained and updated a historic plantation in Spring Hill, Tenn. called Rippavilla as part of a deal for land to build an assembly plant in the city in the 1980s.

Michael Wayland / CNBC

Since GM’s Spring Hill Assembly plant was built, the company also has maintained two historic plantations as part of land deals struck during the construction. It still maintains one called Haynes Haven, whose historic horse stables were turned into a welcome center and used for other events. The surrounding area is currently being used for employee parking during construction of the company’s new $2.3 billion battery plant, next to the original plant.

The other site, called Rippavilla, sits across the street from the plant and was donated by the company to the city in 2016. It is now being run by a nonprofit organization, The Battle of Franklin Trust, committed to Civil War preservation and education.

“The last people that owned Rippavilla were pretty insistent that they wanted it to be a historic site. They did not want to happen to what happened to Haynes Haven, which Haven is owned by GM and able to use however they see fit,” said Eric Jacobson, CEO of the organization.

Jacobson credits GM with saving and maintaining the site in the form of $100,000 a year up until 2016, when a 10-year deal to maintain the property ended. GM said it continues to support the site.

Battling the union

While the automakers may have to navigate battlefields of the South, they don’t have to worry as much about battling unions.

The United Auto Workers has failed to successfully organize a non-Detroit automaker plant in the South, despite decades of attempts. The prominent union also now faces challenges of organizing joint venture battery plants from GM and Ford in the South.

“It’s a very critical time for the UAW,” Ray Curry, president of the union, told CNBC. “This transformation piece is about our future. It’s about 86-plus years of longstanding history.”

Ford’s more than $11.4 billion investment to build new U.S. facilities in Tennessee and Kentucky is expected to create nearly 11,000 jobs to produce electric vehicles and batteries.

Both GM and Ford officials have said the decision of whether to unionize at their U.S. battery plants, which are joint ventures, will be left to the workers.

While the labor cost gap has narrowed between the Detroit automakers and other non-unionized automotive plants, organized labor costs are higher for the companies.

At the end of a current four-year contract between the Detroit automakers and UAW in 2023, the Center for Automotive Research estimates average hourly labor costs per worker will be $71 for GM; $69 for Ford; and $66 for Stellantis, formerly Fiat Chrysler.

“There’s quite a bit of anti-union attitude that prevails in the international carmakers,” said James Rubenstein, a professor emeritus at the University of Miami Ohio, who specializes in the automotive industry. “It’s a little bit easier to do that down South, to keep the union out.”

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Toyota Sales are Going From Bad to Worse

Photo: Toshifumi Kitamura/AFP (Getty Images)

Toyota is seeing its sales go from bad to worse as supply chain issues take hold, EV startup Lordstown Motors saw its first ever profit, and Boeing workers at three U.S. plants agreed on a new contract. All that and more in The Morning Shift for August 4, 2022.

1st Gear: Toyota Sales Drop 42 Percent

It’s a tough time to be a carmaker, as supply chain issues, lockdowns caused by the pandemic and the threat of a recession linger over us all. For Toyota, this triple-pronged assault has hit its sales. Hard.

After seeing a 30 percent drop in volume sales in 2021, the automaker has now reported a 42 percent drop in profits for the first quarter of its latest fiscal year. Clearly, things are going from not great to substantially worse for the Japanese firm. According to Reuters:

“Toyota Motor Corp’s profit slumped a worse-than-expected 42% in its first quarter as the Japanese automaker was squeezed between supply constraints and rising costs.

“Operating profit for the three months ended June 30 sank to 578.66 billion yen ($4.3 billion) from 997.4 billion yen in the same period a year ago, Toyota said on Thursday, capping a tough period. It has repeatedly cut monthly output goals due to the global chip shortage and Covid-19 curbs on plants in China.”

The scale of its plummeting profits was “far beyond expectations.” Despite bringing new models to the market this quarter, like the electric BZ4X, rising production costs and parts shortages had a big impact on the firm’s sales.

Toyota claimed that rising material prices have cost it 315 billion yen ($2.36bn).

But the carmaker doesn’t think these bad fortunes will be around forever. A spokesperson for Toyota told Reuters that production would pick up in the second half of the year. The company also stuck to its forecast for full-year operating profits and reaffirmed its ambitions to produce 9.7 million vehicles this financial year.

2nd Gear: Lordstown Motors Reports its First Profit

But while Toyota was witnessing a dramatic drop in income, an unlikely EV maker had posted its first ever profit. Troubled startup Lordstown Motors reported a profit in the first quarter of this year after it sold assets including its Ohio assembly line to Taiwanese contract manufacturer Foxconn. Reuters reports:

“The EV company recorded a gain of more than $100 million in the April-June quarter from the Ohio asset sale, which was prompted by the need for funding amid industry-wide supply chain disruptions and rising material costs.

“That helped it post a net income of $63.7 million, compared with a loss of $108.2 million a year earlier.”

The EV maker claims its all-electric Endurance pickup truck will definitely, maybe, make it into production later this year. But earlier this year, the automaker warned that it was burning through cash at an alarming rate.

In 2021, Lordstown Motors had $587 million in reserve, with which it was developing and building the all-electric truck. But by March this year, that figure had fallen to just $203.6 million. The sale of its Ohio plant to Foxconn was thought to offer a short-term boost to the firm as it neared the final hurdles of getting its truck on the road.

3rd Gear: Subaru Is Doing Fine, Actually

Lordstown Motors wasn’t the only car maker with something positive to share this morning. Japanese firm Subaru saw its profits rise 24 percent in its latest quarter as the company “​recovered lost production, ramped up sales and cashed in on favorable exchange rates,” according to Automotive News.

The site reports that Subaru’s operating profit reached ¥37 billion ($271.3 million) in the fiscal first quarter ended June 30. Subaru said this rise was as a result of rising sales as it “gradually overcame crimped production from the Covid-19 pandemic and global semiconductor shortage.” From Automotive News:

“Global output increased 12 percent to 205,000 vehicles in the April-June period, helping drive a 12 percent increase in worldwide sales to 196,000 vehicles. The rebound helped Subaru gain its footing after struggling to fill the product pipeline amid strong demand for its products.

“The biggest boost to Subaru’s earnings, however, came from a windfall from the Japanese yen’s dramatic weakening against foreign currencies, especially the U.S. dollar.”

As the firm’s fortunes continue to rebound following the struggles of the pandemic, Subaru CFO Katsuyuki Mizuma has also quashed talk of recession in the U.S. Mizuma claimed that demand for Subaru vehicles “remains robust” in America, and said the company was “racing to fill some 50,000 back orders” over here.

Mizuma warned that limited output remains Subaru’s biggest hurdle.

4th Gear: Toyota Will Buy Back Your EV

Earlier this year, Toyota made a big song and dance about its first EV, the BZ4X, which was produced in partnership with Subaru. The electric SUV has proven pretty popular, and Toyota has so far delivered almost 3,000 to customers in the U.S. But, its rollout has been hit with issues, and now the company is offering to buy back vehicles affected by a recall.

After just two months on sale, Toyota announced a recall of the BZ4X thanks to faulty wheels, which it said could come off the car while you’re driving. Not a great start to Toyota’s battery-powered future.

Now, according to Electrek, the firm is offering to buy back faulty models as its recall continues to falter. The site says:

“Toyota announced the bZ4X recall in late June, citing a potential for the new EV’s wheels to fall off. Though it did apply to all bZ4Xs produced, since it happened soon after the car’s launch, it is still a relatively small recall – only 2,700 vehicles.

“Now owners are getting letters from Toyota corporate detailing the specifics of what Toyota is offering in exchange for the trouble of this recall, and given the scope of the offer, it doesn’t seem like the recall is going great.”

The letter, seen by Electrek, asks owners not to drive their EVs while Toyota seeks a remedy to the issue.

While it investigates a fix, Toyota will store recalled vehicles and offer loaner cars to affected customers. The automaker will also reimburse fuel costs for the loaned car, and will even repurchase the vehicle if you don’t like the sound of its solutions.

Electrek says the problem also affects Subaru’s Solterra, but it is not believed that deliveries of this model have started in the U.S. yet.

5th Gear: Boeing Workers Agree New Contract

Just weeks after threatening strike action, Boeing workers at three U.S. factories have called off industrial action and agreed a new contract. More than 2,500 workers at the aerospace giant’s sites in the Midwest voted to ratify a contract that their union said will raise pay by “an average of 14 percent over three years and add inflation adjustments.”

The Associated Press reports that members of the International Association of Machinists and Aerospace Workers at Boeing plants in St. Louis and St. Charles, Missouri, and Mascoutah, Illinois, agreed to the contract earlier this week. According to the site:

“The union said the new contract includes a provision from the rejected deal that calls for company contributions of up to 10% to employees’ 401(k) retirement plans, and it added a $8,000 lump-sum payment that can go into the employee’s account. It also has improvements for sick leave and parental leave, and makes no changes to the workers’ health insurance plans, according to the union.”

The sites in question center around Boeing’s military operation. While the firm has struggled to fill order books for its commercial jets amid the ongoing pandemic, its defense and space business has been booming.

The AP reports that through the first six months of this year, this sector accounted for about 38% of Boeing’s total revenue.

Reverse: This Happened

Neutral: I’m Hungry

I feel like I’ve not yet tapped the full potential of America’s snack market. I was driving over the weekend and took some cheesy popcorn, peanut butter cups and grapes out on the road with me, but I’m not sure they’re very good driving snacks. What do you stock up on before hitting the roads?

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Renault says electric-hydrogen concept will have 497-mile range

Details of Renault’s Scénic Vision concept car were presented to the public on May 19, 2022. The firm’s idea of developing a passenger vehicle that uses hydrogen technology is not unique.

Benjamin Girette | Bloomberg | Getty Images

Renault has released details of an electric-hydrogen hybrid concept car, with the French automaker describing hydrogen technology as being “one of the options to make electric vehicles more convenient.”

The design for Renault’s Scenic Vision incorporates a hydrogen engine, electric motor, battery, fuel cell and a hydrogen tank. The 2.5 kilogram tank is located at the vehicle’s front and, Renault said, would take around five minutes to fill.

According to a document published on Thursday that outlined the concept, the Scenic Vision’s 40 kilowatt hour battery is recyclable and will be produced at a facility in France by 2024.

In a statement, Gilles Vidal, who is director of design at Renault, said the concept “prefigures the exterior design of the new Scénic 100% electric model for 2024.” The company said the electric-hydrogen powertrain was “part of a longer-term vision, beyond 2030.”

The broad idea is that the Scenic Vision’s hydrogen fuel cell would help extend the vehicle’s range during longer trips. “In 2030 and beyond, once the network of hydrogen stations is large enough, you will be able to drive up to 800 km [a little over 497 miles] … without stopping to charge the battery,” Renault said.

Read more about electric vehicles from CNBC Pro

Described by the International Energy Agency as a “versatile energy carrier,” hydrogen has a diverse range of applications and can be deployed in a wide range of industries.

It can be produced in a number of ways. One method includes using electrolysis, with an electric current splitting water into oxygen and hydrogen.

If the electricity used in this process comes from a renewable source such as wind or solar then some call it green or renewable hydrogen.

It’s envisaged that Renault’s hybrid would use green hydrogen, although the vast majority of hydrogen generation is currently based on fossil fuels.

Renault’s electric-hydrogen concept illustrates how car companies are looking to find ways to develop low and zero emission offerings that can compete with the range of gasoline and diesel vehicles.

“Several systems to complement electric motors are being explored today to address the requirements associated with long-distance driving,” Renault said. “Hydrogen technology is one of the options to make electric vehicles more convenient.”

In the field of hydrogen mobility, the Renault Group has already set up a joint venture with Plug Power called Hyvia. Among other things, it is focused on hydrogen fuel cells in light commercial vehicles and the rollout of hydrogen charging facilities.

Renault’s idea of developing a passenger vehicle that uses hydrogen technology is not unique.

Toyota, for instance, started working on the development of fuel-cell vehicles — where hydrogen from a tank mixes with oxygen, producing electricity — back in 1992. In 2014, the Japanese business launched the Mirai, a hydrogen fuel cell sedan.

Other major companies like Hyundai and BMW are also looking at hydrogen, as well as smaller concerns such as U.K.-based Riversimple.

While the above companies are looking at the potential of hydrogen, some high-profile figures in the automotive sector are not so sure. In Feb. 2021, Herbert Diess, the CEO of Germany’s Volkswagen Group, weighed in on the subject. “It’s time for politicians to accept science,” he tweeted.

“Green hydrogen is needed for steel, chemical, aero … and should not end up in cars. Far too expensive, inefficient, slow and difficult to roll out and transport. After all: no #hydrogen cars in sight.”

Despite Thursday’s unveiling of the Scenic Vision concept, even Renault CEO Luca de Meo would appear to be cautious when it comes to talking about hydrogen’s prospects, according to comments published by Autocar.

Elsewhere, in Feb. 2020 Brussels-based campaign group Transport and Environment hammered home just how much competition hydrogen would face in the transportation sector.

T&E made the point that green hydrogen wouldn’t only have to “compete with grey and blue hydrogen,” which are produced using fossil fuels. “It will compete with petrol, diesel, marine fuel oil, kerosene and, of course, electricity,” T&E said.

“Wherever batteries are a practical solution — cars; vans; urban, regional and perhaps long-haul trucks; ferries — hydrogen will face an uphill struggle because of its lower efficiency and, as a result, much higher fuel costs.”



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Air Company makes vodka out of CO2 emissions, backed by Toyota, JetBlue

At Bathtub Gin, a reinvented speakeasy in lower Manhattan, patrons may be pining for the past but they are drinking a vodka specifically invented for a cleaner future. Air Vodka is made in part from greenhouse gas emissions – specifically, captured carbon dioxide.

It is just one of a bevy of new products designed to make use of CO2 emissions that can be captured from various types of industry.

“We work with partners that capture that carbon dioxide before it’s emitted into the atmosphere, and then we use that CO2 in our process in creating the alcohols that we create,” said Gregory Constantine, Co-founder and CEO of Air Company, which is also producing perfume and hand sanitizer from those emissions. “It’s obviously far better for the planet in that we’re removing CO2 for every bottle that we’re creating.”

Distilling alcohol the old fashioned way not only releases its emissions, but it uses a lot of water — about 35 liters of water to make one liter of distillate. Air Vodka is made of just two ingredients, CO2 and water. It separates hydrogen out of the water through electrolysis, releasing the oxygen. The hydrogen is then fed into a “carbon conversion reactor” system with the captured CO2. That creates ethanol which, when combined with water, becomes a type of vodka.

The scientific process in the Air Company’s laboratories is valuable to the environment, but the results are not cheap. The three-year-old start-up’s vodka is a luxury brand, costing about $65 bottle. But at Bathtub Gin, the vodka is getting high praise.

A bartender pours a jigger of Air Vodka, a spirit made of CO2 emissions.

Nathaniel Lee | CNBC

“Once we tell them, ‘hey, this is how it’s made and it’s got a negative carbon footprint, all those really beautiful things, is what happens to make them want it even more. And then they go looking for [it[, going, ‘where can we get it?'” said Brendan Bartley, beverage director and head bartender at Bathtub Gin.

The company’s sights are set beyond just vodka and perfume. Constantine said he expects to offer new products made of CO2 as it opens its third production facility.

“Vodka for us is really a gateway towards all the other products and then the industrial applications of where our technology can go,” he said.

Carbon capture is fast becoming big business, as companies look not just to reduce greenhouse gas emissions but to keep necessary emissions from getting into the atmosphere. Captured carbon is being used to make everything from vodka to eyeglasses, laundry detergent, Coca Cola and even jet fuel.

The Air Company is backed by Toyota Ventures, JetBlue Technology Ventures, Parley for the Oceans and Carbon Direct Capital Management. It has raised just over $40 million to date.

 

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