Building Cars Is Harder Than It’s Ever Been

I want to start today with a quote from Bob Lutz, who is a longtime car exec credited with a lot of BMW’s success in the second half of the 20th century. Lutz has variously been a skeptic of green cars, a proponent of EREVs, and a late supporter of EV companies that mostly never went anywhere. Because it’s Lutz, just imagine him saying this with a cigar the length and breadth of an Ohio-class submarine dangling from his lips:

“What makes Faraday think they can produce an electric vehicle cheaper than Tesla?” asked Bob Lutz, the longtime industry executive who has been involved with several small automotive ventures since retiring in 2010 as vice chairman of General Motors. “And Tesla is losing their shirt.”

This is a quote from Bob Lutz in 2015, in an Automotive News feature about upcoming electric cars, which included Elio, Local Motors, Bollinger, Tesla, Faraday Future, and Lucid. Tesla ended up being fine, and Lucid is still around, though the rest of them have variously flamed out or are heading quickly towards such a fate.

Tesla had its Q2 Earnings Call yesterday, and it sounds like it’s not going great. Even worse for investors, it’s possibly going to be rough until the second half of next year, according to Musk. Not like anyone else has it quite figured out. The closest is probably a company like Hyundai, which is still reporting decent profits above expectations as its mix of products is fine for now. Even they’re worried.

Mitsubishi? The company currently makes no cars in the United States and is taking on new competition in its key ASEAN markets. Porsche’s woes are well known to readers of The Morning Dump, and CEO Oliver Blume is taking on a very Alan Mulally approach to the future by selling stuff. It’s worked before!

Elon Musk Was Sort Of Honest About His Company, And It Did Not Go Well

Again, Elon is committing unforced errors on the conference call, in the end this likely won’t matter and is semantic, but it’s completely unnecessary to parade out negatives on the call. Stick to achievements, metrics, and questions on the call, do an all encompassing long…

— Jesse Miller (@jmiller_dot_com) July 23, 2025

Elon Musk’s businesses have always been fueled by a mix of technological achievement and, uh, enthusiastic prognostications that eventually appear. Sometimes. The company did build an electric car that was, for a time, the best-selling car in the world. Every conversation about how Elon Musk’s companies have fallen short requires an admission, right up front, that Tesla did what basically every other car company said was either impossible or a trillion years in the future.

All that being said, optimistic viewpoints of the future require achieving at least some of the things you set out to do, and the results have been mixed lately. According to Elon Musk on last night’s Q2 investor call, the results will continue to be mixed for a little while.

Full disclosure: I did not listen to it live on account of having an early Ultimate Frisbee pickup game on the backup field, which doesn’t have lights. Half of the field was Ultimate, and the other half was a pre-teen softball game. If I’m being totally honest, I think the girls had the better game. So I’ve been listening to it this morning, and it takes me back to what I wrote a year ago after the Q2 2024 call: “Elon Musk Sounds Bummed Tesla Still Has To Make Cars.”

The vibe I got then was that the carmaking business was running into the usual problems of a mature business, including increased competition globally. Rather than talk about cars, he seemed quite interested in robots, AI, et cetera. Shortly after the call, Musk got super involved in politics, with mixed results for himself personally. On last night’s call, he was back to talking about cars a bit more and about all the challenges that will be forthcoming. He also opened with a dick joke, I think.

While there were a lot of positives that Musk talked about related to xAI, Optimus, and robotaxis, he was a bit more blunt when answering a question about the challenges of the car business:

Well, we’re in this like weird transition period where we will lose a lot of incentives in the U.S. We have incentives actually in many other parts of the world, but we’ll lose some in the U.S. Look, we’re still a bit at the relatively early stages of autonomy. On the other hand, autonomy is most advanced and most available from a regulatory standpoint in the U.S. So I mean, does that mean like we could have a few rough quarters? Yes, we probably could have a few rough quarters. And I’m not saying we will, but we could, Q4, Q1, maybe Q2. But once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I think I would be surprised if Tesla’s economics are not very compelling.

That’s fairly straightforward, right? The entire hand-wave of the autonomous car gambit Tesla is undertaking is that the technology will work at a massive scale and that the current government will support it, neither of which is obvious at this point. So far as I can tell, Elon Musk also never mentioned the Cybertruck. It’s the company’s newest all-new product. That’s strange.

Also, the “affordable Tesla” has all but been confirmed to be a decontented Model Y, which is maybe a good idea. Unfortunately, it’s likely not the $25,000 car everyone hoped it would be.

The market is not taking the call well. Tesla is already down this morning and, as you can see in the tweet above, the stans are mad! That specific Tweet/X/Whatever is particularly amusing because the poster is explicitly mad that Musk committed “unforced errors” by not being blindly positive about everything. Musk has both a legal and moral responsibility to be at least somewhat honest on these calls, though it’s clear in the eyes of some that they perceive Musk’s job as making the little number on a stock chat become a bigger number.

What’s also notable is that Tesla’s actual earnings were mediocre by the company’s historical standards, but weren’t that far away from analyst projections. Some have called Tesla a “meme” stock, which isn’t fair. It’s a successful business, selling both cars and regulatory credits. Now that it’s doing neither as well as it has in the past, the stock should reasonably go down. It’s not a “meme” stock, but given how many small-time investors the company has, it might be fair to call it a “vibe” stock. And the vibes are bad.

Building cars has always been hard, and it’s getting harder.

Mitsubishi Is Getting Battered By Tariffs, ASEAN Competition

Mitsubishi Motors is the one Japanese automaker that always seems to be able to quietly keep going, getting neither too big nor too small. It just makes cars for Southeast Asia and the United States that cost neither too much to build nor too much to buy. It’s been a good enough business for a while.

This last quarter (which is Q1 for Japanese companies) was a little less-than-good enough as operating profits fell to just $35.5 million, down by 84% year-over-year. Why? A big deal is that Mitsubishi makes no cars in the United States, so it’s been particularly hit by tariffs. But there’s more, as Nikkei Asia reports:

Kentaro Matsuoka, Mitsubishi Motors’ vice president and CFO, told an online news conference, “Competition for global sales is intensifying as other companies focus on exports to other regions.” He cited Europe and Southeast Asia as new focal points as carmakers shift their gaze away from the U.S.

In Southeast Asia, the company’s most important market, Mitsubishi Motors sold 54,000 vehicles in the three months, down 8.5% from the previous year.

Matsuoka welcomed the lowering of the U.S. tariff rate, saying “both positive factors and negative factors” are affecting the business. But, he added, “the impact of [U.S.] tariffs on our business is wide-ranging, and we cannot view the situation optimistically.”

As for the Japan-U.S. trade deal, he said, “It is unclear how things will move following the agreement. We need to assess carefully. We may need to consider the possibility that the economic outlook could deteriorate structurally and environmentally in some cases.”

It’s hard out there for EV automakers, smaller Japanese automakers, and basically everyone. Is anyone doing well?

Hyundai Beats Estimates, Because Hybrids

Every time I drive a hybrid Hyundai product, I think to myself: “Oh, yeah, this is nice. I could do this.” While I bought a Honda CR-V Hybrid, I think I’d have been happy with a Tucson or a Santa Fe. Everyone else seems to agree, as Hyundai and its various offshoots have had a good year so far.

Per Bloomberg:

Hyundai Motor Co. second-quarter earnings beat analyst expectations, propelled by solid hybrid vehicle sales in North America that helped alleviate concerns over slowing global demand and intensifying tariff pressure.

Operating profit was 3.6 trillion won ($2.6 billion) for the three months ended June 30, slightly exceeding the 3.5 trillion won median estimate compiled by Bloomberg. Revenue rose 7.3% from a year earlier to a record 48.3 trillion won, South Korea’s top automaker said in a statement Thursday.

The stock dropped 2% in late afternoon trading, paring some of the immediate losses after the earnings were released.

The results reflect Hyundai’s efforts to diversify its product lineup and shore up profitability despite slowing overall sales and mounting tariff risks, showing robust performance in North America and strong demand for hybrid and electric models.

I’m not sure if this is a perfectly future-proof plan, and Hyunadi doesn’t seem quite so sure either, but it’s working for the moment.

VW CEO Reportedly Wants To Start Selling Stuff

As a company, when money is cheap and profits are up, it’s often a good time to acquire. This is a mantra that Volkswagen has long held, and so the company is sitting on brands (Lamborghini, Ducati), industrial companies (Everllence), and even an IT consultancy (MHP, which is owned by Porsche).

Cash flow is starting to become a concern for companies like Volkswagen, and, according to Manager Magazin, it’s maybe not the worst time to start offloading some of these side projects:

Oliver Blume is now taking a more strategic approach. “Audi needs money. Porsche needs money. VW needs money,” one source explains the situation. The group and its brands are investing tens of billions of euros annually in autonomous driving, battery cells, and new electric and combustion engine models. At the same time, business is modest, particularly at Audi and Porsche, with share prices for the Volkswagen family and the major shareholder holding company Porsche SE depressingly low. Net cash flow is sinking toward zero; CFO Arno Antlitz (55) and his team are exerting pressure, according to the company.

Does Porsche need an IT company? Does Volkswagen’s truck arm need a marine diesel engine subsidiary? Is it worth it to keep losing money on bicycles?

Money is expensive and profits are down, which means it’s a good time to sell.

What I’m Listening To While Writing TMD

If David thinks Coldplay are the new Beatles, who does he think are the new The Rolling Stones? I’m not sure anyone could provide as funky a cobwell line as the Stones do here on “Honky Tonk Women.” Maybe I don’t want an answer to that question, now that I think about it.

The Big Question

What’s the most undervalued automaker right now?

Credit: Tesla