A fine Monday morning to you all, and welcome back to The Autopian’s daily news roundup. If you’re reading this, you probably aren’t able to buy a Li Auto, but we’re about to explain why it’s a huge deal for the auto industry, anyway. Also on today’s docket: the latest on America’s electric vehicle tax credits, an interesting trend on hybrid cars, and how Stellantis is finally showing up to the EV party.
(Yes, it’s another day of mostly EV news, but that should tell you a lot about where things are going. Get used to it.)
Foreign Brands Get Creamed In China
I distinctly remember a conversation with an exec from a European luxury automaker some years ago where he cheerfully told me that China’s car sales would simply go up and to the right forever, because the rate of new millionaires being minted there every day was exponential enough to be considered a permanent trend. This, he said, would make China into a perpetual golden goose for his car company.
Now, I’m just a small-town blog boy. I’m no fancy, big-city MBA or anything like that. But I can tell you that permanent upward growth is generally impossible. And everytime automakers count on it, they get egg on their faces. That day of reckoning has arrived in China, and the culprit isn’t even an economic downturn—it’s the homegrown Chinese brands getting their shit together and pushing out brands that have boomed to this point like Buick and Porsche.
Here’s the New York Times on this situation, which is driven entirely be EVs. Chinese buyers largely have no interest in fully gasoline-powered cars and the new market is about 25% electric. And these new brands like Li Auto—more on them in a second—are not only subsidized by various levels of government, they’re winning the hearts and minds of Chinese buyers who don’t want to be dependent on other countries’ cars forever:
Ford Motor sold one million cars and light trucks in China in 2016 and in 2017 but barely 400,000 last year. Hyundai Motor, the South Korean giant, sold 1.8 million cars in China in 2016 and only 385,000 last year.
General Motors, which once vied with Germany’s Volkswagen for market leadership, has lost nearly half its sales in China. G.M. would be faring even worse if not for Wuling, a joint venture in which G.M. has a 44 percent stake. Wuling sells ultra-cheap pickup trucks and microvans that cost $4,800 to $21,800 and have slender profit margins.
The market share of China’s domestic car companies rose to 52 percent in the last quarter of 2022, from 47 percent the year before, largely on a huge rise in electric vehicle sales. The best-selling brand is BYD, in which Warren E. Buffett was an early investor. It now holds 10.3 percent of the car market, up from 2.1 percent four years ago and supplanting the Volkswagen brand as China’s leader.
The reporter also speaks to the young Cao family in Shanghai, who now own a $290,000 Porsche 911 (nice) and a $70,000 electric SUV called the Li Auto L9. That car packs an optional gasoline range extender that charges the battery but never drives the wheels; I suppose we’d categorize that as a hybrid in America, but it’s beside the point.
These new EVs in China fit the lifestyles of the country’s families, especially with their more limited driving habits. And now the foreign brands are having to compete on their terms:
Mr. Cao said he doubted he would need the backup engine. He plans to drive the S.U.V. for day trips to large parks on the outskirts of Shanghai, recharging it at home each night. Such outings have become popular in China with the end of “zero Covid” quarantines and municipal lockdowns. For longer travel to other cities, he said, he would fly or take one of China’s many bullet trains.
Even the maneuvering for choice display locations at auto shows like the one in Shanghai has changed. Until the last several years, Chinese automakers vied to put their displays close to multinational brands like Mercedes-Benz, in the expectation that Chinese car buyers would flock to the multinational brands and might see the local brands along the way.
But now, it’s Chinese electric car brands that other companies want to surround on the showroom floor, said Bill Russo, a former chief executive of Chrysler China. “You want to be closer to them — the Chinese companies have the hottest battery electric vehicles,” he said. “Foreign automakers don’t have the same halo now.”
What does this mean for the auto industry as a whole? Well, all automakers hinged their long-term hopes on China, which is now the world’s biggest car market. It’s part of why everything is going so heavily electric. And Chinese brands are starting to catch on rapidly in Europe because they’re sold at super-affordable prices. Furthermore, China still has a very tight grip on the EV supply chain, though America and other countries are trying to get ahead of that.
America’s deep tensions with China could make it hard for those brands to break into our market. I think BYD has the best chance, but it’s clearly taking its time here. But here’s the upshot: even if you’ve never seen these cars or heard of these brands, the Chinese automakers are now a huge force in the industry that could cut into profits and future plans for Western and other Asian companies.
Hybrids Also Getting Creamed By EVs in America
On the path to zero-tailpipe-emission vehicles, do we go hybrid and PHEV first or skip that step altogether to go fully EV? That’s a fascinating debate raging in the auto industry for now, and generally speaking, the EVs are winning. European buyers are souring on PHEVs (in part because they often weren’t charging them at all and thus never getting the most out of them) and China has made no secret of where it stands.
But in America, the U.S. Department of Energy pointed out that automakers here are generally not increasing their PHEV options. In fact, EVs now outnumber PHEVs on the market. This is a great find from Green Car Reports:
Looking at light-duty vehicles, the DOE found that the number of EV models surpassed the number of plug-in hybrid models for the first time since 2014—going from 20 to 38 distinct models in just a year. And versus a year earlier, the number of PHEV models went down in 2022.
The DOE says that in calculating the number of models, it counted each model name just once, despite multiple configurations available for some of them.
By sales, EVs have been far ahead of PHEVs for some time—since around 2018. By the end of 2022, EVs stood at about 6% of the U.S. market while PHEVs were at just over 1%.
Experts I’ve spoken to are divided on this topic. I’ve written before that I think hybrids and PHEVs are a fantastic way to cut gas use and CO2 emissions if EVs are too rare and too expensive right now (they are) or the public charging network is still too inadequate (it is.) But others argue that hybrids are still pushing the limit for a declining technology — internal combustion — that runs on a finite resource, gasoline. The focus instead, they say, should be building up an infrastructure where batteries and minerals can be recycled almost endlessly rather than trying to stretch fossil fuels any further. [Editor’s Note: Hybrids are the answer in my eyes. Pushing people into $50,000 EVs with humongous, dirty-to-build batteries that they only use 10% of each day is just a foolish way to try to move towards electrification. I get that some people might buy a PHEV and use it like a gas car, but there are easy software fixes that would compel someone to drive mostly on electricity. I say that as someone with a BMW i3, which has a tiny gas tank that feeds a loud(ish) engine requires a fuel refill every 70 miles. Trust me, I’m gonna use my EV capability as much as possible. -DT].
I think that’s a tough sell right now with our charging infrastructure and not-so-green grid being what it is. But even if you think, as I do, that hybrids and PHEVs have a lot of use, automakers aren’t really investing in them; that story points out most are from Toyota, Volvo, BMW, Hyundai and Honda these days. The hybrid market has kind of stagnated while the EV market is doing very much the opposite.
Stellantis Shows Up To The EV Party
Even before France’s PSA Group merged with Fiat Chrysler, both companies could be described as electro-skeptical. In the latter’s case, it only sold a handful of electrified cars for years, and now that they’re married and living together as Stellantis, they’re both led by CEO Carlos Tavares—who has also never been a huge fan of this stuff. Or the costs involved.
But now, even Stellantis has seen the writing on the wall and lots of electric and electrified options are coming over the next 18 months. And they range from the Ram 1500 Rev, with its massive battery, to the tiny new Fiat 500e. From The Detroit Free Press:
First out of the gate will be the Ram ProMaster electric delivery van and the Fiat 500e, due later this year. The ProMaster EV is likely to be built in the U.S., while the 500e, a little city car, will come from Europe.
The chic little 500e is entirely different from the EV of the same name Fiat Chrysler reluctantly sold in the U.S. in 2010-19. While funky and fun to drive, that was a “compliance car,” built solely to satisfy a few states’ demand automakers sell EVs.
Fiat Chrysler lost so much money on each 500e that its then CEO, the late Sergio Marchionne, once publicly asked people not to buy them. It had a short range and an affordable price Fiat subsidized as a cost of business to sell Jeeps, Rams, minivans and muscle cars in big, profitable states like California.
Man, I miss Sergio. He really did say that, too. There’s also the electric Dodge Charger, the Jeep Recon and at least one EV for poor, neglected Chrysler. So if you’re a fan of Mopar stuff or its Franco-Italian cousins, you’re about to have some interesting choices here.
One thing I think is cool is how each of these brands is leaning into its strengths on the EV front; an electric Ram truck will be a unique animal from a Dodge muscle car, a Fiat city car or a Jeep rock-crawler. I’m eager to see how they turn out.
The Tax Credit Thing, Again
It’s almost Tax Day here in America! (I really hope you’re not hearing that news from me for the first time.) But with it comes the official announcement of which EVs make the cut for the revised tax credit scheme, and which do not.
Expect a lot more in the “not” category this time. That’s because the new rules give the most incentives to EVs with their batteries built in North America and their “critical minerals” sourced here too. The rules are meant to incentivize local battery manufacturing, but right now, not many vehicles make that cut.
Here’s NPR on what we’re looking at:
Starting Tuesday, fewer vehicles will qualify for the current $7,500 tax credit. Some will get a $3,750 credit instead, and some cars will no longer get any credit at all, thanks to battery sourcing requirements that are kicking in.
The $7,500 tax credit is actually two separate credits, worth $3,750 each. Right now every qualifying vehicle gets both credits, but starting April 18, vehicles could end up qualifying for neither, one, or both.
Who are the winners of the full credit? The Cadillac Lyriq, Chevy Silverado EV, Tesla Model 3 and Model Y, the F-150 Lightning, the Lincoln Aviator Grand Touring PHEV (I’m not sure I knew that even existed until now?) and the Chrysler Pacifica PHEV. Others may only get half the credit.
Needless to say, this kind of sucks for EV buyers right now. Long-term, a domestic battery operation will allow many more cars to qualify, and this is meant to incentivize that ecosystem, but that’s gonna take time.
I’d also argue that if the Biden Administration’s lofty goal is 50% EVs by 2030, and it’s spending billions in grants for public chargers, it should’ve gone much wider on car tax credits early on to spur purchasing. But hey, I’m not the president.
I did always want to run Jason for president at The Old Site; maybe I’ll finally do that in 2024 and really drain the swamp for real, you know? Changlis for some, miniature American flags for others.
Hybrids: Are they worth automakers investing in or not?
I get the ones that say nope; if you’re dumping billions and billions into EVs and batteries, you want to get there as quickly as possible. But I’m driving a Volvo S60 Recharge PHEV right now—the one with 455 horsepower and 523 pound-feet of torque—and I really get the benefits here. (Also, it’s fast as shit.) I’ve used very little gas in it so far and it charges overnight off a wall outlet. It’s to want more for a daily driver. And did I mention it has 455 hp?
If you’re a global carmaker and you’re facing an all-electric future at some point, do you bother with hybrids at all?
- Readers Aren’t Having Georgia’s Bullshit Reason For Banning Kei Trucks: COTD
- Fiat Panda Six-Wheeler, Volkswagen Golf Country, Indian Sport Scout: Mercedes’ Marketplace Madness
- The Second-Generation Saturn Vue Lived, Then Died, Then Lived Again: GM Hit Or Miss
- Can You Guess The Three Cars The Autopian Has Tried To Buy This Week?