Yesterday, I found myself awfully perplexed over Ford’s decision to abruptly hit pause on its $3.5 billion Michigan battery factory, which develops cheaper LFP batteries with technology from China’s CATL. Was it a way to hit back at the striking United Auto Workers? A political controversy? Did Jim Farley lose the deed to the land in a high-stakes poker game? Aliens? Today, we know more: it’s looking like the second one.
That leads off today’s Morning Dump, my last one at The Autopian (more on that in a bit.)
Also on tap for this fine Wednesday: Presidents Biden and Trump visit the picket line, sort of; why Toyota could be the big winner in the strikes; and more on the clash between personal economics and technological shifts.
Ford’s Battery Battle
No wonder Ford hit pause yesterday: Reuters reports lawmakers at three U.S. House of Representatives committees have demanded that the automaker turn over documents related to its partnership with CATL and may force Farley to testify before Congress:
Republicans Jason Smith, Cathy McMorris Rodgers and Mike Gallagher – who chair the Ways and Means, Energy and Commerce and China select committees – jointly wrote to Farley with a new deadline seeking documents about the CATL partnership and the automaker’s plan to build a $3.5 billion battery manufacturing plant in Michigan using Chinese technology.
“Ford’s ongoing refusal to provide substantive responses … raises serious concerns regarding its licensing agreement with CATL,” the lawmakers wrote on Tuesday in a previously unreported letter seen by Reuters.
Republicans have been probing Ford’s battery plant plan for months over concerns it could facilitate the flow of U.S. tax subsidies to China and leave Ford dependent on Chinese technology.
Ford has until Oct. 6 to comply, but the automaker told Reuters it’s been responding to all questions so far.
Basically, here’s what happened: a lot of folks (outside of Ford, presumably) are pissed that Ford is doing business at all with China for this battery plant, one of several it’s building—but this one will focus on cheaper, more volume-friendly LFP batteries.
The problem is the Inflation Reduction Act’s aggressive green subsidies and tax credits have two goals: one is to spur EV adoption and production here in the U.S. and North America, and two is to kneecap China. Sometimes those goals work in sync; sometimes they do not. Ford turned to CATL because it knows how to make cheap batteries, which America will need, and swears it’s just licensing that technology with no IP theft or national security risks. This guarantee has not been enough for lawmakers, especially ones on the Republican side.
And the Wall Street Journal indicates there’s a larger fight here over those tax credits and China, and already General Motors is crying foul over Ford’s play. This anecdote starts after a speech Farley gave in June announcing the CATL venture:
Later the same day at the General Motors headquarters, CEO Mary Barra and her team had a different message for the lawmakers: Ford’s plans could be the harbinger of Chinese domination of U.S. car manufacturing.
At stake in the meetings, described by people familiar with them, was more than just pride between the old crosstown rivals. It was also the price many Americans could pay for their electric vehicles in the next 10 years—and how the automakers would invest billions of dollars to sell EVs in the U.S.
The pair are lobbying over the terms of a $7,500 tax credit for consumers who purchase new electric vehicles. Starting next year, buyers can’t use the credit on cars that contain battery components from any source that the U.S. deems a “foreign entity of concern,” a vague term meant to reduce American reliance on Chinese batteries and materials.
President Biden is expected to decide this fall how strictly to enforce that requirement. If the rules are too tough, few EVs—if any—will qualify for the tax credit, potentially leaving Americans without that incentive to switch from gasoline-powered cars. A loose read on the rules could invite blowback from Republicans and other China critics.
Ford, with its plans to license Chinese technology to make cheaper, iron-based batteries in Michigan, has lobbied for a more flexible interpretation of the “foreign entity” rule. If its planned batteries aren’t eligible for the car-buyer subsidy, Ford executives have indicated they could scale back the investment; on Monday, the company paused construction of the new battery plant.
Emphasis mine up there. This is starting to make more sense now. And you get why GM’s unhappy here; it, too, is spending a ton of money to grow its local battery operations but not working with any Chinese companies. Apparently, Farley met with Michigan Republicans who demanded answers about this in July, but they weren’t satisfied. One last note from that story:
“All sides want to rid the U.S. of excess reliance on China,” said Jennifer Harris, who worked on clean-energy supply chains at the White House until March. “In some areas, the shortest, surest path may take some Chinese know-how up front, confined and cabined.”
Maybe. But is that something automakers, and America, will regret? Is it something they’ll even be allowed to do?
Biden On The Picket Line, Trump Follows Tonight (Kinda)
It’s been called a historic moment: the first time a sitting U.S. president has joined a picket line. Biden joined the UAW and its president, Shawn Fain, yesterday with Local 174 Willow Run in Belleville, Michigan; a GM distribution center currently on strike.
That’s one way to look at it. And it is historic, to be sure. But another way to look at it is Biden finally doing something after months of claiming to be the most “pro-worker” president in history, but prevaricating on where he stood on the UAW strike. After all, he needs a good relationship with the automakers too, and there are tons of political complications around his EV initiatives.
But there was a lot of candor from the president yesterday. He even said he believes the UAW “deserves” the 40% pay increases they’re seeking. From his remarks:
I see these CEOs try to justify a system where they take all the profit and the workers are left to fight for the scraps and live paycheck to paycheck. That’s got to end.
They say they deserve all the profit because they say they’re different. You know what? They are different. They have different degrees. They have different responsibilities. They have different titles, different positions.
You know what? I agree, though. They’re different. We — let’s talk about some of that. These CEOs sit in their offices, they sit in meetings, and they make decisions. But we make the product. They think they own the world, but we make it run.
The CEOs think the future belongs to them. Today belongs to the autoworkers and the working class.
Welcome to the struggle, comrade. (I guess?) Meanwhile, Trump, still the GOP frontrunner and most likely candidate to face Biden next year, is also going to Michigan today. He had said he would be speaking with the auto workers, too, but only kind of; I don’t doubt many folks will come to his speech, but it’s at Drake Enterprises Inc. in Clinton Township—a Tier-2 and Tier-3 supplier. It’s a company very worried about jobs if a shift to EVs happens. From Automotive News:
“If EV really accelerated and took off, we would be out of business,” Dombrowski told Automotive News. “We would have to lay a lot of people off.” Union leaders these days don’t have a lot of love for Trump, but with this pro-jobs message, he’s clearly looking to pick up voters in what’s still a crucial swing state.
Does Toyota Win In The UAW Strike? Maybe
The real winner in the UAW strikes, if they go on long enough, apparently could be the Toyota Tundra. That’s one possible outcome from Cox Automotive’s fall forecast, quoted today by the Detroit Free Press:
So far, the targeted strike is limited enough in its scope to not have a big impact on Detroit carmakers’ sales yet, Cox Automotive Chief Economist Jonathan Smoke and senior economist and Cox’s senior director of industry automotive Charlie Chesbrough said Tuesday. But if the strike expands to more plants and persists into the fall, the supply of new vehicles — already tight — will shrink even more. If demand for cars remains steady, then it means “increasing prices in both the new market and the used market,” Smoke said during a news media briefing.
Smoke said the Japanese brands are in the best position to benefit from the strike’s fallout, especially Toyota, because its supply problems have resolved and it is now increasing vehicle production. Also, the Asian automakers’ lineups tend to be lower-priced sedans and smaller SUVs compared with the Detroit Three’s higher-priced big pickups and SUVs, making not only availability, but affordability attractive to consumers.
Maybe so. And they’re not union-built, but these days, the Toyota trucks are about as American as baseball, apple pie and not maintaining our infrastructure. If trucks from the Big Three start to run dry, those seem like the obvious place for customers to turn. Then again, I do not see this strike dragging on that long. We’ll see if I’m right or not.
The Electric S-Curve
A few news stories today almost made the cut for The Morning Dump, but I’m rounding them up here because they all kind of say the same thing. Volkswagen is cutting EV production at its German factory due to slowing demand in Europe, and Hyundai and Kia are cutting their EV prices in South Korea for the same reason. And yet this year is on track to be a record one for EV sales. How can both be true?
A study from the climate-focused Rocky Mountain Institute shows that EV adoption globally is tracking faster than expected, led by China and Northern Europe. But in most other places, it’s not going to be this magical up-and-to-the-right growth many people predicted years ago.
And pretty much everywhere, people are squeezed by higher energy costs, inflation, wage stagnation and concerns about charging; that’s true in multiple countries. Here’s Barron’s with more data from Cox Enterprises about what’s going on here in America:
As for EVs, sales are still hitting records. Second-quarter unit sales were about 295,000, a record and up about 48% year over year. EVs accounted for about 7% of all new car sales, but Cox forecasts that will rise to 8% for the third quarter. That translates to roughly 310,000 units, another record.
That is where the good news ends for EVs. Dealer inventories are equivalent to about 97 days of demand, compared with 57 days for traditional vehicles, a signal that the industry has produced too many EVs. They are selling in record numbers, but still not as fast as expected.
EV sales at Ford Motor for instance, were only up about 6% year over year through August, while Tesla U.S. sales increased 30% from a year earlier in the first half of 2023. Production delays are part of the reason for Ford’s slower growth, but where demand for EVs is the strongest is also an issue.
Cox projects that EV sales will account for 23% of all new-car sales in California in the third quarter, while the figure in Michigan and Ohio—Ford and General Motors country—is projected to be 3%. Both manufacturers have a lot of assembly plants and employees in the region, but people there don’t seem to want EVs.
We’ve spent a century building a car-centric society across the world; changing that is going to weird, messy, expensive and fascinating. And as we see above, an increasingly hot political football just about everywhere.
A Programming Note
I find this stuff interesting, anyway. Plus it’s where all the news is going in the car world lately. Interesting enough that next week, I start as the new Editor-in-Chief of InsideEVs. Though this means I’m sadly moving on from The Autopian and freelancing in general, I hope you’ll check us out over there too from time to time. There’s no shortage of great stories in this world right now, and I think the world needs more places to cover them—not fewer ones.
This is all to say I’m grateful to The Autopian for having me around this past year, but even more grateful to you readers for supporting them. (And if you aren’t a paying member yet, consider it!) I can tell you this place is a real labor of love from all involved, but it’s growing fast and it deserves to be. That could not happen without the incredible backing from its readership. The Autopian is proving to be a real bright spot in an otherwise fairly dismal media climate; thanks for being a part of what they do. They’re just getting started, too.
So once again, I appreciate your support of David, Jason, Beau, Jeff, Matt, Mercedes, Thomas, Peter, Stephen and the rest of this wonderful crew. And remember this above all: never go to a second location with any of them.
[Ed note: It was fun to have the band back together again for a few months. It’s been an incredible period of growth and having Patrick around was a huge help and, on more than one occasion, a much-needed sanity check. I know Patrick will do great things at InsdeEVs and they’re lucky to have him. I also have a message to Patrick’s new boss (and, also my buddy) Seyth: Treasure Patrick, and if you don’t, please know that I do have a very particular set of skills. Skills I have acquired over a very long career. Skills that make me a nightmare for people like you. – MH]
[Ed note: It’s been awesome having PG around, even if only part-time. His morning news roundups (he refused to call it The Morning Dump, strangely) is always excellent, and his ability to step in every now and then with edits has been hugely helpful as our team tries to grind through a somewhat tumultuous startup phase that requires everyone to wear many, many hats. It’s been wild to see him, Matt, Jason and me all back in one place, like the olden days, and it’s all been enabled by the greatest readership on earth — a readership for whom we here at The Autopian will never stop showing our appreciation. Thank you all, and thank you, PG. -DT].
[Ed Note: It’s funny how everything we’re doing here suddenly all seemed more real when PG showed up. That’s because for years PG was my editor, the adult in the room, the responsible, rational one who could read a story in the Economist and furrow his brow just right and only spent, what, a couple of days in jail? It was fantastic having PG with us, and he brought a lot of journalism-fu to our nascent site, and we will hold on to that, tightly, until it leaks. I know PG will be a fantastic EIC over there at SparkyCars or wherever he’s going. And I’m glad we never changed the name of the Morning Dump, because I’m a child. – JT]
What do you think is the most interesting story in the automotive world right now?