Home » The ‘Reality Check’ Era Of The EV Transition Is Upon Us

The ‘Reality Check’ Era Of The EV Transition Is Upon Us

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Make batteries instead of engines, they said! It’ll be fun and perhaps even profitable, they said! Toward the end of the previous decade, and on the heels of the industry-upending mess that was Dieselgate, we saw a ton of automakers and brands announce these sorts of pivots to electric vehicles. At the time it almost seemed simple—how hard could it be for the 100-year-old auto industry to move to one focused on batteries and software, right?

This year’s proving to be the year where they all learn—and show their investors—how hard that really is. Call it the “reality check” era of EV adoption. Ford and General Motors have been going through versions of this. On today’s morning roundup, we’ll see what the German luxury brands are up to on this front.

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Beyond that, we have some good news for Mazda; heat over the United Auto Workers’ contract negotiations in Detroit; and also why Tesla losing a CFO is a cause for concern. Let’s jump in.

Ze Germans Face Ze Music, But Are Undeterred

P90423597 Highres The Bmw I4 Edrive40
Photo: BMW

My take on the auto industry’s great transition, now that we’re more than midway through 2023, is this: it’s more than likely going to be a battery-powered future, getting there will be very complicated and expensive, not all brands will survive it, and adoption will not be some magic up-and-to-the-right thing until all the gas cars are gone. It’s going to be weird and rocky, basically. But things are moving in that direction.

Automotive News has a breakdown of the approaches taken by the three big German luxury automakers, all of whom have a high-dollar, tech-savvy, first-adopter buyer base and have gotten their lunches eaten to various degrees by Tesla over the years. They’re all well-positioned to make this pivot, in other words. Here’s how they’re doing and what they’re telling investors right now:

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Mercedes is the most aggressive brand, vowing to go all-electric globally by 2030. From 2025 forward, every new product architecture will be electric-only, the company said. Mercedes is expanding its U.S. portfolio of battery-powered crossovers and sedans with zero-emission versions of its CLA coupe and GLC crossover.

But Mercedes acknowledges that the pace of EV adoption will be uneven worldwide. The brand expects electric vehicles to account for 40 percent of its new-vehicle sales in the U.S. by 2026 and 70 percent by 2030.

“Uneven worldwide” is key, especially when you remember how many Mercedes-Benzes across the globe—diesel taxis in Morocco, stuff like that—are harder to transition. BMW, on the other hand, urges even more patience as it electrifies the top and bottom of its range. (And it’s actually doing really well with all of this so far.)

BMW is taking a more cautious approach, estimating that about half of its global sales will be fully electric by the start of the next decade.

[…] BMW’s EV offensive in the U.S. surges in 2026 with several X-line battery-powered crossovers plan-ned. The automaker will produce many of them in Greer, S.C., where it is investing $1.7 billion to produce at least six battery-powered crossovers.

BMW’s small car brand Mini views electrification as the path to renewed relevance. A battery-powered Countryman will be the first of several new electric Minis globally starting next year. Two China- made EVs — a small crossover and a Cooper SE replacement — will come to market next year, but Mini has not confirmed them for the U.S.

As a two-time former Mini owner myself, I hope the brand finds a way to stay afloat (and relevant) in the United States. From what I’ve heard internally, a lot of Mini’s future EV plans for this country are TBD. But there’s an air of caution with both of these announcements that feels different from all the rosy optimism we’ve heard in the past. Making cars is hard, as we say, and making electric cars is even harder; more and more automakers are being open about the challenges here.

Meanwhile, let’s talk Audi, once an early leader in this space with the e-tron cars and a marque that is now struggling with the same cost and software issues as parent company Volkswagen. It also wants to go all-electric by 2033, but the plan in the meantime seems to be “the same cars it makes now but with electric twins that have different names.” Emphasis mine below.

Audi, part of Volkswagen Group, says it will end development of new gasoline engines in 2026. That means most of its popular combustion vehicles should have at least one more product cycle left before they are replaced with battery-powered alternatives.

To delineate between powertrains, Audi is temporarily altering its alphanumeric model naming system. It will keep the A prefix for sedans and Q for crossovers, but future electric models will adopt even numbers, while combustion models remain with odd numbers. The switch is expected to take place gradually as vehicles are redesigned.

The brand will expand the EVs on its PPE architecture, which will slowly merge with other platforms into a unified EV platform across the group.

Even for electric, odd for internal combustion. Somebody write that down!

Tesla’s CFO Out, Leaving More Succession Questions

The front three-quarter view of the Tesla Cybertruck
Photo: Tesla

After writing that subhed, now I’m envisioning the Tesla version of Succession. Who gets to take the reins at Tesla after Elon Musk decides to retire to rule over his Mars colony? Tom Zhu? His old friend Peter Thiel? Kanye West? Catturd? One of his kids named after math equations? The mind swirls at the possibilities.

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It won’t be Zach Kirkhorn, who’s stepping down as Chief Financial Officer after 13 years under Musk (which must’ve felt like 500 human years.) Kirkhorn was known as one of the more level-headed guys in Tesla’s comparably small C-suite; Bloomberg’s Dana Hull describes him as “a calm, steady presence and regularly spoke at length with investors, even playing the role of Musk’s surrogate the time he skipped Tesla’s earnings presentation.”

It’s not often that losing a CFO makes big headlines in the auto industry, but you know how closely watched Tesla is. Its new CFO, Vaibhav Taneja, is a native of India who currently serves as chief accounting officer. For now, at least, Taneja is serving in both roles, which is considered unusual in business.

More importantly, Kirkhorn was seen as a possible Tesla CEO someday. Who runs Tesla without Musk? What is Tesla without Musk? That’s a very tough question that more and more investors are asking, especially with the EV competition heating up and Musk’s attention seemingly so heavily focused on his social media platform. From Bloomberg:

Musk, the richest person in the world, oversees six companies: Tesla, SpaceX, X (formerly known as Twitter), Boring Co., Neuralink and xAI, his most recent venture. Musk’s many interests and the competing demands for his time have long raised concerns about whether Tesla is too dependent on a single individual.

The EV maker has just four executive officers: Musk, Drew Baglino, the senior vice president of powertrain and energy engineering; Tom Zhu, senior vice president of automotive; and now Taneja.

Musk is still relatively young at 52 and, barring any Zuckerberg-related combat accidents, is probably not going anywhere anytime soon. But “Tesla without Musk” is now an even bigger question than “Apple without Jobs” ever was and somebody’s going to need to figure that out someday.

Okay, fine; I will do it. I will be the CEO of Tesla. Time to log on, baby.

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Mazda: Doin’ Well, Actually

Mazda Cx-50 1
Photo: Mazda

I still want to see Mazda move faster on EVs and hybrids, but in the short-term, everybody’s favorite manufacturer of the Miata is doing pretty well at the moment. Automotive News reports it swung back to a Q2 profit thanks to the more upscale, more profitable crossover-focused lineup. It seems its grand plans to become a kind of Japanese BMW are working—so far. Recovering from the supply chain crisis is a big help too:

Operating profit rang up at 30.0 billion yen ($207.5 million) in the company’s fiscal first quarter ended June 30, wiping out an operating loss of 19.5 billion yen ($134.9 million) a year earlier, the company said in a statement.

Net income more than doubled to 37.2 billion yen ($257.3 million), from 15.0 billion yen ($103.8 million), as revenue climbed 72 percent to 286.0 billion ($1.98 billion) in the three-month period.

Global sales expanded 32 percent to 309,000 vehicles in the quarter, soaring on the wings of a 61 percent jump in North American shipments to 128,000 vehicles.

Shipments were especially brisk in the U.S., where the CX-90 and CX-50 anchor a refreshed lineup of crossovers. Mazda expects its U.S. sales momentum to gain speed on increased supply following the start of two-shift production at its Alabama assembly plant in July.

Also:

Mazda wants the CX-90 to “upshift” existing customers into a higher price bracket while also siphoning off customers from premium brands with a lower price point.

“We see it steadily growing share week by week,” Guyton said of the CX-90, adding that it has already outstripped the market penetration of its CX-9 predecessor nameplate.

I still owe you a review of the CX-90 hybrid! It’s good and it’s stealing customers from other brands for a reason. Anyway, this is all fine news. No profits means no future Miatas and such. We want profits and we want Miatas. Good luck to all involved.

UAW Demands Could Spike Labor Costs

Chevrolet Traverse Z71 3

We’ve been telling you for a minute that the UAW contract negotiations are a big deal, in their own ways as big a deal as the Hollywood strikes happening right now. Both involve big fights over new technologies and the role of workers in them as the corporate entities up top post record profits but face uncertain futures. And the UAW isn’t on strike but negotiations could go sideways and this union is one that’s eager to send a message.

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The Detroit News is tallying up the supposed costs of their demands and the tab is big:

The United Auto Workers’ contract demands of the Detroit Three automakers could surge per-person labor costs to more than $100 per hour in wages and benefits, according to three sources familiar with the situation, potentially outstripping North American profits over the life of a new contract.

Now, it’s unclear who those three sources are here; given the story’s framing my guess is they’re automaker sources, so take that with a grain of salt.

“That number seems astronomical for manufacturing jobs that are already relatively well paid,” said Sam Fiorani, vice president of global forecasting for AutoForecast Solutions LLC. “In order to get anywhere near those (wage increase) numbers, other things will have to come off the table, including profit sharing, other benefits, any number of things in order to just get this one thing. If this is not done, you’re absolutely going to see employment reductions from the Detroit Three.”

The total calculation would be nearly double the estimates of what foreign automakers operating in the United States pay their workers in wages and benefits. The gap would be even wider for employees at electric vehicle maker Tesla Inc. The result could challenge the automakers’ competitiveness and valuation, risk UAW jobs and potentially send work to other countries, experts say.

But the workers say they’ve been left behind by rampant inflation even as their post-bankuptcy (minus Ford, obviously) companies rake in record profits and cars cost more than ever:

In a Facebook livestream this week, UAW President Shawn Fain called the demands “audacious and ambitious” because the working class has been left behind by the profits achieved by the automakers for more than a decade. This is the workers’ chance, he said, to gain back what was lost amid the Great Recession and automotive bankruptcies.

“Overall, the starting pay for a Big Three worker today is almost $21,000 less than it was in 2007 when adjusted for inflation,” Fain told The Detroit News in a statement Friday, reprising his criticism of the automakers’ profitability and CEO pay. “UAW members made enormous sacrifices to save the automakers during the Great Recession, but we’ve never been made whole. These massively profitable companies can afford our demands. Our message is clear: record profits mean a record contract.”

Still, this is how union negotiations go; you aim for crazy stuff, management flips out, and then hopefully after weeks or months, you reach a deal without a strike nobody wants:

Scott Houldieson, a Ford electrician and co-chair of the Unite All Workers for Democracy Caucus that endorsed Fain for president, said the communication for leaders is a “mind-blowing sea change” that gives workers confidence their union is fighting for them.

“We aim for extraterrestrial Mars,” said Houldieson, who isn’t involved in the negotiations, “and if we fall short, at least we made it to the moon.”

There’s Musk-esque quote for us all to end on.

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Your Turn

You tell me; What is Tesla without Elon Musk?

In some ways to me, Tesla already feels like the post-Jobs era of Apple does now: still strong, in control of market share, but not quite the innovator and game-changer it once was. More steady than anything else. And I’ve been wrong when it comes to Tesla before, but it doesn’t feel like the Cybertruck changes that equation.

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Vetatur Fumare
Vetatur Fumare
11 months ago

I agree with most of that (especially the “Third World country in a Gucci belt” tenor), except I am unsure what to make of Musk’s remaining impact on Tesla. A lot of people hold their noses and buy a Tesla, but a lot of people (some of whom don’t like him) are still under the impression that he’s a magically endowed genius of some sort.
I think that Tesla without Musk will be a regular company, and that fall will be much higher than what Apple had to deal with. But, time will tell.

Vetatur Fumare
Vetatur Fumare
11 months ago

“Mazda: Doin’ Well, Actually”:Since BMW has abandoned being the German BMW, maybe they could just be BMW, plain and simple.

Freelivin2713
Freelivin2713
11 months ago

Tesla would still suck w/o dipshit/douchbag Melon Husk

Jesus Helicoptering Christ
Jesus Helicoptering Christ
11 months ago

…The automaker will produce many of them in Greer, S.C., where it is investing $1.7 billion to produce at least six battery-powered crossovers.BMW’s small car brand Mini views electrification as the path to renewed relevance. A battery-powered Countryman will be the first of several..

AAAAAARRRRRRGH!

Just give us some nice sleek electric cars, please! For crying out loud!

Turkina
Turkina
11 months ago

Musk’s cult of personality and salesmanship has brought Tesla through its growing pains, because his braggadocio juiced the tech-bro sector enough to get that funding to help the company through potentially company-destroying barriers. The company now should have progressed past that, and concentrate on new generations of their models with increased consumer confidence without the Tesla-stan effect. The share price will take a hit, but the more professional corporate culture might shepherd Tesla to sustainable growth and longevity.
Send Musk to Mars without shielding. He’s outlived his usefulness. SpaceX doesn’t need him, Tesla could go on without him, probably building a Cybertruck for a few years, then ditching it, and Twitter/X could be run better by a council of monkeys.

MDMK
MDMK
11 months ago

The prospect of the UAW driving auto prices even higher has BYD and other Chinese automakers eager to gain a foothold in the U.S. Market rubbing their hands and grinning like Mr. Burns.

Last edited 11 months ago by MDMK
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