British Petroleum, aka BP, aka aka the folks who brought us both the Deepwater Horizon disaster and the Texas City Refinery Explosion, is not necessarily a company you might associate with vehicle electrification here in the United States. The news, then, that BP us ordering $100 million worth of EV chargers from Tesla might be a surprise. It shouldn’t be.
It’s Friday, folks, so I’m gonna take a little tour through the 20-F annual filing of British Petroleum as a warm-up, and then we’ll talk about vehicle affordability (or lack thereof). More strike updates? Let’s have more strike updates.
Honestly, by the time I’ve finished writing the first section of The Morning Dump we’ll probably have more strike news and I’ll have to start over. Perhaps I should start writing faster.
How BP And Tesla Make Sense
If you’re in the United Kingdom, the idea of BP as an EV-charging firm is probably not so outlandish to you. The company’s EV consumer-facing business, called BP Pulse (formerly Chargemaster), has more than 5,000 public charging points stretching from the English Channel all the way up to Scotland. It’s basically the UK’s Electrify America.
In the United States, BP Pulse stations are few and far between outside of eastern Washington State. I was looking at the BP Pulse stations nearby and it looks like all the ones in the northeast are basically perfectly designed to get an executive from their home in suburban New Jersey to their summer house in a tony neighborhood on the north shore of Long Island.
Seriously, look at this:
A coincidence, I’m sure!
I mention those two disasters in the lede of this morning’s Dump not merely to throw shade on the company, but because they’re important to understanding why BP is doing this. The Deepwater Horizon spill was one of the worst natural disasters in American history and resulted in the largest fines/settlements levied by the government against a company. Overall, the disaster has cost BP more than $65 billion.
The Texas City Refinery was sold, in part, to pay for Deepwater-related expenses and to (at least temporarily) wind down some refining operations, as noted in tthis article from The Guardian from 2012:
BP has been keen to scale down its refining operations, where profit margins are thin. The company is confident of reaching its $38bn target by the end of next year, although it has not hoisted the “for sale” sign over any other assets.
BP took a $38bn charge related to the Gulf of Mexico disaster. So far it has spent $14bn cleaning up the oil spill; paid out more than $8bn in claims; and agreed a settlement with the Plaintiffs Steering Committee – which represents affected individuals and small businesses – which is expected to cost the company another $8bn.
In the last two years, the company has pivoted to a broader strategy called “performing while transforming,” which is to say it’s going to keep the petroleum thing going and use that money to try some other green stuff.
Looking at the company’s 2022 annual report, it’s clear BP is doing both. While it’s easy to be super cynical and call this greenwashing, BP’s plan appears to be to freeze its upstream production of traditional hydrocarbons at about 2.3 mmboe/d (millions of barrels of oil equivalents per day) for the next few years and wind down to about 2.0 mmboe/d by 2030. Given where oil demand is going, this seems sensible (especially in light of the company’s divestment from Russian petroleum company Rosfnet).
At the same time, the company’s consumer division is expected to grow. The most serious sign that BP means what they say is the purchase earlier this year of TravelCenters of America for $1.3 billion. EV charging is a real estate and utilities game, more than anything. Placement along major traffic nodes with access to power is key and, while Tesla got an early lead on Electrify America, TravelCenters of America has about 280 sites primarily located on key highways.
With most major automakers in North America switching over to the NACS/Tesla charging standard, the $100 million worth of Tesla’s chargers makes a lot of sense. From the company’s press release:
The roll-out is planned to begin in 2024 and locations will include key sites across the bp family of brands, including TravelCenters of America, Thorntons, ampm; and Amoco, as well as at bp pulse’s large-scale Gigahub™ charging sites in major metropolitan areas and at third-party locations, such as Hertz locations, as part of previously announced collaborations. The first installation sites have been identified in Houston, Phoenix, Los Angeles, Chicago; and Washington D.C.
If BP is actually serious about offering a competitive charging experience as part of its diversification in the United States, it’s impossible to do that without NACS-style chargers, and who better to buy from than Tesla itself? Add that to the TravelCenters and it gives BP a huge potential leg up in the interstate/long-distance charging game.
This is the first time that a company that wasn’t Tesla has purchased Tesla’s superchargers for an independent network, but I doubt it’ll be the last.
There Is No ‘Magic Wand’ For Vehicle Affordability
Automotive News hosted a conference for dealers this week in Chicago called the “Automotive News Retail Forum: Chicago” and what it may lack in pizzaz, it more than makes up for in panels covering topics I am interested in.
Specifically, a panel made up of consultants and dealers talked about vehicle affordability (or the lack thereof). It’s pretty grim.
Yup, affordable models are on the way out, to be replaced by… nothing? It gets worse:
It’s gonna be a long wait.
Also, should I have gone to this? Sounds like my kind of party. Maybe next year.
Tesla Raises A Price In China
It turns out I can’t embed Weibo posts (Weibo is China’s equivalent of Twitter/x, but probably less accommodating to propagandists). After numerous price cuts, it looks like the price of the Model Y High Performance is being raised bout $2k, at least according to Tesla’s official Weibo account. It’s been a while since we’ve seen a Tesla increase, so this is newsworthy.
Ford Misses Q3 Earnings, Estimates Loss Of $1.3 Billion From Strike
Ford’s got a tentative deal with the UAW and Q3 revenues rose 11% to $44 billion. Good news, right?
Not quite. According to the company’s Q3 filing, the company is withdrawing its profit guidance for 2023 and the company’s adjusted earnings per share of $0.39 was lower than the $0.45 per share expected by analysts. The reasons? Ford points to the strike, EVs, and lingering quality issues.
On the strike, Ford’s CFO John Lawler said in an earnings call:
In the third quarter, the strike had an EBIT impact of roughly $100 million, and so far, the strike has trimmed about 80,000 units from our plant. This would reduce 2023 EBIT by roughly 1.3 billion.
Morgan Stanley analyst Adam Jonas also asked about hybrid vehicles and the margins they offer and I thought this was interesting:
There’s added costs as you’d expect for the battery and the motors, etc. But if you look at — let’s just take F-Series, for example. If you take the hybrid on average, they have a higher margin than our highest-volume gas versions because of the mix and what we have in the vehicle and the pricing we can get for the hybrid technology and the fuel efficiency that comes along with that. And one of the things we learned about hybrid, because we’re executing very differently than our first-gen hybrids, is we have Pro power on board.
We have a lot of other attributes that people are willing to pay for, you know, like F-150 powering a jobsite or your house as back up energy. That’s another advantage of having those batteries that maybe some of our competitors haven’t had the same pricing power. The F-150 now, a hybrid, is up 40% year over year, and we think the new F-150 new hybrid will be 20% mix, and it may be the best-selling hybrid in the United States. So, our hybrid strategy is a little different than our competitors because the work cycle for our products are different, but hybrid has a really big place.
We’re trying to challenge ourselves, Adam, to execute hybrids, so they do more than just propel the vehicle for pricing power.
I will say this until I’m blue in the face but: Hybrids have huge potential in the market and it’s where Toyota, Honda, and Ford can be extremely competitive.
The Big Question
How long is your memory for disaster/scandal? Did you stop going to BP stations? Did you stop buying Firestone tires? Did you drive past VW dealerships? Do you vote with your pocketbook?