General Automotive Thread

Then maybe there needs to be government intervention to avoid all other things being equal? Maybe some kind of tax-incentive if people buy their car from a manufacturer that uses union (and thus better paying) labour in the construction of the vehicle? You could even combine this with EV credits to create a market incentive for electrification of production lines while keeping jobs well paying. Someone in the US government should really get on tha…

Wait a minute!

Edited by Silasw on Oct 12th 2023 at 7:06:45 PM

Yeah, that's the thing. Chinese cars are awful and basically don't have a market outside China and southeast Asia, which have the dynamic of American, European, Japanese and South Korean car companies mostly not paying attention to them.

They also have a nasty habit of failing safety tests mandated in the US, Canada and EU. Like, they're not sitting there waiting for an opening, they're sitting there with cars that can't legally be sold in the markets where union negotiations are happening.

And, I have to be honest, the big car companies are not going to go bankrupt because they're paying for pensions or paying people proper wages to work on electric vehicles. It's completely ridiculous to think that's a serious consideration. These companies are, in fact, making profit, quite a bit of it and "but if we pay people properly and treat them with respect, we'll go bankrupt" is the single most bog-standard excuse you can possibly find for why union bad.

Personally, I think a lot of the problem is actually Elon Musk himself. He attached himself to electric cars and then acted like a complete jackass and created a fuckton of negative press for himself while constantly positioning himself as the electric car guy. I asked some of my low-info relatives what they think of electric cars, and it turns out most of them still think they're totally unreliable and have terrible range because they don't trust the guy who called a hero a pedophile in Thailand and who was in a really bad and unfunny SNL episode. Seriously, those are still the main points of reference a lot of people have. And I think it's doing a lot of damage to the market in general, because once you get outside of the range of people who aren't already in favour of electric vehicles and weird nerd Musk fans, the market drops off like a rock, and Tesla pre-order numbers aren't a good counter to this issue. 1.5 million cybertruck preorders! In a country of nearly 400 million people! How many Teslas have been sold? About 5 million globally. Ever. That's a lot yeah, but it's next to nothing compared to the overall market and there's definitely something messing with the demand.

Also, Tesla desperately needs a union, like holy shit. It's like, the first thing they need after getting a dedicated and competent advertising department.

Edited by Zendervai on Oct 12th 2023 at 2:28:03 PM

Tesla workers can’t legally form a union, as they receive shares as compensation and it’s illegal to have a union with a large number of shareholders being members.

Which is a law that predates Musk and needs updating. I get the original point being to avoid unions being taken over by the owner giving shareholder buddies non-jobs, but the stock market has changed dramatically since the law came about and there’s a lot more ability of middle-class employees to invest in their employer.

It could also be fixed by getting rid of the dumb law that only gives union members legal protection if the union is formally recognised as the collective bargainer for the workplace (which requires 51% of staff to join the union). Then people could choose to either join the union and opt-out of shares compensation (but probably get better base pay and conditions) or remain outside the union and get shares as part of their compensation.

Good luck getting the US government to force large manufacturers to unionize, even if Democrats manage to retake control. Let's go for realistic solutions. Rather than a bunch of different collective bargaining organizations, I'd like the government to guarantee good labor standards (wages, hours, leave, healthcare, retirement, etc.). But we can't all have nice things.

I'm not going to play the Musk blame game. Regardless of his antics, the fact is that the majority of consumers in the US market seem unaware of the value and usability of electric vehicles. I don't have equivalent data for Europe, but GM and Ford don't seem to be in any hurry to advertise this stuff either. (Aside: Every time a legacy EV ad campaign comes on TV, it bumps Tesla's search statistics and orders.)

China is an interesting market because Tesla isn't the biggest EV player, but the company that is, BYD, focuses on cheaper models and splits its production between plug-ins and full EVs. Tesla is way more profitable per-vehicle. BYD is trying to break into the European market and it has its sights set on the US, which we've talked about already. I have no data to support claims that the quality of its vehicles is poor.

Chinese consumers seem much more informed about EVs, but there is an awful lot of disinformation and outright propaganda being spread around as well. There's a trend for safety claims to blow up on social media, even or especially when these claims are faked. As one example, "brake failure" claims are apparently rampant, and several major cases (including against Tesla) were later proven to be falsified and their perpetrators made to pay restitution.

All that aside, there are some facts that can't be ignored.

• Battery-electric vehicles require fewer mechanical components, less labor, and fewer workers to manufacture. (They also require less service.)
• Legacy automakers tend to specialize in engines and use networks of third-party suppliers for other components. They have no direct experience with batteries or electric motors, and they don't write their own software — something that is crushing VW at the moment.
• This means that if BEVs replace ICVs on a one-for-one basis, fewer total workers will be needed and those workers will need to adopt new skills.
• Tesla holds approximately 60% of the BEV market in the United States.
• All significant automakers except Tesla (and BYD) lose money on every BEV they produce and sell.

If I were Ford or GM (never mind Stellantis, which hasn't built one yet), I'd be sandbagging electrification as much as possible. This only gets worse if a major strike forces me to significantly raise wages and provide job guarantees.

There are no morals here. I'm just stating reality. Tesla would have no reason to exist if GM hadn't scrapped all of the EV-1s and sat on electrification for twenty years. They have nobody to blame but themselves.

Edited by Fighteer on Oct 12th 2023 at 3:40:27 PM

You seem to have missed the joke in my post. The US federal government is already doing exactly what I said, with a combined EV/Union Job tax credit on vehicles, one you yourself have posted about multiple times.

The China comparison isn’t valid, because all other things aren’t equal and never will be.

The part I’ve bolded is something we should be fighting against, electrification cannot afford to wait the full timescale that it takes for full manufacturing electrification and then the full time it takes a car to go from being brand new to being scrapped (average 14 years). We need to flood the market yesterday so as to satisfy existing demand in the first-hand market, build demand in the second-hand market, have extra supply ready to address population/vehicle growth and reduce prices by increasing supply.

I know we’ve been over this before but I believe this is based on them including production line setup costs into the cost right? So we don’t actually know if automakers are turning a profit on each the BEV individually and just still in the negatives because of the major upfront costs they’ve had to pay to get production going.

It’s like saying a nuclear power plant makes a loss on ever bit of electricity sold, just because it won’t turn an overall project profit until it’s sold 10 years of the 40 years of electricity it will sell.

Edited by Silasw on Oct 12th 2023 at 8:49:34 PM

Yeah, it's important to avoid falling into the Hollywood accounting trap. Yes, the companies need to pay down the upfront costs, but are they losing money on the actual production process of each car? If yes, they're doing something wrong. If no, they just need to keep ramping up and they'll be fine. Investing money into new product lines is normal and expected and it's not actually weird to "lose money" in the short term while paying off the cost of the investment. It's how heavy industry works and pretending otherwise is just being disingenuous.

I mean, hell, if we applied this standard to Tesla, Tesla would have been a failure until 2020, the first year they turned a profit the whole year. It's only fair to give Ford more than a year before writing off the production of the F150 lightning as a failure due to needing to pay off upfront costs, because Tesla got twelve years from their first release to making a profit. Not to mention that GM and Ford are making an overall profit. It's a little weird to be claiming that paying employees the same on the electric production lines as the gas car production lines could lead to GM or Ford going bankrupt because the cost is not that high and they're fully capable of handling it everywhere else in the company. Or are you saying that electric cars are impossible to sell without exploiting the fuck out of the workers, Fighteer? Because it sounds like that's what you're saying.

Edited by Zendervai on Oct 12th 2023 at 3:57:58 PM

They might also just not be operating at sufficient scale for the price point they are selling at. Economies of scale are a huge factor in manufacturing profitability and a lot of ICE manufacturers haven’t made the switch at scale.

Which is crazy, because if you’re about to generate a bunch of surplus workers than a switch at scale should be easy, because you’ve got the labour pool right there.

Yeah, that's true. But it still stands that paying off upfront costs isn't actually a manner of concern or a thing to really focus on, because literally every car company on the planet operates like that, and, again, it took...17 years total for Tesla to reach that point and they're almost certainly producing, say, cybertrucks and semis at a loss under that definition, because that's how the car industry works. They're just not announcing it like that.

A company that uses surpluses from one sector to pay costs from another sector until the second sector becomes independently profitable is standard. It's not a gotcha.

Tesla's kind of an unusual company in a lot of ways, some of which are real problems that'll hurt the company bad once the big companies get into gear. Which will happen in the long run. Being the first major player in a market only gets you so far, especially if you're deliberately limiting your advertising reach, especially since it's impossible for a car company to manage to reach tech industry monopoly levels.

GM and Ford both also looking into electrification of public transit is also going to have an impact, because those are incredibly lucrative and long term government contracts and Tesla's been totally and completely ignoring that market. Like, straight up, Tesla should have been designing an electric bus. It's not a sexy or exciting market, but if you get the contract for a city? That's thousands of units all in one go and you get the maintenance contract too for years. It's also a market where Europe is ripe for the picking, especially since the Russia/Ukraine thing is putting a real crimp on the natural gas powered buses over there.

But that would require Elon Musk to understand that public transit is important and necessary and absolutely worth investing in, instead of his (very well documented) kneejerk "ew, why do I have to sit with the plebs" attitude.

Edited by Zendervai on Oct 12th 2023 at 4:14:04 AM

@Silasw:

In fact, the union component for the federal EV tax credit was dropped, so the point stands. Biden's administration is not supporting unions with fiscal policy, just verbally. A lot of that falls on Congress, of course, but we have no reason to expect that the era of divided government will change any time soon. I'd like to see a Democratic trifecta in 2025, but I'm not pinning all my hopes to it.

While you aren't wrong, there are two critical problems:

1. How will we get automakers to build capacity that will become obsolete once we go from replacement to maintenance? The ROI on manufacturing capex can span decades.
2. How will we get consumers to increase their purchase rates so that this replacement can occur, especially in today's higher-interest environments?

Umm, sort of. I don't have the accounting chops necessary to give you definitive answers, but you're broadly correct that marginal cost only becomes dominant once production reaches scale.

Tesla was able to earn gross profits on vehicle sales before it was profitable as a company because it built capacity as it went. It didn't have huge stranded costs like legacy auto and it didn't spend billions on production space that it wouldn't need for years to come like Lucid and Rivian.

Of course, it went through its own turbulent times, largely because leadership wanted to automate too many of the production tasks. The Model 3 ramp nearly killed Tesla because it had to go back and retool large chunks of the assembly lines. That's not something I'd expect of Ford and GM, but by the same token I would have expected them to scale their EV manufacturing a lot faster than they have been.

Anyway, Tesla is spending on capex and R&D at a high rate, so the point you're making is moot regardless of scale. That goes into its operating margin, which is also positive.

@Zendervai:

Tesla has been increasing its advertising slowly, so this may not be the gotcha that you think it is. The company is aiming for a goal of twenty million vehicles per year, globally, by 2030, which would double Toyota's current sales. That wouldn't make it a monopoly in the sense of Apple or Android, but it would be the dominant player by far.

It's also false that Tesla isn't considering other types of vehicles. It's developing a smaller car with a price target of $25,000 along with a variant of that car intended for use as a dedicated robotaxi. It is also looking at a commercial van of some sort, although this is being kept very close to the chest.

Electric buses and other mass-transit vehicles are obviously necessary, and they are being produced, but I fear you're falling into the trap of thinking that people will stop using cars in the next few decades. That's a pipe dream.

Edited by Fighteer on Oct 12th 2023 at 4:26:19 AM

So why shouldn't Tesla be designing an electric bus so they can be ready when that particular market curve happens? Because if they aren't, that means that when public transit inevitably has to ramp up (which it will, it's the only cost effective way in the long run to keep people moving given that a bus can transport way more people with a way smaller relative material investment), Tesla will be basically locked out the market. Because bus manufacturers actually do have regional monopolies for various reasons and if Tesla isn't ready, they'll lose out completely.

"It's also false that Tesla isn't considering other types of vehicles."

Great, point me to where I said that. I said they aren't designing a bus. Are they designing a bus and I missed it?

And, like has been gone over extensively with you in the past, the public transit infrastructure needs to be ramped up first in order to disincentivize car use for people where public transit is easier, cheaper and more effective. Yes, people will keep using cars, literally no one has said otherwise to you, but if a city fixes their public transit system, the number of cars being used will go down, by quite a bit, which will have positive knock on effects basically everywhere, and is effectively the only tool that can be used to reduce congestion, because nothing else works for that.

Edited by Zendervai on Oct 12th 2023 at 4:32:17 AM

Does Tesla need to design a bus if other people are already doing it?

I think you mistake my core point here, Zendervai. The idea isn't to have Tesla dominate in every possible market; it's to electrify transportation as quickly as possible.

Legacy auto is sandbagging and digging its heels in to the maximum degree possible, and the UAW is, intentionally or not, making the problem worse. So someone has to step up.

Edited by Fighteer on Oct 12th 2023 at 4:32:09 AM

You haven't addressed why you think I said Tesla wasn't working on anything else when I didn't say that.

Dude, stop picking fights. I'm not interested. I want to talk about the large-scale economic issues.

Was the US manufacturing part dropped? Because that has the same effect of blocking Chinese cars from the market.

It will take decades for manufacturing to fully switch over and even once it does we’re looking at around 14 years for the western market to go from replacement to maintenance and even after that we’ve got all the emerging markets that need to switch. Sure China is going take a big chunk of that pie, but with the vehicleisstion of Africa and population growth in other parts of the developed world there’s a lot of growth in the market to come.

So they build the massive surge of manufacturing capex now and it runs for let’s say 30 years (do we know how long a EV production lines lifespan is?) and then they do less replacement in 30 years, likely managing the staffing reduction through natural attrition instead of layoffs.

One way is to improve consumer purchasing power so that they’re able to purchase in a financially affordable way, we do that via wage increase. The Ford tactic of paying your workers enough that they can buy your product.

That’s the carrot, the stick is what’s already in the pipeline in many countries, the legal banning of the sale of new ICE vehicles. The other less heavy handed way to do it would be to calculate the cost to carbon capture all the emissions of an ICE car and stick that on the sale price as a tax.

Why aren’t Lucid and Rivian using that production space? We keep seeing that the EV market has low supply and high demand, so why aren’t they ramping production? Do they just lack the cash on hand?

That curve has already hit. London has the second largest zero-emission bus fleet in Europe (with nearly 4,700 buses being BEV or Hybrid (over 50% of the fleet)) but lots of cities have been electrifying their buses for a good decade, Tesla would have to focus exclusively on the tiny US market (which already has active participants) and it’s frankly not going to be worth the effort for them to branch out. They missed that bus.

If wages are dragged down such that people can’t afford an EV that won’t help electrification. We need both manufacturing at scale and good wages for electrification, which are the two things UAW are fighting for.

Edited by Silasw on Oct 12th 2023 at 9:55:23 AM

No, that's still there, and it's also affecting Japanese, Korean, and European brands. Regardless, it won't be healthy for the market if the only two surviving major automakers are Tesla, supplying North America, Europe, and Asia; and BYD, supplying Europe and Asia. (Africa, as always, is an afterthought in these markets.)

Edit: I should note that nothing in the law prevents foreign automakers from building battery assembly plants in North America to qualify for the credit.

Right now there aren't enough EVs being made to even approach maintenance, never mind replacement. We have to get to that ~80 million global number first before we can start moving beyond to accelerate the transition. If we can bring the 80 million down as well through mass-transit, so much the better, but there is a huge gap to close.

I don't know. I posted about this over in the EV thread, but Lucid claims supply chain issues — it can't get the parts it needs to build the cars. It's set to only hit half of its 2023 goal, at around 10K units. Rivian is looking to hit 52K units, but even with a big factory space it has to install the capacity and ramp it up.

It doesn't help that both of these companies sell relatively high-priced vehicles, limiting their addressable market. I wouldn't be surprised if Lucid is bankrupt within a few years, especially if the Saudis don't continue to bail it out.

Har, har. The addressable market and thus the ROI on buses isn't large enough to justify the investment from a company like Tesla, especially (as has been noted) if others are already doing it. (Edit: It's certainly not a market you want to enter early as a startup.)

The batteries needed for one city bus could support up to ten passenger vehicles, which will generate substantially more gross profit than the bus. (This is also an argument against the Tesla Semi, one that Tesla is well aware of, but Class 8 trucks are a much larger total market.)

This would be more relevant if manufacturing were a larger sector of the employment market. As of the latest available statistics, manufacturing jobs in the United States represent around eight percent of total employment, so even if every single worker in that industry doubled their wages, it wouldn't make a huge difference in the overall purchasing power of consumers.

(Incidentally, agricultural labor is somewhere around three percent, but they have enormous power to wag the dog in Congress, not unlike coal workers.)

Like it or not, the United States is a service economy, and manufacturing labor unions are holding back the tide on an increasingly small inlet of the vast ocean. They aren't competing with non-union shops in the US any more; they are competing with overseas labor.

Edit: This is one of the reasons why I say we need government solutions to labor standards. Manufacturing unions, even if they had 100% of the available workers, would still be a small part of the overall economy.

Edited by Fighteer on Oct 13th 2023 at 2:32:10 PM

Reuters: UAW strike could upend GM, Ford financial strategies

I have some thoughts here. First, UAW leadership is clearly trying to hit Ford and GM in the pocketbooks, and is apparently succeeding. There's an idea going around on social media suggesting that Shawn Fain is trying to delay the companies' investments in electric vehicles, which we've discussed may lead to fewer net jobs in the future.

But when I look at $3.8 billion in dividends, or $5 billion in share buybacks, I see that these companies have plenty of free cash flow that they don't need for capex. If they needed the cash, they wouldn't be in such a rush to pay investors. So regardless of Fain's position on EVs, Ford and GM could meet his terms without affecting their ability to invest in new factories and technologies.

The narrative from the Big Three makes no sense except to hide that that they're prioritizing shareholders over workers.

Edited by Fighteer on Oct 16th 2023 at 5:50:05 AM

Yeah, UAW is almost certainly of the belief that if somebody has to take a reduction in gain to grow the company for long-term sustainability it should be the shareholders not the workers, as the shareholders are the ones who will make the profits.

It's not just that, but if Ford and GM need to pay workers more, they can take that money from free cash flow without affecting capital expenditures at all. That they don't is a straight admission that they care more about shareholders than about their companies' long-term prospects.

Edited by Fighteer on Oct 16th 2023 at 6:52:12 AM

When it turns into "but our profit might drop by a percent of a percent of a percent!" (I know it's not that extreme, but I'm making a point), it's really, really hard to take the companies seriously. When it's not even a question of profit vs breaking even, and it's just crazy profit vs slightly less crazy but still crazy profit, boo hoo? Just pay your workers properly, goddamn.

Them having that much free cash flow also means they absolutely have the capital to push their way into full electrical production.

Edited by Zendervai on Oct 16th 2023 at 7:06:32 AM

China Observer talked about how Russians didn't like Chinese cars. It's mostly due to how the cars are assembled and there's no modifications made from the factories to better handle weather/terrain conditions in Russia.

He also mentioned the pricing. Aside from showing videos that the Chinese are very lax in the assembly/safety standards that they don't care on improving reliabity since they're the only ones there.

CO also mentioned the strict sanctions, forcing Russians to rely on airbags/seatbelts from other places or allow certain exemptions (eg a Russian-assembled car with no seatbelts/airbags will be allowed for now).

General Motors (GM) released its Q3 2023 earnings results today, showing a year-over-year drop of 19% in its net income.

Pertinent to our discussion is that it claims to have lost $800 million in earnings (EBIT) so far due to the UAW strike and says it is now losing approximately $200 million per week. This was before the most recent strike action by the UAW that targeted GM's Arlington, Texas plant. That factory is supposedly its most profitable.

GM did not disclose the contribution of its EV division to its margins, but it acknowledged that it continues to lose money on them. It is postponing plans to deploy new EV models, stating the need for them to be profitable first and achieve volume sales second (my phrasing).

The Chevy Bolt, GM's only mass-produced EV, is being discontinued at the end of this year. Due to demand, the company has announced plans to bring a new version to market at an unspecified future date. Despite its popularity, it never achieved sales profitability even before the mass recall in 2021 for battery defects.

I continue to revel in the irony of the Biden administration touting GM's "leadership" in electrification.

Edited by Fighteer on Oct 24th 2023 at 6:37:28 AM

Last I had heard the "leadership" claim was a union demand, that the companies mentioned there had to be unionized under UAW...

And well, given that the UAW heavily fights electrification....

I feel like the UAW fighting electrification might be related to how every single time these big companies try to do an electric line, they immediately attempt to screw the workers over and pay them a lot less to work on electric cars. One of the points of contention between GM and the union is GM trying to get out of covering pensions for people hired to work the electric lines.

As Fighteer has pointed out, these companies are very cash flow positive, and there’s not really any actual reason to behave like this. If GM and Ford were like “electric car workers are under the same contract as gas car workers” and didn’t consistently attempt to carve out exceptions for no good reason, the unions would probably be less hostile.

But I can’t know that for sure, admittedly.

In fairness to GM, it has managed to retain second place among the Big Three US automakers in electrification by virtue of Stellantis having not yet released any BEVs. That's a kind of leadership if you squint very hard.

Unions or no unions, Biden made himself look foolish with that statement. I don't blame him for pinning his career to the UAW. I do blame him for blatantly misrepresenting facts (dare I say lying?) because they told him to.

Workers at GM's Tennessee Ultium battery plant did vote to unionize last December, and won pay raises this year, but there is not yet a formal union contract in place.

Edited by Fighteer on Oct 25th 2023 at 8:39:46 AM

With that statement, there wasn't really a good approach to it. Either praise a company that isn't really doing that well at electric stuff, or praise a guy who is fervently and incredibly hostile to unions. And the Democrats generally need to work with the unions. He could have made no statement, but that'd get people focusing on how he doesn't care about sustainable tech.

I can see an argument that he was attempting to kick GM in the ass and get them to get in gear, but most big companies aren't going to be very receptive to that.

Edited by Zendervai on Oct 25th 2023 at 8:42:18 AM