Good morning! Before we dig into the car news, let’s address the most important news of all: It’s Friday, baby. We did it. I’m proud of you, and I want you to know I was behind you all the way on this. Let’s close out this week with some news about Audi production in the U.S. and ditto on that for Volkswagen’s new Scout brand; Mercedes’ big software plans; and Hyundai finally moves to deal with some truly horrifying behavior in the South. Let’s dig in.
Audi’s American Plans
Audi is an interesting creature among the three major German luxury brands in that it does not have a manufacturing presence at all in the U.S. BMW has a gigantic plant in Spartanburg, South Carolina, actually the biggest one it (currently) has worldwide and the producer of basically all its SUVs sold globally. Mercedes-Benz also has a pretty large plant in Tuscaloosa, Alabama. Both of those have been around since the 1990s.
The closest Audi has come on this continent, however, is a factory in San Jose Chiapa, Mexico. That’s about to change soon because the new Inflation Reduction Act says that if you don’t weigh in, you can’t wrassle. In other words, if an automaker wants its electric vehicles to qualify for tax incentives—making them more enticing to buyers over competitors who don’t offer that—both the cars and the batteries must be made domestically. The goal of the IRA is to localize both EV production and the supply chain around it, and so far, it’s working. Many automakers have announced they’ll create or expand their U.S. production bases now to take advantage of the new rules. It’s already set to drive a lot of American manufacturing jobs.
That now includes Audi, Reuters reports, citing comments directly from the brand’s CEO. Audi officials said they were considering this move last fall, but now it appears to be a go for real. And as makes sense, it may be a team-up effort with another VW Group brand. From that story:
Chief Executive Markus Duesmann said that a decision had not yet been made but that the IRA made it far more attractive to build electric vehicles (EVs) in the United States. Duesmann made the comments in an interview with Frankfurter Allgemeine Zeitung, which were later confirmed by the company.
Asked whether Audi would build a plant itself or do so together with other Volkswagen brands, Duesmann said: “Both are possible. But the probability that we do it within the group is high.”
The $430 billion IRA was passed last August and offers subsidies and tax incentives for a swathe of domestically produced green industry products, including a $7,500 consumer tax credit to buyers of North American-made EVs. It also includes a restriction on battery minerals and component sourcing to the region, in an attempt to phase out Chinese inputs.
VW’s Scout Will Reportedly Do The Same Thing
Volkswagen Group (VOWG_p.DE) will build its own production plant in the United States for its new Scout brand rather than collaborating with a partner, industry publication Automobilwoche reported on Friday, citing company sources.
[…] Volkswagen is expanding its existing U.S. plant in Chattanooga, Tennessee, to produce the ID. Buzz. However, the Scout brand will build off-road electric pick-up trucks and SUVs that require a new platform and the Chattanooga plant does not have enough space to do it all, a source told Reuters last May.
Mercedes Wants Drivers And Subscribers
Speaking of big plans, BMW’s probably gotten the most heat (yes, pun very intended) so far for its subscription feature stuff. But rival Mercedes has a lot in store there too. At a recent event where the Silver Arrow brand unveiled the new E-Class interior and its fancy TikTok integration, executives said Mercedes expects its “robust menu of on-demand services” to explode over the next few years. That all starts when it debuts its new proprietary in-car operating system.
Here’s Automotive News on what to expect:
We’ll see!
Hyundai Cracks Down On Supplier Accused Of Child Labor
Hyundai is about to be done with Smart Alabama, one of the U.S. parts manufacturing companies it owns that has been accused of using migrant child labor in recent months. This has been an absolutely horrifying story and it could lead to criminal charges. Children as young as 12 were allegedly working at some of those plants.
Now, Hyundai says it will divest itself of one of those subsidiaries. Here’s Reuters again, the news organization that broke this story in the first place:
One of the plants where children worked, SMART Alabama LLC in rural Luverne, Alabama, is a direct Hyundai subsidiary. According to Hyundai’s financial statements from last year, the automaker controls a 72% stake in SMART.
[Hyundai Chief Executive Jaehoon] Chang wrote that Hyundai was “in the process of divesting its ownership interest in SMART” but it would ensure “that the economically important jobs in the Luverne, Alabama community are preserved.”
Hyundai’s letter did not say when the transaction would be completed or identify a buyer or the form a divestiture would take. Since the early 2000s, the metal stamping plant has made chassis parts for hundreds of thousands of Hyundai vehicles per year.
If you’re wondering how the hell this happened in the first place:
As Reuters reported earlier, many of the underage workers who found their way into the Alabama auto parts plants were recruited by third-party staffing agencies, a process that can allow big corporations to turn a blind eye to the illegal employment of minors.
In the shareholder letter, Chang reiterated that Hyundai was “discouraging” suppliers from relying on such staffing agencies in the future.
These are very rural plants where things like staffing can have minimal oversight. One hopes that will soon change; heads need to roll over this whole thing.
Your Turn
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My take of subscription services…
Car companies will only make one trim in any car, I’m sure long run, it works out miles cheaper for them, especially as the plan is move upmarket anyway. It will be the subscription costs that alter the ‘trim’. Maybe wheels, tyres, brakes expected, but even then with better regen tech, they might be able to pull the brake option.
You’ll then have subscription for a bunch of features, might be in packs, might not, might be buy 2 get the 3rd free deals. Who knows. But I think they are hoping people will cough up for a minimum of features, these might even be seasonally based. If they sell it right, the user will think they are only paying for features they need or really want. Personally, I never use heated seats, but I do use cooled literally 12 months a year, but find me a car that only has cooled seats… Or even the option to try a feature out for a couple of months before committing. Previously you’d either shell out for the top trim, or go without and always wonder what if.
From the actual environmentally friendly part, you now don’t need to go buy a new car for a feature your current car doesn’t have. You click a few buttons, boom sorted. I think really its going to be down to software improvements. You’re car has only done say 25k in 5 years, its still solid, but the new lane keep assist software looks the goods, so you cough up for it. The car manufactures no longer care you aren’t buying a new car every 3-5 years as they know they have constant cash flow anyway. It’s almost in their best interests to keep you in the same car, and keep the upgrades coming, as if you jump to another brand they loose out big time.
The final one, car manufactures will have to build better cars (or at least more reliable). If their revenue model is based on subscriptions (rather than initial sale), that the longer you have, the more they make, they need to make the car mickey mouse so you hold on to it. If its a shitty car, with shitty subscriptions, you’ll jump ship asap.
Don’t get me wrong, I don’t like the idea, but I can see that’s some of the logic behind it. (maybe not the better built cars bit, that’s deffo optimistic)
I think (hope) that attrition will kill subscription services. What seems like a good idea on a new car quickly becomes a financial leech after a few months. $20 a month for heated seats and auto wipers turns into $250 a year with taxes for something you use for a few minutes at a time. OnStar anyone? I sincerely feel sad for younger generations. Nobody wants to sell you anything, they want to rent you everything. Welcome to the company store.
I have purchased 3 new cars in my adult life (2000, 2008 and 2018). When I’m due for another car in 5-10 years I would hope to buy another one. However, the subscription idea rubs my the wrong way. Hopefully by then the consumer will have gotten smart enough (pause here for 15 minutes of laughter) to call bullshit and this fad will have disappeared. Realistically, I may have purchased my last new car and will only be buying pre-2020 vehicles for what remains of my life.
The only subscriptions I can see paying for are where outside content is being brought in, like OnStar(which is crazy pricey), Sirius(which you can haggle and get not terribly pricey), Starbucks, etc.
There can also be upsides to certain things like Vinfast’s battery subscription for EVs, that seems like an option for people worried about the batteries. Possibly tire companies will start offering subscriptions for that, maybe one day all wear items will be able to be subscription based, “The rain-x wiper package is $19.99 a month but the Delco is only $15.99!”
But paying for a part that generally doesn’t fail, or is built into the drivetrain or what not is so lame. What happens when you sell the car? Does the manufacturer support the new owner? Or is it all locked down? What happens when the wireless networks update and your car can no longer receive the subscription signal, does that brick it like a jailbroke iphone 4?
It wouldn’t be so bad if we hadn’t seen some of these issues with 3G sunset and OnStar a year ago, and that impacted cars less than 10 years old! I guess MB doesn’t care about people driving 10 year old cars though so no worry for them.
Okay, but hear me out: what if you paid the $1,200 and got to KEEP the performance upgrade you’ve made to your EQ?
Subscriptions for capabilities and stuff that’s already installed on the car just feels like a shakedown. Always will. I don’t mind the idea of subscribing to data—say, data for continuously updating maps or music services—but performance upgrades and comfort extras should be a one-time fee.
I really worry what this will mean for DIYers and tuners. If extra performance or comfort features are already there on the car, the automaker shouldn’t punish owners who figure out how to enable it on their own without paying the monthly extortion fees.
Where will it all end? Will you start needing subscriptions to use your A/C? Roll down a window? Reposition your seat, or mirrors?
I also will NOT be buying any car that requires these services – if I’m going to own a car, I will own all of it.
“dealers must meet training requirements and hit subscription sales volume targets to earn the revenue share.”
This can’t possibly go wrong or be abused
Hey PG,
Thanks for rooting for me. It means a lot. I have to ask though, what does it mean to not make it to Friday?
Warmly,
Alex W.
There’s the obvious/realistic one, but maybe you get stuck in a Groundhog Day situation, repeating Wednesday for eons.
Or you are in a longer time loop, stuck Monday through Thursday.
Or, like a messed up Quantum Leap, you are jumping from weekday to weekday, forever hoping your next jump will be the jump to Friday.
Not much, all things considered. We’re all one week closer to death.
D’oh, you asked what it meant NOT to make it…
…well, time is a flat circle, and nothing matters. I’ve been stuck in an endless loop of wake up, get coffee, forget what day it is and stare at the Puffalumps for an hour or two. Sometimes I look upon my 944, too, and despair. All in all, my answer is still “not much.” Everything is meaningless, and we’re all stuck on this spinning orb of pointless suffering until we die. Eat Arby’s, I guess.
You have a strong point.
Musk having to be convinced to allow residents of Florida to get extended range in order to flee a hurricane was a fucking joke. People buying used cars with extended range, then getting it cut back cause they didn’t buy that range but the previous owner did? Fucking joke.
I’m full time WFH, my wife is full time WFH, we don’t have a commute and we don’t take road trips. When I drive my car, it’s short trips for errands or fun drives for the sake of driving. I don’t need a subscription to anything for that.
So you think.
“Coming to you in the near future!!!” “You only need short trips? We have a packages of 25, 50 or 100 short trips for 30% off for a limited time. Add ons: “Air Conditioning”, “Fun”, “Navigation” and many more. Log on now to http://www.enablecarsystemsthatyoualreadyown.ctrl.
Well, if Audi’s shopping, there’s some industrial property out in Westmoreland County that has some vacancy
hehehe I see what you did there 😉
Subscription services? Looks to me as if future car buyers are going to be stuck with them and, in time, will just see them as a “normal” cost of driving. People will gripe for a while, but eventually will take the plunge. How many re-upped their OnStar accounts just because?
Home computers do this as well, with apps that are free to begin with — you bought the computer, so you bought what’s inside — and then, in time, require a paid upgrade if you want to use what you already shelled out for.
I’ve seen ads for a couple of phone and/or Internet providers touting “10G” networks. When 3G died, I had to replace my perfectly functional phone. That’s going to happen again, and soon. Will car manufacturers get it right this time? My bet is on “nope!”
I guess I am the outlier. When I bought my last new car it came with a trial of XM radio, and Onstar. I cancelled both before they were to expire.
I build my own computers and only use Free software. I won’t even look at “Trial” software.
I can only fight the subscription based consumerism, I can’t change where it’s going unfortunately.
I don’t have your computer chops, so I just use what I have, and don’t get fancy.
Which, BTW, is how I see cars. My current ride is pre-OTA Updates, non-subscription, and I get by just fine. My intention is to stay with cars of that sort (or, if I can find/afford what I really want, something older). As General Ripper famously said, “I withhold my essence from them.” Which, in this case, is money.
Kinda in the same boat here. My PC does not have a single piece of subscription software because it is simply not necessary.
And a lot of these car subscriptions are on the level ofpaying a fee to use the discrete graphics over the integrated graphics.
The domestic production requirement is clearly working as intended. I am starting to wonder how it will all shake out. Growing pains and quality control issues as companies rush to open US factories? Will US models and European/Japanese/Korean models become completely different as they shift production for the US here? Will supply chain issues ease or be exacerbated by bringing so many factories here? Will more foreign companies start moving toward more custom orders with stateside factories? Will competition for labor here make foreign-made cars competitive without the tax credit?
It’s going to be an interesting time for vehicle buyers and for auto workers.
I love that companies are all of a sudden coming here to make shit.
American Manufacturing is a good thing.
Ok, what the roaring blue fuck has to be wrong with a person where they think “getting children to work in factories is within my moral wheelhouse”? Seriously, are we not past that by this point? What the hell happened to basic human decency?
It’s a willingness to put cost savings/profits ahead of everything. When your company is asked to source the cheapest labor you can, you figure you can get a couple 14-year-olds for the same money as someone in their 20s. You just make sure not to know it’s happening and pretend that your very policies didn’t lead to it.
“We weren’t trying to hire kids, we just did a terrible job verifying anything about our workers.” It’s a weird defense that shouldn’t work, but might. They’re probably going to try to put this on the kids for falsifying documents (that they likely encouraged/helped them to falsify, just without a paper trail to prove it).
“They’re probably going to try to put this on the kids for falsifying documents (that they likely encouraged/helped them to falsify, just without a paper trail to prove it).”
This is why we need strict liability for child labor laws, where mistake of age is not a defense.
Absolutely. Instead, we have some states trying to relax child labor laws, sadly. Iowa and Minnesota that I know of.
As a reminder, these actions are all GOP-lead, so voting matters. When they tried it in Wisconsin, the Democrat governor vetoed it, but in Iowa it will pass into law. (Iowa is also the state where you can buy a gun if legally blind 🙂
Don’t worry, they’re totally fixing it. By divesting from the subsidiary so there’s another layer of indirection between them and the child labor they’re profiting from.
“don’t feel bad Mercedes is hiring”
Gotta make those profits baby!!!
I would say it’s fair to assume that a large number of people that are cool with this are also cool with the GOP members they vote for. You know, the ones that literally wanted to kill the Vice President they elected and would vote in favor of concentration camps for minorities and liberals in a second. In other words, they have no morals.
Wrong website…
Not at all. I’m sorry I hurt your feelings.
Subscriptions: none for anything that isn’t consumable like food or entertainment and neither apply here. The music and traffic they list are provided by the phone that I pay a subscription for as it is an ongoing service. Even for the things I would get a subscription to, I generally don’t. Upfront costs don’t bother me as I can determine value at that time and buy or not, but I try to keep monthly expenses down because life is unpredictable and BS things like these are easy to forget (and sometimes hard to remove if they’re automatic withdrawals as some companies make that as difficult as possible. I wonder how many optional car subscriptions will continue to be deducted after a vehicle is sold and how much nonsense a customer will have to go through to end it and get their money back. MB, maybe not as much, but a shitty company like Hyundai, when/if they turn to these?). While I actually prefer the minimum amount of crap (AC is plenty enough luxury for me) and wouldn’t want anything they’d ask for subscription fees for, I don’t want the unusable equipment even installed and just demanding subscription fees for installed hardware in general marks a company as sleazy to me and I’m unlikely to do business with them regardless. Also don’t want OTA updates, which means connected vulnerabilities. If it’s actually an important update, I’ll go into the dealer.
Couldn’t say it better myself. If I remember correctly Toyota allows OTA’s to be turned off on new cars. Not sure if anyone else does. If you offer a car with heated seats, and I have to pay a sub for it, I won’t be doing business with you. Hell, I don’t even want infotainment systems in my car. I am happy with bluetooth, or a cable to listen to music.
Something about recurring subscriptions bothers me on a subconscious level, even when rationally and financially, they make sense.
To buy all the DVDs it would take to equal the Disney+ I subscribe to for my kids would costs as much as a decade of monthly charges, if not more. But there’s something about the idea of paying forever and ever, and theoretically losing everything the second I don’t pay up, that’s extremely discouraging.
The future where you’ll own nothing and rent everything is not one that I’m particularly excited about. But enough people seem to be happy with it, or at least content with it, that it keeps affecting more and more of our lives. Why should cars be any exception?
Same here. For me, it just means I’ll spend even less as I’d generally rather go without than pay for a subscription for something that I really don’t need.
I agree, but also, the subscription model for things like streaming services is likely about to get more and more expensive.
Much like most of the tech sector, during the free cash low interest rates era that lasted far longer than it should have, all these media companies went on a drunk spending spree. Now, they’re forced to actually make money. Disney + and others aren’t going to be the deal they once were.
I also find it discouraging that with damn near everything being a “rental”, my poor checking account has some sort of pending transaction damn near every day of the month. I know that overall it might be a better deal for me, but I can’t shake the feeling that someone is always grabbing at my money. What if one day I need to shut it all down because I’m experiencing an unfortunate financial meltdown? It’s hard to imagine spending tens of thousands on a car, owning it outright, but then during a time of hardship having to go without heated seats because they’re tied to a damn subscription…
“during a time of hardship having to go without heated seats”
At least with heated seats you can hope it happens during summer….
I guess when you have the philosophy of put a little down and finance the rest you dont see the light at the end of the tunnel of going years without car payments, or no mortgage or rent payment. I see if you want to retire getting house and cars paid off really eliminates your expenses to enable you to do it. But if driving new cars all the time is what you want over financial security and future retirement go for it.
Now if you dont pay for remote start and heated seats subscription can you install these features after market like you have always been able to?
That’s going to be a big question. Will disconnecting subscription features break other things, since they’ll be routed through the car’s computer? You’ll definitely need to install a separate switch for aftermarket features, since the existing ones are tied to the subscription. Will you need to leave the old wiring/switches in the way so the computer knows they are there?
Can’t really stop you from buying a seat cover with a 12V plug. Probably won’t roll with anyone buying a new BMW though.
Remote start can be done with either the DVD or Disney+ model though. If it’s from your key it’s the DVD, if it’s from your phone that requires data to the car and it’s more like the Disney+ model. My understanding is that with most cars you only have to pay for the phone remote start.
I am open to paying for a subscription service when there is some recurring effort required on the part of the service provider in order to keep it going. Non-automotive examples include things like streaming services (they continue to produce or license new content and deliver it to me), cell phone service, etc. I won’t pay a subscription just to use something that I already own.
In a car, maybe I’d pay a subscription for updated in-dash navigation that includes real-time traffic updates since that service requires regular maintenance and investments on the part of the provider. I don’t want to pay extra every month just to use the bun-warmers that are already installed in the car.
I’m not so sure about the Mercedes performance subscription. Other than greed, what good reason is there to pay for that forever as a subscription instead of a one-time payment?
Do you think VW/Audi will go back to PA? That was where their first US factory was in the 70s, and the first foreign car factory in the US (near Pittsburgh)
Maybe more vertical integration/less outsourcing might help the child labor shit, too.
No car manufacturer in the right minds would build a plant in PA. I lived less than 45 minutes from the VW plant in PA. I remember the devastation when it closed. Some of those people ended up working retail sales for Sears. Then Sony was building TVs there. Then they left too. Manufacturing in PA? No one can really make it work financially for something that large, much as I would like it to be different.
P.S. I’m also old enough to remember when all the steel mills shut down in the Pittsburgh area.
I remember those days as well. What was that car movie made there with Michael Keaton?
Forgot to mention, that plant was originally built by Chrysler, who never used it.
It would be more poetic if VW built Scouts in Fort Wayne, Indiana. A huge marketing coup, IMHO.
Rabbits Rabbits RABBITS
Subscriptions need to make sense. Satellite radio, properly updated nav, phone apps that relay car location/commands through a server. Basically anything that requires upkeep on their end and would be communicating with outside servers anyway. I’m not willing to pay for all of these, but they don’t give me an irrational amount of anger.
Locking things that are locally controlled behind a subscription are not only unnecessary, but they introduce an extra failure point. My car should not have to check with a server to see if I am still subscribed to the performance upgrade or seat heater or whatever else. If that communication fails, do I have a different level of acceleration? Worse, does the car decide not to function if it can’t verify my subscriptions on startup?
This is precisely how I feel about it. If the feature requires access to a 3rd party service like the satellite radio or nav or even remote start if it goes via a smartphone app rather than a simple RF signal from your keyfob. Subscriptions for heated seats are fucking stupid though. I’m surprised nobody is marketing a $2 switch as a “heated seat subscription defeat device” already.
A subscription-based heated seat likely has a control module buried in the seat receiving signals from the body control module over the vehicle’s internal network. So a $2 switch won’t cut it unless you’re prepared to pull the seat, half-disassemble it, and rewire things. Add additional parts if you want more than one heating level.
It’ll be a pain, but I’d definitely pay for and/or spend the time on a significant change to defeat subscriptions on things. The only fear I have is that they’ll somehow wire it up to cause problems if it detects you’ve defeated it. Like the car checks for connection to all the modules and won’t properly start up if you routed past/around them.
Yet another reason we need right-to-repair. We should be able to modify. Change their seats for custom ones that offer heating/cooling without a subscription. Remove things we won’t subscribe to. Fix things without going to the dealer to be sure the car will accept the repair.
One way I suspect people will defeat the subscription model is with a little box that mimics/replaces the cell signal. You’ll lose updates, but it will say you have all the subscriptions.
(This will absolutely be terrible, between recall updates and just adding more signals that will interfere with each other to the car, but it will require the least modification to the vehicle.)
Car makers have a history of just assuming that cellular providers are never going to shut down their obsolete networks, even though there is ample history of exactly that happening. I have a 2016 model year vehicle whose telemetry functions are now completely worthless because the manufacturer decided not to design the 3G modem to be upgradeable. My car was sold new in 2016 with a sticker price around $80k, so it’s not like they didn’t have available margin to engineer the system to be upgradeable – they made a choice not to make it upgradable. As vehicles become more connected, consumers *must* start insisting that manufacturers have some kind of long-range plans to keep these systems viable through future cellular network transitions that will inevitably occur.
Unlikely, cars in the EV world are going to be more disposable appliances. Useful life of 8-10 years and then it goes to the recycler. Do you really think all the electronics are going to last 10, 20, 30 years? Those giant screens in cars now which without the car can not operate. How long do you think they will continue to make screens after the models life. Even if there is a source it is going to be exp as sh!t and the 3rd owner won’t be able to afford it.
Perfectly running cars will be in the junkyard, oh just needs a custom 20″ curved screen, few sensors, and a software update…
They’ll absolutely keep relying on 4G until all the carriers announce it is retiring, and they’ll do nothing for anyone with a 4G modem, just like they did for 3G. And they’ll keep taking subscription money if you don’t cancel, probably.
Do those options get blocked out and how do I get reimbursed when the issue is straightened out???