There has never been a more difficult time to be a strategist, executive, or product planner at a car company. It’s too complicated a world, with too many unpredictable inputs and unexpected outputs. The noise is louder than the signal and separating the two sometimes feels impossible.
In just the last five years the industry has convinced itself of the following:
- A huge mass of people will want to subscribe to their car instead of owning it.
- Self-driving cars are inevitable and imminent, so not investing in self-driving tech will doom companies.
- Mass adoption of electric cars is inevitable and imminent, so companies need to pledge complete electrification of their portfolios now.
- Hybrids are a waste of time.
At least in the present, none of those predictions have panned out for any traditional OEM. Most subscription car services attempted in the last few years have been abandoned. Huge money has been spent on self-driving cars and attempts to get to Level 5 autonomy, but no one has done it at scale beyond a handful of robotaxis, which are all Level 4, at best. Electrification is growing, but not at the speed predicted even a few years ago. Hybrids are the fastest-growing powertrain option for new cars in the United States.
I don’t blame any company for following these trends, but in retrospect, it does seem like the best strategy was to just take it slow and commit to a plan. Otherwise, you end up like Volkswagen.
Today’s Morning Dump is about the knee-jerk reactions companies made and the sudden realization that maybe knee-jerk reactions weren’t the way to go. We’ll start with GM, which is trying to get people to think longer-term. What about Ford? Ford’s starting to wind back some of its aggressive electrification plans. Stellantis is slowing down. Lotus, too, sees a future with more EREVs.
‘What Is Normal?
Yesterday was the Barclays Global Automotive and Mobility Tech Conference in New York. It sounds like fun, but no one invited me. I was at a race track with a Miata, instead, so no pity necessary. Thankfully, the Detroit Free Press was able to listen in and filed this dispatch, which includes some interesting comments from GM CFO Paul Jacobson:
CFO Paul Jacobson said the automaker has learned to stop having a “knee-jerk reaction” to market shifts and instead takes a conservative and consistent approach to ups and downs. That means sticking to a long-term strategy no matter what short-term challenges might arise.
Jacobson, who spoke Wednesday at the Barclays Global Automotive and Mobility Tech Conference in New York, said he would often grow frustrated hearing the word “normalization” bantered about when discussing how to run GM’s operations.
“We banned the word ‘normalization’ inside the company because what is normal? Isn’t it possible we’ve established a new normal?” Jacobson asked. “We’ve learned a lot about the value of our products in consumers’ eyes: How to price them, how to not react with a knee-jerk reaction to what’s going on around us, and focus on our inventory, our demand and our execution.”
This is a reasonable view and I think what Jacobson is saying here is correct. Jumping from one idea to the next, chasing your tail, et cetera, is not great. Unless Elon Musk is correct and we’re all going to be taking Cybercabs everywhere in three years, consumer taste doesn’t move as fast as we all think.
Also, this is a little funny coming from GM’s CFO, right? I’m glad GM is learning the lesson, here, but GM is the company famous for quickly reacting to things and then just jumping away when the going gets a little tough. General Motors started making hybrids and then stopped. It made the original mass-market EV and then killed it. GM said a few years ago that it expected to double its revenue thanks to Cruise driverless taxis, subscription services revenue, and selling a lot more electric cars than it’s likely to sell.
Almost a year ago I was worried that the company’s plan to increase dividends and focus a bit more on shareholder value was a short-term decision with negative long-term results:
The world is a complex place and Barra deserves credit for winding her way through difficult times and restoring some faith in the company. But this is a huge step backward in my mind (and I‘m not the only one who thinks this is weird). Yes, the company’s truck and SUV business is very profitable and I also think their new EVs look very good, but if I were a GM shareholder I’d want them to invest as much as possible in hybrids and fixing their Ultium production. It’s nice that GM will be profitable this year and that the strike is only going to cost about a billion dollars, but in what universe does GM not need every cent to survive a future with Chinese automakers expanding in Mexico and Tesla showing no signs of slowing down?
Do I still feel that way a year later? Not quite. GM still hasn’t announced a good hybrid solution here in the United States, but Ultium production has seemingly been addressed. More importantly, it did work from a market perspective. Since writing that post GM’s share price has almost doubled so it’s fair to say that this had the short-term result the company wanted. If GM can improve/maintain its credit position and hold onto these gains then that’s theoretically more money that can be invested.
I also think GM’s plan to avoid the overproduction whiplash effect of trying to earn profits with volume over price is the correct strategy in this market, even if it might not be great for consumers. Ultimately, I think what GM is telegraphing about its decision-making is entirely sound and I look forward to critiquing the company’s application of these ideas at home from the safety of this blog.
Ford Keeps Revising Its EV Plans
I like Quebec. There’s good fishing in Quebec. There’s also a big battery material plant being built in Bécancour (shout out Les Riverains) that Ford was supposed to be an investor in as part of the company’s big EV push.
According to Automotive News, that’s not happening:
Ford Motor Co. has abandoned plans to produce battery material for electric vehicles in Quebec, backing away from a joint-venture manufacturing plant under construction in Bécancour as it slows its rollout of EVs amid high costs and tepid demand.
The reversal will not halt construction on the $1.2-billion ($860 million USD) cathode active materials plant that partners Ford, EcoPro BM Co. and SK On Co. announced in August 2023, but ends the automaker’s direct involvement in the project and makes its role as end customer uncertain.
“After evaluating shifts in EV technology, costs and the needs of our business, we’ve decided not to enter in as a minority stakeholder in this joint venture,” Ford Canada spokesperson Said Deep said in a Nov. 19 statement.
This is part of a pattern from Ford. The company has slowed or outright canceled the development of some of its 2nd generation EVs as it plans for a third-generation vehicle. Ford, like most automakers, got super excited about electrification only to see the market stall. The advantage that Ford had was that it wasn’t as far into EVs as, say, GM, and it also had a robust hybrid tech it could pivot to that GM couldn’t match.
While this isn’t a major Ford project, it is a sign that all the enthusiasm for electrification has been dampened. Ford also announced this week that it’ll cut about 4,000 jobs in Europe due to weakness in the EV market in the UK and Europe.
Stellantis Is Delaying Ram REV and Ramcharger
The all-electric RAM REV will be delayed, which isn’t a surprise and doesn’t seem like a bad idea to me given the market for electric trucks right now. Unfortunately, this also means the awesome Ram Ramcharger EREV will also be delayed until some point next year. Boo.
What’s going on? The company wants to focus on the Dodge Charger Daytona and Jeep Wagoneer S electric SUVs.
I’ll let Stellantis CEO Carlos Tavares, pictured above talking to Tom Hanks, explain it via The Detroit News:
“We just do things in a proper way,” Tavares said during a virtual news conference about the STLA Frame platform that underpins the REV and the Ram 1500 Ramcharger, an electric truck with an on-board gas engine charger.
“We don’t want to take risks,” he continued. “In terms of validation, it’s very important for Stellantis to demonstrate that we have all the capabilities and that we master the technology with a high level of durability, and that’s exactly what we are doing right now. So, we don’t want to rush, and as we all know, it’s better to take a few weeks more to validate properly than to rush and then to make mistakes in terms of quality. That’s what we are doing now. We are validating, and we are managing the peak between the products that we have ahead of us.”
I’m going to start using “We just do things in a proper way” to explain everything from now on. I love it. Also, as badly as I want to drive a Ramcharger, this is probably sensible. I don’t think the Wagoneer S will do anything but land with a thud on the market, but a Ramcharger that doesn’t work isn’t a great plan, either.
Lotus Is Back On The EREV Train
No automaker has had more surprising momentum in the last couple of years than Lotus, which has found a small hit in the Emira and the promise of more with new, Geely-backed electric platforms. Then President Biden upped tariffs on Chinese-built cars. Now it’s unclear how Lotus is going to truly compete in the United States, especially after Lotus said it would go full-EV with, mostly, Chinese-built electric cars.
The answer to this conundrum is that Lotus is going to jump on the EREV bandwagon as reported by Autocar:
Lotus will produce hybrid versions of future models in response to the continued reluctance of luxury car buyers to move to EVs.
The switch, confirmed by the brand’s CEO to reporters at recent Guangzhou motor show in China, means the brand is tearing up its current plan to go all-electric by 2028.
Lotus will develop ‘Super Hybrid’ technology with ultra-fast plug-in charging along with a turbocharged combustion engine to extend overall range to 680 miles, Feng Qingfeng said.
My view is that 2024 is the Year of the Hybrid, but that the 2020s are the decade of the EREV, though how successful these will be is an open question as our old pal John Voelcker points out at InsideEVs:
[T]he majority of PHEV makers flatly refuse to disclose data on whether they’re plugged in, how often, and what percent of overall miles are covered using grid electricity rather than gasoline. Some just ignore the plug by dubbing the PHEV a “Hybrid” model, e.g. Chrysler Pacifica. Others start the car in hybrid mode, even with a fully charged battery, meaning the owner must specify EV mode every time it’s turned on if they want all-electric drive.
In that light, it seems like magical thinking to believe EREVs will be plugged in as designed. Full, comprehensive, aggregated data is the only answer. Anecdotes no longer suffice.
As always, John is a smart guy with a lot of experience and insight, but he’s also probably wrong. I think the lack of PHEV data from automakers could be construed as a sign that a decent number of owners don’t plug in their PHEVs, but we don’t know that for sure. Additionally, I think a RAV4 Prime owner probably is likely to plug in, whereas the Jeep Wrangler 4xe and Pacifica PHEV probably distort these numbers in the other direction.
What I’m fairly sure of is that buying an EREV and not plugging it in regularly is going to be so obviously expensive and counterproductive for EREV owners that most will plug these vehicles in and making the leap from ‘We don’t know what PHEV owners will do’ to ‘This means EREV owners won’t charge at home’ is its own form of magical thinking.
What I’m Listening To While Writing TMD
Honestly, I’m listening to Pavement this morning, but I play a lot of that around these parts. Here’s bluegrass band Nickel Creek doing a cover of “Spit on a Stranger.”
The Big Question
Do you think people will plug in EREVs?
TIL somebody listens to Pavement.