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

Make batteries instead of engines, they said! Itll 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 simplehow hard could it be for the 100-year-old auto industry to move to one focused on batteries and software, right?

This years proving to be the year where they all learnand show their investorshow 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 todays morning roundup, well see what the German luxury brands are up to on this front.

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. Lets jump in.

My take on the auto industrys great transition, now that were more than midway through 2023, is this: its 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. Its 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. Theyre all well-positioned to make this pivot, in other words. Heres how theyre doing and what theyre telling investors right now:

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 globediesel taxis in Morocco, stuff like thatare harder to transition. BMW, on the other hand,urges even more patience as it electrifies the top and bottom of its range. (And its 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.

[] BMWs 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.

BMWs 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 Ive heard internally, a lot of Minis future EV plans for this country are TBD. But theres an air of caution with both of these announcements that feels different from all the rosy optimism weve 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, lets 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!

After writing that subhed, now Im 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.

It wont be Zach Kirkhorn, whos stepping down as Chief Financial Officer after 13 years under Musk (which mustve felt like 500 human years.) Kirkhorn was known as one of the more level-headed guys in Teslas comparably small C-suite; Bloombergs Dana Hull describes him as a calm, steady presence and regularly spoke at length with investors, even playing the role of Musks surrogate the time he skipped Teslas earnings presentation.

Its 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? Thats a very tough question that more and more investors are asking, especially with the EV competition heating up and Musks 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. Musks 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 somebodys 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.

I still want to see Mazda move faster on EVs and hybrids, but in the short-term, everybodys 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 workingso 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 companys 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! Its good and its 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.

Weve 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 isnt on strike but negotiations could go sideways and this union is one thats eager to send a message.

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, its unclear who those three sources are here; given the storys framing my guess is theyre 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, youre 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 theyve 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 weve 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 isnt involved in the negotiations, and if we fall short, at least we made it to the moon.

Theres Musk-esque quote for us all to end on.

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 Ive been wrong when it comes to Tesla before, but it doesnt feel like the Cybertruck changes that equation.

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The 'Reality Check' Era Of The EV Transition Is Upon Us - The Autopian