November 17, President Biden delivered an address on the just-signed Infrastructure Law at the opening of Factory Zero, a new EV plant rising from ashes of an old ICE plant, lauding the CEO for “electrifying the entire auto industry”, and recounting the bold, ambitious plans the company has to lead the industry.
Like many political speeches, it was long on superlatives and promises, and given the heavy lifting the President and his party did to get the Infrastructure Law passed, a well-deserved victory lap.
However, some EV industry observers suggested the president was in the wrong state, wrong factory, standing beside the wrong CEO. The president was not in California visiting Tesla Fremont beside Elon Musk, he was in Michigan, visiting the former GM Detroit-Hamtramck plant, hosted by GM CEO Mary Barra.
Two days later, the Los Angeles Auto Show 2021 opened with the number of EVs on display creating a buzz. At the GM Pavilion, the company showcased its new models and technology, proudly displaying a cut-away of its new power plant, a 5.5 liter, 670 horsepower, V8 Internal Combustion Engine.
Not a single EV was shown. Not even the Hummer EV to be produced at GM Factory Zero.
To anyone who follows EVs, it was not surprising Biden chose a GM plant that will soon be the beneficiary of Infrastructure Law funding for the celebration rather than Tesla; Biden has consistently cold-shouldered Tesla and Musk. Still, it rankled industry observers that his words seemed more to describe Tesla than GM, some going as far to call it “stolen valor”.
Writing in Electrik, Fred Lambert held his Tesla fanboy emotions in check long enough to write a fact-checking takedown worth reading in full, including:
A segment of the speech stood out because Biden somehow thought it would be a good idea to give Mary Barra, CEO of GM, credit for “electrifying the entire automobile industry.”
If you know anything about the auto industry, you’d think that this is a joke, but Biden literally followed up by adding that he is “serious.” As if there was laugh track.
Here’s the relevant part of the speech:
Mary, I can remember talking to you way back in January about the need for America to lead in electric vehicles. And I can remember your dramatic announcement that by 2035, GM would be 100% electric.
You changed the whole story, Mary, wherever — [applause] — wherever you are. There you are. You did, Mary. You electrified the entire automobile industry. I’m serious. You led — and it matters — in drastically improving the climate by reducing hundreds of millions of barrels of oil that will not be used when we’re all electric.
You know, up until now, China has been leading in this race, but that’s about to change.
Biden is a politician, and if he was standing in a Ford factory he would have given Jim Farley credit for electrifying the industry, even though the guy has been at the head of Ford for barely a year.
But I think it’s worth correcting the president here because as someone passionate about electrifying the auto industry, I don’t think Barra deserves any credit whatsoever ….
Lambert goes on to examine the record (including the fact Barra-led GM joined Trump efforts to reverse California emissions standards) and questions how GM will realize lofty goals it shows little progress on today compared with competitors.
That is what this story is about. Not the bad blood between Biden and Musk, a petty distraction, but about the steep uphill climb legacy automakers face to transition their business from ICE to EV, overcoming significant technical challenges, and more importantly, financial challenges given their huge debt burdens that will ultimately be transferred to taxpayers one way or another, success or failure.
But first, let’s set the record straight: there is an American auto company that electrified the industry and has met its goal to produce 100% EVs.
Tesla. In 2012. In a refurbished ICE plant previously run by GM before it was shuttered. So it can be done.
Biden was correct about something important: China is poised to be the market leader in EVs. It has been working on that for more than a decade, jumping-in about the time Tesla was struggling to push its hand-built roadster prototypes out the door to investors one step ahead of bankruptcy.
The fact Tesla and Chinese companies pioneered the industry (for real, scaling production beyond the compliance cars and R+D showboats) means they did a lot of heavy lifting, took risks, and having persisted, are beginning to reap the rewards.
Koreans, once again skillful fast-followers, are also poised to benefit as they solve their battery problems and transition to clean-sheet EV platforms with the design, quality and value that put the Japanese industry on it’s back foot. (Sadly, Toyota, the PHEV pioneer, has totally fumbled EVs.)
GM, Ford and several other European and Japanese automakers have dabbled in EVs, but did not take the market seriously until Tesla Model 3 scaled to mass-production, putting EVs into middle class striking range and Tesla into profit, taking sales from the likes of Audi, BMW and Benz.
What really got their attention was the success Tesla had building their Shanghai, China plant in less than a year, which has expanded to three plants, with Berlin Germany coming on line in 2022 (where Musk and Herbert Diess, VW Chief Executive, have struck-up a friendship).
Tesla Shanghai also cast a spotlight on the progress China has made in developing EV technology, particularly battery technology that has surpassed Japanese and Korean manufacturers on scale and cost, and is innovating ahead of them. (CATL and BYD lead in cobalt-fee LFP technology, suppling Tesla for Chinese & EU markets, and CATL has introduced a innovative Sodium Ion battery for mass storage.)
Now, as several Chinese EV makers join Tesla’s invasion of Europe with cars that rival German brands for quality and performance at a lower prices, the industry is having a Come to Jesus moment.
So what is Biden’s “Tesla Problem”? GM, Ford and Stellantis (Chrysler) are not Tesla.
Time and Money
Major legacy automakers in the USA, Europe and Japan have slow-walked EV development on the assumption consumer acceptance would take decades, allowing them time to make a leisurely transition, including structural changes in their factories, supply chains and distribution model.
The majors also carry a huge amount of debt and non-performing assets while running a low margin business, adding to the burden.
However, recently, consumer demand for EVs has skyrocketed as prices have declined with scale, and as the simplicity and speed of manufacturing them produced efficiency conventional autos cannot touch.
When consumers can buy EVs near or at the prices of ICE cars and avoid the high fuel and maintenance costs, they increasingly chose EVs as a “cheaper, faster and better” solution. It’s a no-brainer.
Now, time is running short for legacy car makers. Achtung Baby.
New car sales in some markets are now approaching or surpassing ICE (Norway is really the first EV dominated market), and EV sales in China and Germany are setting monthly records. China, the largest auto market, is over 20% and expected to pass 40% in 2022. Germany just passed 30%.
That scares the shit out of legacy automakers. Don’t take my word for it, listen to VW’s Herbert Diess
Then:
Now:
Trinity. Umm ... sounds vaguely … radioactive.
Here is Ford’s Jim Farley:
It’s interesting to see major companies, already making progress in EVs, suddenly announce major changes to their business strategies to put the pedal to the metal. It’s almost like a brick hit them in the head or something.
Of course, they are all confident to be the world leader soon. No doubt.
But how much money can these companies and governments throw at the problem? Is this 2008 or 2021?
Can they buy enough time? Can they build supply-chains fast enough to compete? And what about the existing suppliers and their workers? What happens to them?
The answer seems to be not so fast, not so cheap and not at all painless for the worker bees.
If Tesla and Chinese manufacturers took more than a decade to get to critical mass, it is hard for me to believe that, even with a fast-follower strategy and a path cleared by government largess, these lumbering companies will get there much faster. Your milage may differ.
I realize Biden is a true believer in American Exceptionalism and thinks Americans are uniquely capable to do things no one else can if we only set our minds to it.
But the US is not going to be the global leader in EV production any time soon unless we define that as Tesla surviving start-up hell to turn a profit and be No.1 long enough to stop Detroit laughing at it.
OK, then. Bring it on. Time to rumble. More EVs sooner? I love it.
GM has been publishing some encouraging EV sales numbers recently despite the LG battery fiasco that forced Bolt production and sales to an abrupt halt. So where is GM getting these EV sales figures?
GM is a partner in SAIC-GM-Wuling, a JV producing the incredibly popular Hongguang Mini EV for the Chinese market, which, priced starting at $4,500, outsells the Tesla Model 3 locally.
Is this what Biden had in mind when he spoke of world domination?
Hooray! Gen-Z to the rescue!
Well, why not? Hummer EV it ain’t, but it’s a cute, warm upgrade from a scooter.
Great work by the company Propaganda Advertising Department! cc: Mary Barra
What matters is managing the transition from ICE to EV, not who is the biggest and baddest, the market decides that.
Diess is worried about 30,000 jobs. Now his job is on the line for taking in public. Run, Herbert, run.
I would not trade jobs with Mary Barra right now. She needs all the friends in high places she can get.
Make your next car an EV. It’s a smart choice.
Tuesday, Nov 30, 2021 · 1:16:45 AM +00:00 · koNko
A bit late to update, but because it is right on topic, here is an interesting quote from GM CEO Mary Barra from an NYT interview with CNBC’s Andrew Sorkin via Teslaratti, followed by the source video.
“Right now, GM, in terms of the electric vehicle market, you have about 9-10% of the market. Tesla has about 63% of the market. Five years from now, if you succeed — but everybody else has their own success in this space — what does that pie chart look like?” Sorkin asked.
Quite surprisingly, Barra responded by stating that GM is the leader in the United States’ electric vehicle sector today. The CEO also noted that GM is currently number two in China’s EV market. Overall, Barra stated that she remains optimistic about GM’s future in the electric vehicle sector, and she has no intention of conceding General Motors’ leadership position to anyone.
“Well, we have said, just like we’re the leader today, if you set aside you know with the distortion that’s happening with the semi shortage, we have been the leader in the United States. We’ve been number two in China for many years. I think, when you get to wanting to get 50% all EVs, you have to win customers that only drive one vehicle. They only own one vehicle. They depend on that vehicle every day.
“General Motors has brands that they trust. We have the highest loyalty rating. We have manufacturing plants that are ready to go, and so, when I look at our ability to scale, to serve customers, I think we’re incredibly well-positioned. And we’re not going to cede our leadership position to anyone,” Barra said.
Note that the interview starts with a discussion of company valuation, which I agree is distorted and crazy (but that is the stock market) so you will have to wait to 4:20 for the subject discussion.
I’m not sure if Barra was referring to GM’s position in the US and Chinese market for EVs or all autos, but GM is most certainly not the market leader for EVs in the USA or Globally, and can only claim the be the current leader in China due to it’s association with SAIC-GM-Wuling with the Wuling Hongguang MiniEV being the (numerical) sales leader as I originally noted above.
But that is a specious claim given the fact the car was designed and is branded by Wuling, not GM, is manufactured by SAIC, and GM’s involvement is just as a 1/3 joint owner of the JV company. This is not really a GM product, but CEO’s get paid to spin, and that is what she is doing.
As Teslaratti notes, in the (overall) EV sector, Tesla’s 63% share is somewhat larger than GM’s 9~10% share, so claiming leadership is a stretch to say the least.
One last point that intersects the discussion thread below, Sorkin raises a question about Tesla workers getting compensation greater than GM’s UAW workers, but no data was put forward so Barra questioned that, and correctly states total compensation packages would have to be compared, so we can leave that hanging.