AD #3489 – Tesla’s Eye Popping Profit Margins; Gasoline Demand Peaked, Now Falling; Pickup Owners Shift to SUVs

This is Autoline Daily, the show dedicated to enthusiasts of the global automotive industry.

GASOLINE DEMAND PEAKED, NOW FALLING
Well, we knew this day was coming and now it looks like it’s here. Gasoline demand in the United States has peaked and will not rebound to pre-pandemic levels, ever. The Energy Information Administration says demand will fall less than 1% this year to 8.74 million barrels a day. But between 2022 and 2027, demand is expected to drop 15%, for a total decline of 1.4 million barrels a day. You can thank electric cars and trucks for that. And while that’s good news for the environment, it’s going to cause gasoline shortages and price spikes. That’s because oil refiners are cutting back on production due to the drop-in demand. Last year, they cut capacity by more than 1 million barrels a day. But when supply and demand even out, it should keep costs in check.

UNIONS TELL BIDEN TO KEEP “MADE IN USA” AS PART OF IRA 
President Biden is under pressure from allies like Germany, Japan and South Korea to grant them exemptions to the Inflation Reduction Act. The IRA cuts out sales subsidies for EVs and batteries made outside of North America. But Reuters reports that the Administration is under pressure from unions and environmental groups to not make any concessions. Several unions sent a letter to the White House urging it to keep the bill intact. They say that the law doesn’t violate World Trade Organization or free trade rules. The Administration has already made one exemption. Last month, the Treasury Department said it would allow consumers who lease an EV built outside North America to qualify for up to $7,500 in commercial green tax credits. But it’s unclear if that exemption is even going to stick.

GM FUNDS V8s, QUITS BATTERY PLANT WITH LG
Something weird is going on at General Motors. So let’s connect the dots. The company that says it’s “all in” when it comes to EVs just announced it’s investing $854 million for a new generation of V8 engines. That makes sense. GM needs the profits from its full-size pickups and SUVs to pay the bills for its investments in electric vehicles. But the same day that GM made that announcement, the Wall Street Journal broke the story that LG was canceling plans to build a 4th battery plant with GM. The Journal says GM is talking to another battery maker to build that plant, which reportedly would get built in Indiana. Meanwhile GM’s ramp up of EVs that use Ultium batteries that are made by LG is going slow as molasses. Last quarter GM only sold 86 Cadillac Lyriqs and only 72 Hummer EVs. Likely there’s a problem building those batteries and maybe that’s one of the reasons why the deal with LG to build another plant was canceled. 

BMW MOVES FORWARD WITH SOLID STATE BATTERIES
BMW says it’s going to start testing solid-state batteries for electric vehicles this year. But don’t get too excited, they’re still years away from production. BMW formed a partnership with solid-state battery maker Solid Power, where BMW could copy Solid Power’s production line at its own facility in Germany to make prototype cells. Now BMW officially has a license to use Solid Power’s technology to speed up installation of that prototype line. The next step will be for BMW to work with Solid Power to optimize the manufacturing process. BMW plans to get cells for testing from Solid Power this year, and it plans to come out with a demonstration vehicle with a solid-state battery before 2025. But that means volume production will be later in this decade at the earliest.

TESLA’S EYE POPPING PROFIT MARGINS
Tesla is currently earning more than twice as much as traditional automakers for every vehicle it sells. According to Reuters, the EV maker earned over $15,600 in gross profit margin per vehicle in the third quarter of last year. VW is the closest of the traditional automakers at a little over $6,800 in gross profit margin. Interestingly, BYD is hot on Tesla’s heals at nearly $15,000. But Tesla still earns more than 4 times Ford and 5 times more than GM. Tesla’s manufacturing methods, like using large castings and structural battery packs, are a few of the reasons it holds an advantage over the other automakers. Also remember Tesla is playing hardball with its prices right now and we’ve already seen a number of its competitors cut prices too. But as we warned last week, Tesla can afford to cut its prices and still earn money. Now we just have a figure to put on it. So, the competition faces a tough choice; lose money or lose sales.

APTERA UNVEILS LAUNCH EDITION
Is Aptera finally going to get going? The 3-wheel, 2-passenger electric car was first unveiled in 2005–that’s 18 years ago, and it’s still not in production. The company has gone through multiple management changes and the car has gone through several redesigns, but even though Aptera has 40,000 orders for the car it just doesn’t have enough money to start them rolling down the assembly line. But maybe it’s getting close. It just unveiled the launch edition which it hopes to start building sometime this year. The car is said to have a 400-mile range, as well as a solar roof that can deliver up to 40 miles a day. It uses three in-wheel motors for all-wheel-drive, it offers over 32 feet of cargo space, and it uses Tesla’s charge port, so it can get access to Tesla’s Supercharger network. Originally the car was supposed to be priced at $26,000, but we don’t know if the company is holding to that number.   

PICKUP OWNERS SHIFT TO SUVs
Big shift taking place in the American market. More and more pickup buyers are shifting to SUVs. S&P Global Mobility says that light-duty full-size half-ton pickup sales have been declining for more than two years. In the third quarter last year, the segment’s retail share was 7.8%, the lowest it’s been since Q3 2012. And alarmingly for Ford, GM and Stellantis, S&P found that half-ton F-150, Silverado and Ram owners have become less loyal to the pickup body style over the last year, with more saying they prefer SUVs. But while half-ton sales are falling, the share of three-quarter and one-ton pickups have remained steady.

NHTSA FINDS NO DEFECT IN FORD EXPLORERS
Ford just won a big victory. The National Highway Traffic Safety Administration closed an investigation into complaints that exhaust fumes would leak into the Ford Explorer. NHTSA started investigating these complaints in 2016, and Ford did agree to do some service work such as reapplying sealant and reprogramming the climate control, but it did not do a recall. Now NHTSA says the leaks were caused by upfitters who drilled holes in the body of the vehicles, mainly on police cars. The leaks were also caused by rear end damage on Explorers that caused the seals in the body to break. But NHTSA could not find anything wrong with the Explorer.

GEELY TEASES SLEEK ELECTRIC
Geely is planning a sleek, new electric sedan. It teased this vehicle, which shows a fastback rear end and suicide doors. It’s said to ride on the SEA platform, which is used by a number of brands Geely owns, including Lotus, Polestar and Zeekr. The car is supposed to make its debut sometime this year and will be followed by a new series of NEVs that are priced in the middle- to high-end of the market.

But that brings us to the end of today’s show. Thanks for making Autoline a part of your day.