First Gear: Dealers Not Supporting the Vigorous EV Drive
President Joe Biden’s proposed federal standards for EV sales are being criticized by some 4,000 car dealerships nationwide, who argue that they would force an unfeasible transition to battery-electric vehicles.
In a letter, the group urged Biden to “slow down” his efforts. They noted a plan from the EPA that would require that by the 2030 model year, 60% of newly sold vehicles be battery-powered. That percentage would rise to 67% by 2032. According to Automotive News:
The letter states, “We think these vehicles will become more and more appealing over time because they are ideal for many people.” But the truth is that the current restrictions are causing a huge influx of BEVs to arrive at our showrooms, outpacing demand for electric vehicles. The number of BEVs on our lots is growing.
A wide range of auto brands sold in states like California, Michigan, Colorado, and New York are represented by the dealerships. They contend that because there are still issues with access to dependable charging networks, car affordability, and range anxiety, consumers are not prepared to make the leap to entirely electric vehicles.
Legislation like the Inflation Reduction Act of 2022 and the Infrastructure Investment and Jobs Act of 2021 aims to address these issues by providing billions in federal funding for the construction of a nationwide network of EV charging stations, increasing domestic battery production, and bringing down the cost of EV purchases for consumers.
Dealerships, however, urge Biden to take steps that could facilitate consumer acceptance, such as “allowing time” for advancements in battery technology, lowering the cost of EVs, and developing infrastructure for charging them.
According to the National Automobile Dealers Association, its members are making the necessary preparations for the switch to electric vehicles. Over $6 billion has been spent on equipment and training as part of this endeavor. Car dealers are claiming to encourage the switch to electric vehicles, which is a very rich idea.
An extensive, cohesive strategy that takes into account the critical importance of elements like affordability, consumer incentives, charging infrastructure, utility capacity, resources for battery manufacturing, and model availability will be necessary for any meaningful EV penetration into the mass market, which is where we are witnessing stalled EV growth and all this new model inventory start to pile up, according to NADA spokesperson Jared Allen in a statement.
He went on, “The whole auto industry is worried that we simply aren’t recognizing that these factors are real and that they definitely affect customer attitudes and decisions.”
It remains to be seen whether the letter will impact Biden’s initiatives, but I wouldn’t bet on it.
Second Gear: Stock Buyback and GM’s New UAW Contract Cost
According to General Motors, the firm would have to pay $9.3 billion for its new labor agreement with the United Auto Workers union. It also announced a $10 billion share repurchase plan, a 33% dividend hike, and “substantially lower” spending at its robotaxi division, Cruise, at the same time as this statement. According to Reuters:
At Tuesday’s closing price, the buyback represents about a fifth of GM’s common shares. Its stock had dropped almost 14% so far this year, but on Wednesday premarket trading saw a 9% increase.
Following the United Auto Workers (UAW) strike in the United States, the Detroit carmaker likewise reduced its forecasts for 2023 profits.
With the UAW strike, issues at its Cruise self-driving car division, and the introduction of its new electric vehicles this year, General Motors has found it difficult to raise the price of its shares.
The $9.3 billion in increased expenses until 2028 are related to contracts with the United Auto Workers (UAW) and the Canadian organization Unifor. Over the course of the agreements, this equates to roughly $575 per vehicle.
From a previous outlook of $9.3 billion to $10.7 billion, GM’s updated guidance cut expected net income attributable to stockholders for 2023 to a range of $9.1 billion to $9.7 billion.
Although GM’s stock price was “disappointing to everyone,” CEO Mary Barra pointed out that shares were really 15% below GM’s 2010 IPO price of roughly $28.
GM announced earlier this year that it would reduce fixed expenses by $2 billion by the end of 2024. In July, the company announced plans to reduce costs by an additional $1 billion. About 5,000 salaried employees accepted buyout offers and consented to depart GM, the company announced in April.
GM announced that it would reduce expenses at Cruise, which has halted all testing in the United States following a crash in California that prompted the state’s regulators to forbid the firm from conducting driverless vehicle testing. Cruise, which is reducing employment, has lost over $8 billion since 2016 and over $700 million in the third quarter.
“We anticipate that when operations resume, Cruise will expand at a more deliberate pace, resulting in significantly lower spending in 2024 than in 2023,” stated Barra.
Paul Jacobson, Chief Financial Officer of GM, stated that less money will be spent on cruises in 2024—”hundreds of millions of dollars.”
According to Barra, GM and Cruise would have to “rebuild trust” with local, state, and federal authorities.
Budget-wise, GM now faces greater expenses as a result of the new UAW deal.
A budget “that will fully offset the incremental costs of our new labor agreements and the long-term plan we are executing” is what the company stated it was completing for the upcoming year.
$10 billion will be sent to executing banks as part of GM’s expedited share repurchase program, and the firm will promptly receive and retire $6.8 billion worth of GM common stock.
…
Prior to the buyback program, GM had about 1.37 billion shares of common stock outstanding, according to the corporation. The initiative, which will be carried out by Bank of America, Goldman Sachs, Barclays, and Citibank, is anticipated to conclude in late 2024.
Through its share repurchase authorization, GM will still have $1.4 billion in capacity available for further stock buybacks. Beginning in 2024, it is anticipated to raise the dividend on its common stock by three cents per quarter.
Third Gear: Honda’s Significant Investing in Electric Motorbikes
By the end of the decade, Honda plans to invest roughly $3.4 billion in its electric motorcycle company. Additionally, it is increasing its aim of 3.5 million units sold annually to four million units by 2030. According to Bloomberg:
According to a statement released by the firm on Wednesday, it intends to launch 30 new electric motorbike models globally by 2030 and will begin running dedicated electric motorcycle plants starting in 2027. It stated that assembly line length will be shortened by roughly 40% thanks to new technology.
Head of Honda’s motorcycle electrification development division Daiki Mihara stated, “We aim to sell electric motorbikes at the same price as ICE models,” during an online press briefing.
The corporation stated that it wants to increase its market share in the Asean area and in India. According to Mihara, additional production facilities will “very likely” be located in Southeast Asia and India.
Honda continued by saying that it has been working on lithium ferrophosphate batteries and that it intends to use them starting in 2025.
The Japanese business claimed in the statement that “having a variety of batteries, each with different strengths in terms of output range and cost, will enable Honda to accommodate a wider range of use applications and expand the range of product variations.”
Honda is reportedly looking toward mid- to long-term batteries that have a better energy density than what we now have. It aims to utilize every solid-state battery currently in development. Additionally, it stated that it wants to cut the price of completed electric bikes by 50%.
For its motorbike division, Honda hopes to achieve an operating profit margin of more than 10% by 2023. Only more than 5% of bikes will be electric, though.
Fourth Gear: Mercedes Stops Producing EV SUVs
Mercedes-Benz intends to replace its high-end electric EQS SUV with the more popular GLC EV by discontinuing manufacturing of the former in the United States. In the latter part of this decade, the 6,300-employee EQS SUV plant in Vance, Alabama will be moved to Berlin, Germany. According to Automotive News:
The goal of the product rotation is to provide space at the 6-million-square-foot Alabama plant for the higher-volume GLC EV, dubbed a “cash cow” by one source.
AutoForecast Solutions estimates that the first quarter of 2026 will see the start of GLC EV production in the United States. According to research firm projections, GLC EV volumes will reach 50,000 vehicles in the first year of production, which is more than twice the present production volume of EQS SUVs.
The Mercedes factory in Bremen, which produces a variety of models, including the C- and E-Class sedans, the GLC and EQE crossovers, will gain roughly 20,000 new cars a year as a result of the EQS SUV manufacturing transfer.
The EQC electric crossover, which was intended to be MB’s first mass-volume EV in the United States, will be replaced by the new GLC EV. Nevertheless, the manufacturer abandoned those plans due to the EQC’s constrained range, which was blatantly insufficient for the American market.
