Jim Farley officially becomes Ford’s new CEO this week, VW thinks the ID.4 will compete with the RAV4 and Tesla’s rivals in China aren’t terribly worried about anything. All that and more in The Morning Shift for September 28, 2020.
1st Gear: Jim Farley
Ford’s new CEO is taking the helm this week, and, well, he has a pretty big task before him, including the introduction of an electric F-150 at some point in the next couple of years. Not to mention the automotive industry’s transformation already underway. Automotive News takes the temperature:
Making Ford stand out will be among Farley’s many challenges as he leads a company he grew up revering. It’s a company often not easy to lead; the only CEOs to hold the job for more than eight years were both named Henry Ford.
If Farley wants to join that elite group — or at least bring more stability than his immediate two predecessors, whose tenures were only about half the length of an F-150 product cycle — he’ll have to successfully steer Ford through the most consequential changes in its 117-year history.
The automaker is on the verge of transforming its product portfolio, for the first time adding what it hopes are high-margin, high-volume electric vehicles. In the next few years, it plans to launch autonomous commercial services to haul both goods and people, a pivot from its traditional business model as it begins to implement the “smart city” vision espoused by departing CEO Jim Hackett. Ford is relying on alliances with Volkswagen, Mahindra and Rivian — rivals that are key to sharing the rising development costs of new technologies.
And Farley will have to do all of that while maintaining the strengths of the business today, starting with a redesigned F-150 that will hit dealerships within weeks of him assuming the CEO role.
“High-volume electric vehicles” don’t really exist at the moment, but here’s hoping they will soon.
2nd Gear: Steelmaker ArcelorMittal Sold For $1.4 Billion
I grew up about 35 miles from ArcelorMittal’s plant in Cleveland, with vivid memories of its smell and smoke. This morning, Bloomberg reports that part of ArcelorMittal has been sold to an Ohio company.
Cleveland-Cliffs Inc. will buy the U.S. operations of ArcelorMittal SA for $1.4 billion in cash and shares to become the biggest flat-rolled steel producer in North America.
Ohio-based Cleveland-Cliffs expects its second major deal in less than a year to boost sales to the important automotive market and help reduce costs. Earlier this year, the global steel industry saw its biggest slump in production in a decade as demand from key consumers was hit hard by coronavirus lockdowns. Even before the pandemic, the sector had struggled for years with excess production capacity.
“Consolidation has been needed in steel for a long time,” said Colin Hamilton, managing director for commodities research at BMO Capital Markets. “Low industry capacity utilization weighs on margins and low interest rates mean nothing goes to the wall to take out capacity.”
3rd Gear: Beijing
We will have much more on this year’s Beijing Motor Show as this week progresses. But to start things off, the Financial Times says most people are pretty optimistic over there:
For international carmakers, China’s apparent success in effectively eradicating Covid-19 within its borders is translating into much-needed sales with Auto China 2020 a big opportunity to pitch new models directly to the nation’s drivers.
“The confidence is back,” said Jochen Goller, BMW’s head of China, at the event on Saturday which was packed out with Chinese journalists, many ignoring venue rules and removing face masks for selfies or to live stream commentary to fans.
Driven by wealthy young Chinese buyers upgrading to high-end models, premium brands like BMW, Audi and Mercedes-Benz have been among those benefiting from a recovery in sales.
Mr Goller predicts single-digit growth for BMW’s sales in China this year despite a 31 per cent year-on-year fall in the first quarter. An important aspect of that will be EV sales, which he said in China have evolved from a niche into the mainstream. “Only now [are electric vehicles] arriving in the core segment.”
4th Gear: Volkswagen Thinks It Can Compete With RAV4 And CR-V With Its ID.4
The Volkswagen ID.4 is a $40,000 all-electric SUV. I don’t think Toyota or Honda are quaking in their boots, because their competing ICE models cost many thousands of dollars less — and gas is cheap. So I had to stifle a laugh at the following in Automotive News this morning:
When Volkswagen starts selling its new compact electric crossover, the 2021 VW ID4, late this year, it believes its best opportunity to conquest new customers will be found among some of the industry’s most loyal buyers: those shopping for a Toyota RAV4 or Honda CR-V.
It’s what might be termed an ambitious plan, maybe even a crazy one, for a brand with just more than a 2 percent share of the North American market. But VW executives adamantly believe that as much as 30 percent of buyers of the segment-dominating Japanese crossovers are at least EV-curious — that is, willing to consider buying a full-electric vehicle, to help the environment.
And since neither Toyota nor Honda yet offer a battery-electric crossover to North American customers, that is where VW intends to strike.
“This is the heart of the U.S. car market in terms of sales, it’s 4 million sales a year, something like 35 million sitting in driveways right now. It’s the RAV4, it’s our Tiguan, it’s the Honda CR-V, and frankly, there is no electric vehicle sitting there,” explained Scott Keogh, CEO of Volkswagen of America, during a media preview in Brooklyn. “And if you look at what our dealers are excited about, it’s to have a tool that no one else has, and then let’s go take advantage of that.”
As much as 30 percent of RAV4 and CR-V buyers “willing to consider” (!) buying the ID.4 is not something I would bet a whole lot on, but then again I’m not Volkswagen. Also, there is a car sitting in that segment — it’s called the Tesla Model Y, which is gonna eat the ID.4's lunch. Jesus! Volkswagen is moving me to defend Tesla.
5th Gear: Tesla’s Rivals In China Aren’t Worried
Elon Musk made (some) waves with his announcement on Battery Day that there would be a $25,000 Tesla at some point. Tesla’s competitors in China aren’t terribly worried, according to Bloomberg.
“It’s a good thing for us,” WM Motor Co. founder and Chief Executive Officer Freeman Shen said. “We are very happy Tesla came to China because Tesla is just like Apple in the early days, they educate the whole market.”
Just as Apple Inc.’s share in the mobile-phone market has been eroded by local players like Xiaomi Corp., Oppo and Huawei Technologies Co., so too will Tesla’s, however over a longer time horizon, Shen said. Tesla’s slice of the “mainstream” electric vehicle market will significantly decrease in five to 10 years, he said.
Where WM Motor will be by 2030 isn’t certain either. The company earlier this month raised $1.5 billion in a Series D round led by Shanghai Automotive Industry Corp. (Group), the parent of China’s biggest automaker SAIC Motor Corp. People familiar with the matter have said WM plans a stock-market listing in its hometown of Shanghai as soon as this year, something Shen indicated on Saturday sounded ambitious, but declined to comment on further.
Xpeng Inc. Vice Chairman Brian Gu meanwhile described Tesla as a partner, with both EV manufacturers trying to make sure more consumers are attracted by smart, environmentally friendly cars. EVs are “less than 5% of the market” so together “we are accelerating that change and conversion,” he said in an interview with Bloomberg TV.
Reverse: The Ocean Was A Mistake
Neutral: How Are You?
I spent the weekend devising a plan to buy a garage in New York City. If and when it happens I will be going there and never returning.
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