On the Move, March 18-24, 2024

Carmakers shift gears amid dwindling electric vehicle demand

The automotive industry is experiencing a significant shift from electric vehicles to hybrid models, triggered by a notable decline in EV demand. This adjustment has led carmakers to instruct their suppliers to move towards hybrids, anticipating reductions in EV prices to stimulate the market. The slowdown in EV sales has surprised manufacturers, prompting giants like General Motors and VW to scale back on EV expansions in favour of engine and hybrid vehicles, especially in western markets. With EV incentives influencing market dynamics, particularly in Europe, carmakers are expected to use pricing strategies and incentives to meet environmental targets and maintain sales amidst fluctuating consumer interest.

Renault's rallying cry for a European response to Chinese EV challenge

Renault's CEO, Luca de Meo , has issued a call for a unified European strategy to support the electric vehicle industry against the rising competition from cheaper Chinese models. Advocating for a collective investment in EV subsidies, raw materials, and infrastructure, de Meo emphasises the need for collaboration rather than unilateral action in transitioning away from combustion engines. This approach includes proposals for regional economic incentives and a focus on developing local software and semiconductor capabilities. As Europe faces a slowdown in EV sales growth amid financial pressures on consumers, the suggestion aims to safeguard the continent's automotive market while creating a competitive yet cooperative relationship with Chinese manufacturers, ensuring Europe remains a key player in the global shift towards electric mobility.

US carmakers granted reprieve on emissions targets

The Biden administration has decided to extend the timeline for carmakers to comply with emissions goals by three years, responding to pressures from the automotive industry, labour unions, and the oil sector. This adjustment could potentially decelerate the shift towards electric vehicles in the United States. The US Environmental Protection Agency (EPA) 's updated regulations now require the most significant reductions in vehicle emissions to start in 2030, as opposed to 2027. Amidst a backdrop of lobbying from various sectors and concerns over the impact on jobs and consumer choice, the final rule allows for a more diverse array of "clean" vehicles, including advancements in petrol, hybrid, and electric models. Despite fears of slowing EV adoption, the EPA maintains that the adjusted rule will still lead to substantial CO₂ emissions reductions, supporting a broader transition to cleaner transportation options.

Carvana's comeback...from the brink of bankruptcy to record profits

In a dramatic reversal of fortunes, Carvana , the online used-car dealership, has managed to steer away from the verge of financial collapse, marking a notable shift in the company's trajectory. Despite enduring a sharp decline in share price and facing potential bankruptcy amid skyrocketing interest rates and diminishing affordability for used cars, Carvana's strategic turn towards cost-cutting and improved efficiency has paid off. The company reported its highest-ever gross profit per vehicle and record operating profits of $300 million in 2023, even as vehicle sales dropped from their pandemic peak. This turnaround was facilitated by an agreement with bondholders, providing Carvana with essential financial leeway and causing its stock to surge, silencing critics and inflicting significant losses on short sellers. Carvana's resilience underscores the importance of adaptability and focused execution in navigating market challenges, with its sights set on capturing a larger share of the stable US used car market.

Bentley's bespoke bonanza...customisation drives profits

Bentley has experienced a surge in demand for customised luxury vehicles, with 70% of customers in the last year opting for bespoke features costing over €40,000. This trend towards personalisation, including unique requests like using wood from a customer's own forest, contributed significantly to the carmaker's impressive profit figures. Despite a decrease in overall operating profits from the previous year due to a decline in China's market, the enthusiasm for tailor-made additions has remained robust. Bentley's plan to transition to exclusively electric vehicles by 2030 has been adjusted, with a continued focus on hybrid models for the next decade due to high demand and software development delays for its first electric vehicle. This strategic shift underlines Bentley's adaptive approach in a changing automotive landscape, balancing innovation with customer preferences for luxury personalisation.

Hertz's electric gamble hits a bump

Hertz 's strategic pivot towards electric vehicles under the helm of former Goldman Sachs CFO Stephen Scherr has encountered turbulence, leading to his departure. The car rental company, seeking revitalisation post-bankruptcy, aimed to differentiate itself in the competitive mobility market by integrating Tesla EVs into its fleet. However, this move, coupled with Scherr's leadership, failed to ignite the anticipated boom. Instead, Hertz faced a sharp decline in share value, compounded by operational challenges with its EVs, including higher than expected damage rates and maintenance costs. These setbacks have prompted a reevaluation of Hertz's EV strategy and leadership, underscoring the unpredictable journey of transitioning to electric mobility in the face of consumer hesitance and financial complexities.

MG and JSW forge ahead with electric dreams in India

In an ambitious move, India's largest steel producer, JSW Steel , has joined forces with Chinese automotive giant SAIC Motor to launch a $1.5 billion venture under the MG brand for manufacturing electric vehicles in India. They plan a $5 billion investment by 2030, aiming to lower costs through increased local sourcing, including setting up a battery manufacturing facility in Odisha. This joint venture, named JSW MG Motor India, intends to roll out a new EV model every few months over the next three years, beginning in October. Amidst regulatory challenges for Chinese firms in India, this collaboration signifies a strategic step towards indigenising EV technology and production, potentially transforming the Indian EV landscape currently dominated by Tata Motors . The venture also aligns with India's growing openness to EV innovation, highlighted by international interests from brands like VINFAST , Tesla, and Suzuki.

Audi eyes US production to drive electric expansion

AUDI AG is exploring options to start manufacturing electric vehicles in the United States, potentially leveraging a new $2 billion Volkswagen plant in South Carolina, aiming to boost its market presence. The move comes as Audi seeks to capitalise on the growing demand for EVs and take advantage of the Inflation Reduction Act's tax incentives for locally manufactured electric vehicles. Unlike its rivals BMW Group and Mercedes-Benz AG , Audi currently does not produce any vehicles in the US, relying instead on imports from Europe and its Mexican factory. With US deliveries up by 21% last year and EV sales increasing by 55% between 2022 and 2023, Audi's strategic shift towards local production could significantly impact its position in the competitive US automotive market. The company's focus on long-term investment indicates confidence in the sustainability of the EV market, regardless of potential changes in subsidy policies.