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Joe White Global Autos Correspondent
Greetings from the Motor City!
It’s a great day in the Great Lakes state of Michigan! The University of Michigan won the college football championship last night. Who’s got it better than us?
Chinese automakers could say, “we do!” Why? Read on.
Don’t worry CES fans. This newsletter will contain the words “artificial intelligence,” as well as “chips and software.”
We’ll explain the significance of “4.20.” No, it’s not that. It’s Tesla’s U.S. market share – 4.20% for 2023.
There are also some predictions for the U.S. vehicle market that you can store away until next January. It’s not always bad when forecasts prove wrong. Did you really want a recession?
Let’s motor on. Go Blue!
Today –
* China dethrones Japan
Automakers exported more than 3.8 million vehicles from China last year, up 62% from 2022 and enough to knock Japan into second place among vehicle exporting nations, according to a new report by the Chinese Passenger Car Association.
China’s vehicle export coup will rattle legacy automakers and their respective governments – nevermind that it comes with some asterisks. Toyota and other Japanese automakers long ago shifted significant shares of their vehicle production to factories in the U.S., Europe and Southeast Asia as trade barriers and supply chain economics made relying solely on exports unviable.
Auto exports remain a powerful symbol of industrial power. Just ask Germany’s automakers.
Less than a decade ago, the prospect of China as a major vehicle export hub was a hypothetical concern for Western automakers and politicians. Chinese automakers exported just over 800,000 vehicles in 2014, mainly to developing markets. They were struggling to hit a target of 860,000 for 2015.
Vehicles offered by Chinese brands were not up to the standards of developed markets. Legacy automakers’ joint ventures were focused on keeping up with fast-growing domestic demand.
That’s all changed. Chinese-made vehicles – including those made by Western automakers such as Tesla – are highly competitive and getting better. China’s BYD is as of the fourth quarter of 2023 the No. 1 EV company in the world, ahead of Tesla. Calls in Europe for new trade barriers underscore the progress Chinese brands have made.
China’s domestic market grew 5.6% last year to 21.7 million vehicles – by far the biggest auto market in the world. But that was not enough to soak up all the new capacity in the country’s auto sector as EVs displace combustion vehicles. For many Chinese auto factories – including joint ventures with Western partners - it’s now export or die.
About 73% of the vehicles exported last year burned petroleum, according to China Passenger Car Association data. Many went to Russia where domestic auto production has collapsed under pressure from Ukraine war sanctions.
Will Chinese automakers take the next step down the road Japanese and South Korean manufacturers have traveled and set up factories in overseas markets? No need to guess. Those moves are already starting in Europe and the United States.
* Essential Reading
* Don’t you want a talking car? Sure enough, automakers are using this week’s CES technology mega-conference to promote their plans to integrate emerging artificial intelligence technology into future cars.
Volkswagen said it is developing a voice command system using OpenAI’s ChatGPT and is aiming for a mid-year launch. Mercedes previewed an AI-enabled “dialogue partner.”
AI chipmaker Nvidia showcased partnerships with four Chinese automakers that will use Nvidia technology to power automated driving and advanced infotainment. There will be more talk of AI and super-powered chips for cars at CES.
But let’s take a deep breath…..
* Connected car revenue dreams may be just that Separate studies released in conjunction with the CES show contain warnings for automakers dreaming of big revenues from new “connected car” technology, including AI.
Salesforce, the enterprise software company, concluded from a survey of 2,000 consumers that 65% of drivers don’t know what a “connected car” is. Two-thirds said they don’t have or don’t use connected car features already in their vehicles.
Most importantly, Salesforce found that only 25% of drivers surveyed said “they were willing to pay more for electric or hybrid vehicles, and just 9% would pay more for in-car apps, games, and videos.”
Consulting firm Deloitte had a similar message of caution for automakers counting on connected services revenue to offset losses on EVs.
“While interest in connectivity grows, only 25% of U.S. consumers surveyed are willing to pay extra for connected services as many in established markets have come to expect the introduction of new features as a way for brands to differentiate themselves in the market,” Deloitte found.
Consumers are willing to trade personal information for better route guidance or timely alerts to schedule maintenance, Deloitte’s automotive research leader Ryan Robinson said.
But most aren’t willing to pay extra for those services – especially features such as route guidance that are already available for free via a smartphone app, he said.
Convincing customers to hand over money for digital service subscriptions “is one of the biggest challenges the automakers and captive finance arms face over the next three to five years,” Robinson said.
* EV prices are dropping Here’s good news for consumers – and bad news for U.S. automakers: Electric vehicle prices are dropping as sales growth slows and more models hit the market.
That’s one conclusion from a broad overview of the U.S. auto market outlook from Cox Automotive. (Another: The seller’s market for new vehicles created by supply chain bottlenecks is over, and don’t let dealers tell you different.)
EV inventories hit 113 days’ supply by the end of 2023, high by historical standards and 63% above the industry average.
Average selling prices for EVs – not including tax breaks – have fallen from more than $65,000 in early 2023 to $50,798 as of December – just $2,039 above the average selling price for a combustion vehicle, Cox data shows.
Tesla’s price cutting was a significant factor. So was consumer reluctance to pay asking prices for some legacy automaker EVs like the Ford F-150 Lightning. The more affordable Chevy Bolt, by contrast, had a terrific year, with sales up 62%. Too bad it’s going out of production.
Used EVs are becoming more affordable, too. Recurrent Auto said in a new report that used 2017-2019 Tesla Model 3 sedans are now selling for under $30,000.
* Fast Laps
Northvolt will get
$986 million in subsidies from Germany to build an EV battery factory near Heide.
Robo-taxi operator Cruise
offered to pay $75,000 to settle an investigation California state regulators launched after a Cruise automated vehicle dragged a woman down a San Francisco street.
British Telecom previewed a plan to turn cabinets for phone wires into EV charging stations.
The U.K’s largest junkyard operator, Synetiq, said it will provide salvaged EV battery packs to battery recycling startup Allye Energy to use for energy storage systems.
Chinese EV brand Zeekr aims to double sales this year.
Volkswagen and BMW said sales are recovering as supply chain bottlenecks ease. BMW said it is confident in its EV sales goals for this year.
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