Welcome to the Hyperdrive daily briefing, decoding the revolution reshaping the auto world, from EVs to self-driving cars and beyond.
News Briefs
- The White House will roll out car-emissions limits Thursday.
- China’s EV makers turn to social media influencers for an edge.
- GM shares tumble as earnings and outlook miss the mark.
Carmakers Weren’t Kidding
Stellantis hit it out of the park with earnings this week, as surging demand for Jeep SUVs and Ram trucks drove standout first-half results. One figure buried on slide 21 of the company’s presentation really stood out.
It was the 3.9 billion-euro ($4.7 billion) boost to the company’s adjusted operating income from “vehicle net price & content.” In other words, pricing was an almost $5 billion benefit to Stellantis’s bottom line.
The inflation buzz I wrote about in this space a couple weeks back was more than just idle talk. This is a huge amount, and it reflects how the pandemic, the global semiconductor shortage that’s disrupting production and rising raw material prices could combine to change the way cars are built and sold.
Scarce chip supplies have shrunk vehicle inventory across the globe, most notably in the U.S., where gross stock ended last month at the lowest since at least 1985, Credit Suisse analysts said in a note. At the same time, incentives and rebates dropped to levels last seen almost eight years ago, according to RBC analysts, handing major earnings upside to Stellantis and several of its peers.
So is this the new normal? Will automakers ditch their old, bad habit of overproducing cars that sit on lots for months until they’re sold at steep discounts? Will they pivot for good to more of a direct-order system that better aligns production with demand? Ford says it will go in this direction. Stellantis’s CEO is hinting he’s interested, too, by beginning talks with European dealers about direct sales.
Here are a couple other things that caught my eye this earnings season:
VW’s EV Issues
The automaking dinosaur considered to be furthest along shifting to the electric age is having early trouble delivering on that expectation.
While strong Porsche and Audi sales led Volkswagen to lift its profitability forecast yet again, the German company shipped 170,939 fully electric vehicles in the first half — just 28% of its full-year target of 600,000.
The much-anticipated ID series accounted for less than half of those sales, according to Bernstein analysts, suggesting some of the software teething issues that delayed the rollout of the ID.3 may have put off customers.
The situation is especially worrisome in China, where the company sold just over 18,000 EVs. VW expects EV sales to pick up in the second half, but there’s growing concern that the carmaker will have a tough time replicating the success it’s had selling combustion cars in the world’s biggest auto market. President Xi Jinping also has minced no words about wanting to see China’s homegrown automakers succeed.
"Near term, we share concerns about what looks like a shift in China, where both consumer preference and public policy seem to threaten the market share of foreign brands,” Jefferies analysts led by Philippe Houchois said in a note this week.
BMW Mobility Boost
BMW, traditionally the final big European automaker to report quarterly results, showed off decent profit and sales that beat analyst estimates. Still, the luxury-car maker underwhelmed the market because it sounded a much more cautious tone than Stellantis about the extent to which supply-chain bottlenecks will crimp second-half earnings.
There were a few bright spots, though. With the pandemic easing, some of the company’s mobility services are rebounding. Its Free Now ride-hailing service recorded 140% growth in taxi trips and short rides, and the Share Now car-sharing offering also experienced a “strong upswing,” Chief Financial Officer Nicholas Peter told analysts.
Automakers so far have had limited success challenging the likes of Uber and Lyft with their mobility offerings, so the latest figures from BMW, which runs this business together with Daimler, should at least provide hope that not all is not yet lost.
Before You Go
Those auto executives hoping for a return to the old ways of brokering deals in convention-hall cubicles will have to wait a bit longer. Organizers of the 2021 New York International Auto Show on Wednesday canceled the event for the second year in a row, citing concerns about the spread of the Covid-19 delta variant. While the show typically contributes about $300 million to the region’s economy, it was called off because of increasingly stringent local measures to limit the spread of the virus. For now, the IAA Mobility auto show in Munich is still a go for early September, with executives from VW, Daimler and Facebook due to attend.
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