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Transmission: Automakers brace for spiking COVID-19 infections

This is Transmission, a twice-weekly newsletter built to chronicle the seismic shift in auto supplier networks as the industry goes cross-border and electric.

Automakers brace for spiking COVID-19 infections

Detroit, like the rest of the U.S, is experiencing a resurgence of positive COVID-19 tests. The Detroit News reported that 28 out of the 290 new COVID clusters and outbreaks are related to manufacturing and construction. This virus surge has led Michigan to impose new restrictions that affect restaurants, school systems and businesses across the state. 

However, the auto industry is projected to continue operations as normal thanks to effective virus protocols in place. Ford’s spokesperson Kelli Felker said, “Our plants are running at approximately 97% of planned production since we returned to work in May.” Fiat Chrysler Auto and GM have also announced their intentions to continue running operations as normal. Virus prevention practices include frequent hand-washing, mandatory mask requirements, and social distancing. 

The growing concern within the automotive supply chain is whether or not all manufacturers in North America are abiding by safe regulations. If one manufacturer or supplier experiences an outbreak, it could have detrimental impacts across the whole network. A halt in production slows down vehicle output during a period full of high demand and inventory restock. 

(Chart: Freightwaves SONAR. Outbound tender volumes dropped during the third week of October.)

For example, Chevrolet had to halt production for a couple days back in October because of a COVID-related issue with a supplier. Thankfully this issue was resolved within a week, but the fact still remains that the automotive supply chain is vulnerable to supply shortages affected by the ongoing pandemic.

The race for No. 1: GM vs. Tesla

As the race for EV market domination continues to unfold, GM is stepping up efforts to challenge its market competitors, including Tesla, who has been dominating the EV sector for the past few years. 

Tesla currently leads in market value with a recent valuation of $495 billion dollars, more than the industry’s top-9 automakers combined‒a list that includes Volkswagen, Honda, Daimler AG, Ford, and GM‒valued at $480 billion. 

(Chart: Transportation Research Center at Argonne National Laboratory. Tesla and GM electric vehicle sales from 2011-2019 (Tesla-Red, Purple, Yellow; GM-Aqua, Royal Blue, and Dark Green).

In 2019, Tesla sold nearly 190,000 EVs in the U.S while GM sold approximately 27,000. Tesla has generated a lot of enthusiasm as shareholders believe in the company’s vision of a sustainable future and is on track to sell half a million EVs worldwide by the end of this year. 

While Tesla leads the race by far, Mary Barra, CEO and Chairman of General Motors, believes that GM can compete with Tesla and lead the charge for an all-electric future.

In a recent interview with Barron’s, Barra mentioned the various technologies GM is investing in to prepare for the future of EVs, including autonomous vehicle research and development and battery cell manufacturing. Barra was enthusiastic about the strides GM is taking to meet an expected strong demand coming in the next decade.

GM has a gameplan in place to ensure the company can thrive as this future comes to fruition. 

At the Barclays Global Automotive Conference held on Nov. 19, Barra stated the goal of GM is to be the No. 1 seller of EVs in the world. Here’s a brief summary of what GM announced at the conference:

  • GM revealed plans to introduce 30 new electric vehicles to their fleet by 2025. 
  • Barra recognizes the charging infrastructure bottleneck and said GM is partnering with organizations to expand charging stations across the U.S.
  • GM is exploring new features for their mobile app that already enables consumers to manage their vehicles by providing maintenance information and reducing “range anxiety”.
  • GM plans to provide customers with charging management tools that allow drivers to identify the best times to charge.
  • GM has also increased the vehicle range of their Ultium battery fleet to 450 miles while reducing the battery cost by 40% compared to the lithium-ion battery of the Chevrolet Bolt.

Earlier this month, General Motors announced plans to collaborate with Walmart to provide an electric, driverless fleet of vehicles for at-home deliveries via Cruise. The Detroit automaker is also adding up to 3,000 new jobs with the sole purpose of researching EV technologies.

Tesla made over $330 million in Q3 profits, while GM made closer to $4 billion (combined EV and ICE vehicle sales). The main factor behind a potential GM – EV takeover is GM’s superior production processes, ability to scale EV technology across many models, and its extensive dealer network and sales infrastructure. GM is also exploring and currently doing with Honda by allowing both auto makers to increase development efficiency since resources can be allocated to achieve the same goals. Points in Tesla’s favor include its technological superiority, especially around autonomous vehicles, its brand appeal, and recent expansion into China.

The Gist: GM is taking serious steps towards an EV future. They’re aggressive growth strategy is proof that this “EV future” is more than just a trend—it’s an expectation. Barra asserted that autonomous vehicles are on the horizon and GM has invested into R&D for that technology. Our thoughts? As more research gets poured into battery performance and safety, the more accessible EVs become. This could also push up the time table for autonomous driving. GM wants to dominate the EV market, and with this aggressive growth strategy, it’s definitely a possibility. 

In other GM news…GM has been instructed to recall 6 million trucks with Takata inflators. Takata used volatile ammonium nitrate to create a small explosion to fill air bags in a crash. If the chemical is exposed to excessive heat and humidity, it could explode with enough force to spew shrapnel. The malfunction has led to 27 deaths, with 18 being in the US. 

Industry News

  • Bentley, the luxury automaker under Volkswagen, is planning on parting ways with the internal combustion engine. They’ve revealed plans to have an all-electric lineup by 2026.
  • Vittorio Battaglia has been appointed president of Gefco France, a leader in supply chain solutions and automotive logistics. 
  • BMW has decided to relocate production of its sub brand Mini in Germany in response to Brexit. If the U.K government can’t agree to a zero-tariff deal, manufacturing in the U.K could come to a stop.

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