Happy New Year! New year, same newsletter. Here’s another awesome edition of Transmission, a twice-weekly newsletter assembled to chronicle the seismic shift in auto supplier networks as the industry goes cross-border and electric.
Toyota’s president believes EVs are a victim of excessive hype
If you’ve been a part of the Transmission community since the start of the newsletter, you’ve probably figured out that the push for electrification is a huge topic I hone in on. There’s so much change happening around the world as society advocates for sustainable and clean transportation. New developments in EV technology like Quantumscape’s new battery breakthrough create headlines that excite consumers about the future of mobility. Although a lot of the hype generated from EV development is deserved, some people believe EVs are overhyped, including Toyota President Akio Toyoda.
Wall Street Journal reported that Toyoda criticized the excessive hype over electric vehicles, saying advocates fail to consider the amount of carbon used by generating electricity and the costs of an EV transition. “When politicians are out there saying, ‘Let’s get rid of all cars using gasoline,’ do they understand this?” Toyoda said Thursday at a year-end news conference. Toyota’s president also shed light on a surprising observation saying that Japan would run out of electricity by the summer if all cars were running on electric power.
At first blush, Toyoda’s comments may come across as a critique of consumer enthusiasm for EVs. However, he’s actually criticizing aggressive regulation tilting the scales toward EVs. Lately, like one domino after the next, countries have implemented bans against the sale of new ICE vehicles (yes, this was a topic in a newsletter a few weeks ago). China recently announced the ban of new ICE vehicle sales in the mid-2030s. Japan is still considering an exact date with South Korea expected to follow. Other countries like the UK and Sweden have already put plans in place with similar timelines.
Charging infrastructure needs to continue to develop. OEMs have been partnering with companies like Chargepoint and EVgo to rapidly add stations across the U.S. General Motors is one of many automakers seriously pursuing all-electric fleets, with GM aiming to do so by 2025. The current ratio of chargers to EVs is 1 to 14. The International Energy Association calculates that the ideal ration would be 1 to 10 with the more the merrier. Bans aren’t inherently bad, but if they’re aggressively enforced before infrastructure catches up, then we could have a serious situation on our hands.
2021: What to expect from a new administration
With a 2021 finally upon, we can look back and wave at the sad year that was 2020. One of the changes that’ll be experienced this year will have a significant impact on the automotive industry: a new president. This is in no way a political post, but rather an outlook of what’s expected for the new year ahead.
- Stricter emission standards: Biden wants to reimplement the strict emission requirements of the Obama administration. Trump reversed the policy after manufacturers complained about compliance costs.
- EVs: Biden has promised to spend $400 billion in public investment to transition to cleaner energy. The federal government is expected to help state and local officials build 500,000 new charging outlets by 2030, a significant jump from the 87,600 outlets that exist currently.
- Incentives: Biden wants to encourage the purchase of new EVs by providing consumers with tax credit. The current system gives $7,500 consumer tax break for the 200,000 an automaker sells. A “cash for clunkers” rebate program would also be put in place that sees consumers receive up to $3,000 for trading in an older car and switching to an EV.
- China Trade War: Biden and his administration will reevaluate the tariff imports on Chinese-made vehicles and components.
- More Jobs: A saying that every politician makes. Biden aims to add 1 million jobs to the automotive industry including suppliers, manufacturers and infrastructure. It’ll be interesting to watch this play out. OEMs are beginning to quickly ramp up EV production which requires less labor then ICE vehicles. Union workers are nervous that they could actually lose their jobs.
Biden’s platform can be added on top of a promising outlook for the auto industry. Retail sales continue to grow as dealers digitize and move online. The auto industry is expected to recover 1 million sales in 2021. In a webinar back in November, Tyson Jominy, vice president of data and analytics for J.D. Power said, “As soon as vehicles show up at the dealership, they’re going home.” Jominay also mentioned that 50% of vehicles hitting the lot are bought within 24 hours.
The positive outlook on sales and heightened demand is great news, but sales can’t happen if there isn’t a vehicle to be sold. Suppliers are playing catch-up to make up for lost production time in 2020. OEMs have been working through the holidays to meet demand. In short, Jominay’s quote summarizes the supply shortage. “We are ending the year at a very strong clip,” Jominay said, “If we had more cars to sell, we’d probably be doing even better than we are now.”
- Tesla has reached a 5 year deal with Sichuan Yahua Industrial Group Co. to supply Tesla with battery-grade lithium hydroxide. The deal is estimated to worth between $630 million and $880 million.
- Volkswagen has offered a glimpse of its mobile charging robot. The robot is planned to service VW’s autonomous vehicles.
- Shares of Tata Motors rose 4% on Monday as the UK and EU agreed on a post-Brexit trade agreement.
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