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.
The race for No. 1: GM vs. Tesla (continued)
There is an ongoing race for EV domination as automakers across the globe push to be No. 1 in the EV market. Automakers are investing heavily in R&D and unveiling new electric models in anticipation of growing demand.
In Tuesday’s edition of Transmission, I covered the gameplan that General Motors CEO Mary Barra set in place to gain more ground in the EV race and start challenging the current industry leader, Tesla. I spent most of the newsletter discussing GM’s aggressive growth strategy, but today I’m shifting the spotlight to Tesla and its strategy to stay on top.
It’s no secret that Tesla’s vision of providing sustainable energy and transportation excites both investors and consumers. Tesla vehicle deliveries have increased even during the pandemic and are projected to rise by 30% to 40% versus 2019 as the company continues to develop its vertical integration.
Tesla currently works with Panasonic to manufacture battery cells in Nevada, with a battery cell production capacity of 35 gigawatt-hours (GWh). The two companies are in discussions of increasing capacity to 54 GWh. Tesla has also co-developed a battery cell with supplier Catl, who boasts the battery is capable of powering a vehicle for 1.2 million miles. The battery cell would lower the cost of EVs in relation to internal combustion vehicles.
Construction on two Gigafactories, located in Berlin, Germany and Austin, TX, is underway so Tesla can continue expanding its manufacturing footprint across the globe. At the European Conference on Batteries, Elon Musk, CEO of Tesla, said that the Gigafactory in Berlin could be the largest battery cell plant in the world, with an output of 250 GWh once operations are in full in swing. Bloomberg estimates that 250 GWh is just under the current world capacity of lithium-ion battery cells, with the majority of battery cell production taking place in China, South Korea, and Japan.
One of the challenges that EVs present is the cost of battery production. Tesla has been researching ways to lower the cost all the while maximizing sustainability. Musk informed the conference audience of the new battery innovation the company has been developing, which uses dry electrodes as compared to solvent that causes off-gassing.
Musk also shared an update on one of Tesla’s ventures, the Tesla Semi. Delayed in the beginning of 2019, the Tesla Semi now has a stated range of 621 miles, up from 500 miles, using the company’s new Tesla 4680 cells and new battery pack design that was unveiled in September. Musk stated that the truck could pull 40 metric tons, although he meant to say that the Tesla Semi hauling a full load would weigh 40 metric tons. The heavy weight of the battery cell used in electric trucks is a concern because any additional weight must come from the freight payload. During the conference, Musk hesitated in saying that there could be a 1-ton penalty for the Tesla Semi, but followed up by saying the long-term goal is to have a zero cargo reduction.
The Gist: Tesla’s expansion of their manufacturing footprint is key to their growth. With plants now located across the globe, including China, the United States, and soon-to-be Germany, Tesla can now sell into multiple markets more efficiently. Tesla made 139,000 vehicle deliveries in Q3, 2,000 more than Wall Street projections. Global sales are expected to top 500,000 units by the end of 2020. The demand for Tesla’s vehicles clearly exists, but the problem that haunts Tesla is the challenge of scaling production, as Musk pointed out in the European Battery Conference.
When GM went bankrupt in 2010, Tesla bought a plant it had jointly operated with Toyota under NUMMI near San Francisco. Currently, Tesla uses about half of the plant’s production capacity. If the company can find a way to create economies of scale, then Tesla can meet the strong demand for its vehicles and lower battery costs. GM has the advantage here because of their ability and interest in partnering strategically with other automakers like Honda.
Laredo witnessing influx in freight volumes
Cross border transportation and trade is on the rise in Laredo, TX. Laredo is currently the nation’s No. 1 inland port in the U.S and generated about $232 billion in imports and exports in 2019.
Inbound truckload tenders—shippers’ requests for capacity—are reaching new heights as the automotive supply chain continues to recover from COVID-19. As a result, wait times have increased across the border as a result of the influx in inbound freight.
The U.S Customs and Border Patrol (CBD) has announced a pilot program which will reroute all northbound trucks carrying empty containers to the Laredo-Colombia Solidarity International Bridge to speed up cross border wait times starting December 7. This comes to no surprise as truck volumes were up 5% and 7.7% y/y in the months of September and October.
- Gatik, a company specializing in autonomous driving of B2B short-haul delivery trucks, has closed a $25 million series A round. The California-based company also announced a deal with Loblaw, providing them with a fleet of vehicles in Canada.
- The UK car industry could lose up to $74 billion if a Brexit deal isn’t reached. Tariffs imposed on imported and exported vehicles and components could put automakers in quite the pinch.
- GM has flipped the switch on the Trump administration’s legal battle with California regarding the state’s ability to set its own fuel-efficiency regulations. The automaker believes that California’s regulations are aligned with GM’s vision of an all-electric future.
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