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I Regret To Report That Elon Musk Was Right

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Tesla’s in-house strategy is paying off, Ford has the CEO of John Deere on its board of directors now, and BMW. All that and more in The Morning Shift for December 30, 2021.

1st Gear: In-House

Everyone mocked Elon Musk and Tesla when they said they wanted to do everything in-house. Every other automaker was like “haha you fools just use suppliers it’s fine.” Tesla did use some suppliers, for batteries primarily, but otherwise strove to do things themselves, and actually made it work, somehow, despite lots of headwinds.

[It should be noted that Tesla delivered around 499k cars this year, so this isn’t exactly apples to apples. For context, Toyota sold almost 750k cars in August of 2021. —ED)

Anyway, The Wall Street Journal now reports that the chip shortage has proven Tesla’s approach right, mostly.

Tesla has been able to keep production lines running in part by leaning on in-house software engineering expertise that has made it more adept than many rival auto makers at adjusting to a global shortfall of semiconductors, industry executives and consultants said. Chips are used in everything from controlling an electric motor to charging a phone.

Faced with shortages earlier this year, for example, Tesla was able to quickly rewrite the software necessary to integrate alternative chips into its vehicles, the company’s chief executive officer, [Tesla CEO Elon Musk], has said.

Semiconductor executives and consultants said Tesla, as a still relatively young car company, had the advantage of designing its vehicles from the ground-up, rather than adding parts in a piecemeal fashion over decades as many legacy auto makers have done. That allowed Tesla to consolidate systems, some of them said.

In Tesla’s Model 3 sedan, a single group of semiconductors enables features such as speaker control and voice and gesture recognition that in many other vehicles would be controlled separately using more chips, according to a Bain & Co. study based on a 2019 Model 3.

Ganesh Moorthy, chief executive officer of semiconductor supplier Microchip Technology Inc., said electric-vehicle-focused producers benefit from being more rooted in technology than traditional car makers.

“They are more plugged in, in many cases, and I think as a result also have been able to be more flexible in what they have built,” he said.

Tesla didn’t respond to a request for comment about its chip-sourcing strategy.

Tesla, of course, is striving to make its own batteries, too, in a move similar to Apple dumping Intel and making its own chips. The in-house thing is an expensive luxury with lots of risk, but could pay long-term dividends.

2nd Gear: Dealers In The U.K. Had Good Reason To Be Afraid In 2021 But Ended Up Doing Great

Like in the U.S., the shortage of new car inventory has meant that dealers can charge more for new and used cars alike, though the Financial Times also says there is an interesting twist:

However, new car values have been artificially capped as UK laws mean forecourts, unlike those in the US, cannot charge more for a new model than the manufacturer’s recommended selling price.

This has resulted in a narrowing gap between second-hand car and new vehicle prices, with the value of some used models even overtaking those of new ones — an “unprecedented” situation, say industry executives.

Pendragon chief executive Bill Berman said prices were rising so fast at one point that used-car values were surging while the vehicles stood on the forecourt.

“We had a situation where we bought [a car] in July, and sold the car in September, and the price had gone up by 10 per cent. That just never happens.”

On Auto Trader’s site, a quarter of nearly-new cars, classed as less than a year old, are now on sale for more than the new models, the company said. Almost half the used cars are within 5 per cent of the new sale price.

“It’s a seller’s market,” said Ian Plummer, commercial director at the company. “It’s a fundamental question of supply and demand.”

The group found average prices on used cars had increased by £3,400 between May and November.

A law that means you can’t charge more than MSRP seems like a good idea.

3rd Gear: Nissan Is Getting Out Of Barcelona, And EVs Are Getting In

There had been some talk that the Chinese automaker Great Wall Motor would get Nissan’s Barcelona plant, but instead an EV company called QEV likely will, according to Reuters.

Spain is rushing to find a buyer for the plant, which Nissan will vacate at the end of the year. Great Wall had been slated to take it over but pulled out this month.

A commission comprising Spanish and Catalan politicians, union representatives and Nissan executives has been meeting regularly to evaluate various proposals for the plant.

“The partipants … have backed the general lines for the electromobility hub plan led by QEV Technologies,” Nissan said in a statement. “The hub meets all the set objectives.”

Further talks will focus on the concrete requirements of the plant in terms of space and assets and to determine whether other complementary projects could be included.

None of this is really going according to plan for Nissan.

4th Gear: BMW Hiring To Make EVs

There has been some concern that the switch to EVs would threaten the jobs in the automaking sector, though so far that hasn’t really been the case, and BMW said Wednesday that, on the contrary, it would be hiring thousands to make EVs.

From Reuters:

Germany’s BMW plans to create up to 6,000 new jobs next year to prepare for growing demand for its electric vehicles, the carmaker’s chief executive told daily Muenchner Merkur.

BMW is on a very good path through the transformation and has its plants prepared for e-mobility, Oliver Zipse was quoted as saying in an interview published on Wednesday. “That is why we will increase our workforce by up to five percent next year.”

[…]

Zipse said demand for EVs was very high. “Our i4 is sold out for months, as is the iX.” The i4 is an electric compact executive car and the iX is an electric mid-size luxury crossover SUV. Next year, BMW plans to introduce an electric version of its luxury sedan 7 series. “It won’t be any different there,” Zipse said.

I still think that EVs will amount to a net loss in jobs in the auto sector, because there simply are fewer parts involved in the making of an EV versus an ICE car, though it also seems likely that won’t be a near-term thing.

5th Gear: Ford Has A New Board Member

It is John May, CEO of Deere & Company, which makes the John Deere brand of tractors. The Detroit Free Press has taken this as an opportunity to speculate about what it means for labor relations, given that thousands of Deere workers went on strike recently, and given that Ford has had a relatively friendly relationship with its unionized workforce. More interestingly, the Freep also wonders why the hell Ford added another white guy to its board.

Ford choosing not to add a woman to the board actually “surprised” [industry observer John McElroy, host of “Autoline After Hours” podcast and webcast].

“Look, American companies and European ones are under the gun to increase the diversity of their boards, particularly with women,” he said. “GM has a 50-50 split, the best in the industry. Ford doesn’t like to be shown up by GM in any way, shape or form. I really thought one of the things they could go after is trying to increase the number of women on the board.”

Ford has 15 board members and four or 27% are female. GM has 13 board members and seven or 54% are female.

Ford executive chair Bill Ford has said during annual shareholder meetings in recent years, when asked, that the company is committed to promoting qualified women to leadership positions.

Actions speak louder than words, etc.

Reverse: Strike!

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