TariffWatch Continues: Harley Woes Edition

As TariffWatch continues, I had 16 browser tabs opened to different reports about the effects of proposed tariffs on companies just from this past week! On Tuesday, Donald Trump tweeted, "We are finishing our study of Tariffs on cars from the E.U. in that they have long taken advantage of the U.S. in the form of Trade Barriers and Tariffs. In the end it will all even out - and it won’t take very long!" What exactly “even out” means is very much under debate, but what isn’t being debated is the fact that nobody outside the Oval Office wants any sort of tariffs to happen, and that all projections suggest a really bad outcome for everyone.

Having previously threatened as much as a 25% tariff on vehicles assembled outside the United States, Trump changed his mind a bit again last Monday, saying maybe just 20% will do. What it will actually do is raise prices, by quite a lot. Assuming the 25% tariff, consumers, to whom the additional cost would be passed, would face an average of $5,800 added to every car, totaling about $45 billion in extra taxes paid every year. This is applied to all vehicles considering the steel and aluminum tariffs and anticipated tariffs applied to auto parts used to assemble cars within the U.S.

German luxury vehicles would be the models hit the hardest, since their high prices mean the tariffs would drive their costs to consumers to truly untenable levels. This not only means fewer sales, it means we could start seeing manufacturers start withholding their cars from the American market. According to Reuters, the tariffs would destroy the business case for niche market vehicles like convertibles and sports cars, which are sold in low volumes and for high prices. If companies can’t sell them and can’t make money on them, why produce them? Or at least why send them to America? Hell, even the very American Toyota Camry, the best selling car in the country, would see its price increase $1,800.

Ostensibly, these tariffs are meant to harm German manufacturers, which they would, to the tune of around $5.24 billion, according to analysts at Evercore ISI. But it’ll hurt other manufacturers, including American ones, especially FiatChrysler, whose profits would take an $886 million hit if the 25% tariff is enacted.

But it’ll create jobs, right? Well, the Council on Foreign Relations estimates that the 25% tariff will actually cost the country between 18,000 and 40,000 auto industry jobs just by the end of next year as companies look for ways to lose less money. And that’s the most conservative study! The American Action Forum estimates a net decrease of 157,000 jobs while the Peterson Institute for International Economics is even more dire, suggesting 195,000 industry jobs will be cut. And that study goes on to suggest if other nations retaliate with tariffs, as is expected, the total industry loss would be around 624,000 jobs.

While this tariff isn’t yet in place and may not be enacted if anyone can talk any sense into Trump and his advisers, the tariffs placed on aluminum and steel are already wreaking havoc on American companies. After their metals were taxed, the European Union responded with tariffs of their own on blue jeans and Harley-Davidson motorcycles. They probably would’ve taxed apple pie too, if that were feasible.

Unfortunately, Europe is Harley’s second biggest market, where they sold more than 40,000 bikes last year, and an increase of between 6 and 31 percent in Europe means their bikes are going to run on average $2,200 more expensive, which is a tough sell. They were already hurting from the steel and aluminum tariffs, which caused costs to rise $15-20 million and the tariff is added an additional $35-40 million to that just this year. Next year they expect to lose more like $80-100 million.

To counteract this, Harley announced that they would move some manufacturing to Europe to avoid the tariffs, which is sort of the exact opposite effect I think Trump was hoping these taxes would have. Previously having called Harley a true American icon, Trump engaged in one of his wildly incoherent tweetstorms, ending with a threat that the company would lose their aura and be hit with taxes like never before. Well, they already are, and it’s your fault, buddy.

Honestly the most terrifying part of all of this is the fact that, while we’re over here slamming doors and storming off to build walls, China announced this week that after July 28th, they will roll back foreign ownership restrictions on joint ventures in the country. After decades of requiring companies from other countries to find a Chinese company to take the lead when they wanted to sell their cars in China, the country is saying, “Hey Tesla, BMW, everyone else! I know you’re getting a raw deal over there in America, why don’t you have a seat over here. We’re keeping it nice and warm for you.”

When even Toyota has to issue a public comment stating that its 137,000 employees in the U.S. don’t pose a national security risk, you know something is backwards, and what that is, is progress. What, I think in many people’s mind, made America great was its role as the guiding force in international commerce, politics, and trade. Now we’re seeing China step up and challenge us for that role and instead of forging forward as we have, we’re stepping back and saying, “Hey, do whatever you want, we’re fine on our own.” The problem is, in this situation, we're not fine on our own and it’s we the people who pay the price, whether through increased costs or restricted choices. Trade wars are the true enemies of automotive enthusiasts and consumers in general.

Authored by
Devlin Riggs

Headlines for the Week for June 18th, 2018

Flying Cars to Take Off in Ingolstadt

Long time listeners may remember a few months ago I mentioned Audi’s partnership with Airbus to start developing flying cars. As a refresher, these were very loosely termed cars. Basically it’s a three-part design, with a quadcopter, passenger pod and electric skateboard-like platform. The pod can be transported by either the quadcopter or wheeled platform, making it either flying or car, but not really “flying car.” I said at the time that the idea was pretty neat and more likely to succeed than any other system I’d seen and, sure enough, Audi has just received approval from the German government to start testing these in their headquarter city in Bavaria, Ingolstadt. Now, this is a long way from being like “oh my God, we are all going to be catching flying car taxis from the airports within five years,” but it’s a lot closer than I thought we’d see in my lifetime, so I’m hoping this actually goes somewhere. Onward and upward, Audi.

Volvo’s New US Plant feat. Dig @ Trump

In a time when automotive manufacturing jobs can be hard to come by in the US, who can we trust to bring back those jobs? Yep, the Chinese and Swedes! Volvo, which is owned by Chinese company Geely, formally opened their new factory in South Carolina, which will build the new S60 we’ll get to later. In addition to providing Volvo the chance to suck up to American buyers by focusing on the $1.1 billion investment in America and the 4,000 jobs the factory will host when construction is complete, the event gave Volvo execs the chance to cast some serious shade at Donald Trump and his supporters Nikki Haley and Governor Henry McMaster. Volvo CEO Hakan Samuelsson said “If you have trade barriers and restrictions, we cannot create as many jobs as we are planning to. We want to export and if suddenly China and Europe have very high barriers, it would be impossible. Then you have to build the cars there. And then all cars will be more expensive, you have to invest more tooling and have every model in every country. That’s against all the logic of modern economies that trade with each other.” It seems there’s a lot of commentary about our trade policy being against all logic, and yet here we are, threatening a 25% tariff on imported vehicles and auto parts. It’s almost like logic doesn’t factor into decisions at all, but what do I know, I’m only a master of business with a degree in political science who happens to like his cars cheap and fast.

Audi CEO Arrested, Thrown in Slammer

^Criminal

The fallout from the Dieselgate scandal continues still in Germany where this week Audi CEO Rupert Stadler was arrested based on concealment of evidence relating to the defeat devices on Volkswagen Auto Group vehicles. He’s actually remaining in custody because the prosecution thinks he’s a flight risk. Audi has had to scramble to name an interim CEO while their boss remains a jailbird, but this just continues to look bad. If the CEO of one of your major brands was aware of the effort to deceive authorities, former Volkswagen CEO Martin Winterkorn is probably shaking in his boots because you can bet he knew about it too. It’s a serious problem when a culture of corruption comes straight from the top, and you would’ve thought Volkswagen had learned its very expensive lesson, but by keeping Stadler as Audi CEO this long after the scandal came to light, maybe they need a couple more billion dollar settlements before the root out all the corrupt jerks. I’ll take my settlement in the form of a V10 R8, thank you.

Teslupdate #1,000,000,000

This will again not be the week when we have no Tesla news, because there was some wild shit going on with Elon Musk’s company this week. First, the not-so-wild: tesla completed the setup of a third production line over the weekend...in their parking lot. Yes, the new line is underneath temporary tents outside because the space is needed that badly to ramp up production to meet goals. Back when the factory was a combined General Motors and Toyota venture, they managed to crank out 8,200 cars per week from the inside of the place, so if Tesla needs to move outdoors just to reach 5,000, I think you can imagine how much more complicated those production lines must be and how much more space they take up.

Amazing work by Tesla team. Built entire new general assembly line in 3 weeks w minimal resources. Love u guys so much! Pic of 1st Model 3 dual motor performance coming off the line … pic.twitter.com/Xr55P3fmGd

— Elon Musk (@elonmusk) June 16, 2018

Next came some serious shade thrown from General Motors. Actress Mary McCormack who you may remember from some sort of television shows somewhere, tweeted out a video of her husband’s Tesla Model S, which apparently just started catching fire while he was driving it and burst into flames in the middle of Santa Monica Boulevard. Tesla has no idea what happened or why, but GM jumped at the opportunity, offering the actress a free Chevy Bolt as a more dependable loaner car. Nicely done, GM communications guy Ray Wert.

Okay now we get to the crazy shit - on Sunday, Elon Musk sent out an email accusing a former employee of sabotage and intellectual property theft, as well as leaking sensitive information to third parties and the press. He followed that email up with another about someone potentially trying to sabotage a production line by starting a fire. Then on Tuesday Tesla filed a lawsuit against a former employee for allegedly having stolen confidential information and making false claims to the media. Then on Thursday, someone claiming to be a friend of Martin Tripp, the guy Tesla sued, called the Gigafactory to warn that Tripp was coming in to shoot up the place, causing a minor panic and for beefed up security until the county sheriff found there was no credibility to the threat. Then AFTER THAT, Tripp posted to Twitter an email exchange that he had with Musk about the lawsuit wherein they both called each other horrible human beings and generally behaved like children.

We’re not yet sure if the Sunday email and Tuesday lawsuit are connected, but if not, that means there are several people trying their darndest to mess up Elon’s life. And jeez, people if you like constant dramabombs being dropped, no need to watch daytime television, just follow Elon Musk on Twitter. This is ridiculous.

J.D. Power Initial Quality Honors Hyundai

The annual list of J.D. Power rankings for initial quality were released this week and, if you’ve been listening to this show and looking at their recent cars, you won’t be surprised to learn that Genesis, Kia and Hyundai are the top three brands. All of them being owned by Hyundai. Even Porsche comes in at just fourth spot and Ford in a somewhat unbelievable fifth. The trick is, the initial power rankings count the number of problems experienced per hundred vehicles in the first 90 days of ownership. If things are going wrong within 90 days, that’s generally not a great sign for future reliability, but certainly not a sign that cars with good initial quality will last longer, as may be the case with Ford. They also don’t measure the severity of problems, so a busted transmission is effectively the same weight as a windshield wiper motor squeaking, which is pretty misleading. Furthermore, as I’ve discussed before, automakers pay JD Power for the right to use their awards in marketing materials, so these sort of non-firsthand user reviews should be taken with a grain of salt. Nevertheless, Hyundai definitely deserves a look as they do make some pretty nice cars. Just, as with everything else, QUESTION EVERYTHING.

RC-6 Corvette

While I’ve never driven one, It’s my understanding that Corvettes are very fun cars to drive. But in the Netherlands, where people decided they’d rather have land where the sea was so they built a complex series of windmills to drive the sea back into the ocean, one man has gone and made his Corvette a bit more complex as well. Specifically, he modified his C6 Corvette to be remote controlled. We’ve seen full-sized R/C cars before, but doing so to a Corvette is an entirely different scale; one that cost about $4,000. It’s honestly really impressive that someone could pull this off, but I still think I’d rather be behind the wheel of that V8 rather than just puttering it around a parking lot. But that’s the Dutch for you - defying convention, and the ocean.

Authored by
Devlin Riggs

Header image: When your GTI is the least athletic member of your automotive family tree.

Headlines for the Week of June 11th, 2018

Daimler Defeat Devices Doom Diesels

In Germany this week, Transport Minister Andreas Scheuer made like a middle school principal and called Daimler CEO Dieter Zietsche to his office. On Monday, he asked a sheepish Zietsche if he know how exactly five cheating devices were found in new Mercedes diesel engines. Of course Dieter claimed he had no knowledge of such a thing and that it was his classmate Martin Winterkorn over at Volkswagen who was the cheater! Well, said Principal Scheuer, he didn’t believe that, but he did believe that Daimler had put defeat devices in as many as one million recent Mercedes cars to try to skirt the Euro 6 emissions standards and that, to make things right, Dieter would have to do the equivalent of resubmitting his homework. Which in automotive terms is recalling 774,000 of their latest model diesels. All joking aside, these cars were probably designed after Volkswagen’s dieselgate scandal came to light, so just how was it Daimler thought they were going to get away with this? And how far does this dieselgate rabbit hole go? The more they cheat, the more it seems like diesel cannot be made clean and really has no future.

Tesla Drops Employees, Props Autopilot

Just one week, I’d love to go through Feedly, which is an RSS reader I use to aggregate my news and think, “oh wow, not a single notable thing about Tesla this week, I guess their 5,000 vehicle production rate is humming along smoothly.” Sadly, that was not this week and they remain the brand mentioned more than any other on my and most websites.

First, some lawsuits; one from an employee who alleges he was fired after he expressed concerns about workplace safety, and another who claims he was ousted after expressing interest in joining a union. Both are crimes, both will probably be settled to nobody’s satisfaction, and both have been denied by the company. Why cover this? Because such rumors have been floating around for a long time and the more we hear about them, the more it seems Tesla has a toxic culture of secrecy, cover-ups and anti-union sentiment, which is a problem when it comes to protecting workers’ rights and well being. Also because no other company is having this sort of problem, at least not visibly.

Then came the news that Tesla is laying off nine percent of their workforce in an effort to streamline efficiency and gain better profitability, which is to say “any profitability at all.” It sounds like the cuts will come primarily from salaried positions because they need all hands on deck for the production of their vehicles. Despite planning factories in Shanghai and Europe, Musk still claims he won’t have to raise any new capital and that the company will be profitable by the third or fourth quarter of this year, so this culling is probably critical to getting there or close.

Finally, hot on the heels of a report from the Association of British Insurers and Thatcham Research indicated that calling vehicles “autonomous” led to dangerous grey areas and driver over-reliance on technology, Tesla announced that they will begin rolling out full self-driving features this August. Details are scarce (as they are on the fact that the next Roadster will apparently have rocket thrusters), but if there’s one thing that’s certain, it’s that people are too dumb for this technology. If you hear the word “autonomous” and you immediately stop listening to anything else and immediately start thinking that cars are going to do everything for you, you should not be allowed as a passenger in a car, let alone driving. Seriously, hop on a train.

Toyota Drops Cool Bill on Grab

Any time a car maker spends a billion dollars, it’s going to get some attention, and that’s just what Toyota did this week when it took a stake in Singapore’s Grab Holdings, which is Southeast Asia’s largest car hailing service, a company that drove Uber out of their home markets. That Toyota had to spend so much to buy in indicates not only the growing value of ride sharing, but the view among car companies that they think that traditional vehicle ownership is going to be majorly disrupted by car sharing and autonomous ride hailing services. Toyota’s big cash drop means they’ll get a seat on Grab’s board of directors, which analysts say almost guarantees that Grab will start buying Toyota cars for its service. As they say, you gotta spend money to make money, and with $54 billion in cash laying around, I’d say Toyota has some they can spend! Toyota has increased partnerships and investments in a bunch of automotive disruption companies that focus on ride hailing, ride sharing, electric vehicles and autonomous cars, so they are hedging their bets that one or more of those is going to take off and they’ll be well-positioned to take advantage. Once more, Ford should be taking note of how Toyota does business before they have to kill off their entire passenger car production because they didn’t plan well enough.

Autonomous Vehicles will be SO GREAT

Even though autonomous cars aren’t very good right now, they won’t always be glorified assisted driving systems. According to a report by Security America’s Future Energy, autonomous vehicles will be so great for everyone and will lead to an incredible $796 billion in total annual benefits by 2050. This comes from congestion mitigation and economic impact as well as the totally super easy to quantify “quality of life improvements.” It also means cost cutting for taxis and truckers since those hundreds of thousands or millions of jobs will be taken over by robots, and it’s like you always hear those people who lose their jobs to robots say, “but my quality of life is so much better now that I’m unemployed.” This report is full of bogus or at the very least dubious data and projections, including safety because, as we’ve been learning lately, safety isn’t exactly guaranteed by autonomous vehicles. Maybe by 2050 they’ll have it all figured out. That’s only 32 years or so from now.

Food in Fords Making Moves in Miami

Speaking of autonomous vehicles, when Ford isn’t buying old train stations in Detroit to slap their logo on, they’re building customized Ford Transit Connects to act as Postmates food delivery vehicles in Miami. The small vans will be equipped with curbside lockers to hold food, which will be placed in the car by the restaurant after a customer places an order through the app. The food will then be taken to the customer who will receive a locker number and code to unlock the locker. Car arrives, customer gets food, and we all move on with our lives without having to make polite small talk with the delivery person while you try to decide how generous you will be with the tip. In the wake of vacating sedan and small car sales, Ford may be jumping in with both feet on this “autonomous mobility” movement sector and this pilot project could help inform systems and layout for an entirely food delivery-focused vehicle sometime in the future. I look forward to the Domino’s Transit that will cook my pizza while it’s on the way to my house. I don’t mind having to cut it because it’s not like the people at the store actually do it worth a damn anyway.

China Proves U.S. IS Not so Bad

Starting on July 1st of this year, China will be rolling out a voluntary system by which all new cars will have RFID chips placed on the windshield of vehicles, thereby allowing the Chinese government to use its dense network of surveillance technology to track you wherever you go. If you’re thinking, “well at least it’s voluntary,” starting in 2019, it won’t be anymore, and all of those 30 million or so new cars sold in the world’s largest car market every year will be equipped with these chips. China already has a number of surveillance systems, including incredible facial recognition technology, in place that use artificial intelligence to track criminals and shame people with high debts or for petty shit like jaywalking, so this is just another way of maintaining social control, and probably another way in which China can expand its incredibly creepy social rating system. While it sounds like this is yet another step on China’s journey into a dystopian nightmare, bear in mind that we all carry around cell phones equipped with RFIDs, so this could already be happening in the U.S. without your knowledge.

Dieselgate Can’t Stop Won’t Stop

Despite beginning in 2015, here we are three years later and Volkswagen is still dealing with the consequences of their diesel cheating scandal or “dieselgate.” They set aside 28.5 billion Euro to cover the sprawling fines and lawsuits stemming from their inability to make clean diesels that won’t kill us with excess carbon pollution, but just this week they were hit with another one billion euro fine from the German government for the same scandal. The Germans’ investigation was apparently much more exhaustive than the one we had here in the U.S. because it took way longer, but also resulted in lower fines. Add to this the fact that former owners of cheating diesel cars in Vermont and Arizona will receive $1,000 for the hassle of having to turn their cars back in and this thing only gets more expensive for Volkswagen.  In any case, they have to be getting close to putting this whole thing behind them. Just too bad the millions of people in Europe who will likely die early from inhaling those diesel fumes won’t be able to. SAD!

Fishy Filings Could Trouble Toyota

For the last…ever, people and politicians have been saying “where are the jobs?” and this year, Toyota and Mazda came through, committing to spend $1.6 billion on a new plant in Alabama, where everyone was super happy to greet them. Well, almost everyone, because the Center for Biological Diversity has been saying for years, “what about the fish?” Specifically, the Spring Pygmy Sunfish, which is a rare species and could theoretically be driven to extinction by the construction of the factory and the various infrastructure and activities around it. In a lawsuit filed this week, the Center alleges there hasn’t been enough legal protection for the fish’s only known habitat near the factory location, and they’re hoping to get the Fish and Wildlife Service to make some special efforts to protect the important characteristics of the apparently critical habitat. All this for a small striped fish that rarely exceeds an inch in length and has already been presumed extinct twice before someone found one living somewhere. But being the relative conservationist that I am, it strikes me that it can’t be that hard to accommodate some small fish, plus what if there’s like a butterfly effect where if this fish dies, Elon Musk never colonizes mars? Talk about a disaster.

Fuel Economy Matters, but Does it Really?

A new study released this week by Consumers Union and sent to me by AllWaysDrive Blog minion Jordan revealed that, among 19 popular vehicle features, almost 1,900 drivers chose purchase cost, reliability, safety and fuel economy as their top four most important, in that order. The researchers also asked study participants which vehicle they would prefer and participants generally chose options that cost 25% more but increased reliability, safety, and fuel economy. Less important were acceleration and performance, which surely indicates that this study polled the wrong people. Setting aside the fact that the study’s sample size was relatively small compared with the total car buying public, this isn’t really reflective of reality, with the average cost of cars climbing and the average fuel economy of new cars sold actually decreasing since mid-2014 with the booming sales of SUVs and crossovers. So there’s obviously a disconnect between what consumers say they want in an ideal car and what they actually end up buying. Go figure that people can’t be trusted to tell the truth!

Cars Drivers Drive the Least

If you’ve looked on the app Autolist for a car, which I highly recommend you do, you’ve probably seen a bunch of “online only” results from a company called Carvana, which will deliver vehicles to your door in a sort of backwards dealership kind of situation. Well, they also come up with lists, apparently, and after analyzing more than 1.6 million automotive sales from January through May of this year, they’ve come up with a list of vehicles they say get driven the least each year. In the top 15, you get your regular list of high class Mercedes and BMWs that are someone’s “treat yoself” vehicle when they’re not driving their ’94 Ford Ranger back and forth to work, and the same go with the Sunday cars like the Maserati Ghibli, Lexus RC, M4 and sure, even the Volkswagen Beetle. Also on the list are the Nissan Leaf and BMW i3, which people don’t drive because of range anxiety and the Smart ForTwo which people don’t drive because it’s crap. But there are cars on the list like the Mini Cooper, VW Golf Sportwagen and Buick Encore, which are just sort of normal cars. Why are you not driving your Buick Encores, people? Is it because you’re tired of people asking “oh, that’s a Buick?” But leading the list are the Porsche 911 and Chevy Corvette, which are driven just 4,700 and 4,500 miles per year on average, which is just a crying shame because they are both some of the best cars to drive. You stupid collectors are ruining everything!

Fifth Gear Returns this Fall

After the bummer news last week that Matt LeBlanc was leaving Top Gear after his third season, we got a boost this week with the news that competing show Fifth Gear would be returning this fall, with old hosts and top blokes Tiff Needell and Jason Plato once again hosting after a three year hiatus. Fifth Gear never had the budget of Top Gear, didn’t do the crazy stunts and always focused less on the antics of three weird oldies instead of the cars themselves, which was always attractive to the real car nerds out there, even if it was a bit tougher to get the significant others interested. As I mentioned when the old Top Gear crew left for the Grand Tour, more car shows will never be a bad thing and, even if Vicki Butler-Henderson doesn’t return, I’m going to try to find a way to tune in here in the States, and so should you.

Ford Files Patent for Existing Thing

When they’re not buying train stations, delivering Miami’s to-go-orders or killing off popular vehicle models, Ford is busy filing patent applications for silly things that have existed for decades. Recently, the company applied for a patent for a screen that drops from a car’s tailgate to provide a privacy curtain. One could imagine this being especially handy at the beach for changing out of a swimsuit before hopping back into the car or for doing your business while out in the woods or when overcome with a sudden case of bowel evacuation syndrome because you ate curry for lunch and you knew it was risky but decided dammit, Darryl, just go for it. In any case, these screens have been around for years and you can buy them on Amazon if you’re the type of person who chooses not to think about if someone could just look through the windshield and see you despite the privacy curtain. The difference here is that they will apparently be built into the tailgate instead of being an add-on you purchase separately. There’s also a variant that deploys into an awning, basically giving you a shady spot to sit behind your car on sunny days. Plus, with the fact that the Mustang will be the only Ford vehicle without a hatchback or tailgate, this means they could apply it to almost every single car in their U.S. lineup! Hooray for small victories? 

Infrastructure, Now with Stuffed Crust

After so many campaign promises by so many politicians to address the country’s crumbling infrastructure, we are finally starting to see some progress being made. Oh, wait, did you think the government was doing something? Oh, no, sorry. We can’t even get a coherent trade policy. The entity currently working on restoring our roads is actually Domino’s Pizza. Under the guise of creating a smoother ride for their delivery vehicles so our pizzas don’t arrive in a jumbled mess, Domino’s is fixing potholes from California to Texas to Delaware and, after paving over the road canyons, painting them with a very tasteful Domino’s logo and their tagline, “Oh yes we did.” Yes, this is a publicity stunt and yes it’s working but hell no, I don’t mind driving over Domino’s logos in the streets instead of feeling the jarring crash of a six-inch deep pothole and wondering if my wheel has bent so much I won’t make it home. Oh yes you did, Domino’s, because oh no, our elected officials can’t.

Authored by
Devlin Riggs

Electric Vehicles: In Demand & Bad for the Planet?

While vehicles that plug in for electric power comprise just more than 1 percent of vehicles sold in the United States, electric vehicles may not remain such niche products for much longer. According to a new survey from AAA, as many as 20 percent of consumers want their next car to be electric, which is up five percent from this time last year. The reasons why 80 percent remain disinterested are obvious and well covered – from range anxiety to lack of infrastructure to the fact that batteries are a new technology that haven’t yet been optimized – but those interested in EVs say that the benefit to the environment outweighs the concerns.

But is that even accurate? In China, the government has been offering huge subsidies to encourage automakers to build and sell electric vehicles and the country has the highest adoption rate of EVs of any in the world except Norway. The problem is, their smog problem isn’t going away. In China, 72 percent of the country’s electric power is generated from coal, which, regardless of what conservative talk radio may tell you, is not clean and cannot be made to be clean. You can merely capture and store the carbon byproduct of burning coal to create power. They’re not doing that in China though, and oil company CNPC found that electric vehicles emitted more than double the toxic PM2.5 particles that generate China’s smog than do standard internal combustion vehicles. And, if you like your statistics not brought to you by an oil company whose interests may be somewhat skewed, a University of Michigan Transportation Research Institute paper found that cars that achieved greater than 40 miles per gallon were actually more environmentally friendly than the electric vehicles being made in China. And that’s just when it comes to operating the vehicles.

Add to that a Harvard and Tsinghua Universities study that reported that China’s production of EVs, PHEVs and fuel-cell vehicles generated 50 percent more greenhouse gas emissions than production of internal combustion cars, it’s hard to make the case that electric cars are the more environmentally friendly solution.

Photo by Gwenn Dubourthoumieu

And speaking of production, that’s looking like it’s going to get harder before it gets easier. I’ve discussed this a bit before, but the situation is only worsening when it comes to the global supply of cobalt, which right now is a critical part of the lithium-ion batteries that power most electric vehicles. About 60 percent of the world’s cobalt supply is located in the Democratic Republic of Congo, a country with a humanitarian rap sheet as long as the receipt you get from CVS when you go in just to get some gum. High taxes, the use of child labor and an unstable government all contribute to huge volatility in the cobalt market, which has gotten analysts revising their figures about when they think a shortage is going to hit. The answer is sooner than later. Though the CEO of Cobalt 27 Capital, the owner of the world’s largest stockpile of cobalt, ensures that there won’t be any supply shortages, he does not go on to say just how much companies will have to pay for that supply – costs that would undoubtedly be passed on to consumers and therefore delay adoption of EVs because they’re too expensive. Non-cobalt-company-CEOs are less optimistic, with Bloomberg New Energy Finance and Darlton Commodities both predicting shortages as soon as 2021. Prices have already spiked 300 percent over where they were in 2016 and capacity is not expanding as quickly as demand, which is a recipe for higher prices.

Fortunately, several companies are getting off their asses and doing something about this. Panasonic announced this week that they are working towards lithium-ion batteries that achieve zero cobalt usage in the near future and have been already reducing its content in the batteries that they supply, primarily to Tesla.  Samsung too has been working to reduce cobalt content below the 5% of batteries it currently achieves, and they are hoping to expand recycling programs that will recover cobalt from used cell phone, computer and other lithium-ion battery sources. Currently recycling rates are somewhere between 25 and 50 percent, so there’s a lot of potential for improvement there. Chinese automaker BYD is also developing batteries with a nickel-manganese-cobalt ration that reduces the amount of cobalt, which, in addition to lowering prices, apparently extends the life of the battery, which is a win-win for companies and consumers.

For even more bad news, cars aren’t the only things using lithium-ion batteries. Companies and utilities are expanding the use of modular energy storage systems to better utilize distributed energy resources like solar and wind farms and even hydroelectric generation, so there’s another force working to increase demand for cobalt and other precious metals. Full disclosure- I work for a company that makes those big battery storage units and they are flying off the shelf, so companies will have to both ramp up cobalt production and R&D into technology that uses less of it if there’s any hope of averting a shortage or at least a price spike.

But back to the cars – what does all this mean for those of us who just want a Jeep Wrangler plug-in hybrid? The truth is somewhere in between everything. While 20 percent of people would love an electric vehicle as their next car, not that many will take up the technology, especially with 80 percent of such vehicles being leased right now. It shows that public trust isn’t there that we’ve really mastered electric cars yet and nobody wants to be locked into technology that’ll be obsolete in a couple years. Cobalt demand will cause prices to remain high but the price of gas was high and look what that did – it spurred investment into the research and development of electric vehicles, which have lowered demand and prices have eased up, if only just a bit. The market will adapt, companies will continue to innovate and while EVs aren’t optimized right now and the electrical grid (especially in China) isn’t well suited to provide clean energy for them, it won’t always stay that way. Nor does it mean that EVs are destroying the planet, it just means they’re maybe not as green as we want them to be yet. We’re on a good path right now and have unprecedented choice in vehicles. At least until companies start thinking like Ford, but I don’t think it’s going to become too widespread.

Authored by
Devlin Riggs

In Trade Wars, Everyone Loses

Now, I try not to get to political because my podcast is about cars and not ideologies, but the truth is the automotive industry is heavily affected by the actions of politicians, so every once in a while, those actions are worth exploring if only to evaluate their impact on our favorite past times; cars and driving.

The policies in play this week are all about import tariffs, taxes placed on things made outside the United States for the simple fact that they were not made in the United States. Last week it was steel and aluminum, both of which are critical components in cars and which are rarely made in the United States anymore. China, specifically, is one of the world’s leading exporters of steel and and the theory is that, by imposing a tariff on Chinese steel, companies would rather purchase steel from US steel plants because it’s cheaper, thereby creating jobs in the steel manufacturing sector and leading us all to live happier, more fulfilling lives knowing that we provided people with some work.

The problem with that theory is, companies that use steel don’t exist to create jobs or give everyone a warm, fuzzy feeling inside. Unless that company is Chipotle, companies exist to make money and they will fight tooth and nail for every profit margin possible. That means that, when something costs more to make, they will charge consumers more to buy it, leading to price inflation and a lower quality of life because people have less money after spending it all on whatever they are buying with steel or aluminum in it. Like, for instance beer cans or my beloved Diet Coke.

This week, the conversation turned from raw materials to completed cars, when Trump proposed implementing a tariff on European vehicles, claiming that the US had been treated very unfairly by the European Union. The EU responded by saying they would tax Harley-Davidsons if such tariffs were applied to their vehicles. And let’s be honest, people are not going to go buy a Cadillac instead of a Mercedes just because a 10% import tariff has been applied, they’re just going to pay more for the Mercedes and hate the government.

The apparent issue at the core of this is that Trump thinks that, because the US has a trade deficit, that means that everything is all wrong and we’re losing and everyone else is winning and we need to be the ones winning, when that simply isn’t the case.

Here’s a quick explanation of the trade deficit; I go into Chipotle and I get steak tacos, I have a trade deficit with Chipotle and I have to pay them for the product I received. This is partially because it’s more expensive to go buy the ingredients myself, but also because I am lazy and by having Chipotle do the hard work for me, my quality of life is higher.

And that’s what it boils down to: quality of life. The primary argument for implementing tariffs and reversing the trade deficit is to create jobs, but that effort is doomed to fail because we have things like the minimum wage here, and health and safety rules that make the production of goods more expensive than they can be produced in China or most countries in southeast Asia, where there is little to no worker protection. And why have those regulations in place that guarantee a certain hourly wage and working conditions that aren’t likely to wind up in employees dying? Because we want a higher quality of life. Part of the price we pay for that is a trade deficit, where we consume more than we create, product-wise. What we also get are cheaper goods, access to more and varied items and low inflation.

And now we’re at a point when our chief executive is calling for a trade war that he insists is good and will be easy to win. What we’ll get with a trade war is more expensive raw materials, more expensive products, access to fewer items, higher inflation, higher debt from greater spending on more expensive items and the accompanying high inflation, which will likely increase personal bankruptcies and lead to actually fewer jobs than it will create because we can never truly compete with our trading partners in some sectors. Especially after we learned this week that Americans owe more than $1 trillion in car loans, and we’re borrowing record amounts of money to buy cars, often at deep subprime interest rates, we simply cannot contemplate policies that will only cause us to plunge deeper into personal debt. There’s no such thing as a good trade war, and there are no winners. In a trade war, everyone loses, including us petrol heads.

Authored by
Devlin Riggs

Headlines for the Week of February 26th, 2018

Time to Flee Chicago

An investigation from ProPublica and Mother Jones this week revealed that the city of Chicago has been bankrupting its citizens through aggressive efforts to collect on parking fines. And it’s not just a few isolated cases. They found around a more than 10,000 Chapter 13 bankruptcies that included debts to the city which were usually for unpaid tickets in amounts averaging $3,900. Tickets totaled about 7 % of the city’s total operating budget, around $264 million in 2016. Chicago loves to make parking difficult. For residential streets, they require you purchase a city sticker. Where you can find a parking spot, sometimes there will be neighborhood stickers too, further restricting spots. If you don’t have a city sticker, bam. $200 fine, and it’s not like they won’t give you a ticket because you have already received one. Unpaid tickets can result in garnishment of tax refunds, impounds, license suspensions and more. So while they can’t imprison you for debt, they basically make it impossible for you to travel, which makes it awfully hard to hold down a job to pay off fines.

There are many caveats to this, of course. You should obey the law and pay for parking and park legally, and in Chicago especially, having a car sucks because of the winter and it’s generally pretty easy to get around with the L and Metra, but they don’t go everywhere. So while it’s not impossible to avoid getting trapped in this cyclical debt loop with the city, it’s pretty hard to get out of once you’re in it. That’s where bankruptcy comes in, which is sometimes the only choice even when it wrecks your credit score. Chicago has been one of the only major metropolitan areas to lose population recently and one can’t help but wonder if it’s policies like this that place the city’s budget over the wellbeing of its people that is driving the exodus.

Geely Owner Buys into Daimler

This week Li Shufu, Chairman of Chinese automaker Geely, spent 7.3 billion Euro on Daimler stock, making him the largest single shareholder in the company who rejected advances from him previously. He now owns almost 10% of the company after initially asking for only five and has signaled his intention to stick with that amount for the time being, which sounds like a threat if he’s not taken seriously. China has been one of the strongest markets for German vehicles in the last decade and vehicles from Audi, BMW, Mercedes and others are frequently copied by Chinese manufacturers looking to cash in on their popular style. The Germans don’t need help selling their cars in China, and Daimler already has partnerships formed with BAIC Motor and BYD to develop electric vehicles under the Denza brand name, so it makes sense why Daimler wouldn’t want anything to do with Li or Geely. What it is Li is hoping to get from his hostile purchase of Daimler stock is still unclear, especially after it was reported that he had kicked the tires at Fiat Chrysler before going after Daimler stock. The companies are very, very different, so perhaps it’s just an effort to exert a greater control on overseas automotive players. Sort of the business equivalent of building sand islands in the South China Sea to claim more territory.

BMW to Build Mini-E in China

Speaking of China, they’re way out ahead of the rest of the world in terms of electric vehicle adoption and automakers the world over are seeing the advantage of working with Chinese companies who have developed expertise in this space. One such company is BMW, who has partnered with Chinese company Brilliance to produce the forthcoming electric Mini. Apparently this will be the first mini vehicle ever produced outside of England even though Mini has been owned, operated and designed by Germans since 2001. For some reason, some Mini electric vehicles will also be produced in England, but they will be different than the ones made in China. Given the strong history of both countries producing unreliable crap, this is sort of like a choose your own painful automotive adventure scenario. 

UPS Expands Electric Fleet

Meanwhile, UPS is keeping Brown close to town. Er, home. Hometown. They’re getting some electric vehicles from the U.S. Specifically from Workhorse, who we’ve mentioned a few times here for their electric pickup truck. Apparently they’ve been working with UPS for about four years on the development of a class 5 delivery truck, whatever class 5 means, but UPS want more of them and have placed an order for 50. They’ll use these vehicles as a technology testbed with the aim of purchasing more next year. Of course the range of these trucks won’t be as good as on their gas-powered counterparts, especially when hauling heavy loads, UPS said that, just like their skimpy shorts, they’re okay covering less ground than is appropriate.

Ferrari Keeps on Rolling (Back Odometers)

Some disturbing news for all of you looking at the used Ferrari market this week when it was revealed that Ferrari corporate openly allowed dealerships to manipulate odometer readings, rolling back mileage to zero to inflate the value of their vehicles for sale. It’s not clear if they could roll back mileage to an arbitrary number, since a car with 50,000 miles on it will show some signs of wear and the odometer reading zero miles would smell awfully fishy. There’s also a statement from Ferrari that this could only be conducted on cars with fewer than 311 miles or 500 kilometers, which seems like it was intended to be used to wipe off delivery miles so new cars could be handed over to customers with a big old goose egg on the dash. How many times they could be reset though, could be meaningful. And the fact that, in order to use the tool, dealerships were required to receive authorization from Ferrari HQ is most definitely meaningful because it means they’re at least complicit in violating US federal and state laws against odometer manipulation. Ultimately, I don’t think this is going to result in any substantial change in the used Ferrari market since its application was apparently so limited, but it’s just sketchy as hell that such a function existed anyway. It’s pretty strange to me that Ferrari makes cars where you can change the odometer willy-nilly, but you can’t even stop it catching fire because they used cheap glue. Italian priorities...

Metal Market Manipulation Means More Migraines

Back here at home, Donald Trump has announced that he will be applying a 25% tariff to foreign steel and a 10% tariff to aluminum, apparently to prop up U.S. metal manufacturers. This is, of course, shortsighted and idiotic because lots of things use metals as components including, importantly, motor vehicles. So by making parts more expensive to come into the country, that incentivizes companies to produce their cars elsewhere and then import them, costing the U.S. vehicle manufacturing jobs. It will also result in higher vehicle prices during a time when vehicle sales are down, costing dealerships salespeople jobs. It could also kick off a trade war with China, the world’s largest steel manufacturer, who could impose tariffs on American goods in response, costing jobs in other sectors like farming. While the tariffs haven’t been implemented yet, the announcement alone took the stock market down 500 points because real businesspeople have the common sense to understand how supply chains work and appreciate the consequences of such actions. Hopefully this is a warning sign enough to scare Trump away from actually implementing the tax.

Ford’s Dumb Advertising Record

Visitors to Madrid, Spain may have noticed the iconic España Building looking a little different due to a truly massive Ford advertisement recently. Showing off the new EcoSport compact crossover, it is actually the Guinness World Record holder for largest billboard. I know an audio medium is not an ideal venue to discuss the scale of a visual advertisement, but consider it’s the size of 20 tennis courts and you sort of have a mental picture of how huge and unnecessary it is. If you’re thinking it’s ironic that they’d use such a wasteful display to promote the EcoSport, Ford says that when the ad campaign is complete, it will be donated to the Apascovi Foundation employment center for people with disabilities, where the materials used in its construction will be repurposed somehow.

Toyota to Build Mini-Nurburgring

The Nurburgring in Germany is widely considered the best place to test the limits of a car thanks to its long and varied course. That’s why it’s so popular to try to set new records there - automakers think of it as a measure of a car’s ability to cope with the most demanding conditions a car can face while driving as fast as possible. But for Japanese companies, Germany is half a world away, so getting cars there for comprehensive testing can be a huge pain in the ass. So as Toyota got to work on a new research and development center back home in Japan, they have decided to dedicate two square miles to the creation of a mini-Nurburgring. It’s just 3.3 miles but will feature many of the most demanding turns and elements of the famous German track. Fortunately, since this will be owned by Toyota, I don’t think it’ll experience the same ridiculous lap time contests, saving journalists the world over from having to roll our eyes when some new company claims to be the fastest ever around it.

Uber Rider Blacks Out, Finds Himself Home (300 miles away)

Another week, another crazy Uber story, but fortunately this was in no way the company’s fault. A man visiting friends at West Virginia University got hammered and, like a responsible college kid, called himself an Uber to get back home. Problem is, he lives in New Jersey and the driver, a well-meaning chap with a ridiculously comfortable Toyota Sienna, obliged for the 300 mile journey across three states to return him home when he blacked out in the back seat. The cost of this monumental cock-up? $1,635 and one rich Uber driver’s whole night. Even worse, the guy accidentally ordered an Uber XL instead of just an X, so he paid $700 more than he even could have if his drunk ass had been able to press buttons right. At least he didn’t drive, but maybe there is such a thing as too drunk to Uber.

Stink Bugs Create Rotten Situation for Kiwis

New Zealand residents waiting for new cars from Japan have been forced to wait a bit longer due to a severe infestation of stink bugs on container ships from Japan. New Zealand has a fragile ecosystem to which stink bugs could potentially do severe damage, so three container ships hauling approximately 10,000 new and used vehicles from Japan have been made to sit off the coast of the country until they can be cleaned out. A further 8,000 are sitting at the dock in Japan waiting for transport. New processes will be put into place after this fiasco to ensure cars are cleaned prior to shipment, but there’s still no word on when those ships will be cleaned up and vehicles delivered. Suddenly my house’s infestation doesn’t seem so dire.

Clever Man Pays, Steals with Own Tools

Here in the Midwest, police across several states are looking for a man who has been stealing thousands of dollars from automated car washes in Ohio and Indiana. This guy rolls up to an automated wash, inserts a laminated $20 bill attached to some fishing wire, yanks out the bill and cancels the sale on the wash machine, which spits out money in the amount he paid. At one station in Indiana, he was able to complete the task 35 times, netting him $700 just at one location. He’s apparently done this several times at different locations in different states and has yet to be caught, despite his face being visible to cameras on the machines. And we’re not talking about some criminal hacker mastermind, we’re talking about a clever guy with a laminator and fishing line. I had no idea car washes were so easy to game or held $700 worth of cash in them at one time! Kudos to this guy, but also not because, you know, criminal.

Naked Man Plays, Drives by Own Rules

In Kansas City this week, drivers along the 435 freeway that loops the city were treated to quite the show. Specifically, on display was a nude male riding a stolen bright yellow ATV into oncoming traffic. He refused to stop police and kept going for a while, managing to be filmed by several drivers which, let me tell you, makes for one hell of an animated gif. Police were eventually able to apprehend him and noted that no “dangerous instruments” were found on him, which seems like an especially harsh commentary on his personal endowment. Apparently the owner of the ATV called the police to report it stolen, at which point the 911 dispatcher started laughing and said “we know where your ATV is.” The owner may want to go ahead and purchase a new seat though.

Authored by
Devlin Riggs

2018: The Year the Sedan Died?

Mid-sized sedans - we’ve talked about them before on this site, and the news is rarely good. But recently, it’s just been one hit after the other for the segment and, according to a Bloomberg article this week, there’s a very real possibility that the mid-sized sedan segment ceases to exist in as little as eight years. So could 2018, a year heralded as the Year of the Truck by three very high profile unveilings in Detroit, also be the year the sedan died? 

Truthfully, this movement started years ago. After the days of $4 per gallon gasoline subsided, American buyers resumed the 1990s trend of buying gas-guzzling SUVs and driving vehicles vastly larger than they needed or could justify simply because they could. The family car became the family SUV and the primary victims of this trend were the cars that performed most poorly in a shrinking segment. These, of course, were Fiat Chrysler products. 

But to his credit, Fiat Chrysler CEO, Sergio Marchionne, did the unthinkable - he killed off the Chrysler 200 and Dodge Dart - the traditional bread-and-butter mid-sized sedan and compact sedans that kept the big three American automakers alive during the oil crisis of the 1970s. And the outcome for Chrysler has been incredible. They’ve refocused their efforts on selling Jeeps, SUVs, big, powerful Dodges and Ram pickups, all of which are much higher margin cars than the 200 or the Dart, and the company is finally looking to turn a profit in 2018, which it has not done since 2012.

Other companies are taking a different path, moving production from the US, Canada or Mexico to China. It’s where pretty much all future Buicks will be built, and Ford has alerted Fusion suppliers that they will cease Mexican production, with the alternatives being China or not producing the car at all. With such a declining pie, the pieces are getting smaller for each manufacturer and to justify their existence, mid-sized sedans need to achieve a greater profit margin, which means cutting production cost or raising price. And in a declining automotive market where SUVs and crossovers frequently cost around the same price as sedans, the latter simply isn’t an option. 

So, will 2018 be the year the Sedan died? I think not. Or, I should say, not yet. Toyota has unveiled a brand new Camry and Avalon, the Honda Accord just won car of the year (again) and a new Nissan Altima is coming soon, too. But there’s an unshakable feeling that, even though these sedans will be the best they’ve ever been this generation, this could be sort of a last hurrah for them, as crossovers continue to come in and eat their lunches.

It’s not all sunshine and rainbows for crossovers either, though. A study released today showed that compact crossovers, some of the most popular vehicles, especially among young buyers, are among the fastest depreciating cars on the market, losing up to 1.18 percent of their value every week. It’s terrifying to think that you could go in and buy a Honda HR-V or Toyota C-HR or Mazda CX-3 or any number of the other alphanumeric-named, useless hatchbacks on stilts and find yourself a year later with a car worth just 39 percent what you paid for it 52 weeks ago. And the truth is, there’s no great advantage to these compact crossovers. They have less storage than the cavernous trunks of mid-sized sedans. They handle worse, usually have less powerful engines and generally all have obnoxious styling. But they’re hip and offer a slightly higher ride height, which allows you to see more of the road beyond the screen of your iPhone 10. Plus, they’re easier to park in these urban communities where I’m told the youth all live. 

So sure, things could turn around for the sedan, once people realize how poor these compact crossovers are both in terms of value and practicality. But at the rate sales are declining and sedans are being put out to pasture, by the time common sense catches up with buyers - by the time they realize that sedans really are enough car for virtually everything - it could already be too late.

Authored by
Devlin RIggs