On TILT: Auto Manufacturing
TILT: Auto Manufacturers are betting heavily on electric vehicles. But where are the customers? It’s a tiny market. And supply lines are sketchy.
The actual demand is an Executive Order from the White House.
[Note: This article is one of several in the TILT series, highlighting unusual behavior in large industry groups. When companies don’t practice open market conventions, there are implications for customers, candidates, employees, investors, and suppliers. Decide for yourself what this means for you. This series doesn’t examine causes, responsibility, or intent. There’s no deep dive into WHY these things are happening. It simply observes WHAT is happening, so you can do your own homework and consider your next move.]
Situation: Poor Auto Sales
Auto sales had a tough couple of years, because of…
• COVID mandates
• “Supply Chain Disruptions”
• Recent lockdowns in China (CCP Tesla sales last month were Zero.)
Situation: Small EV Market
By any measure, the EV market is less than 5% of total auto sales.
Tesla dominates, owning more than 70% of that.
The crumbs left for everyone else wouldn’t normally constitute a movement.
Situation: Biden Mandates EVs
This was fast…
• Biden crushed the oil and gas industry on his first day in office.
• Gas prices doubled.
• August 5, 2021, Biden issued an Executive Order, pushing electric vehicles. (All manufacturers except Tesla were invited.)
Action: Abandon Gas; Go Electric
Despite poor auto sales, manufacturers are aggressively switching to produce electric powered vehicles. And they’re vocal about it. Ford, alone, is allocating $29 billion for EVs and autonomous driving. (Automation Integrators confirm, reporting large projects for the next four years.)
Challenge: Too Soon?
“Going Electric” is not a phased-in proposition. It doesn’t build on prior successes.
This is just an abrupt in-your-face rejection of a very successful life style.
It’s more like Marketing Through Intimidation, but without putting key elements in place.
Brute Force Transition could end badly. Here’s why…
• Customers aren’t ready.
◦ EVs are too expensive.
◦ “Range Anxiety” (Can I get to my destination on this charge?)
◦ Recharging takes time, and it’s hard to do at apartments, condos, and hotels.
• Production isn’t ready. (Elon Musk on supply problems: “gigantic money furnaces.”)
• We have energy shortages now, BEFORE adding EVs to the same power grid.
• No plan for millions of dead batteries.
How many “unanticipated setbacks” should we anticipate?
Doubling Down: No Options
Auto manufacturers’ alleged commitment to electric vehicles aligns with Biden’s directive: “…there’s no going back.”
I say “alleged commitment” because…
Maybe the auto industry just doesn’t want to challenge a Command and Control Economy.
Perhaps the wise CEO will at least look enthusiastic about dismissing customers who lined up for six months, hoping to buy a new car.
Either way, manufacturers must know that every step toward EV production adds risk.
They become increasingly dependent on entities controlled by the Chinese Communist Party for batteries, chips, and rare earth materials. Choosing to be vulnerable to the CCP seems dangerous, considering recent disappointments.
Old Track Record
We stopped using electric vehicles over a hundred years ago.
The very earliest cars proved that…
• Batteries are picky eaters.
• Combustion engines can run on anything that burns.
Electric Vehicles are fun, but…
• They won’t save you time;
• They won’t save you money; and
• (Excuse me.) They surely won’t save the planet.
It’s hard to see what natural force could drive a market like that.
Alternates: Two Options
1. Elections – People don’t like to be pushed around. And Marketing Through Intimidation increases resistance. One election cycle could alter much of what we see today.
2. Innovation – Hyundai is reminding us of the hydrogen powered car. Hydrogen is readily available, and the exhaust is water. Drinkable water. If the environment is your thing, you can’t go greener than that.
Auto Manufacturers are in a tough spot.
• They can’t supply what customers are buying.
• And customers don’t want what government demands.
• Competing World Powers are messing with production.
• Government directives could easily backfire.
These conflicts might push the auto industry to make dramatic course corrections, going forward.
That makes it…
• Hard to be a manufacturer;
• Brutal to be a customer; and
• Fantastic to be a Systems Integrator.