Change In Management
Tesla has announced the appointment of Vaibhav Taneja as its new CFO, replacing outgoing CFO Zachary Kirkhorn. Taneja is the company's chief accounting officer and has been with Tesla for several years. The change in leadership comes at a critical time for Tesla as it builds a factory in Mexico and prepares to launch its Cybertruck pickup. Taneja is now tasked with leading Tesla's financial strategy as the company navigates a competitive EV market and strives to maintain profitability.
Expanding
Global suppliers are investing heavily in silicon carbide microchips to meet the rising demand for EVs. Silicon carbide chips offer advantages such as faster charging, smaller footprints, and increased efficiency. Bosch is expanding its semiconductor facility in Reutlingen, Germany, to produce more silicon carbide chips. The company also acquired chipmaker TSI Semiconductors in the US for $1.5B with plans to upgrade its facility to handle silicon carbide chip production by 2026. Other major players such as BorgWarner, Magna International, and Vitesco Technologies are also investing in securing silicon carbide chip supply.
LG Energy Solution is considering making its operation in Holland, Michigan, its North American headquarters, as it extends battery manufacturing across the country. The company was already expanding its existing Holland facility by 1M sq ft as part of LG Energy Solution's broader efforts to increase capacity for automakers launching electric vehicle lines.
Industry Directions
According to experts, the apparent surplus of EVs at dealerships is not indicative of waning demand but rather a sign of growing pains in the EV market. While there are reports of over 91k EVs accumulating at dealerships, the evolving nature of EV sales is complex. EVs represent an increasing portion of the market, and their sales now outpace inventory. In fact, EVs constituted 8.6% of retail sales and 6.7% of available stock in June. The Biden administration's target of 50% EV sales by 2030 aligns with the industry's direction, but matching supply and demand can be challenging.
Labor
The UAW's contract demands, including significant raises for members, pensions for all workers, more retiree health benefits, and reduced working hours, would potentially lead to a considerable increase in labor costs for the Detroit 3. According to knowledgeable sources, these demands could increase labor costs by $45B to $80B annually and nearly triple labor rates to over $150 an hour per employee at the three companies. Such costs are considered unsustainable and could threaten the competitiveness and viability of the automakers. Despite the UAW's strong stance on its demands, labor experts believe that extreme initial offers are common in negotiations and are likely to be significantly adjusted during the bargaining process.
Canada's Unifor has begun contract negotiations with Ford, General Motors, and Stellantis. The talks address concerns over rising living costs and the shift to electric vehicles. Unifor aims to improve pensions and wages and secure production commitments. The negotiations are set to continue into September as the current contracts expire on September 18.
Mergers, Ventures, Acquisitions
BYD is negotiating to purchase a shuttered Ford factory in Camaçari, Brazil, as the country aims to establish itself in the electric vehicle industry. This move reflects President Luiz Inácio Lula da Silva's ambitions to spur a manufacturing renaissance in Brazil with China's assistance. While the US focuses on maintaining a technological advantage over China, Lula sees China as a benefactor that can help the country's manufacturing sector.
Canada's Linamar announced the creation of a new corporate unit called the Linamar Structures Group, which will include newly acquired battery enclosure plants, castings plants, and a giga castings plant. The company anticipates sustained double-digit growth in its mobility and industrial units and is "keeping the door open to acquisitions."
Opening
China's Gotion is officially moving forward with its $2.4B EV battery parts plant in Big Rapids, Michigan. The company had faced pushback from locals over environmental concerns and politicians over national security. It plans to hire around 40-50 employees by the end of the year, with a focus on engineering and IT positions. Once up and running, the plant expects to create 2.4k new direct jobs, with an average hourly wage of $24.50 plus benefits. Gotion hopes to remain non-unionized, with plans to "make our workers so happy that they feel they don't need a union." The plant aims to support 100 GWh of battery production.
South Korea's Hanon Systems will invest nearly $170M in establishing a new plant in Loudon, Tennessee. This plant will focus on assembling automotive thermal products such as HVAC, powertrain cooling, and compressors for EVs. This facility will be Hanon Systems' fourth planned location in the US, following the announcement of its Statesboro, Georgia, facility earlier this year.
Taiwan's TSMC has committed $3.8B to build a chip factory in Germany, its first in Europe. This is part of the European Union's efforts to boost its semiconductor manufacturing capacity and reduce reliance on imports. The plant will be located in Dresden, Germany, and will be TSMC's third manufacturing facility outside Taiwan and China. The German government is contributing up to $5.4B to the project, a significant step toward creating a robust European semiconductor supply chain. This announcement follows TSMC's $40B investment in a new plant in Arizona.
Production Decrease
General Motors is facing ongoing challenges in ramping up production of EVs, mainly due to issues with assembling battery modules. The automaker's CFO, Paul Jacobson, reported that the production of the Cadillac Lyriq crossovers and BrightDrop vans had been affected. For instance, GM produced just over 1k Lyriq vehicles in July, falling short of their initial targets. In contrast, GM's majority-owned Cruise AV operation is experiencing positive developments, with more than 400 vehicles on the road and significant progress in technology challenges. Cruise aims to achieve $1B in revenue by 2025 while lowering costs and increasing margins.
Production Increase
Rivian raised its full-year production forecast after posting a narrower Q2 loss and significantly improved revenue. The company now expects to produce 52k vehicles this year, up from its previous forecast of 50k. Rivian delivered 12,640 EVs in Q2, surpassing analysts' estimates. Rivian's efforts to build its own drive unit to reduce dependence on suppliers are seen as a differentiating factor among EV startups.
Raw Materials
Piedmont Lithium faced skepticism and opposition at a meeting with local officials in North Carolina. The company is seeking approvals for an open-pit lithium mine in the state, which would be one of the few lithium-producing sites in the US. Officials and residents raised concerns about the potential environmental impact of the mine, including the possibility of depleting local wells. The project highlights the tension between the desire for domestic mineral supply and ecological and community concerns. Piedmont Lithium aims to supply Tesla with lithium, a crucial component of EV batteries but faces challenges in gaining the necessary approvals for its mining project.
Regulation
Volvo and Polestar are leveraging the US duty drawback program to import Chinese-made vehicles at a lower cost, allowing them to recoup import duties and the 25% US tariff assessed on these vehicles. This program permits businesses to claim a refund on duties and tariffs on imports from China when offset by specific exports in the same tariff classification. This strategy enables Volvo and Polestar to offer Chinese-made vehicles in the US at competitive prices. This approach could also position Volvo's Ridgeville, South Carolina, factory as a Southeast export hub, competing with other major automakers in the region.
Indonesia has pushed out the dates to qualify for EV incentives, aiming to boost local production. Manufacturers must now produce at least 40% of EV content in Indonesia by 2026 instead of 2024. This move is part of Indonesia's push to establish a thriving EV industry and attract investment. Mitsubishi Motors and China's Neta EV brand have already committed investments. Indonesia aims to produce 600k EVs by 2030, a 100x increase from current sales.
Supply Chain
Semiconductor shortages causing bottlenecks in Germany's car industry are expected to persist for years, according to a senior manager at Audi. Despite plans by chipmakers like Intel and TSMC to build factories in Germany and substantial government subsidies to attract them, the complex nature of building and ramping up semiconductor production facilities means that a resolution will take time. The shortage has prompted German automakers and electronics producers to reevaluate their supply chains and consider ways to reduce reliance on a small number of chip suppliers. The Audi manager suggested that one way to mitigate the issue would be to reduce the number of chip varieties used in vehicles.
Aptiv anticipates that semiconductor prices will remain high in the foreseeable future. Although supply-chain challenges are improving, the elevated costs of 25%-30% are impacting profits.