Robust management and struggling EV’s

This week will be a small overview of various things happening in the car industry as well as around it, highlighting some current developments and issues and some others that may become important in the coming years. This will of course touch on EV’s that seem to become a crucial part of that future whichever way you turn, but we’ll actually start in the (still) conventional industry, up at Aston Martin’s HQ in Gaydon in the UK. That is where Tobias Moers, previous CEO of Mercedes-AMG, moved in two years ago, with a mission to improve profitability at Aston. He did, quicker than most expected, but in spite of that, last week he was forced to clean his desk.

I’ve touched upon Moers both in my post on AMG and in that on the Aston DBX last year. He was the boss of AMG between 2013 and 2020, leading Mercedes’s sub-brand in a short-term successful, but in my humble opinion a long-term somewhat risky brand dilution strategy, and was hired by Aston’s strong man Lawrence Stroll in 2020 (father of F1 driver Lance Stroll) to accelerate Aston’s turnaround. Moers said himself that he would never have taken the job hadn’t it been for Aston’s line-up, especially the DBX, and he started the transformational Project Horizon straight away, contributing to rapidly increasing profit numbers for Aston, to a large extent built on the DBX. There’s no doubt he greatly improved and streamlined Aston’s production processes, but in parallel he also became known for his “robust management style”, apparently contributing to many senior departures and a general bad climate in the Gaydon factory. This to me sounds very much like a cultural clash between German efficiency and British, well, uniqueness, but Moers is anyway now replaced by ex-Ferrari chief executive Amedeo Felisa as Aston prepares to launch a new range of sports cars, most of them electric.

Well, he does look rather “robust”…

That brings us to the latest from the EV world, and I believe what we’re witnessing right now and will continue to witness over the coming months and years, is the great pains associated with going from the production of a few hundred cars to true mass production. The two new EV brands mostly in the news and also those with the most exagerrated valuations (although those are far less exagerrated now than a few weeks ago) are no doubt Lucid Motors, the American luxury EV builder, and Rivian, the equally American EV pick-up builder. Starting with the latter, it recently had to increase the price of its R1T by up to 20% and halve its production target of 25′ cars this year. So far, around 900 Rivians have been built. Lucid on the other hand, saying it wants to get its first car “exactly right” has pushed back the production start several months.

There’s a few things here worth considering. No doubt part of the problems can be traced back to the global supply chain issues the world is currently experiencing, more on that later. That’s however far form the whole story, the most important component of which to my mind boils down to whether these new car builders can emulate the Tesla success story with the same kind of “mojo” that made Tesla what it is. I’m not saying they can’t, but it’s certainly not a given. Firstly, there are very few Elon Musks in the world. Secondly, it’s very easy to forget the production hell Tesla went through over close to ten years before starting to make money. At one point that production hell was so bad that dealers had to fit the wheels on the cars, just to give an example, and quality issues plagued the company on several occasions (and to be honest, still do).

Personally I think it would be great if Rivian made it!

That’s all changed now, but the change consists in a development which has made Tesla much more of a standardized car company, whether they like it or not. Which then of course brings us back to all the traditional carmakers who now all have a number of EV’s in their line-up. They were certainly neither first, nor very innovative, but they know how to build cars and have the production process not only under control, but perfected over decades. I’m sure we’ll have a new Tesla at some point. It may be a brand we’ve yet to hear of, or it may be Lucid and Rivian, but that’s far from certain. They probably have about 12 months to make or break it, and I wouldn’t put my oney on them making it.

Things would certainly become much easier for not only Lucid, Rivian and Tesla, but also for all other car makers in the world if the current supply chain disruptions were solved, or at least improving. Currently however, rather the contrary is the case. Many of you have probably already seen the below picture in various forms, showing all ships currently waiting to unload in China, mainly in locked-down Shanghai. The total number is over 500, and they’re not waiting because the port is full of ships leaving…

Zero Covid has a price…

Shanghai is in a lockdown that doesn’t seem to end anytime soon, rather the contrary as imposing similar lockdown measures in Peking is now being discussed. We’re not going into Covid policies here, let’s just say that the combination of a zero Covid policy leading to most people not having antibodies in combination with clearly less efficient domestic vaccines (no Western vaccines are allowed in China) make even the current Omicron variant potentially quite dangerous. And “dangerous” in a country of 1.5bn in habitants could mean a few million deaths. The current situation will therefore not change soon, but at some point China will have to decide between an economic depression an relaxing measures. Not only car builders hope for the latter.

To conclude, let me share an interesting picture from Zeihan on Geopolitics (highly recommended for those with an interest in geopolitics!), showing the material consumption of EV’s vs conventional cars, as well as materials used in various energy sources. It’s no secret that EV’s require a greater quantity of most materials than conventional cars, quite a few of which are problematic, as highlighted in my post on why EV’s won’t save the world a bit more than a year ago. It’s also true that things are improving, which is great. I notably learnt from a trustworthy source last week that Tesla has now managed to eliminate cobalt in roughly half their batteries. Such and other improvements also mean EV’s make up the CO2 deficit from their production in fewer km’s which is also great – although that calculation never includes the fact that you’re building a whole new car often only to replace a still fully functional existing one, as I believe it should, given we still have no answer to what should happen to all the cars we plan on replacing with EV’s.

These are not produced in your typical holiday destination…

There will however always be more problematic materials needed in EV’s and renewable energy sources, and if we think about where these are produced, that puts Russia’s current invasion of Ukraine into perspective. We’re currently all dreaming of eliminating Russia as an energy supplier (and please, also as an aggressive invader of other countries!), and few people think of Saudi Arabia and Iran as other great countries to do business with, but as we electrify the world and need to get to the minerals mentioned above, we’ll have to deal with a far larger number of other not-so-great countries than we did in the oil days. These notably include Bolivia, Chile, Brazil, Mozambique, Guinea, Gabon, China, Congo and yes, Russia. That’s obviously not ideal in any way, but it’s the price to pay for a future based on windmills and solar panels!