{"id":28627,"date":"2022-01-21T23:56:41","date_gmt":"2022-01-22T03:56:41","guid":{"rendered":"https:\/\/henrypayne.com\/?p=28627"},"modified":"2022-01-21T23:56:41","modified_gmt":"2022-01-22T03:56:41","slug":"new-ev-rules-handicap-transplants-play-to-detroit-threes-strengths","status":"publish","type":"post","link":"https:\/\/henrypayne.com\/index.php\/2022\/01\/new-ev-rules-handicap-transplants-play-to-detroit-threes-strengths","title":{"rendered":"New EV rules handicap transplants, play to Detroit Three’s strengths"},"content":{"rendered":"

As the most onerous federal mpg regulations in 50 years force the auto industry toward electric vehicles, domestic manufacturers are in the catbird\u00a0seat. Credit the Detroit Three\u2019s huge advantage in profitable fleet trucks and vans, say industry analysts, that are lining up corporate customers. Meanwhile, more consumer-reliant Asian automakers see a tough road for EV adoption.<\/p>\n

Call it the Motor City\u2019s revenge.<\/p>\n

The Detroit Three automakers’ rising stock prices and fortunes contrast with sliding market share in the late 20th century after\u00a01970s Washington fuel-efficiency regulations\u00a0compelled vehicle downsizing. Designed to reduce dependence on foreign oil, so-called CAFE laws opened the door to smaller, sippier Asian brands. Coupled with huge domestic assembly-plant investments, foreign\u00a0transplant automakers rode the wave to become major players in the U.S. market.<\/p>\n

\u201cThe tide has turned,\u201d said Dan Ives, Wedbush Securities\u2019 managing director of equity research, in an interview as Ford\u2019s market cap crested $100 billion. \u201cIn the EV market, the golden goose is the pickup truck. Detroit automakers are leveraging their position of strength, (which is why) you are seeing stock value in Ford at an all-time high.\u201d<\/p>\n

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With big businesses pledging their commitment to the planet by electrifying pickup and van fleets \u2014 some 3 million trucks were sold in the U.S. in 2021 \u2014 Detroit executives like GM\u2019s Mary Barra and Ford\u2019s Jim Farley have embraced federal regulation aimed at making half of U.S. auto sales battery-powered by decade\u2019s end.<\/p>\n

Compare that with foreign brands who are unsure their customers want battery-powered vehicles.<\/p>\n

\u201cWhat is the consumer uptake? Right now, I think that\u2019s something that\u2019s a little out of whack\u201d with manufacturers\u2019 rush to bring\u00a0EVs to market, said Honda North America boss Dave Gardner at a January briefing with reporters.<\/p>\n

The Japanese automaker is tentatively dipping its toe in the EV market by jointly developing two 2024 EVs with GM. Meanwhile, Ford and GM are readying battery-powered versions of their most popular pickup products \u2014 the Ford F-150 Lightning and Chevy Silverado EV. If Honda is dipping a toe, \u201cFord is diving into the deep end of the EV pool,\u201d said Ives.<\/p>\n

That\u2019s a change from 20 years ago, when Honda and Toyota pioneered battery-powered, gas-electric hybrids. The compact 2000 Honda Insight and Toyota Prius captured the fancy of green celebrities and politicians for their fuel-efficient ways. The Asian brands expanded hybrids across their sedan and SUV model lineups, while Detroit automakers struggled to sell similar products like the Ford Fusion Hybrid and Chevrolet Volt.<\/p>\n

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A 2009 IBM Institute for Business Value research survey found that auto industry executives expected 100% of sales would be hybrid by 2020. They were off by 97 percentage points. Though dominated by Asian automakers, hybrid sales only amounted to 3% of 2020 sales as consumers resisted hybrid premiums and gas prices plunged.<\/p>\n

Now it’s Detroit automakers who are bullish on alternate powertrains, with GM predicting all-EV sales by 2035. Their volume customers seem to be on board.<\/p>\n

Barra\u2019s commitment to the \u201cpursuit of sustainability and climate equity\u201d echoes that of corporate giants like FedEx and Walmart \u2014 not to mention powerful green politicians like Sen. Bernie Sanders, I-Vermont, whose legislation aims to shape the future of transportation.<\/p>\n

\u201cCorporate fleets are a real market,\u201d said veteran Wall Street analyst Joe Phillippi, president of AutoTrends Consulting. \u201cBarra and Farley have got it figured out. They have massive truck and van fleet sales and they can subsidize their EV truck development with gas-powered trucks. No one else has that cash machine. I think Wall Street has figured out that, at the end of the day, the volume buyer is going to drive EV sales \u2014 and the volume is in corporate fleets.\u201d<\/p>\n

Foreign transplants from Honda to Hyundai to Volkswagen depend\u00a0on mainstream SUV and sedan sales where retail customers have turned a cold shoulder to EVs not named Tesla. EV sales are just 3% of the U.S. market (almost half of them in California) \u2014 80% of them by the luxury Silicon Valley brand.<\/p>\n

But for big corporations under pressure from activist investors to declare Environmental Social Governance goals, service fleets are a moral haven \u2014 and make a sound business case too, say analysts.<\/p>\n

\u201cEVs may be more relevant to the fleet market than to the consumer market,\u201d said Ed Kim, industry analyst with Auto Pacific, as corporations eye $7.5 billion in federal infrastructure subsidies to jump-start their charging infrastructure. \u201cFleet vehicles can run fixed routes of 150 miles on a smaller, cheaper battery. Then they can charge overnight on cheaper utility rates. With Congress\u2019s proposed $12,500 in incentives, a Ford Lightning, for example, can make up its purchase premium over a gas-powered F-150.\u201d<\/p>\n

The $12.5k subsidy is a controversial expansion of EV tax credits proposed by Michigan Democrats that would favor domestic, battery-electric vehicle production at Detroit Three unionized plants.<\/p>\n

When asked about the pro-UAW tax credit provision, Honda\u2019s Gardner said the legislation was unfair to non-union U.S. plants like Honda\u2019s Ohio facilities.<\/p>\n

Honda has long touted its goal to \u201celectrify\u201d two-thirds of North American sales by 2030 in part to ward off the threat of global warming lawsuits against automakers similar to those brought against tobacco companies to cover state Medicaid costs. But electrification assumed a mix of hybrids, plug-in hybrids, BEVs\u00a0and fuel-cell vehicles.<\/p>\n

Gardner said Honda is committed to EVs by 2040, but only with \u201cvery aggressive government help and subsidies.\u201d Such subsidies have already existed for hybrid vehicles for 20 years, yet hybrids make up just 10% of Honda sales.<\/p>\n

He said Honda’s strength is affordable vehicles, but EV sales are overwhelmingly bought in\u00a0premium segments. It\u2019s a niche where trucks also play as status symbols. The average price paid for an F-150 in 2020, for example, was a lux-like $47,174.<\/p>\n

\u201cThat\u2019s the beauty of pickups,\u201d said Auto Pacific\u2019s Kim. \u201cThey can sell a variety of flavors to fleet and high-end retail customers. Chevrolet is launching a work truck, but also a loaded, $105,000 Silverado EV.\u201d<\/p>\n

Federal mpg laws originally slowed Detroit companies, but \u201ctoday they are a headwind for Asian automakers,\u201d said investment analyst Ives.<\/p>\n

Henry Payne is auto critic for The Detroit News. Find him at hpayne@detroitnews.com or Twitter @HenryEPayne.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

As the most onerous federal mpg regulations in 50 years force the auto industry toward electric vehicles, domestic manufacturers are in the catbird\u00a0seat. Credit the Detroit Three\u2019s huge advantage in profitable fleet trucks and vans, say industry analysts, that are lining up corporate customers. Meanwhile, more consumer-reliant Asian automakers see a tough road for EV […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"_links":{"self":[{"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/posts\/28627"}],"collection":[{"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/comments?post=28627"}],"version-history":[{"count":1,"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/posts\/28627\/revisions"}],"predecessor-version":[{"id":28628,"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/posts\/28627\/revisions\/28628"}],"wp:attachment":[{"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/media?parent=28627"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/categories?post=28627"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/henrypayne.com\/index.php\/wp-json\/wp\/v2\/tags?post=28627"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}