EV Discussion thread

Martyn1981

Grumpy_chap said:

Martyn1981 said:

Legacy really need to bite the bullet, and invest massively in the transition to BEV's, asap. Moving slower isn't going to work now, Tesla and the Chinese aren't going to slow down.

A question - I doubt any of us know the answer.
To what extent are the legacy auto manufacturers impeded by exactly that - legacy?

Tesla, MG, BYD, etc are all starting from scratch so need to meet the investment costs of new design and new factories but then come out the other end with ultra modern and highly efficient factories purpose built to the needs of modern EV manufcature.

Legacy auto have historical cost liabilities (pensions), existing workforce liabilities (Unions), and forced to do their best to adapt historical manufacturing sites to be modern and efficient and, by working around the constraints imposed of an existing site, won't arrive to something as efficient as a new build factory.  Likely less efficient in terms of manufacturing processes and facilities (space heating etc.)

If a legacy auto manufacturer said "we will close the X factory, rebuild and re-open in Y years as a totally modern best-in-class facility" there will be uproar from the site Unions, local community, and a sense of distrust that the new factory will ever open, then resulting in some lump of Government incentive and the factory will stay open, the transition will be slower and all the constraints of history will still apply.

Yep, tough question. Going back 5+yrs, the argument against Tesla (often posted on the Motoring forum) was that Legacy could simply pivot to BEV's. And usually, there would also be the claim that an established dealer network was a big benefit. I recall one regular critic, going so far as to describe the supercharger network as a millstone around Tesla's neck, due to the cost of roll out.

Also important to remember that legacy auto that sell through dealers, don't get the retail price that customers pay, whereas Tesla does.

Now, I appreciate that a BEV is closer to an ICEV, than the Ford Model T was to a horse, but still, it's not a like for like change, so as with most disruptions, the incumbent isn't necessarily well placed. And the software side was often missed completely too, for ICEV to BEV.

I think the claimed or estimated costs of upgrading an ICE factory to a BEV factory is similar to the cost of building a BEV factory. At least I recall something about VW and or Ford estimates. And as you say, the resulting modified factory may well be less efficient. [But .... it's also worth noting that in 2021, Tesla's Freemont factory (a modified ICEV factory) became America's most productive car factory. Is nothing simple?]

Another potential cost, and I'm not sure if this is significant, or trivial, but will be the sunk costs for developing better engines (and gearboxes, and clutches etc etc). Those development costs are probably sitting on the balance sheet, and being spread over multiple years as a cost on the profit and loss. But if they've been worked out over a number of ICE sales, and years, then reducing the total sales on which those costs can be spread, may require some sort of correction (cost) in the shorter term.

BYD were always a sleeping giant for BEV car sales, as they a long history building and selling 10's of thousands of BEV buses, and now trucks, yet another boost for them, despite them really being a legacy auto company I suppose (not really sure, maybe a special case, a hybrid?)


Edit - Just a thought, but I was recently watching some discussions on a US business site about BEV's. One comment was interesting, pointing out, that for now, every extra car Tesla sells is extra revenue and profit. But on average, every BEV legacy sell, will displace an ICE sale. Legacy probably make a loss on the BEV, and also lose the profit they would have made on the ICEV. Ouch!

silvercar

“ Just a thought, but I was recently watching some discussions on a US business site about BEV's. One comment was interesting, pointing out, that for now, every extra car Tesla sells is extra revenue and profit. But on average, every BEV legacy sell, will displace an ICE sale. Legacy probably make a loss on the BEV, and also lose the profit they would have made on the ICEV. Ouch!”

The Tesla sale is displacing something, probably a high end brand ICEV, so some of the “ouch” is going to happen regardless. Market disruption, the playing field has already changed.

JKenH

I think VW’s iD3 problem is the user interface. This was developed during the Diess era. He was the problem not the solution trying to ape Tesla with minimalist styling and screen dominated controls. Not the traditional VW offering. Plenty of people wanting to go EV were prepared to buy the iD3 (when I got my Leaf I was wishing the iD3 was arriving a bit sooner) but have been so disappointed by the product. I wouldn’t buy the current Golf - I deliberately chose one of the last Mk7.5 models rather than the Mk8 which has those awful HVAC touch insensitive sliders.

The Cupra EV equivalent is well liked so VAG can do it.

JKenH

Martyn1981 said:

Grumpy_chap said:

Martyn1981 said:

Edit - Just a thought, but I was recently watching some discussions on a US business site about BEV's. One comment was interesting, pointing out, that for now, every extra car Tesla sells is extra revenue and profit. But on average, every BEV legacy sell, will displace an ICE sale. Legacy probably make a loss on the BEV, and also lose the profit they would have made on the ICEV. Ouch!

But currently the profit on every ICE car sold helps cover the development cost of the next EV. Toyota’s net income is something like $20bn per annum and after the savage price cutting in the EV market it currently has a higher operating margin than Tesla. Who is going to have the money to develop the next generation of EVs? Tesla has until recently been operating in a niche market with industry leading margins. Now that EVs are mainstream, margins are reducing and that is hitting Tesla hard. 

Martyn1981

silvercar said:

“ Just a thought, but I was recently watching some discussions on a US business site about BEV's. One comment was interesting, pointing out, that for now, every extra car Tesla sells is extra revenue and profit. But on average, every BEV legacy sell, will displace an ICE sale. Legacy probably make a loss on the BEV, and also lose the profit they would have made on the ICEV. Ouch!”

The Tesla sale is displacing something, probably a high end brand ICEV, so some of the “ouch” is going to happen regardless. Market disruption, the playing field has already changed.

Yep, each Tesla sale removes an ICE car and the profit (for the manufacturer) as you say, too.

The problem for legacy is they are losing money on the BEV's they currently sell, and are planning vast investment to switch to BEV's - for the largest, possibly $100bn to $200bn - but will steadily be earning less and less profits, as their ICEV sales continue to fall. Big Ouchy.


Edit - Just remembered VW saying 'the roof is fire' this summer:

VW CEO Calls For Immediate Freeze On Spending, Says “All Is At Stake”

Volkswagen brand CEO Thomas Schafer said during a recent internal meeting with the company’s managers that “the roof is on fire,” suggesting that “all is at stake” for the German carmaker as it seeks to become a leading manufacturer of EVs while also supplying global markets with internal combustion engine vehicles, according to Wards Auto.

michaels

Martyn1981 said:

silvercar said:

“ Just a thought, but I was recently watching some discussions on a US business site about BEV's. One comment was interesting, pointing out, that for now, every extra car Tesla sells is extra revenue and profit. But on average, every BEV legacy sell, will displace an ICE sale. Legacy probably make a loss on the BEV, and also lose the profit they would have made on the ICEV. Ouch!”

The Tesla sale is displacing something, probably a high end brand ICEV, so some of the “ouch” is going to happen regardless. Market disruption, the playing field has already changed.

Yep, each Tesla sale removes an ICE car and the profit (for the manufacturer) as you say, too.

The problem for legacy is they are losing money on the BEV's they currently sell, and are planning vast investment to switch to BEV's - for the largest, possibly $100bn to $200bn - but will steadily be earning less and less profits, as their ICEV sales continue to fall. Big Ouchy.

Sort of depends how the accounting works though, if they have already written down the R&D costs of ICE then 'run out' production can be extremely profitable as there is no new ICE R&D to be paid for from revenue?

Martyn1981

michaels said:

Martyn1981 said:

silvercar said:

“ Just a thought, but I was recently watching some discussions on a US business site about BEV's. One comment was interesting, pointing out, that for now, every extra car Tesla sells is extra revenue and profit. But on average, every BEV legacy sell, will displace an ICE sale. Legacy probably make a loss on the BEV, and also lose the profit they would have made on the ICEV. Ouch!”

The Tesla sale is displacing something, probably a high end brand ICEV, so some of the “ouch” is going to happen regardless. Market disruption, the playing field has already changed.

Yep, each Tesla sale removes an ICE car and the profit (for the manufacturer) as you say, too.

The problem for legacy is they are losing money on the BEV's they currently sell, and are planning vast investment to switch to BEV's - for the largest, possibly $100bn to $200bn - but will steadily be earning less and less profits, as their ICEV sales continue to fall. Big Ouchy.

Sort of depends how the accounting works though, if they have already written down the R&D costs of ICE then 'run out' production can be extremely profitable as there is no new ICE R&D to be paid for from revenue?

Yep, high profits on each ICE car sale, or not, if they sell a BEV instead. Tricky times ahead.

JKenH

UK Government publishes long-awaited results of consultation on Zero Emission Vehicle mandate

The ZEV mandate is designed to provide various options for manufacturers who may not reach the applicable target in a given year, or those who over-comply. This includes the following mechanisms:

• Banking: manufacturers will be allowed to bank any unused ZEV allowances, to be used in later compliance years, for up to three years. This remains unchanged from the Government’s proposals.
• Borrowing: manufacturers will be able to borrow ZEV allowances from later years in order to ease the pressure of complying with the targets in earlier years. For cars, the number of allowances that can be borrowed remains unchanged at 75% of the ZEV allowance target in 2024, 50% in 2025 and 25% in 2026. The cap on borrowing in relation to vans has been increased to 90% in 2024, following which it will align with the caps applicable to cars in 2025 and 2026.
• Trading: as set out in the consultation, manufacturers who exceed their ZEV targets may trade excess allowances freely to other manufacturers for any price. The Government response does not indicate any change to this proposal.
• Conversion: unused allowances from the CO2 scheme may be converted for use in the ZEV mandate. The Government has increased the cap on such conversion to 65% of the ZEV target in 2024, 45% in 2025 and 25% in 2026.
• Closed pools: manufacturers who are part of the same corporate group will be able to form closed pools and be treated as a single participant for the purposes of the ZEV mandate and CO2 scheme.

Where manufacturers do not reach the applicable ZEV target in a given year, and do not make use of any of the mechanisms described above, a final compliance payment, i.e. a financial penalty, will apply. For cars, this remains unchanged from the proposed amount of £15,000 per ZEV allowance. For vans, payments in 2024 have been reduced to £9,000, rising to £18,000 from 2025 onwards.

The Government has pledged to keep the mandate under continuous review, and will publish a mid-point review in early 2027, followed by a post-implementation review in 2029.

https://riskandcompliance.freshfields.com/post/102iowb/uk-government-publishes-long-awaited-results-of-consultation-on-zero-emission-veh

silvercar

Martyn1981 said:

michaels said:

Martyn1981 said:

silvercar said:

“ Just a thought, but I was recently watching some discussions on a US business site about BEV's. One comment was interesting, pointing out, that for now, every extra car Tesla sells is extra revenue and profit. But on average, every BEV legacy sell, will displace an ICE sale. Legacy probably make a loss on the BEV, and also lose the profit they would have made on the ICEV. Ouch!”

The Tesla sale is displacing something, probably a high end brand ICEV, so some of the “ouch” is going to happen regardless. Market disruption, the playing field has already changed.

Yep, each Tesla sale removes an ICE car and the profit (for the manufacturer) as you say, too.

The problem for legacy is they are losing money on the BEV's they currently sell, and are planning vast investment to switch to BEV's - for the largest, possibly $100bn to $200bn - but will steadily be earning less and less profits, as their ICEV sales continue to fall. Big Ouchy.

Sort of depends how the accounting works though, if they have already written down the R&D costs of ICE then 'run out' production can be extremely profitable as there is no new ICE R&D to be paid for from revenue?

Yep, high profits on each ICE car sale, or not, if they sell a BEV instead. Tricky times ahead.

But the market is now disrupted. They can't keep only selling ICEVs, at some point they have to switch. 

JKenH

If manufacturers  lose money on every EV they make one wonders why Ford, Volkswagen and Stellantis were disappointed at Rishi’s delaying the ban on ICE cars to 2035. I would have expected them to be pleased that they could keep selling profitable ICE vehicles rather than the not-for-profit EVs. Maybe PR matters more than profit. At least Elon Musk says what he actually believes even if it offends some people.