GM to Sell Up to 175,000 Electric Vehicles to Hertz

Photo: Chevrolet

General Motors is selling tens of thousands of electric vehicles to rental car agency Hertz, a new prediction says that half of U.S. car sales will be electric by 2030, and the semiconductor shortage is keeping Stellantis from its subscription model dreams. All that and more in The Morning Shift for Wednesday, September 21, 2022.

1st Gear: GMs Big Deal With Hertz

General Motors is about to get one really huge order from rental car company Hertz. The company is planning to buy 175,000 GM electric vehicles over the next five years. The multi-billion dollar multi-year plan is part of an effort on Hertz’s part to hit zero emissions.

This could end up only being the first step for GM selling electric vehicles to rental car companies. GM North American operations chief, Steven Carlisle, says the automaker is in talks about similar deals with other rental agencies. From Reuters:

Automakers have cut reliance on low-profit, bulk sales to rental car agencies as supply chain problems curtailed production. Carlisle said GM expects to deliver electric vehicles to Hertz at close to retail profit margins.

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GM aims to have capacity to build 1 million EVs annually in North America by 2025. Carlisle said the sales to Hertz fits within that previously announced goal.

Such deals would ease pressure on GM to hit EV sales targets through individual customer sales, a market dominated by Tesla Inc.

Hertz’s current goal is for one-quarter of its fleet to be electric by the end of 2024. In April, Hertz said it would buy up to 65,000 electric vehicles over five years from EV maker Polestar, a joint venture between China’s Geely and its Swedish Volvo unit. In October 2021, Hertz announced plans to purchase 100,000 Tesla electric cars, primarily the Model 3.

The GM deal “spans a wide range of vehicle categories and price points — from compact and midsize SUVs to pickups, luxury vehicles,” the companies said.

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The first GM EV to ship to Hertz is reportedly the Chevy Bolt starting early next year. Many of the EVs will be in Los Angeles and San Francisco in an effort to meet California electric vehicle quotas.

2nd Gear: We Could Hit 50 Percent EV Sales By 2030

According to new report from Bloomberg, by 2030 over half of all passenger cars sold in the U.S. will be electric vehicles. The big catalyst here is the new $374 billion in climate spending put forth by President Biden. From Bloomberg:

Those incentives, among them a point-of-sale tax credit of up to $7,500 for a new EV purchase, are likely to boost the pace of adoption, BloombergNEF analysts found in the report. Prior to passage of the Inflation Reduction Act (IRA) in August, projections for EV sales by 2030 2030 came in at 43% of the US market. With the climate-spending measure in place, that estimate was revised upwards to 52%.

The latest projection from BloombergNEF puts the US on track to hit a key target set by Biden last year, for half of all cars sold in the US to be battery-electric, plug-in hybrid or fuel cell-powered by the end of the decade.

Last year, EVs made up less than five percent of sales in the U.S. That was well below the global rate of about nine percent. With the new forecast from BloombgerNEF, the U.S. will surpass the global average two years ahead of schedule in 2026.

The three automakers with the most domestic battery production coming online in the near term—Tesla, GM, and Ford—are set to benefit most from the new law, according to the report. At the insistence of West Virginia Senator Joe Manchin, the IRA restricts the full $7,500 credit to vehicles assembled in North America, with additional phased-in thresholds for manufacturing batteries in North America.

In the new report, analysts noted that these requirements “will take time to adjust to,” particularly as automakers contend with critical minerals and battery rules. But those challenges are expected to lessen over time, a shift that could also bring more electric cars into an affordable price range.

“In the next year or so, there shouldn’t be too much of a difference [in sales],” Corey Cantor, BloombergNEF electric car analyst, said. “Later in the decade, we expect not only the EV tax credit but the battery production tax credit to drive a steeper decline in EV costs.”

3rd Gear: Stellantis Can’t Get Subscriptions Going

Stellantis really wants to offer subscription services to its customers, but the damn semiconductor shortage is putting a kink in its plans.

Off the bat, no this isn’t a subscription service for features. It’s a subscription service for vehicles. The proposed program would allow vehicle “owners” to swap out vehicles across the Stellantis group of brands.

Need a Ram for a weekend? No problem. Hauling the kids around for school? Here, have a Pacifica. Want to look like the coolest guy at your local Sheetz parking lot? Wrangler, coming right up. It’s a neat idea on the face of it. From The Detroit News:

Having too few vehicles on dealership lots, however, is holding up the launch of the program. That stems from a global microchip shortage that is hindering production and is likely to continue into next year. Meunier said he expects the offering to launch nationally once more vehicles are available on dealer lots.

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“While from a customer standpoint, there’s a lot of potential appeal to it, because having the flexibility to have different vehicles as needed at different times is nice,” said Sam Abuelsamid, principal e-mobility analyst for market research firm Guidehouse Inc. “You don’t need to drive a Wagoneer all the time, but if you want one for a family trip or a Pacifica for a road trip, you can swap out at various times.

“The problem with that kind of model is the logistics of getting the swaps,” he said. “It was very costly. Every time you swap vehicles, you’re cleaning up the vehicles. It’s maintenance and everything. In order to make it viable, the price was so high, it wasn’t appealing to consumers.”

Stellantis, though, said it has shown that it can make subscription-style rentals work and be profitable. Its Free2move mobility service brand offers monthly Car on Demand rentals throughout California and in Austin, Texas; Columbus, Ohio; Portland, Oregon; and Washington, D.C. Because of results in those locations, Free2move says it’s expanding. Costs depend on location, but it’s around $799 per month with maintenance and insurance included.

Apparently, plans for this sort of subscription model have been kicking around for the past four or five years. The idea is that customers would pay a fee to get a a certain number of swaps for a certain time period.

“With the environment we’re in, it would create frustration, because we don’t have a lot of cars to have in that program,” Randy Dye, a Stellantis dealer in Florida, said. “In the current reality, it would be a disaster from a customer satisfaction point of view.”

4th Gear: California’s Goldilocks EV Year

2035 is apparently the “sweet spot” for California’s deadline to end gasoline-only new car sales. The decision is meant to take a huge chunk out of emissions, but it will also be a realistic time for the industry.

“We had to be cognizant of where the automakers are, where the supply chains are, where the production facilities are,” Liane Randolph, California Air Resources Board (CARB) chair, told Reuters in an interview during Climate Week.

“I feel like we landed at the sweet spot,” she said. From Reuters:

In August, CARB said it would require all new vehicles sold in California by 2035 to be electric or plug-in hybrid electrics (PHEVs) after Governor Gavin Newsom issued a 2020 executive order directing the move. CARB said the rules will reduce smog-causing pollution from light-duty vehicles by 25% by 2037 and result in 9.5 million fewer conventional vehicles sold by 2035. Automakers in 2035 can sell no more than 20% of models as PHEVs.

California was not as aggressive as some environmental groups wanted, or Tesla, which urged ending new gas-powered vehicles by 2030.

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California needs a waiver from the U.S. Environmental Protection Agency to adopt the 2035 rules, which will open the request for public comment. “Obviously it’s their decision to make but I mean that’s why the waiver exists. So California can move forward and protect its residents,” she said.

President Joe Biden has called for 50% of all new vehicle sales by 2030 to be EVs or plug-in hybrids but not endorsed a phase-out date.

Randolph added that the regulator has other transportation emissions reductions in the works. Those plans include medium- and heavy-duty trucks as well as in-state locomotives.

5th Gear: China’s Nio Takes On The Germans

Chinese EV startup Nio is looking to take a chunk out of Europe’s electric car marketshare by implementing a battery leasing a swapping network. It’s meant to cut costs for users.

Nio is said to be in the planning stages of building 1,000 battery swapping stations outside China by 2025. Most of those are set to be in Europe to go along with the growing number of EVs the company plans to sell throughout the continent in the next three years, according to Qin Lihong, a Nio co-founder. From Reuters:

Nio opened its first overseas plant in Hungary this month to make power products such as battery swapping stations, which are costly to ship from China because of their size, Qin said.

At the heart of Nio’s move to woo European car buyers is separating the battery – the most expensive component of the EV – from ownership to reduce up-front costs.

Nio’s battery swap stations also promise to send drivers out with a new, fully-charged battery in just a few minutes, faster than current charging alternatives.

The strategy has set Nio off from rivals in China’s EV market, but shifts costs – and risk – to the company, one reason why most established automakers have sought other ways to cut battery costs and boost charging efficiency.

Qin said Nio was also looking to partner with an asset management company in Europe to finance the ownership of batteries for leasing as it begins to roll out sales this year.

The company is already experimenting with this battery plan in Norway. The company has sold 800 of its ES8 SUVs in that country, and it has installed two swapping stations.

Nearly all the buyers in Norway and more than half in China have opted for battery leasing, said Shen Fei, Nio’s vice-president for power management.

Reverse: Do You Remember?

Earth, Wind & Fire – September (Official HD Video)

Neutral: The Pennsylvania Polka

Is anyone else here familiar with The Pennsylvania Polka? I went to a wedding in northeast PA this weekend, and I’ve never seen a group of people more excited for a song in my entire life. It was an infectious joy. Long live The Pennsylvania Polka.