Tesla Robotaxi Looks A Lot Like A Ploy To Pump The Stock

Good morning! It’s Thursday, August 8, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

Tesla Had A Very Interesting Week

1st Gear: Happy Telsa Robotaxi Release Day!

In a parallel universe, today is Tesla Robotaxi release day. Unfortunately for the automaker’s stans, that is not the world we live in. Back in April, CEO Elon Musk said the long-awaited Tesla Robotaxi would be officially unveiled today, August 8. Welp, that’s not happening, and that announcement from Musk is looking more and more like a way to get the automaker’s stock out of a rut.

Recently, Musk changed the date to October 10, saying he wanted to make some changes to the vehicle before it was unveiled. He apparently ordered the design alterations last month, and his team working on it needed more time to build additional prototypes. From Bloomberg:

The delay was a big letdown because the event had served as a shiny object to distract from Tesla’s declining sales. The diversionary tactic was wildly successful — over an 11-week stretch beginning in April, Tesla added $386 billion of market capitalization.

Over the past month, Tesla has coughed up much of those gains. The slight delay in timing of the robotaxi unveiling didn’t help, but the more important issue is the substance of the eventual event. Recent developments suggest it will be nothing more than a promotional spectacle, and that Tesla is endangering motorists by letting customers test out its technology with laxer safety controls.

One indicator of how close Tesla is to putting robotaxis on the road is Full Self-Driving, the company’s misleadingly named driver-assistance system that doesn’t actually make its vehicles autonomous.

The system known as FSD gets endlessly hyped by Musk and his fans on X, but it doesn’t exactly have a sterling reputation on Wall Street. Alexander Potter, a bullish equity analyst at Piper Sandler, alluded to this in a July 28 report titled: “Tesla May Have Solved the Self-Driving Puzzle. Don’t Roll Your Eyes.”

“We think investors have grown accustomed to ignoring Tesla’s hyperbole. And we get it,” Potter wrote. “After all, Elon Musk has been over-promising since 2017. There have been 90+ updates to the FSD system in the last four years, and fully autonomous Teslas still don’t exist. Why should the latest FSD update be any different?”

Well, Potter wrote, Tesla’s latest version of FSD appeared to be “revolutionary” based on user reviews he’d seen on X. In a follow-up report issued three days later, Potter said that several of his clients doubted whether social media posts were reliable, so he pointed them to a crowd-sourced dataset called the FSD Community Tracker.

Tesla owners have submitted over 167,000 miles worth of driving to this tracker, and sure, that sounds like a lot, but one of Musk’s right-hand people posted on social media that over 1.6 billion miles had been driven with FSD so far. That means the submitted and tracked miles are just a tiny sliver of data in the bigger picture.

In the absence of Tesla publicly reporting detailed data along the lines of what the FSD Community Tracker attempts to gather and present, other Wall Street analysts have taken a different approach to gauging the company’s progress toward self-driving.

William Stein of Truist Securities took FSD for test drives in April and July. The analyst, who has a hold rating on Tesla’s stock, summed up his first experience as “good, but not useful today,” then deemed his second go-round as “no better, arguably worse.” In fact, the Model Y he borrowed from a Tesla showroom in suburban New York City almost rear-ended another car at a busy intersection.

That wasn’t the only aspect of Stein’s July 29 report that was troubling. He wrote that, during his test drive last month, a safety feature seemed to have been removed — he was no longer required to tug on the steering wheel, even once, to keep FSD engaged.

While Tesla warns customers that FSD is intended for use by fully attentive drivers who keep their hands on the wheel, actually enforcing this hasn’t been the company’s strong suit. The US National Highway Traffic Safety Administration deemed its driver-monitoring system “weak” when it launched an investigation back in May into whether Tesla’s remedy for 2 million vehicles recalled late last year did enough to keep customers from misusing its driver-assistance features.

While the Model Y that Stein drove didn’t seem to be keeping tabs on if he was touching the steering wheel, Tesla also employs an in-car camera to track whether drivers are paying attention. The trouble is, Stein said Tesla’s monitoring system was also lenient in this regard. He wrote that he turned his head completely away from the road, and the car continued for around 20 to 40 seconds before warning him to pay attention.

“I mean, my head was completely turned away, I was looking in the back seat,” Stein said last week on Bloomberg Television. “Luckily, I was able to do this because I brought my son with me, and I said ‘Hey, tell me if there’s anything dangerous about to happen.’”

When Stein returned the Model Y to Tesla’s showroom, an associate told him that he had just experienced “demo mode,” which allows drivers unfamiliar with FSD the opportunity to test out the system without as many warnings that they need to pay attention.

It’s hard to see a world in which this so-called Robotaxi is actually released on October 10, especially since Tesla’s FSD tech just is not there yet. I’m sure to many of Musk’s fans, this will not matter, but just don’t be surprised when we see that October 10 deadline come and go, just like August 8.

2nd Gear: EVs, Plug-In Hybrids Make Up Half Of Sales In China

Half of all vehicles sold in China in July were electric vehicles or plug-in hybrids, and that’s a real milestone that shows how far ahead the world’s largest auto market is compared to Western countries when it comes to of EV adoption. Sales of EVs and PHEVs jumped 37 percent in July from the same month a year earlier, and they accounted for 50.7 percent of all new car sales.

Just three years ago, EVs and PHEVs (also called new emission vehicles or NEVS) only accounted for 7 percent of the total vehicles sold in China, but the country’s heavy EV investments seem to have paid off. It has propelled the growth of the domestic EV industry, and it has left many established foreign brands scrambling to get their act together and catch up. From Reuters:

By contrast, the share of electric and hybrid vehicle sales in the United States amounted to 18% in the first quarter of this year, according to the U.S. Energy Information Administration, a research firm.

The pace of growth for NEVs in China accelerated from a 28.6% surge in June. Sales of pure electric vehicles climbed 14.3% in July, up from 9.9% growth for June.

Solid growth in NEV sales helped some local brands including BYD and Li Auto set fresh monthly sales records in July.

But overall domestic car sales fell 3.1%, extending declines for a fourth straight month with consumer confidence weak as the economy struggles to gain momentum amid a prolonged crisis in the property market.

Weakness in the auto market prompted China’s state planning agency to announce in late July that cash subsidies for vehicle purchases would be doubled – up to 20,000 yuan ($2,785) per purchase – and would be retroactive to April when the subsidies were first introduced.

Additionally, some cities with curbs on car purchases have moved to relax restrictions. The capital city Beijing, for instance, announced last month it would offer to expand its NEV license quota by 20,000, the first easing of curbs since a strict quota system was put in place in 2011 to ease traffic congestion and improve air quality.

A protracted price war that had seen a flood of domestic brands competing on newer and cheaper models is also easing, as automakers seek to protect margins, with the CPCA’s secretary general Cui Dongshu expecting further stabilisation in August and September.

China’s top EV firm BYD continued to offer discounts in July, but in a less intensive manner than in the first half. It offered a price reduction of up to 17.3% on the hybrid SUV BAO 5 under its off-road Fangchengbao lineup at the end-July.

Vehicle exports rose 20 percent in July over the previous year, and that’s actually down from a 28 percent increase in June. Western automakers better buckle up, because for most of the world, Chinese EVs are coming, and they don’t really have an answer.

3rd Gear: GM Touts EV-ICE Manufacturing Strategy

General Motors is making a pretty large investment to retool its internal combustion assembly plans for electric vehicle production. However, the decision to retool existing factories is going to cost a lot less than building all-new ones, and it will allow “agility” during the EV transition, according to GM President Mark Reuss. From Automotive News:

The automaker has adopted a flexible manufacturing strategy, with dedicated plants that build gasoline vehicles and EVs as well as plants that build both, to use existing capacity and meet customer demand.

“When you convert plants, it’s large. In our case, it’s not as large as trying to build a new plant,” Reuss said at the CAR Management Briefing Seminars here.

“The agility road map, once you get past the initial spend of that, is pretty good and pretty efficient. But to be able to fund that expansion of both, you’ve got to continually invest in ICE,” he said, citing launches of redesigned gasoline-powered vehicles this year, including large crossovers and the Chevrolet Equinox compact crossover. “You see all of those things happening at the same time as our launches of our EVs. Now, that’s a big execution risk, but I would say, timed right with the supply base, we know how to do that pretty well.”GM set a target of having a zero-emission light-duty vehicle lineup in North America by 2035 and is introducing EVs in more segments this year, from top-end full-size pickups to the Equinox EV, which will start around $35,000 with shipping.The EV market is “still growing. It’s growing at a little bit slower pace, but it’s not not growing,” Reuss said. “The infrastructure piece of this is not coming as fast as everybody would like, but it is coming.”

The next-gen Chevy Bolt is in a similar place in terms of “not coming as fast” as folks would like. GM took the little electric hatch, which was built at the Orion plant on GM’s old battery architecture, out of production at the end of last year. It plans to redesign the car to run on GM’s Ultium battery platform in 2025, and it’ll be built at the Fairfax Assembly plant in Kansas. There’s no word on pricing yet, but it’s expected to slot in at the bottom of the electric lineup.

Uncertainty in the EV market, adoption rates and timing have created challenges for suppliers, he said, but GM works hard to maintain those relationships.

“We’ve just got to be in it together. I think that’s the best advice,” Reuss said. “When something is short or you’re having a problem because of a schedule that you couldn’t meet, or we didn’t meet, we’re in it for the long haul.”

GM has shown it knows how to build some really compelling EVs. Hopefully, it can keep doing that as more and more people make the switch.

4th Gear: MG Motors Heads To Mexico

China’s MG Motors is planning to build a manufacturing plant and R&D center in Mexico. The plan would also allow the automaker to learn more about the Latin American market. Its sister company, IM, a luxury EV maker, will also enter Mexico. MG is not the first Chinese automaker to set up shop in the country. BYD has already a similar move. From Reuters:

The move will allow MG, a formerly British brand now owned by China’s SAIC Motor Corp to “not only produce vehicles, but to also produce market intelligence specifically designed for and by Latin America,” country head Zhang Wei said in a statement.

The firm did not say how much it plans to invest or provide a construction timeline, however.

MG Motor said its plant would aim to “make Mexico a pole for growth and expansion for SAIC Group and MG Motor in Latin America and the Caribbean.”

In its announcement, MG did not mention the United States.

In April, Reuters reported that Mexico’s federal government, under pressure from the United States, would no longer offer incentives to Chinese automakers to invest.

Chinese automaker BYD has said the Mexico plant will not serve the U.S. market. In May, U.S. President Joe Biden rolled out steep tariff hikes on Chinese EVs.

It’s a real shame that the U.S. isn’t letting these automakers in, since a lot of what they build is really compelling. Good for Mexico for getting in on it, though.

Reverse: That’s One Tricky Dick

Neutral: Who Said Electric Cars Couldn’t Be Fun?

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