Hyundai and Kia Are (Still) Coming for Tesla

Photo: Hyundai

Hyundai and Kia have their sights set on Tesla’s first place EV sales numbers, Honda may get its supply chain out of China, and Tesla wants California to dismiss a racial bias lawsuit against the company. All that and more in The Morning Shift for August 24, 2022.

1st Gear: Tesla’s Shrinking EV Lead

Hyundai and Kia have officially taken over the number two spot in the U.S. electric vehicle market share. The only company ahead of them is now Tesla. It’s a similar story in Europe as well. The twin Korean automakers’ market share in Europe now sits at 12 percent. The company gained the most EV market share out of any company last year.

Globally, if you exclude China, Hyundai and Kia are the second biggest electric vehicle maker by shipments. They have a combined 14 percent of market share. That trails on Tesla, which has 27 percent of the share. Still, Hyundai and Kia have a lot of work to do. From Financial Times:

The gap reflects the competitive edge Tesla has gained in the more than a decade it has held on to its leading position in the market. Tesla’s cool factor — brand studies have ranked it the “coolest” automaker among millennials — is a hard one to replicate. So are its rapid charger network, remote software updates and vast troves of data from its drivers which, coupled with machine-learning algorithms, continually improve its software.

The latest boost for Tesla arrived last week. The list of car models eligible for tax credits from President Joe Biden’s newly signed Inflation Reduction Act includes all four Tesla models currently on sale, but none made by Hyundai and Kia.

A more accurate comparison can be made by looking at margins. Tesla’s light business model means it runs fat operating margins of 16 per cent, more than double Hyundai’s 6 per cent — which has broader product lines and must reckon with a strong union.

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The long-term trends for Hyundai and Kia are good, though, and the FT says it isn’t dissimilar to Samsung verse Apple circa 2010.

Samsung’s share of the global market was less than 6 per cent, compared with Apple’s lead of more than a fifth. It took just two years after the launch of its higher-priced Galaxy smartphone series for Samsung to overtake Apple in terms of worldwide handset sales.

By the second half of 2013, Samsung’s global smartphone marketshare was nearly three times Apple’s.

2nd Gear: Honda’s Chinese Supply Chain Decision

Honda is thinking about getting its non-domestic supply chain out of China in order to reduce its dependence on the country. This would be a huge move for the company, and the reasoning is reported as two-fold. Production output from China has been choked by COVID lockdowns, and there are some worries about the impact of tensions between China and the United States, Reuters reports, via Sankei.

Around 40 percent of Honda’s car production was in China during the company’s 2021 financial year. Even though its non-domestic production may leave the country, Honda would still make Chinese domestic vehicles there. From Reuters:

A Honda spokesperson said the Sankei report is not something announced by the company, adding it has been working on reviewing and risk-hedging its supply chain in general.

“The review of the supply chain from China and risk hedging are elements that need to be considered, but it is not quite the same as the objective of decoupling,” the spokesperson said.

The government had previously offered companies incentives to bring production back to Japan, although uptake appeared to be subdued, with some executives and analysts saying it would be difficult for Japan Inc to suddenly move away from a market where it had steadily built production and logistics hubs.

Mazda is already a little bit ahead of the curve in terms of decoupling with China. The Japanese company said it would ask parts suppliers to increase stockpiles in Japan and produce more components outside of China.

3rd Gear: Tesla Wants Its Race Bias Lawsuit To Go Away

Lawyers for Tesla are trying to convince a California judge to throw out a lawsuit by the state’s Department of Civil Rights. That lawsuit accuses the automaker of racial discrimination at an assembly plant.

Despite the fact Tesla is facing a number of other discrimination lawsuits from employees, the company says this case is politically motivated. From Reuters:

In a complaint filed in February, the DCR said Tesla’s flagship Fremont, California, plant was a racially segregated workplace where Black employees were harassed and discriminated against in terms of job assignments, discipline and pay.

Tesla, which has denied wrongdoing, and its lawyers did not respond to a request for comment on Tuesday. Neither did the DCR, which until last month was called the Department of Fair Employment and Housing.

…

A state judge in April cut a jury verdict for a Black worker who alleged racial harassment from $137 million to $15 million. The plaintiff rejected the reduced award and opted for a new trial, which is scheduled for March 2023.

In its motion to dismiss the DCR’s case, Tesla says the agency flouted its obligations under state law by filing the lawsuit without first notifying the company of all of the claims or giving it a chance to settle.

The agency has responded that before suing, it followed all of its internal procedures including giving Tesla an opportunity to enter mediation.

Earlier this summer, Tesla filed a complaint with the state of California claiming the DCR’s alleged lapses are widespread. The company also says the agency’s procedures aren’t lawful. One thing is for sure: Lots of lawyers are going to make a lot of money before this is all over.

4th Gear: Toyota Is Straight Up Embarrassed By Hino

Hino has had a rough go of it lately. The company is embroiled in a number of high-profile emissions and fuel efficiency scandals, and now Toyota is kicking the truck maker out of a Japan-wide commercial vehicle consortium.

Hino entered the group that is meant to speed up the shift to electrification just a little over a year ago. It now brings up a big question mark as to what happens next for the company. From Automotive News:

Toyota and Hino announced the decision to expel Hino on Wednesday, with Toyota saying Hino’s “misconduct” was incompatible with the group’s “aspiration and goals.”

The world’s largest automaker orchestrated the creation of the Commercial Japan Partnership Technologies Corp., or CJPT, in April 2021 to help transition Japanese commercial vehicle makers for the shift to battery-electric, hydrogen fuel cell and self-driving technologies.

It initially brought together Toyota, Hino and Isuzu, with Toyota agreeing to take a 4.6 percent stake in Isuzu as part of the tie up. Toyota already held a 50.1 percent stake in Hino.

…

“We are extremely disappointed with the company’s misconduct,” Toyota President Akio Toyoda said of Hino. “Hino has committed misconduct in engine certification for a long period of time, and the company is in a situation where it is not to be recognized as one of the 5.5 million individuals in the Japanese automotive industry.”

Employees at Hino allegedly falsified tests on engines used in over 640,000 vehicles in the past. Now, 66,817 are being recalled.

Toyoda added that Hino’s participation in CJPT will “inconvenience” the other members of the group as they work on electrification. Woof… talk about a disappointed parent.

5th Gear: CATL Is Doing Well

CATL is the world’s largest EV battery manufacturer, and it’s sort of killing it right now. The company said Wednesday that it more than doubled its profits in the second quarter of 2022. The news comes as the Chinese government rolls out new incentives to boost electric vehicle sales. The move is meant to cushion the blow of COVID lockdowns during that time period.

CATL’s clients include Tesla, Volkswagen, and BMW at the moment. The company reported a net profit of $974.64 million (6.68 billion yuan) from April to June of this year. Reuters says that’s a 164 percent increase from just one year ago. Not too shabby.

From Reuters:

The company said that a COVID outbreak during the period, which included lockdowns in several cities including Shanghai, had some impact on its domestic market. Demand, however, remained strong as local authorities rolled out incentives to promote EV sales and companies launched new models.

EV sales growth bucked an overall trend of weakening auto sales in the major markets of China, Europe and the United States, which were hit by COVID and supply chain issues, CATL said.

In China, EV sales surged 120% in the first half, while overall vehicle sales fell 6.6%, according to the China Association of Automobile Manufacturers.

…

CATL said it had taken measures including signing long-term contracts with suppliers, recycling materials and negotiating a dynamic battery pricing scheme with automakers to ease the pressure of rising costs.

CATL also said it is accelerating its expansions in overseas markets. It’s got new contracts to supply batteries to Mercedes-Benz, BMW, and Ford.

All in all, CATL’s global EV battery market share is at 34.8 percent for the first half of 2022, up 6.2 percent from a year ago.

Reverse: A Real Dick Move

Neutral: I’m Tired Of Moving

Next week I’ll be moving for the fourth time since 2019 (college > parents house > East Village > Lower East Side > Upper East Side). I’d very much like to stop doing that. You know what really hurts? Cardboard paper cuts. I would not recommend them at all. Here’s to staying in one place for a little while.