Auto News Update Announcement

Discontinuing Auto News Update for now

Auto Insights Update

Some personal news to share: I just accepted an incredible job offer. I’m very excited and grateful for this opportunity and look forward to taking the next step in my career. Unfortunately, however, I think it’s best to discontinue the weekly Auto News Update so that I can focus on my new role.

Consistently following, analyzing, and writing about EV news has been incredibly rewarding. Thank you to everybody who’s read or shared my work. The direct feedback I’ve received has been amazing and encouraging, so thank you to everybody who’s commented or reached out to me directly!

With that said, this has been a time consuming endeavor. I want to ensure I’m fully focused on making the most of my next opportunity, so I’ll be writing much less frequently here. I won’t post the weekly Auto News Analysis for the foreseeable future, but I’ll still post one-off articles on occasion. As promised, I’ll still publish an in-depth comparison of Rivian and Lucid in the coming weeks, so stay tuned.

I’ll also still be active and share thoughts on Twitter, so make sure to follow me there.

News of the Week

I don’t have in-depth analysis to share in this week’s update, but there was still a lot of relevant news this week. Some of the most important developments include:

1. California bans new gas car sales by 2035: This is significant because California is the largest auto market in the U.S. and other states are very likely to follow. As I’ve repeated many times, regulations and restrictions are becoming increasingly strict and many legacy OEMs are not well-prepared. This is obviously a very negative development for the re-sale values of gas-powered cars, which is another tailwind for EV adoption.

2. Battery manufacturing incentives in the EV tax credit: I’ve previously covered the $7.5k U.S. EV tax credit and the significant implications this has for auto OEMs. However, there’s a key aspect of the Inflation Reduction Act that I missed, along with many others in the media and financial community. This is the $35 per kWh credit for cells and $10 per kWh credit for battery modules made in the U.S. This is will significantly lower the overall cost to make EVs. For context, Tesla plans to scale annual domestic battery production in its new Austin factory to 100 GWh annually. That’s a potential $3.5B annual tailwind, in addition to the vehicle tax credit, for just one factory! This has significant implications for battery manufacturers and other OEMs who can vertically integrate their supply chain.

3. Toyota says lack of consumer demand makes U.S. EV goals difficult to achieve: Toyota continues to show that they’re behind in EVs. It’s obvious that businesses, consumers, and municipalities love owning and driving EVs given the superior performance and economic value proposition relative to gas-powered vehicles. This will become more obvious once re-sale values of ICE vehicles decline given the upcoming bans in places like California and Europe. While scaling production will be very challenging, Toyota is conflating their own demand-related issues with EVs as a whole. Toyota just released its first EV, the BZX4, and it’s been a total disaster. It’s no surprise that consumers don’t want a Toyota EV today.

4. Nvidia highlights that automotive is becoming a tech industry: In its Q2’FY23 earnings report this week, Nvidia specifically highlighted the automotive sector by saying “Automotive is becoming a tech industry and is on track to be our next billion-dollar business.” This isn’t a surprise to anybody who’s followed me, but this really reinforces why I started this substack in the first place. There is significant technological disruption happening and this will only accelerate going forward.

5. Tesla improves fleet with most significant FSD update yet: Last Friday, Tesla rolled out one of the most significant Full-Self Driving (FSD) updates in the company’s history. Elon Musk also announced the price for its FSD package will increase from $12k to $15k. It’s unclear whether the monthly subscription price (currently $199/month) will change, but I think current pricing will (intentionally) exclude the vast majority of consumers from purchasing this option. Obviously, FSD is a highly debated topic, but the improvements in this version are undeniable. If you’re interested in following FSD’s progress, I highly recommend following Chuck Cook on YouTube, who provides excellent autonomous driving demonstrations with objective feedback and criticism. We still have a long way to go before reaching Level 5 autonomy, but the progress (Tesla and elsewhere) has been impressive and could have significant implications on the entire global economy.

6. Porsche expected to IPO in the first week of September: Volkswagen is preparing to IPO its Porsche brand in the first week of September, despite volatile market conditions. The expected valuation range is $60-85B, which is a significant portion of Volkswagen’s valuation today. There are legal liabilities and other capital structure nuances associated with separating these entities, but this seems like a compelling arbitrage if you want a short-term trade.

7. Acura will bypass hybrid vehicles in shift to EVs: Honda, the parent company of Acura, announced that Acura won’t pursue hybrid vehicles going forward. This is warrants its own conversation, but this is absolutely the right move. Hybrids are less efficient than even gas-powered counterparts and won’t meet many of the emissions requirements. Continuing to produce hybrids, which won’t play a long-term role in the auto industry, is simply delaying the inevitable. OEMs that rely on hybrids will fall further behind those who shift to fully battery-electric vehicles as fast as possible.

8. Mercedes starts production of EQS SUV: this is Mercedes’ first battery-electric SUV for the U.S. market.

As always, thanks for reading!