Auto File: Highway Star – Tesla rocks in the first quarter

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Joe White Global Autos Correspondent

Greetings from the Motor City! Thanks to the pandemic, I no longer have a reliable idea of ​​the passage of time. Never mind. “Highway Star” https://www.youtube.com/watch?v=Wr9ie2J2690 – from a Deep Purple album which turns 50 today – is the fitting theme song for Tesla after the company rocked the first trimester. Today we’ll look at why Tesla’s first quarter results should be a red alert for the rest of the auto industry, the struggle auto dealers are having with the pessimists on Wall Street, and how Renault is rethinking everything. Here We Go – Tesla: The New Benchmark By now you know that Tesla has swept Wall Street estimates for its first quarter results. More importantly, Tesla is setting a new high bar for judging competitiveness in the automotive industry. Tesla operates at a higher level of profitability than traditional automakers. Tesla’s EBITDA per vehicle in the first quarter increased 60% to $16,203. Comparing Tesla’s pretax earnings per vehicle to that of General Motors isn’t as straightforward as it might be. I supported the depreciation of Tesla’s EBITDA numbers to approximate the EBIT numbers reported by GM, and Tesla appears to be earning 57% more per vehicle than GM North America in the fourth quarter. In the 1950s and 1960s, GM was the low-cost, high-profit manufacturer that could dictate market conditions. Then it was Toyota, with lean manufacturing in the 1980s and 1990s. Tesla is now fighting for that spot with a strategy that combines high levels of vertical integration, a direct sales model (no profit sharing with dealerships) and high levels of automation and software tools from factory to vehicle dashboard. Tesla’s manufacturing technology is now an asset, not a liability Consider this in Tesla’s call for investors: by designing vehicles so that the battery is part of the vehicle’s structure and by using large castings to replace dozens of parts welded together in the chassis, Tesla can reduce the size of its body welding shops by 60%, Musk said. This is a great reduction in investment costs and potentially a new benchmark for industry-wide manufacturing costs and investments. We’ve come a long way from “production hell” https://www.Reuters.com/article/tesla-musk-idUSL3N1W31CT. Tesla: We have the cells Other companies are jostling for the batteries. Tesla has “significant cell inventory at this time and excess cells to support…2022 volume goals.” Additionally, half of the Teslas sold used lower-cost lithium-iron or LFP cells. Tesla exports a lot of cars from China Some legacy companies (GM) have been criticized by unions and politicians for trying to export vehicles from China. Tesla ships a significant number of vehicles from its Shanghai factory, trading off Chinese labor costs and Western prices. “As our car mix shifts to Shanghai, the average cost is positively impacted,” the company’s chief financial officer told analysts on Wednesday. For Tesla, regulation = revenue Tesla got a one-time benefit of $288 million because the Biden administration instituted tougher penalties for automakers that don’t meet fuel economy goals. Tesla’s emissions credits have become much more valuable. You can call it gaming subsidies. Elon Musk might call it designing a business model to capitalize on a legal revenue opportunity. The more determined government policymakers are to reduce climate emissions, the more it could cost traditional automakers to comply. Tesla can raise prices now for cars delivered later Tesla’s first-quarter performance benefited from the company’s ability to pass price increases on to customers before paying more for materials and parts. Since most Tesla customers order their vehicles and pay for them in advance, the company can record revenue and then later pay for the goods needed to build the cars. In six to 12 months, Tesla will likely pay more for raw materials and parts, Musk said, so to some extent things will even out. Paying for the reservation now helps today’s bottom line. The list above leaves out whether Musk can deliver a Tesla robo taxi without a steering wheel or pedals and use it to launch a ride service using tunnels made by Musk’s Boring Company https://www.Reuters.com/ business/autos-transportation/musks-boring-company-valued-56-bln-after-latest-funding-round-2022-04-21. And it doesn’t matter if Musk can deliver an “Optimus” humanoid robot that, as he put it, “will ultimately be worth more than the automotive industry.”

The Challenge for Companies and Brands Offering Competitive EVs Right Now – or Plan to Do Years From Now https://media.lincoln.com/content/lincolnmedia/lna/us/en/news/2022 /04/20/global-debut-lincoln-star-concept.html – is that Musk and Tesla could redefine industry goals, as Ford’s mass-produced Model T did in the early 1900s, or as GM did in the mid 1960s https://www.nytimes.com/1966/02/01/archives/gm-profit-topped-21billion-in-1965-gm-takes-lead-as- profit-maker.html, or as Toyota did in the late 1990s. Tesla’s $1 trillion market value tells you what Wall Street thinks. Musk and money Elon Musk, the richest person in the world, is on track to get richer by 23 billion dollars -trillion-2022-04-20 thanks to the strong performance of Tesla and the unusual compensation plan he granted the Tesla board of directors. Musk also said he had lined up $46.5 billion to fund his takeover bid for Twitter. https://www.reuters.com/business/musk-tears-up-buyout-playbook-with-465-bln-twitter-financing-2022-04-22 Dealer empire strikes back rough seas of Q1 better than their sworn enemy, Carvana. AutoNation and Lithia Motors beat the street https://www.Reuters.com/business/autos-transportation/autonation-profit-more-than-doubles-strong-demand-used-cars-2022-04-21 with their first-quarter estimates turned in strong profits, driven mainly by higher vehicle prices and repair shop operations that have margins for Silicon Valley software companies. (Really. Gross margins for AutoNation’s service business are 46%.) Carvana, the online used-car seller, suffered a bigger-than-expected loss https://investors.carvana.com/~ /media/Files/C/Carvana-IR/documents/cvna-shareholder-letter-q1-2022.pdf which he attributed to “Omicron, used vehicle prices, interest rates, other macro factors” and problems with its vehicle reconditioning and logistics operations. (One thing traditional dealerships know how to do is recondition used cars.) Carvana withdrew its guidance for the year and said its goal of generating $4,000 in gross profit per vehicle and balancing the EBITDA in the last three quarters of 2022 will be “pushed back a few quarters.” Carvana shares took a beating. But investors also sold AutoNation and Lithia. Interest rates and inflation will bring the automotive retail sector back to earth, as it has done many times before.Renault-Nissan Alliance redesigned? Renault eyes IPO of its vehicle business electric from the second half of 2023 hit-market-2022-04-22 – but this depends on the approval of Alliance partner Nissan Renault holds a 43% stake in NIssan – a legacy of the rescue by Renau lt in 1999 from the now larger Japanese company. Nissan holds a 15% stake in Renault. The two companies have been arguing for years https://www.Reuters.com/article/us-renault-nissan-ma-exclusive-idUSKCN1GJ2A7 over whether to restructure these stakes as part of a broader overhaul of their covenant. Renault shares soared Friday on a Bloomberg report https://www.bloomberg.com/news/articles/2022-04-22/renault-is-said-to-explore-nissan-stake-sale-to- support-ev-shift?srnd=technology-vp that Renault could sell some of its Nissan shares – a move that would free up capital the French company needs to accelerate the development of electric vehicles. The companies did not comment. Meanwhile, Renault-Nissan Alliance architect Carlos Ghosn is wanted in France https://www.Reuters.com/world/europe/carlos-ghosn-surprised-by-reports-french-international-arrest -warrant-2022-04-22. A French judge investigating money flows between Renault and an Omani dealership has issued an international arrest warrant for the former Renault-Nissan boss. Ghosn lives in Lebanon, where he is beyond the reach of Japanese authorities who also want to arrest him for alleged financial crimes and for fleeing Japanese justice. Ghosn says he did nothing wrong. Autoliv waving a red flag The Swedish manufacturer of airbags and seat belts Autoliv reduced its outlook for 2022 BCUaZ2_peAIHHrBE7YmA-BQPBtICU1ZhQA5otaVkonZmJbe6QUHBUhI2gX7gaTlDtXWjDULU3daf5XGgC-ve00_tYGWrUITtvnR5I1a4g495xFVMcNRTjs_KOSXUataGLXiuElJU0EJAHkssXn4eQbnHHfJnxtH_XNhY0yDZy after reporting less than half profit Q1 investors had expected. The company’s shares nosedived. Investors are on the lookout this earnings season for companies exposed to endemic supply chain bottlenecks. The punishment will be severe. Honda electric plans Honda will develop three new -22 electric vehicle architectures, including one developed with General Motors, the head of its electrification strategy told Reuters. Goodbye, Citroën Grand Space Tourer SUV has claimed another victim. This time it’s the venerable Citroen Grand Space Tourer French family transporter that today is one of the first victims as Stellantis sorts through the myriad of makes and models brought to Peugeot and Fiat Chrysler’s marriage. SUVs now represent 46% of sales in France.

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