Auto Industry 101.5: Takeover prices. (Prepare to be disappointed.)

Geely paid $1.5 billion for all of Volvo

Geely paid $1.5 billion for all of Volvo

In this 5th installment of Auto Industry 101, we talk about the price for your toils and troubles of starting a car company. This short course is written due to the recent interest in disrupting the auto industry. The course is kept extremely simple, Auto Industry for the Twitter Generation. Those in the industry will find nothing new. Those new to the industry hopefully will find a helpful primer.

Takeover fantasies usually help prop up a stock price, and with Tesla’s shares slowly trundling in the general direction of Mother Earth, there has been no shortage of takeover fantasies. Elon Musk himself brought up BMW last year, only for BMW to vehemently deny any possible alliances, or dalliances. I am frequently asked what Apple, or a global automaker would pay for Tesla. Here is my usual answer. [Continue Reading]

Auto Industry 101.4: Selling EVs to China. A how not to

Ni hao

Ni hao

 

The 4th installment of Auto Industry 101 won’t be a lecture on how to successfully export an electric car to China. There isn’t enough empirical data for this: No-one so far has successfully exported an electric car to China. Today, we explore the reasons. This short course is written due to the recent interest in disrupting the auto industry. The course is kept extremely simple, Auto Industry for the Twitter Generation. Those in the industry will find nothing new. Those new to the industry hopefully will find a helpful primer.  This lecture may be a bit long. So here is the executive version on how to export EVs to China:

Don’t.

I drove my first electric car in China in early 2007, at around the same time Tesla showed its first Roadster. The Chinese EV was a prototype, built by the Anting Automotive College of Shanghai’s Tongji University. A formal meeting was scheduled for the next morning. The next day at the college, everybody was aflutter, and the meeting was canceled. “Last night, the boss has been called to an urgent meeting in Beijing,” the distraught Dean of the college told me. “No reason was given. We hope he will come back.” At lunch, a call came, and to everybody’s relief and joy, Wang Gang, the President of Tongji University and founder of the Anting College, was installed as China’s Science and Technology Minister.

Suddenly, EVs had a strong and knowledgeable sponsor, right close to China’s very top. Wan Gang had powerful allies: China’s military. The brass was worried: Car sales began to boom in China, and the gasoline in the tanks mainly came by tanker from the Middle East. There had been two Gulf Wars in short succession, and Iraq was falling apart. There was a protracted war in China’s western periphery, in Afghanistan, and the unrest began to affect China’s Xinjiang Province. A flare-up around the Malacca Straits could easily choke China’s oil supply. China’s generals were old enough to remember that World War II did not start in Pearl Harbor, but a year earlier, when America cut off Japan’s oil supply. A big push for EVs promised independence both from Saudi oil, and from imported western technology. Powered by the vast scale of its market, Chinese would assume technological leadership in new energy transportation, while the west would choke on ICEs.

At least, that was the plan. [Continue Reading]

Auto Industry 101.3: The trouble with China

Chinese police drives trucks that officially shouldn't be in China

Chinese police drives trucks that officially shouldn’t be in China

 

China is one of the very few auto markets to show solid growth, with good prospects for decades. We learned this in yesterday’s installment of Auto Industry 101. Today, we look a little closer at China, as close as the big country allows in less than 1,000 words. This short course is written due to the recent interest in disrupting the auto industry. The course is bite-sized, and kept extremely simple, Auto Industry for the Twitter Generation. Those in the industry will find nothing new. Those new to the industry hopefully will find a helpful primer.

The Chinese auto market is a Tiger. It’s big, it’s fast, and it can eat you alive. Responsible for the huge market are Deng Xiaoping, and western investors. Deng invited western automakers to China. Volkswagen and American Motors followed his call. (If you are interested in the inside story of why and how VW came to China, let me know, and I may tell it. For AMC, ask Michael Dunne.) Then, VW and AMC languished in China for two decades. Nothing happened until western investors started pouring money into China at around the turn of the last century. Fueled by Dollars, Euros, and Yen, the Chinese car market exploded.

[Continue Reading]

Auto Industry 101.2. Today: Whither the growth?

What, that's it?

What, that’s it?

Yesterday in Auto Industry 101, we covered the tepid growth of the same. Today, we look into where the industry is growing, and where is doesn’t. This short course is written due to the recent interest in disrupting the auto industry. The course is bite-sized, and kept extremely simple, Auto Industry for the Twitter Generation. Those in the industry will find nothing new. Those new to the industry hopefully will find a helpful primer.

For the last 10 years, the global auto industry has grown at an average annual rate of just 3.4 percent. Ten years ago, 66 million automobiles were sold worldwide. In 2014, it was 88 million. Let’s begin with a look at where the auto market definitely is not growing. [Continue Reading]

Auto Industry 101. Today: How big?

A growth market it is not

A growth market it is not

Due to the recent interest in disrupting the auto industry, here a short course in same. The course is bite-sized, and kept extremely simple, Auto Industry for the Twitter Generation. Those in the industry will find nothing new. Those new to the industry hopefully will find a helpful primer

The auto industry is one of the most complex and, next to pornography, one the most alluring in the world. How big is it? Statista puts the 2013 revenues of the world’s 17 largest automakers at 1.25 trillion euro, or 1.31 trillion USD. This number is skewed by the undervalued Euro. A year ago, and with a stronger Euro, the same revenue was worth 1.75 trillion USD. The global auto industry consists of some 50 players, and not of 17. Large companies such as Volkswagen, GM, or Toyota use the equity method for their China operations, China does not show up in their revenues. China is about one third of Volkswagen’s and GM’s business. It is probably a safe bet to estimate total worldwide annual auto manufacturer revenues at around 2 trillion $US. Total industry size, including ancillary businesses, such as parts, service etc., is probably twice that. That would be a generous $4 trillion, and a healthy chunk of business. However, it is not the $10 trillion that are frequently thrown around.

That was the good news. [Continue Reading]