Blocking China’s robot drivers

Greetings from London!

It’s been a rollercoaster start to the week, with markets down sharply on Monday, then bouncing back, then falling again – all triggered by fears a weak U.S. jobs report meant a recession.

Fears over the state of the U.S. economy will foster concern over the health of the U.S. auto sector, where high interest rates have continued to weigh on sales. July sales were expected to rise slightly, thanks partly to pent-up demand after a cyberattack hit June sales, but dipped instead.

As J.D. Power predicted in its sales forecast, vehicle inventories at the end of July were up a hefty 32.5% versus July 2023, while the discounts U.S. dealers hand to consumers to move new cars off lots pushed car prices down 2.6% in July, meaning lower profit margins for dealers and automakers.

U.S. auto sales remain well above recession levels. But after the last couple of days investors will nervously await August numbers and the impact of pre-Labor Day sales to see if broader market fears are justified.

Which brings us to today’s Auto File…

The national security fight over data in autonomous vehicle technology and connected vehicles just ramped up a notch.

As my colleague David Shepardson reports here, within weeks the U.S. Commerce Department should propose banning Chinese software in vehicles with Level 3 automation and above in the United States. The proposed ban would also affect connected vehicles and vehicles with Chinese-developed advanced wireless communications abilities modules.

This fight has been building for some time and concerns over access to the vast amounts of sensitive data from AVs and connect cars are not just limited to the United States and its allies.

Back in 2021, Tesla was forced to set up local car data storage in China to address government concerns over how it handles data collected by vehicle cameras and sensors. National security concerns even led to employees being told not to park their Teslas at some Chinese government offices.

The automaker’s plans to harness that data for better self-driving algorithms now rely on building a data center in China.

Three years later, U.S. concerns over the data collected by self-driving cars have been simmering away, with a bipartisan group of lawmakers raising the alarm over the issue last November.

After voicing its own national security concerns and acting accordingly three years ago, China’s government now urges the United States to create a level playing field, saying “only fair competition can bring technological progress.”

Musk: UK “civil war is inevitable.” – REUTERS/Gonzalo Fuentes

Even without his decision to wade into spreading far-right violence in Britain with a tweet saying: “Civil war is inevitable,” this was a busy week for Elon Musk and Tesla, the automaker he runs.

After months of sliding sales, Tesla saw sales of its Chinese-made EVs rise 15.3% in July versus the same month in 2023, according to Chinese industry data. And in a fresh bid to gain regulatory approval to sell insurance products, the automaker also registered an insurance broking firm in China at the end of July.

That, and an announcement that a U.S. regulator was seeking more information about a fatal accident involving one of the automaker’s electric Cybertruck pickup trucks, would have been busy enough for most rivals.

But Musk’s post predicting civil war in Britain – from an executive whose forecasts about Tesla’s own technological advances have frequently fallen short – brought criticism from British Prime Minister Keir Starmer’s office.

Musk’s initial tweet was in reaction to a post blaming mass migration and open borders for the disorder in Britain. Unabashed by the government’s reaction, Musk followed that up by criticizing Starmer for saying mosques required special protection.   

As far-right rioters are unlikely to buy a Tesla, it is hard to see what the company so closely associated with Musk stands to gain from such confrontations. His behavior has already apparently put off some would-be U.S. Tesla buyers, but it remains to be seen whether any of this can dent his seemingly invincible popularity among retail investors. 

Saudi PIF cash will fund Lucid’s Gravity SUV — REUTERS/Abhirup Roy 

U.S. EV maker Lucid got some welcome cash this week with an injection of up to $1.5 billion from its main shareholder, Saudi Arabia’s Public Investment Fund (PIF).

This comes just over a year after the PIF bankrolled most of a $3 billion stock offering for Lucid, giving investors confidence that the Saudis have not given up on the EV maker despite the vast sums it burns for every car that it sells.

As has been mentioned in the Auto File before, it takes years and many billions of dollars to manage scale production. A good many EV makers, among them Fisker, have already fallen by the wayside as they failed to raise enough cash to seal the deal.

Like Rivian, which recently got a boost with an investment of up to $5 billion from Volkswagen, Lucid can still raise money, which it will use to ramp up production of a new SUV.

To adapt a quote from Mark Twain, reports of the death of the combustion engine have been greatly exaggerated, especially as major truckmakers are investing in engines to run on hydrogen instead of diesel in the race to develop zero-emission vehicles.

As my colleague Christina Amann reports here, the vast investments truckmakers are making in hydrogen fuel cell models will take years to pay off.

So, in tandem, truckmakers are also working on hydrogen combustion engines as a cost-saving way to bring models to market faster and make use of existing manufacturing supply chains and provide a technology that customers are more familiar with.

Truckmakers are wrestling to cut the emissions that hydrogen combustion engines produce and to shrink the pressurized tanks needed for the highly flammable gas. But some like MAN are already working on test fleets for customers.

Premium German automaker Audi’s new electric car series developed in China for the local market will not sport its four-ring logo, sources tell Reuters, because of “brand image consideration” as the models will be co-developed with Chinese partner SAIC .

Canadian labor union Unifor has called on the government to impose tariffs on all Chinese-made EVs, batteries and other components to bring the country more in line with tariffs already proposed by the United States.

General Motors is revamping its performance review process for U.S. salaried employees to offer better bonuses for high performers and pressure low-performers to shape up or get out, as the automaker seeks to attract and retain the talent necessary for the transition to EVs.

China Evergrande’s EV group says a Chinese court has ruled that two of its subsidiaries should enter bankruptcy and be restructured, which could hurt ongoing talks between liquidators of Evergrande Group, the world’s most indebted property developer, and interest from potential buyers of a stake in the EV company.

Britain’s auto industry body the Society of Motor Manufacturers and Traders has cut its forecast for new car sales in 2024, saying weak demand from consumers for EVs remains an overriding concern.

Kenya’s Mobius Motors, maker of rugged, low-priced SUVs designed for Africa’s roads, has decided to call it quits, citing financial challenges. According to a shareholder source, tax hikes in the East African country effectively killed the company’s business model.

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