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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

The summer earnings season is well underway – we had Tesla on Wednesday. GM, Ford, Stellantis and Mercedes among others are reporting next week.

What are we learning about the auto industry’s outlook for the rest of the year? Here’s what Elon Musk said: “One day it seems like the world economy is falling apart, next day it’s fine. I don’t know what the hell is going on.”

Other auto industry CEOs won’t be that colorful. But Musk is so they don’t have to be. We’ll dig deeper into what Musk had to say, and much more. Have a great weekend! 

Today –

• • Tesla’s pursuit of growth rattles investors

  • Can U.S. subsidies turn dead batteries into gold?

  • The UAW, Washington and 2024

Why Wall Street worries about Tesla.

Tesla reported solid results for Q2, but shares in the world’s most valuable automaker nosedived by more than 10% – zapping more than $90 billion in market cap.

Why? Because Elon Musk doubled down on a strategy of pursuing volume growth over defending near-term profit margins. His bet: That autonomous driving, robots and other artificial intelligence products will dwarf the value of Tesla’s automotive hardware business.

Wall Street is not on board, yet.

Musk has promised Tesla would deliver soon a fully-functional version of its Full Self Driving (FSD) system, only to miss the deadlines.

“I know I’m the boy who cried FSD,” Musk joked, before insisting that FSD really could be better than human drivers by the end of this year. He also said another automaker is in discussions to license FSD technology.

Musk argued that soon, Tesla’s “Full Self Driving” automated driving technology will be ready for large-scale launch, will get approved by regulators, and will unlock enormous wealth as self-driving Teslas generate revenue while their owners work, play or sleep.

“The short-term variances in gross margin and profitability really are minor relative to the long-term picture,” Musk said during a conference call. “Autonomy will make all of these numbers look silly.”

It’s not clear when regulators will clear the path for FSD and fleets of robo-Teslas roaming streets. U.S. regulators are investigating a series of accidents involving Teslas operating on Autopilot or FSD.

In the meantime, Tesla is spending more than $1 billion a year on its “Dojo” artificial intelligence FSD training system, and plowing U.S. Inflation Reduction Act subsidies into offsetting the costs of price cuts.

The debate over whether Tesla is a transformational AI company, or just a car company with better than average technology, will continue.

The Gringotts of batteries.

The Biden Administration’s climate technology subsidies have spurred investment in U.S. battery recycling, Reuters colleagues Nick Cary, Paul Lienert and Victoria Waldersee report.

Three guesses which country dominates battery material recycling today. Actually, it’s too easy. You only get one: It’s China.

U.S. Transportation Secretary Pete Buttigieg

U.S. Transportation Secretary Pete Buttigieg told Reuters the Biden Administration is concerned about Chinese companies developing autonomous vehicle technology in the United States.

Members of Congress earlier this month registered their worry that Chinese entities are gathering up sensitive technology under the guise of developing self-driving cars.

Autonomous driving uses sensors, chips and software that can be repurposed for military hardware – and AVs have been swept up in the Biden administration’s broader efforts to limit China’s access to advanced semiconductors.

Another sign of Washington’s concern about Chinese influence on the auto sector: U.S. House lawmakers are launching investigations of Ford’s plan to build EV batteries in Michigan in a partnership with Chinese battery powerhouse CATL.

Fran Drescher and striking Hollywood actors are getting a lot of attention, but United Auto Workers President Shawn Fain is working hard just outside the spotlight to win support from Washington lawmakers and the White House as the UAW heads into tough bargaining with the Detroit Three.

The UAW, actors and Teamsters union drivers at UPS have common goals and challenges. They all face new technology that threatens to diminish their ranks and amplify the power of managements that control that technology. They all have members who have lost buying power during the recent inflation spike.

In the UAW’s case, the technology threat can be summarized in one name: Tesla. The company’s reinvention of electric vehicles and the manufacturing systems used to build them is the biggest challenge to Detroit Three employment since Toyota’s lean production system. The Toyota Production System and automation transformed manufacturing during the 1980s and 1990s and led to thousands of lost jobs at GM, Ford and the former Chrysler.

One thing in the UAW’s favor is that its members are concentrated in Michigan, a state whose votes could decide the 2024 Presidential race. This week, GOP candidate Donald Trump and President Joe Biden took turns pitching for the UAW’s endorsement.

So far, Fain has declined to endorse Biden, saying the White House’s policies to promote EVs could cost UAW workers jobs.

One reason why Elon Musk can’t figure out where the global economy is headed is the murky situation in China. The economy is slowing, but how much and for how long is not clear.

Chinese policy makers on Friday outlined new measures to stimulate consumer demand for vehicles and electronics. Markets weren’t impressed. More price-chopping lies ahead for the world’s largest vehicle market.

Toyota to the Moon! The automaker said it is working on a lunar rover vehicle powered by its fuel cell technology. One goal: Using water trapped in lunar ice as a hydrogen source.

AutoNation second quarter results beat Wall Street expectations, but shares in the U.S. auto retail chain fell as analysts worried that vehicle prices and profit margins are sliding off their highs. CEO Mike Manley said consumer demand is strong and the moderation in prices is gradual, so far. One area Manley is watching: inventories of unsold legacy auto brand EVs. They are not large as an absolute number – about 2,500 vehicles – but they are 13% of AutoNation’s inventory vs. 5% of sales.

Stellantis executive Emanuele Palma pleaded guilty to conspiring to violate the U.S. Clean Air Act in connection with diesel emissions cheating by the former Fiat Chrysler.

Jaguar Land Rover’s acting CEO, Adrian Mardell, now has a three-year contract to stay in the job from JLR parent Tata Motors. Mardell has worked at JLR for 33 years and stepped in as CEO after the resignation of Thierry Bollore. Mardell’s No. 1 task will be steering JLR’s five-year, 15 billion pound effort to accelerate EV production.

U.S. government agencies are aiming to buy 9,500 EVs this year, but they will pay $200 million more for the vehicles than they would for comparable combustion models, a Government Accountability Office report found. On top of that, the agencies will need to spend $300 million on charging infrastructure.

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