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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

Automakers are being whipsawed by regulators demanding they sell more electric vehicles, consumers reluctant to buy them and investors who want less capex and more cash – which is currently generated only by selling combustion trucks and SUVs.

Western automakers could ease these pressures by developing EVs they could sell at a profit for under $30,000. The report from Reuters today that Tesla has abandoned its effort to build a line of EVs cheaper than today’s Model 3 – on top of Ford’s decision to delay more EV projects – shows how far automakers outside of China are from this goal.

U.S. and European policy makers have set ambitious goals to shift their auto markets to electric vehicles by the middle of the next decade. That won’t happen if EVs are not cheaper and easier to recharge. Western policymakers, workers and voters also do not want domestic auto jobs decimated by Chinese imports.

Right now, China’s BYD is the only company that makes inexpensive EVs and turns a profit. BYD is using its cost advantages to hammer down prices at the expense of Tesla and other rivals.

With BYD and other Chinese automakers hiring fleets of ships to export the low-cost EVs they cannot sell at home, and U.S. EV champion Tesla pulling back from efforts to match BYD’s prices, the situation in the global EV industry looks as unstable as the fictional world of the “3 Body Problem.”

How will the story end? It will take years to find out – just like in the books. But we have plenty of news in the meantime. Have a great weekend! Let’s take a drive…

Today –

• • Tesla hits the brakes on its “affordable” EV

  • Ford slows EVs, speeds up hybrids

  • The UAW takes on Mercedes

The BYD Dolphin – no competition? REUTERS/Athit Perawongmetha

Reuters reported today that Tesla has shelved plans to develop a line of EVs that could sell for around $25,000 and do for EVs what Henry Ford’s Model T did for combustion vehicles more than a century ago.

Instead, sources told Reuters Elon Musk is doubling down on creating a line of self-driving robo-taxis – a bold bet given the technology, regulatory and societal hurdles facing automated vehicle technology.

Musk regularly changes strategic course, but if this decision holds it marks a turning point in the competition to define the future of the global EV industry. Scrapping the Model 2 also calls into question the hyper-growth story underpinning Tesla’s $544 billion market cap.

Tesla’s retreat would leave the field open for Chinese automaker BYD – and potentially other Chinese EV makers – to dominate the market for mass-market electric vehicles anywhere that policymakers do not raise steep tariff walls to keep them out.

But tariff barriers may not keep Chinese EV makers out of other markets for long, as the history of Japanese automakers and later South Korean automakers shows.

Toyota, Honda and Hyundai all faced pressure to curb shipments of vehicles from their home markets to the United States and Europe. They responded by establishing manufacturing inside those markets – and were still able to build vehicles at lower cost than legacy rivals, leveraging technology and supply chains rooted in their home operations.

BYD, Chery and other Chinese companies are following a similar course. They are surging into Southeast Asia and setting up manufacturing footholds in Europe. BYD is scouting Mexico for an assembly operation inside the North American free trade zone.

There is bipartisan political opposition in the United States to opening doors to Chinese automakers and battery producers. Chinese companies could try to soften critics with promises to create U.S. jobs and make cleaner vehicles more affordable.

Chinese EV makers and battery makers are forming partnerships with Western rivals – such as Stellantis’ collaboration with Leapmotor and battery giant CATL’s battery alliance with Ford. This strategy worked for Toyota, which in the early 1980s paved the way for its U.S. factories by creating a joint venture factory with GM.

That plant in Fremont, Calif. is now an assembly plant for Tesla.

Ford: Fewer EVs, more of these. Reuters/Rebecca Cook.

Ford CFO John Lawler told investors last week that the automaker would no longer write open-ended checks for unprofitable electric vehicle programs.

“Model E has to stand on its own, or we are not going to move forward,” Lawler said, using Ford’s name for its money-losing EV operations.

Then on Thursday, Ford backed up the talk with action. The company will delay launching a second generation of electric pickups at its “Blue Oval City” manufacturing complex under construction in Tennessee from 2025 to 2026. Ford is also punting a line of electric three-row SUVs scheduled to go into production next year in Canada off into 2027.

At the same time, Ford said it will invest to expand gas-electric hybrid offerings across its North American combustion model lines (aka “Ford Blue”) by 2030.

U.S. sales of hybrids are surging. Toyota said U.S. sales of its electrified vehicles – mostly hybrids – jumped 61% in Q1 – even as Tesla sales fell.

The explanation Ford gave for delaying the electric three-row EVs – which were a centerpiece of CEO Jim Farley’s strategy a year ago – is telling: “The additional time will allow for the consumer market for three-row EVs to further develop and enable Ford to take advantage of emerging battery technology..” 

Ford is not the only automaker slowing EV projects to boost near-term profits in hope that long-term technology breakthroughs (or more lenient climate policy or industrial partnerships) will fix broken EV economics.

Stellantis CEO Carlos Tavares also pointed for the future to deliver better battery technology in a forum this week, saying automakers need batteries by 2030 that can deliver the equivalent of 250 miles of driving at 50% of the weight required using today’s battery chemistries.

With less fanfare, General Motors has also put some EV projects on hold – including converting a factory in suburban Detroit to build electric pickups.

UAW leaders told workers at GM’s Lansing Grand River assembly plant in a Facebook post “there is still not a defined timeline for the investment at LGR or the maximum length of time that LGR could be down.” GM had outlined plans to build a new line of premium EVs at the plant.

GM and Samsung have not yet confirmed the timing for a proposed EV battery plant in Indiana.

Decisions to slow investment in money-losing vehicles that aren’t selling to plan make financial sense but come with risk.

Chinese EV makers are not slowing down – despite jawboning from European and U.S. officials threatening new tariffs.

South Korea’s Hyundai sees the hesitation among its U.S. and European rivals, and is pouring more than $50 billion into new EV models and capacity.

Passage to India? Patrick Pleul/Pool via REUTERS 

Tesla is building right-hand drive cars at its Berlin factory for export to India, Reuters reported.

The move is opposite of the usual strategy – build vehicles in a low-cost nation to sell in a richer market. But German-made vehicles – with more favorable Indian tariff policy as a tailwind – will help Tesla get a foothold in the world’s most populous country  while it negotiates with Indian authorities over building a factory.

India’s EV market is small, but it is growing rapidly. India’s EV sales nearly doubled last year and are forecast to rise 66% this year.

The United Auto Workers on Friday filed a formal demand for an organizing vote at the Mercedes Benz assembly plant in Vance, Alabama.

The union had previously vote scheduled a vote at Volkswagen’s assembly plant in Chattanooga, Tenn. For April 19.

The UAW campaign at Mercedes has taken a contentious turn. The UAW has accused the German luxury automaker with improper, anti-union tactics. Mercedes has rejected the charges. 

UAW organizers are still working at plants owned by Tesla, Toyota, Honda, Hyundai and others to get the 70% support it has said it needs before filing with U.S. labor regulators to hold union organizing elections.

Nikola said it delivered 40 hydrogen trucks in the first quarter, beating Wall Street estimates.

Xiaomi said it has begun delivering the first of the 100,000 SU7 electric vehicles ordered after the car’s debut last month.

Used EVs keep getting cheaper. Used Tesla Model 3s now selling at just over $27,000, according to new data from Recurrent. Cox Automotive’s Manheim Used Vehicle Value Index showed average used EV prices down 19%.

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