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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

Happy Groundhog Day! Speaking of winter, did you know that people who live in Southeast Michigan have a dozen words to describe a gray sky?

I made that up. But we do get sooo many shades of gray here in January and February. Why don’t we have more words to distinguish one overcast day from the next?

We need new words for a lot of things. What’s the right word for an automotive recall when the vehicles that need fixing don’t have to visit a dealership? Is an over-the-air software update a “recall?” Elon Musk doesn’t think so. But it’s not “no problem,” either.

We’ll consider that question and many more in today’s Auto File. Have a great weekend!

Today –

• • The electric vehicle industry parties like its 1929

  • Elon Musk’s $56 billion pay debacle

  • Ferrari’s great week

Which EV brand will be Duesenberg of 2080? Reuters Mike Segar

Between 1909 and 1941 the number of automobile manufacturers in the United States collapsed from 272 companies to nine, according to research by Steven Klepper of Carnegie Mellon University. Small firms founded in the early 20th Century Big Bang touched off by the internal combustion engine and Henry Ford’s mass production innovations succumbed or were swallowed by bigger fish such as General Motors or Chrysler.

The history of the early auto industry’s shakeout is relevant today as more electric vehicle startups launched in the early 21st Century to chase Tesla’s extraordinary success run into financial and technological trouble.

The latest case is Polestar, the joint venture created by Volvo Cars and its Chinese controlling owner Geely. Volvo Cars said it will no longer fund Polestar’s losses and could turn its 48% stake in the venture over to Geely.

The key thing is how investors responded. Volvo shares shot up 30%. Remember when investors sent shares in EV startups like Rivian to the moon, and cheered when the CEOs of legacy automakers declared plans to spend billions on EV development?

Not anymore. GM shares popped this week after CEO Mary Barra promised shareholders they would get more of the cash spinning off the company’s profitable truck and SUV business, and EV capex would be flat with last year’s reduced levels.

Today’s investors are Motown fans:“Give me money. That’s what I want!”

Investors have largely abandoned the search for the next Tesla, judging from the cratered share prices of most EV startups.

The notable exception is China’s BYD, which has surpassed Tesla in global EV sales and has such a commanding production cost advantage that Elon Musk warns they could “demolish” Western automakers if more trade barriers aren’t erected.

But even BYD’s share price is down nearly 16% since Jan. 1 as investors process signals that the growth in EV demand is slowing down.

What will the EV industry look like in 10 years? The history of capital intensive, scale-dependent industries suggests brands may survive, but many of today’s independent players may not.  

Delaware Judge Kathaleen McCormick. Reuters/Kathleen Flynn

A Delaware judge’s ruling that Tesla’s board mishandled a stock compensation deal for Elon Musk worth $56 billion promises another round of turmoil at the electric vehicle company.

The “unfathomable” sums at issue aren’t all that make this case one for the history books. The nominal winner in the case is a former heavy metal drummer, Richard Tornetta, who at the time he signed on as plaintiff owned just nine Tesla shares.

Musk does not have to sell Tesla shares to satisfy the judgment. He may have to give back more than $50 billion worth of unexercised stock options unless the ruling is overturned on appeal.

Tesla’s board could redo the pay package – but it is not clear that would pass muster if done by the same directors whom Judge Kathaleen McCormick found to be excessively beholden to Musk.

(From the ruling: Board chair Robyn Denholm has received $280 million in stock for her service – a sum she testified was “life changing.” Denholm has indicated plans to sell up to $50 million more in Tesla shares received as compensation, according to Tesla’s latest 10-k – a move reported by Electrek.)

Judge McCormick’s ruling (available here) is a fascinating look inside the dynamics of Tesla’s boardroom. Critics of Tesla’s corporate governance are gearing up to use the ruling as ammunition to demand reforms at the next shareholder meeting.

Musk is counter-programming with a campaign to move Tesla’s legal domicile to Texas, where courts are generally more sympathetic to managements and boards.

Musk’s outrage on his X.com platform, and his demands that he get 25% control of Tesla, won’t help Tesla directors establish a record of arm’s length dealing as they try to craft a new pay deal, Breakingviews’ Jonathan Guilford writes.

Tesla would prefer you don’t visit. Reuters/Abhirup Roy

U.S. vehicle safety regulators are investigating complaints of steering loss in 334,00 Tesla vehicles – a probe that could be more consequential than an order Friday that Tesla upgrade software on more than 2 million vehicles to fix the font size on warning gauges.

Tesla’s over-the-air software upgrade capabilities have redefined the “recall.”  

A recall order from the National Highway Traffic Safety Administration used to mean that automakers had to pay for customers to visit a dealer repair shop. Many of Tesla’s recalls involve only an overnight software download. That’s not free to Tesla, of course. But it’s a fraction of the cost of a traditional recall.

Steering hardware failures, however, do require a mechanic to effect repairs.

Reuters reported in December that Tesla engineers knew about steering and suspension failures affecting tens of thousands of customers. But Tesla technicians were instructed by superiors to tell consumers the failures were not the company’s fault.

Auto technology supplier Aptiv will stop investing in robo-taxi venture Motional, joining Ford, Volkswagen, Uber, and numerous investment funds in dialing back dreams of near-term profits from automated vehicle technology.

Instead, Aptiv CEO Kevin Clark told investors the maker of advanced driving systems, software and electrical hardware will focus investments on expanding business with select Chinese automakers and automating its factories.

Aptiv plans to deploy robot production lines to boost its automation levels to 30% by 2026 and more than 50% by 2030, Clark said. You can get a glimpse of Aptiv’s design for automated assembly here.

If you are someone who worries about the impact of advanced automation on jobs for humans, take comfort. You’re not paranoid.

Aptiv is also building alliances with a dozen Chinese semiconductor suppliers to create a China-for-China supply network less vulnerable to Western efforts to keep advanced chip technology out of Chinese hands. (Silicon Valley superchip designer Nvidia is pursuing a similar strategy to serve Chinese customers.)

This was a pretty great week for Ferrari and CEO Benedetto Vigna. The company reported strong results and gave an upbeat outlook.

Shares surged by more than 9%, sending Ferrari’s market cap toward the $100 billion level – more than much larger one-time parent Stellantis/Fiat. Investors compare Ferrari to luxury goods brands like Hermes, not other automakers.

To top things off, Ferrari snatched star Formula One driver Lewis Hamilton from Mercedes.

New car shoppers increasingly visit auto dealer websites from their smartphones and respond more rapidly to text messages. But dealers are stuck in the dial-up age, relying on voice calls to connect with potential customers, according to a study by Shift Digital. Privacy rules governing how dealer sales representatives can text a would-be customer are a barrier.

Production problems at Hauwei slowed assembly lines for some Chinese automakers this week.

BYD’s European strategy got a lift as a German dealer opened a store for the Chinese automaker’s electric vehicles in Berlin.

Volkswagen launched an artificial intelligence lab. Because, who isn’t opening an AI lab these days?

Electric hypercar maker Rimac will take another leaf out of the Tesla playbook by launching a stationary energy storage business. Tesla projected its energy storage business will grow faster than its EV franchise this year.

U.S. auto sales slowed to a 15 million vehicle annualized pace in January, according to Wards Intelligence. January is usually one of the slowest months of the year.

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