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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

One of my holiday season rituals is re-reading “A Christmas Carol” by Charles Dickens. For the one or two who don’t know the story, it involves a greedy man named Ebenezer Scrooge and four ghosts. The character relevant here is the Ghost of Christmas Future. It is the spirit shrouded in a dark robe that points in silence to doom scenarios Scrooge faces unless he changes his act.

“Are these the shadows of things that will be?” Scrooge pleads. “Or are they the shadows of the things that may be, only?”

Great question! And exactly the mystery confronting the world’s automakers as they peer into 2024. If the last four years have taught us anything, it is that past performance is no guarantee of future results.

Case in point: General Motor (GM) and its CEO Mary Barra. A week ago, GM shares were down for the year, trading below the benchmark $33 price at which the company’s post-bankruptcy shares went public in 2010.

As of this morning, GM shares are up 6% for the year at just above $35 a share, lifted along with nearly every other stock by Federal Reserve Chair Jay Powell’s announcement that interest rates could start going back down. Yuletide cheer, indeed!

Today’s Auto File will outline five issues to watch in the coming year. These are some of the forces and trends visible on the industry’s horizon now – but they are only the shadows of things that may be. Did you expect a global pandemic in 2020? Me neither.

A few things are certain: This will be the last Auto File of the year.  The newsletter and I will take a break until Jan. 2, when the Auto File will move to Tuesdays and Fridays.  In the meantime, best wishes for the holidays and Happy New Year! Find time to lock the smartphone in a box.

OK Rudolph! Let’s run!

Today –

• • What to watch in 2024

  • GM slashes staff at Cruise

  • China’s Nio hits the gas in Europe

The shape of things to come?

As noted above, it has been a tough few years for people who make predictions about where the auto industry is headed.

The items below are based on what industry executives are saying and doing, and on how consumers are behaving.

Some important matters aren’t covered, such as the trouble Tesla’s Cybertruck may – or may not – cause for Detroit’s truck brands or Rivian.

If you get bored during the holiday break, type the word “Cybertruck” into YouTube’s search engine. You’ll need two days to consume it all.

I also left out discussions of software strategy and EV charging. Consider those issues as perennial. 

A Lucid Gravity. If you have to ask, you can’t afford it. Reuters/David Swanson

Electric vehicle (EV) sales in the United States, Europe and China are expected to keep growing faster than the total market, including combustion vehicles. S&P Global’s new forecast for global vehicle sales is here.

The problem for legacy automakers, especially in the United States, is that EVs remain a risky, expensive choice for many middle-income buyers. EVs from traditional brands are not selling up to rosy expectations, sticking GM, Ford, Volkswagen and even German luxury stalwarts with excess production capacity and oil drums worth of red ink.

Legacy automakers began tapping the brakes this year on ambitious EV capital spending plans. Look for more EV project delays, more calls for government subsidies and more lobbying for relief from regulations aimed at forcing the phase-out of combustion vehicles.

The hand of fate. REUTERS/ Dado Ruvic

Artificial intelligence (AI) fever is sweeping financial markets. Automakers want to catch it. Just this week, GM poached an executive from Facebook parent Meta and named him to a new position as Vice President for AI.

Stellantis has built a version of the ChatGPT AI program into the voice command systems of DS vehicles.

But in-car, consumer facing uses of AI chat-bots will be a sideshow – especially if ChatGPT-powered dashboards turn out to be as buggy as their less buzzy predecessors.

The auto industry’s more significant applications of AI will be in factories, supply chains, engineering labs and marketing departments. Automakers are excited about the potential of powerful AI tools that can crunch mountains of critical data – and lower human labor costs.

The drive to cut climate emissions pumped out by cars and trucks – underscored by this week’s Dubai climate deal – will create more tension between automakers and government regulators.

Automakers are eager to accept EV subsidies offered by the U.S. Inflation Reduction Act or the Chinese government. But by doing so, industry executives open the door to back-seat driving from government policymakers, and not just on emissions standards.

U.S. President Joe Biden undertook precedent-breaking interventions in this fall’s United Auto Workers bargaining with the Detroit Three, and is now supporting the UAW campaign to organize non-union U.S. automakers.  

Dependence on government subsidies amplifies political risk. Automakers develop product strategies that unfold over many years. Government policies can shift overnight based on election results.

In Europe and the UK, politicians are backing away from some of the most ambitious deadlines for banning combustion vehicles. In the United States, EV mandates and subsidies have become a partisan issue heading into the 2024 presidential race.

Policymakers in the United States and Europe want more people to buy EVs. That means EVs need to get cheaper. The lowest cost EVs and batteries come from China, which controls key links in the EV supply chain.

But the United States and European governments do not want to hand the future of their respective auto sectors to China. This concern is embodied in the anti-China provisions of new EV subsidy schemes in France and in the complex domestic content rules of the U.S. Inflation Reduction Act.

How Western governments resolve the EV/China dilemma will be a key question for 2024, and beyond. China is fighting to break down trade barriers to promote EV exports.

Market forces will play a role. In Europe, Southeast Asia and Latin America, low-cost Chinese EV brands are winning sales. Think there are no Chinese EVs sold in the United States? Guess again.

The coming year should confirm that the era of consumers paying above list price for new vehicles is over. Well, maybe not for Ferrari. But for most ordinary brands.

The semiconductor supply crunch and other supply chain snafus that intensified as the pandemic eased caused automakers to forgo production of 9.46 million vehicles globally between January 2021 and December 2023, according to AutoForecast Solutions. But of that total, only 930,000 vehicles were lost this year.

As production bottlenecks clear, and borrowing costs rise, unsold vehicles are beginning to stack up on dealer lots. Even Tesla, which has no dealers, has been forced to cut prices to keep production lines rolling.

“Cox Automotive is expecting inventories to be up substantially from 2022 levels—the height of the shortage—incentives to be higher, and discounting to increase,” Cox Chief Economist Jonathan Smoke wrote in his 2024 forecast Friday.

Watch the Detroit automakers to see whether they stick to promises to hold inventories below pre-pandemic levels and move to a “build-to-order” sales approach that supports higher prices.

When inventories bulge, automakers must choose between discounts and layoffs. That is unless U.S. vehicle sales skyrocket in 2024 beyond the low, single-digit growth rates S&P, Cox and others are forecasting.

That won’t happen. Will it?

GM is cutting staff at its Cruise robo-taxi unit by 24% and has dismissed nine executives. The layoffs and the executive shakeup are the latest steps in the overhaul at the operation after one of its driverless cars struck a pedestrian.

Chinese EV maker Nio will launch its low-cost Firefly EV brand in Europe in 2025. Nio is pushing ahead with the European expansion even as it cuts staff to narrow losses.

Tesla will not recall vehicles to revise its Autopilot system in Europe, Dutch authorities said.

Zeekr has an LFP battery that supports fast-charging. The Chinese brand owned by Geely developed the new battery in-house.

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