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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

Well, this is a day that will go down in history. Paul McCartney has figured out a use for artificial intelligence that’s good for humanity: He’s created a new Beatles record! 

At least, I hope it’s good…

I will be taking a break after today, returning Monday, June 26. It’s time for a summer road trip – so of course, oil prices are rising.

But chin up! Let’s get to today’s news from the World of Cars –

• • Toyota promises an EV moonshot

  • Used cars power U.S. inflation

  • Volkswagen sets an ambitious profit goal

Toyota CEO Koji Sato

Toyota shares jumped this week after the world’s largest automaker outlined an ambitious plan for a new generation of electric vehicles that could challenge Tesla and BYD’s dominance.

The new strategy is the output of a year-long review during which senior executives came to grips with the fact that Tesla, not Toyota, is now setting the pace for vehicle and manufacturing technology.

Toyota’s bet hinges on what the company said are breakthroughs in solid-state EV battery technology. Solid-state batteries hold the promise of longer driving range and less risk of fire. But experts have said solid-state batteries were difficult to manufacture at auto industry scale.

Toyota now says it has achieved breakthroughs that should allow it to launch vehicles with solid-state batteries by 2027 or 2028.

The company that invented lean production also said it is rethinking its way of building cars – a response to the challenge from Tesla which has zoomed past Toyota in EV manufacturing efficiency. Toyota will join the ranks of automakers following Tesla’s lead in using large “giga-castings” to build one-piece chunks of vehicles.

Toyota CEO Koji Sato unveiled the new strategy one day before the automaker’s annual shareholder meeting, where investors were expected to pummel him and Chair Akio Toyoda for dragging their heels on EVs.

Chalk up one victory for the new approach: Investors endorsed the new plan, and voted down a proposal to require more disclosure of the company’s lobbying on climate regulation.

Now, Sato and Toyota executives have to deliver, and fight not to lose too much more ground in the three years it will take for the first vehicles born of this new strategy to arrive in showrooms.

Extremely used cars.

Used cars and vehicle insurance rates are among the pricey goods and services propping up the U.S. economy’s stubbornly sticky “core” inflation rate, according to the Labor Department and Reuters colleague Lucia Mutikani.

Used car prices bounced up 4.4% in May compared with April, the U.S. Labor Department reported. New car prices, however, declined 0.1% during the same time. New vehicle inventories are growing as supply chain bottlenecks unclench. But affordable used vehicles are in comparatively short supply – reflecting the production cuts over the past 2-3 years.

The Labor Department called out used cars in a list of goods or services propelling the “core” inflation rate – which excludes gasoline and food.

(Cox Automotive’s Manheim Used Vehicle Value index which measures wholesale used car prices showed a 2.7% decline for May vs. April, which may mean relief for retail prices is on the way.)

Auto insurance – up 2% – was another culprit keeping the core inflation rate high.

Any U.S. motorist who’s renewed auto insurance can attest that rates are going up – and a new study by market researchers at J.D. Power confirms the trend, finding that auto coverage rates have risen an average of 15.5%.

One reason for the surge is that auto insurers have suffered 12 cents in losses for every dollar of premium revenue – the worst loss ratio on policies in 20 years, said J.D. Power’s Mark Garrett.

Power found that more motorists are trying to cut premiums by opting in to “user based insurance” plans to use a monitor to transmit markers of driver behavior to the insurance company.

Volkswagen’s 10 billion euro man: CFO Arno Antlitz

Volkswagen’s core volume passenger car operations, including the Volkswagen car brand, will launch a broad effort to more than double profit margins to 6.5% by 2026, VW Group CFO Arno Antlitz said Wednesday.

The goal requires generating 10 billion euros in savings by 2026, the CFO said. That’s money Volkswagen needs to develop a next generation of EVs for China, pull its vehicle software operations out of the ditch and bank ammo to fight Tesla and Chinese automakers invading its home turf in Europe.

How Volkswagen would achieve these ambitious profit goals without big staff cuts – which German unions and politicians would oppose – is not clear. VW’s board was expected to review plans to slash 3 billion euros in annual costs. (For a sense of the scale of this effort, check out VW’s annual results for 2022 here.)

Likely targets of what VW is calling “ACCELERATE FORWARD: Road to 6.5:” Niche variants of VW models, dealer profit margins and bottlenecks in product development and manufacturing.

GM is counting on big pickups and SUVs to haul billions in profits into the next decade. That’s the strategy behind $3 billion in new factory investments announced in recent weeks.

GM is not alone. All of the Detroit Three plan to keep their biggest combustion vehicles in production into the 2030s. They are putting asterisks on their commitment to EVs out of necessity. For now and for some years to come, EVs will not generate the levels of profit that combustion trucks and SUVs deliver – especially if a future U.S. Congress reduces EV subsidies.

The worries about EV economics among Detroit executives explain the call this week by the industry’s main trade group for the Biden Administration to “ease up” on emissions rules aimed at pushing electric vehicles to a 67% share of the U.S. new vehicle market 2032.

The Alliance for Automotive Innovation warned the winner from an aggressive turn toward EVs would be China.

Swedish auto safety system supplier Autoliv told investors this week it expects to increase revenue at a faster pace than the growth of global light vehicle production.

How? CEO Mikael Bratt told Reuters three engines for growth are new designs for electric vehicles, tougher safety tests in developed markets, and increased safety consciousness in emerging markets where airbags could be deployed on scooters, motorcycles and bicycles.

“We see the emerging markets coming,” Bratt said. Autoliv recently demonstrated a motorcycle airbag system in Malaysia, where authorities are considering stronger safety standards for two-wheelers. In Europe and North America, regulators and testing agencies such as the Insurance Institute for Highway Safety have mapped out tougher crash tests that will likely require novel airbag designs.

Electric vehicles also open up opportunities for new airbag designs that in turn give Autoliv more pricing power, Bratt and other Autoliv executives said.

With no combustion engine taking up space in the front of a vehicle, the dashboard could be further away from the front seats. That means a larger airbag – and Autoliv has designed a “Bernouilli” airbag system that uses a combination of gas from a propellant and air pulled in from the cabin to rapidly fill a large airbag.

For those reclining, corporate jet-style rear seats popular in China, Autoliv is working on airbags that pop out of the seat to envelop a stretched-out occupant in an airbag cocoon.

EV charging network operators Chargepoint, Blink and EVgo said they will equip their charging stations with Tesla-compatible NACS plugs, falling in line with GM and Ford’s decisions to embrace Tesla’s hardware standard.

Mercedes-Benz said it is evaluating “a technical implementation of the NACS and the resulting customer benefits with the respective experts.” Mercedes plans to build network of 2,000 charging hubs in North America, China and Europe.

The ripples from the charging standard alliance among Tesla, GM and Ford are moving faster than the body that governs charging standards can keep up. CharlN, which had backed the rival CCS plug design, said the Tesla plug should go through the proper process to be designated as a standard.

Stellantis said it is evaluating the situation. Volkswagen so far has said it is sticking with CCS. Elon Musk downplayed the benefit to Tesla from its charging standard win during a conference in Austin Tuesday. “I think it’s morally right, but (whether) it’s financially smart remains to be seen,” he said. One challenge is that Tesla owners may have to wait behind non-Tesla vehicles to get a charge.

Tesla’s wild winning streak on the stock market was in peril Wednesday morning as its share price dipped. Tesla had risen for 13 straight days, rallying along with other tech stocks such as Nvidia. Tesla has added more than $200 billion in market value during its latest run, and is now worth $819 billion. Reuters reported Tesla nudged up U.S. prices for the Model Y – a sign that demand is firming up ahead of the end of Q2.

San Francisco is EV Town. The San Francisco Bay area is the first major U.S. metropolitan area in which more than half the new vehicles registered are either electric or gas-electric hybrids, S&P Global reported. The Bay Area’s affluent, tech-savvy young buyers led the way to this milestone, S&P said. No surprise, Tesla is the No. 1 EV brand by far. Among the zip codes where electrified vehicles accounted for more than half the registrations: 94024, which includes Los Altos where the median income is $250,000 +.

Tesla slowed hiring, though not to a complete standstill, according to a Reuters analysis of the automaker’s job postings. The number of job ads has fallen by 4% since May 15, when Musk told managers all new hiring requests had to go through him.

General Motors confirmed it will build a $3 billion battery plant with partner Samsung SDI near the northwestern Indiana town of New Carlisle. GM had earlier sidelined plans to build a fourth North American battery factory with partner LG Energy Solutions.

Federal safety regulators told automakers not to comply with a Massachusetts law requiring open access to vehicle telematics systems. The National Highway Traffic Safety Administration said opening remote access to vehicle data presented a safety risk. The state law was enacted to make it easier for consumers to get vehicles repaired at independent, less expensive shops.

Robotruck company Einride is expanding into Norway from its homebase in Sweden. Einride will supply electric, self-driving trucks to PostNord.

France wants Tesla to build a Giga-factory there, to complement the battery factories President Emmanuel Macron has landed. Elon Musk has met Macron and said nice things about France.

Russian automaker Avtovaz is asking a regional prison operator for forced labor to cover a shortage of workers, Reuters reported.

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