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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

We have lots of news today from the World of Cars, but the real launch party for the auto industry’s New Year kicks off this weekend when the annual CES technology show rumbles to life in Las Vegas.

This year’s CES party game: Every time an auto industry executive uses the term “AI,” everyone takes a drink. Word to the wise: Pre-book the Uber. Or serve mocktails.

Have a great weekend. If you are headed to CES, have a good trip. Let us know if you find out how AI will alleviate those insufferable Las Vegas traffic jams. And now, let’s dive into what’s happening…

Today –

• • CES: The AI Auto Show

  • A key way that Tesla still beats BYD

  • Mobileye takes a beating

Do you like AI and ham? Reuters/Aly Song

From tech giants such as Intel to auto industry manufacturers like Bosch, BMW and General Motors, artificial intelligence – AI – is the phrase that pays.

CES 2024 will mark the start of an auto industry’s AI arms race, analysts and industry executives said this week.

But as Reuters colleagues Max Cherney and Abhirup Roy point out, it is not clear what AI features consumers will pay for, especially in vehicles.

Today’s less complex digital dashboards drive consumers crazy. Industry executives say AI could help. AI could enable drivers to speak naturally to their dashboards. “Hal, please turn off the radio,” could replace stabbing through menus on a touch screen.

AI could improve the quality of monitoring systems that detect when drivers are drowsy or distracted, enable more precise detection of hazards on the road or make it easier to get directions.

The questions about AI business models are bigger than the auto industry. But AI presents a significant new challenge to automakers already struggling to generate revenue from next-generation vehicle software.

“Automakers are trying to get the trains running on time. Tech companies are trying to push the envelope of what can happen,” Alixpartners automotive practice leader Mark Wakefield said this week, presenting a study that concludes legacy automakers are well behind Tesla and Chinese EV startups in developing vehicles with smartphone-level software systems.

Google, Apple and other digital technology companies have a head start in providing digital services to drivers via smartphones. Will consumers pay automakers hundreds of dollars to talk to a map in the dashboard if they can get an AI-infused map for free on their phones?

Great question.

Mobileye. No shortage here. Reuters / Shannon Stapleton

Mobileye shares tanked on Thursday after the Israeli automated driving technology company warned it was sitting on a glut of EyeQ advanced driving system chips. Morgan Stanley estimated Mobileye’s overstock is equal to 16% of full-year volume.

Mobileye’s warning marked another U-turn in the market for advanced automotive semiconductors. For more than two years, chips that powered advanced driving and other systems on vehicles had been in short supply, hobbling production.

Automakers splashed out billions to secure supplies of semiconductors. Governments promised huge subsidies to increase semiconductor production capacity. That now seems so 2023.

Investors are worried the supply chain “bullwhip effect” that created chip shortages in 2022 is now cracking the other way.

Analysts warned that the pullback in orders for Mobileye’s chips could herald trouble at Tier One auto technology suppliers such as Aptiv. Shares in chipmakers NXP, Wolfspeed and ON Semiconductor also fell.

“Tier-1 automotive suppliers have been hoarding components related to advanced driver assistance systems (ADAS), after having struggled to obtain these items during the pandemic,” Piper Sandler analyst Alexander Potter wrote. “Now that they no longer need these components, the tier-1 suppliers are cutting orders.”

Tesla showroom in Beijing: Model of efficiency. REUTERS / Florence Lo

Tesla slipped behind China’s BYD in total electric vehicle sales during the fourth quarter, but Elon Musk & Co still have an edge when it comes to driving sales volume per retail store in China, Reuters colleagues Zoey Zhang and Brenda Goh report.

Tesla moved an average of about 1,500 vehicles through each of its retail stores in China, compared with 600 per store for BYD. BMW also outperformed  BYD in sales-per-store, according to data from China Merchants Bank International.

In the United States, the Toyota brand is the sales efficiency leader at about 1,500 vehicles per store in 2022, according to Automotive News. At the other end of the spectrum are brands such as Chrysler, which averaged 47 vehicles per store.

Demand for new cars and trucks in the United States did not collapse under pressure from rising borrowing costs in 2023, as Elon Musk and others worried it would early in the year.

Sales of sedans, SUVs and pickup trucks rose to 15.5 million vehicles, the best year since 2019. Electric vehicles and hybrids accounted for 17% of the total.

That’s the good news, from an industry perspective. Investors, as ever, focused on outlooks for 2024 which called for sales to be roughly flat with last year. Automakers will likely have to discount more aggressively to sustain sales volume and keep factories humming, analysts said.  

That is especially true for electric vehicles that are losing federal tax subsidies in 2024 – which is most of them. GM and Hyundai, for example, are offering discounts from their own corporate pockets to replace lost $7,500 U.S. tax credits.

China on Friday launched a new front in an EV trade war with Europe by announcing it will investigate whether EU brandy producers are dumping their liquor into the Chinese market.

This wouldn’t be the first time that a trade dispute over one type of product resulted in new tariffs on a completely different set of goods. Pickup trucks imported into the United States still get slapped with a 25% tariff because a long-ago dispute over European efforts to restrict shipments of U.S. chicken.

Investors took the Chinese threats seriously. They slashed 10 billion euros from the combined market values of three big French drinks companies.

Fisker did a U-turn on dealers. Electric vehicle startup Fisker said it wants to recruit franchise dealers to help increase sales, shifting away from its prior, Tesla-style direct to consumer retail strategy. Fisker delivered fewer than half of the vehicles it built in 2023 due to distribution problems.The company now plans to recruit 50 “dealer-partners” in the U.S. and Canada, and a similar number in Europe. In Europe, where dealer franchise protections are less robust, Fisker said it will pursue a “hybrid” of direct-to-consumer sales and sales through franchised dealerships.

Tesla will fix Autopilot software installed in 1.6 million vehicles on the road in China, effectively matching an earlier recall/software revision agreed with U.S. safety regulators.

China’s electric grid should be overhauled to better manage power demands from electrified vehicles, a government planning agency said. The state planner said new standards will be developed to ensure that new energy vehicles (EVs and hybrids) don’t overwhelm the grid with power demands, and can give juice back to the grid when needed.

Japanese manufacturers are rushing to re-start production after a deadly earthquake, but Toyota said a plan to re-start factories on Monday remained uncertain.

Volvo Cars reported record sales for 2023, propelled by a 70% jump in sales of electric vehicles.  

Production of electric Fiats took a hit in 2023 because the Italian government delayed offering new purchase incentives until this month, union leaders at Fiat-parent Stellantis said. Rome said in July that incentives for buying EVs, including Italian-made Fiat 500e electric mini-cars, wouldn’t kick in until January.

Tesla and other automakers should not fight efforts by the United Auto Workers to organize non-union auto plants, a group of 33 U.S. Senators said. In a separate matter…

Elon Musk’s SpaceX asked a federal court to declare that the U.S. agency that regulates union organizing and labor relations operates with an unconstitutional structure.

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