The Era Of Making One Car For The Whole World Is Over

It’s dangerous to ignore the businesspeople. The suits. The number-crunchers. There is a science to economic interactions, and building a company based purely on gut feel is inefficient. At the same time, cold and rational decisions rarely lead to greatness. The trick, usually, is not so much about balancing the two forces as it is about finding harmony between them. That’s what we try to do here.

The pre-pandemic automotive order was built on a rational, free-market view best represented by the quest for a “global car” that could be made efficiently out of parts shipped around the world and then sold to every market with minor variations.

This was going to inevitably fail because of the rise of the Chinese market, but the pandemic surely sped up the process. I mention all this to open The Morning Dump because the new CEO of Polestar did an interview where he basically called out the idealized and efficient globalized car as neither ideal nor particularly efficient.

Will Honda-Nissan-Mitsubishi therefore be a bad idea? Many people think so, and it’s Mitsubishi now that’s wondering if maybe it should sit this one out. The world is all sideways, and execs are saying (anonymously) that potential tariffs on Canada and Mexico will immediately result in slower sales and higher prices for car buyers.

Another big shift is coming to the software that powers modern vehicles, and both Rivian and Volkswagen are looking to become suppliers to everyone else.

‘The Times Are Over Where We Ship Things Around The World’ – Polestar’s New CEO

Polestar is one of the brands I distinctly like and want to be successful for reasons I’m not even sure I can explain. I had a great week with a Polestar 1 once, and I think it’s one of the best cars I’ve ever driven so maybe I don’t want the brand to go away. Maybe?

I’m also a sucker for ex-CEO Thomas Ingelnath’s designs.

The company is currently not in great shape. It was born of the Tesla-inspired race for EV-related stock valuations, and the company basically was able to put concept car design straight into production. Its second product, the Polestar 2, looks great and performs well, but loses out on range to a lot of the competition. Even worse, in spite of being built in China, the company was maybe the biggest loser in the Tesla-BYD price wars. Because it’s Chinese-built, the car doesn’t qualify for IRA tax credits unless leased.

There was plenty of design and heart at Polestar, it just hasn’t become a good business yet.

Ingelnath got tossed and, instead, the company brought in business guy Michael Lohscheller, who has done both the traditional carmaker thing (Opel, VW, DaimlerChrysler) as well as the startup thing (Vinfast, Nikola).

He did an interview with Bloomberg this week and it’s worth reading, so I’ll just excerpt the part I’m interested in this morning. First, in a question about tariffs:

If I go back five, six years, people in our industry were shipping cars around the world. That’s what everybody did. Then logistics topics came up, and people realized that’s not the best way. So a big trend started: let’s produce locally, let’s also localize suppliers. And of course, now the tariffs are totally enforcing this.

But do you localize a car in Europe because of tariffs? That is a key reason, but not the only one. We also localized because of cost, logistics, time to market. The times are over where we ship things around the world.

I tend to think of the MQB-based Mk7 Golf as the ultimate representation of the world-is-flat, Thomas Friedman-esque global car. Sure, that platform was used for a bunch of different models, but an Mk7 Golf is an Mk7 Golf pretty much everywhere. It was such a huge car that there was global production, of course, though cars were assembled using pieces from everywhere. You might have a motor from Mexico, a transmission from Japan, and a bunch of semiconductors from Taiwan.

There’s some logic to this, of course, and Volkswagen was very profitable thanks to getting rid of the old way of rebuilding new platforms all the time. Building cars off a common platform is not going away, but the just-in-time production that typified this era absolutely collapsed with the pandemic.

More than that, local tastes matter, especially in China where, as Lohscheller points out:

It’s also challenged and changed because of customer demands. Take, for example, China. Most consumers in China are first-time buyers. Very different requirements than German or UK or American customer requirements.

So is there one product for the whole wide world? I think that is difficult. It’s not that you always have to do a completely new car, but you’re seeing regionalization of customer requirements.

This feels correct to me, and a good example of this is Tesla. If you just look at a Tesla Model 3 or Model Y, a very slowly changing design, you might assume it’s just one car that goes everywhere, but the simplicity of Tesla’s designs gives a somewhat misleading impression. China has been the first to get new designs, facelifts, and features because Chinese consumers are more demanding in some ways than American consumers.

Western Automakers have had a hard time contending with this and have seen huge drops in sales as they’ve tried, unsuccessfully, to peddle minor variants of popular European models in China. Even Porsche, once beloved by Chinese car buyers, is closing dealers as sales dropped by almost a third last year.

The three biggest individual car markets are China, the United States, and India. Good luck making a perfect car for all three markets.

Mitsubishi Is Not So Excited About This Nissan-Honda Deal Anymore

Damn, am I not going to be able to use this Three Amigos graphic anymore to explain the Nissan-Honda-Mitsubishi tie-up?

Nissan, short on cash and even shorter on prospects, is doing its best to reorganize and downsize. Lately, there has been a big suspicion that Honda, the strongest of the trio, might not go through with a deal out of fear of Renault selling Nissan shares first.

Via Automotive News we’ve got a report that it might be Mitsubishi that is going to stay an independent automaker:

Mitsubishi reportedly plans to sit out the proposed merger between Honda and Nissan in order to work with the two erstwhile Japanese competitors as an independent, outside carmaker.

The move would keep Mitsubishi Motors Corp. as a separately listed entitey on the stock market, distinct from the holding company structure announced last month by Honda Motor Co. and Nissan Motor Co., Japan’s Yomiuri newspaper reported Jan. 24, citing unidentifed sources.

Is this just a case of cold feet? Here’s what Nikkei Asia is reporting:

Regarding media reports on Friday that Mitsubishi Motors would not join Honda and Nissan, Mitsubishi Motors President and CEO Takao Kato said on the same day that “nothing has been decided.”

If this is leaking to the press then there’s probably at least some level of discussion about the prospect that Mitsubishi sits out the merger. What this all probably comes down to is Nissan’s ability to restructure this year successfully. If it can weather an uncertain first half of 2025 then maybe it’ll go forward. You know, assuming Renault doesn’t throw a le rochet into the works.

‘Inflation’ And A Lot Of Companies Going ‘Belly-Up” Will Come From A Chinese-Mexico Tariff According To Global Supplier Exec

Will a China-Mexico tariff, if it happens, lead to more job growth in the United States? Probably. Will it result in a lot of layoffs and inflation in the short term? Also, probably.

But don’t just listen to me, Automotive News asked execs at some global suppliers:

“At the end of the day, they’re going to bring a lot of inflation into the U.S. economy,” said an executive at a major global supplier who asked to not be identified due to the sensitive political nature of the topic. “It’s either that or a lot of companies that cannot deal with a 25 percent tariff going belly-up.”

This same exec said that they assumed prices would have to be passed onto consumers as this could happen real fast. It’s even worse for companies in the process of transitioning to an EV economy:

Further reducing demand because of higher costs from tariffs will only make that worse, the supplier executive said, warning that some smaller parts companies that banked on big business from a given vehicle program could go out of business.

“The industrial base has a ton of capital deployed to produce those vehicles, and more likely than not demand for those vehicles is going to slow down even more than it was,” the executive said. “And then tariffs will impact the financial ability of companies to deal with the slowdown in demand. A lot of suppliers could go belly-up.”

To be sure, tariffs wouldn’t be bad news for all suppliers. Companies that produce parts primarily for the U.S. market could benefit from increased demand from customers looking to source locally, especially if they make parts for gasoline-powered vehicles.

The reality is that no one can predict what will happen.

Rivian Might Sell Some Of Its Software

Rivian was built by a dreamer who wanted to make an electric car. With that dream threatened by reality, the dreamer turned to Volkswagen. It seems like Volkswagen is extremely intent on making this partnership work, and part of that plan might be selling the software that VW so desperately needs.

Here’s the info, via Reuters:

“I’d say that many other OEMs are knocking on our door,” said Rivian Chief Software Officer Wassym Bensaid.

Bensaid, who is also co-CEO of the joint venture, declined to provide names of the interested automakers and details on what stage the talks were at.

Rivian’s architecture requires fewer electronic control units and significantly less wiring, reducing vehicle weight and simplifying manufacturing.

Business!

What I’m Listening To While Writing TMD

The first time I heard ‘Bizness’ by tUnE-yArDs I was like “What the hell is this?” Then I listened to it a million more times. Now it’s one of my absolute favorites and I’ve even had the chance to see Merill Garbus perform it live. It was a great show. Go see tUnE-yArDs.

The Big Question

I’m probably wrong. Perhaps the world gets even more global. Am I wrong? If you don’t want to answer that, what’s the ultimate global car if it’s not an MQB Golf?

Top photo: Depositphotos.com, Volkswagen (not to scale)