The collapse of Germany’s government is not directly related to Volkswagen, nor is the prospect of new elections precisely tied to Germany’s more open approach to China. They are not unrelated, however, and there’s a way to view Volkswagen’s issues with China and Chinese suppliers as an analog for a lot of what’s gone wrong in Germany.
Yet again, Volkswagen is facing the prospect of having to ditch a supplier over human rights concerns, though the issue is with a Chinese supplier operating in Europe and not in Asia. Continuing on the theme of yesterday’s Morning Dump, Volkswagen’s über-performance-brand Lamborghini is hitting pause on its electrification plans as it waits to see what the market actually wants.
The Biden Administration, on the other hand, is hitting fast-forward on its loan programs to companies hoping to build factories related to electrification. Despite fears that the next administration might slow down chargers, some think it would take an “act of God” to reverse those plans.
There’s a lot to talk about for a Tuesday, so let’s jump right into it.
VW Subsidiary Has To Ditch Another Chinese Supplier
If the second half of the 20th century was all about the ascendance of Germany and then Japan in the global car market, it seems clear that the first half of the 21st century is all about China and, to a lesser extent, South Korea. Part of Germany’s economic might at the turn of the century came from its growing relationship with China, which involved sending its manufacturing and industrial expertise to Asia in return for a lot of money and access to China’s market.
There’s an argument to be made that the China Shock of the 1990s over here was aided and abetted by European companies, and in particular German ones, that helped China quickly industrialize and flood the American market with cheap goods. In general, Germany has relied on its industrial might to navigate the many financial upheavals of the last 30 years or so, with China as a key partner.
Keeping Germany’s key industries running was a big part of maintaining political stability for the country’s moderate Conservative governing party and, more recently, its shaky “stoplight” coalition government. Not only did the greater economy need to be stable in order for the country’s leaders to keep both the right-wing and left-wing parties from gaining too much electoral power, but companies like Volkswagen were encouraged to build plants in the former East Germany to boost employment in these areas.
Unfortunately for Germany, there was a bit of realpolitik involved in all this that the country is now having to face. The first shock to the system came when Russia invaded Ukraine. Germany, and much of the West, looked the other way as Russia intervened in the politics of other countries in exchange for cheap energy flowing via a pipeline to German homes and factories. The invasion of Ukraine put an end to that.
The issue of China has been much harder to deal with as the economies of the two countries have long been more intertwined. Volkswagen was essentially the biggest automaker in China for decades due to early local partnerships and, in recent years, more exports to the country. Volkswagen brands still sell millions of cars there, but not as many as in the past as some of the expertise it helped build in the country has been coopted by Chinese firms making cars better suited to local tastes.
Porsche SE, the Porsche/Piech group that owns the largest share of Volkswagen, is already writing down the value of its stake in the company by $21 billion in no small part due to issues with China:
Analysts have warned the combination of pricing pressure, lower dividends from China joint ventures and committed investments will likely leave Volkswagen with a free cash flow close to zero in coming years, boding badly for Porsche SE’s financial stability.
As if sales in China dropping wasn’t itself wasn’t a big enough problem, Germany, in order to keep its good relationship with China, had to vote to try to allow Chinese automakers to sell its cheap cars in Europe, where VW is struggling.
This brings us to this week’s report from Manager Magazine that VW’s truck brand MAN, is stopping the use of tires from upstart Chinese tire manufacturer Linglong over credible reports that the company committed human rights violations against Indian workers building its new tire plant in Serbia:
Zrenjanin in northern Serbia, an hour and a half from Belgrade: Until February 11, 2024, 14 Indian workers were apparently temporarily housed here in order to build the first Chinese tire factory on European soil. Beds without mattresses, contaminated drinking water and illegal employment contracts – this is clear “exploitation” according to the local human rights organization Astra, which had contact with eleven of the men and has extensively documented the conditions together with the Serbian investigative media “Balkan Insight” . “We suffered from everything,” wrote one of the alleged victims to manager magazin via a group chat, “our company made us suffer.” The atmosphere was threatening.
Worse for Volkswagen is the fact that the new Tiguan is rolling out on Linglong tires, forcing the company to “investigate” the issue, which is likely to further aggravate the Chinese government. This isn’t the first time Volkswagen has had issues with Chinese suppliers, as earlier this year he company had thousands of its Audi, Bentley, and Porsche cars stuck in ports here in the US due to suspicions of parts made using forced labor in China.
Germany’s Chancellor Olaf Scholz essentially asked for a “no confidence” vote this week so that the country could have an early election and answer the question of who is really in charge. If the more conservative parties in Germany fare well the issue will become potentially even more complicated as those parties don’t seem quite as inclined to serve Chinese interests, and may become more aligned with the rest of Europe and the United States on the issue.
Both Germany and Volkswagen have to decide the value of the partnership going forward amid increasing pressure both at home and abroad.
Lambo’s First EV Now Not Coming Until 2029
In keeping with the theme of this year, Lamborghini has said it’ll delay the rollout of its first full EV model until 2029, instead of 2028, reports Reuters:
“We do not think 2029 is late to have an electric car. We do not think that, in our segment, the market will be ready in 2025 or 2026,” Winkelmann told reporters at Lamborghini’s headquarters in Sant’Agata Bolognese, near the northern Italian city of Bologna.
As a premium exotic brand, Lamborghini can afford to pass on the costs of those delays in any gas guzzler/carbon taxes onto its customers.
Ford Gets Final Approval For $9.6 Billion Loan For Battery Joint Venture
Ford and its battery partner, South Korea’s SK On, will get the biggest loan ever from the Advanced Technology Vehicles Manufacturing loan program of $9.63 billion to create plants in Kentucky and Tennessee.
From Reuters via the Detroit Free Press:
The amount is higher than the $9.2 billion conditional commitment announced in June 2023 for the BlueOval project. Trump and his advisers have been critical of the Biden administration’s efforts to incentivize EV production.
“This program is essential to getting people to choose the United States of America,” Jigar Shah, who heads the DOE Loan Programs office, said in an interview. “When you look at the competition that we have from China, it is very clear to me that they have used low-cost debt for a very long time to promote a lot of manufacturing capacity that has hollowed out many communities in Kentucky, Tennessee and other states around the country.”
Once allocated it’s unlikely a new administration will be able to, or even try to end a program that’s building plants in traditionally Republican areas.
It Would Take ‘An Act Of God’ To Overturn EV Charging Money
Yesterday, I encouraged people to buy an EV now in case tax incentives went away. A part of that conversation was the noise that the Trump transition team was making about removing support for EV chargers.
A new report from Automotive News indicates that maybe it’ll be harder to reverse the push towards more charging than initially thought:
“It would take almost an act of God for Trump or Congress to overturn” the National Electric Vehicle Infrastructure program, said Loren McDonald, chief analyst at Paren, which recently acquired McDonald’s EV Adoption firm.
That’s because much of the $5 billion that underpins the initiative has already been doled out to the states. The remainder was preapproved. Policymakers designed the five-year program, which started in 2021, to help states create a network of public charging stations in 50-mile intervals along interstates.
That’s a great quote. McDonald goes on to say that private companies were already in the process of rolling out chargers, with the public money helping speed up adoption by reducing the amount of time it takes for these companies to break even.
What I’m Listening To While Writing TMD
When my daughter gets upset she’ll just straight up lay on the floor, which happened today and reminded me of Radiohead’s “Just” video.
The Big Question
How many EV chargers are you near? Are new ones being built?
Few EV chargers near, and no new ones that know of.
Lamborghini should never be an EV…see also Ferrari. See also ALL cars should never be EV TRASH
“How many EV chargers are you near? Are new ones being built?”
I’m in the Toronto area. There are MANY EV chargers near me… starting with the one that I installed in my garage.
RE: EV chargers: The only chargers I see are a few here and there at businesses and hotels, and they’re put in as those properties are remodeled. A few supermarkets that I see have them. None at the big box store plazas, that I’ve seen anyway. I’ve also never seen a dedicated EV charger lot, Tesla or not.
In the RI town I live in, I know of no public chargers except a few at hotels, and those are most likely for guests only.
I also spend a lot of time in Southeast MA, and same deal. No chargers or even plans for them at work, despite MA offering hefty incentives to do so.
I actually kind of like the idea of an EV, but I’d have a PITA keeping it charged. The movie theatre 20 miles away that has 4 or 5 of them would probably be the closest place I could actually charge.
I don’t think Ford taking on more debt is a good idea. They already have more debt than GM with less market share. Second, I don’t think the Trump administration will be against building factories for batteries as long as they’re built in America and employ Americans, cuz that’s kinda the basis of his whole platform. The tax incentives will most likely go away tho. Also, the human rights concerns in Chinese factories have been a known about for ages. It’s just a big deal suddenly because attention is being drawn to it. Auto companies would continue to use those shady suppliers if they thought they wouldn’t receive any backlash. Lastly, I think GM was super smart a few years ago when it sold its European brands. As much as people thought it was a questionable move at the time, I think it was for the best and actually shows GMs willingness to be more financially flexible.
These geopolitical-car-angle-global economy articles ARE MY JAM! Seriously, I can’t find anywhere else crisp and funny articles like this, and not counting when some weak sauce NYT summary drips in 2 years after the facts are widely known. Plus it comes with Carlos commentary.
Gushing now over – I’d be curious to see some completely gut check projections. I’ve been traveling to China for work multiple times a year for a decade and as a car guy I saw this coming since 2019 when their cars actually got better overnight. The question is how bad will it get for Europe and how dumb are German firms for doubling down economically in China. Wouldn’t it make more sense to help the Ukrainians fight back the Russkis, help rebuild then rinse / repeat in Georgia, Belarus, Armenia etc? And forget China? Or help Libyia, most of Africa, Bangladesh etc? Lots and lots of places on earth the could use a little 20th century industrialization.
Automakers need to leave China.
Smart ones already did or have token footprints. Like ze Americans. BMW and VW will pay a heavy price. They’ll be lucky if they’re left with boutique status in 10 years.
I’m like 20 feet from my EV Charger, only about 10 cents per KwH so not too bad there either.
Other chargers I don’t own, there’s an off-brand charger at the gas station about a mile away, and then being in the Charlotte area there’s a ton of Tesla superchargers and some EA ones too.
Wow! At that price I would hook my house up to it that’s less than half my Kwh rate.
Yeah southeast power is cheap, even near a major city like Charlotte. We lucked out even still as we have a co-op for our power so it’s even a little bit cheaper than the major provider Duke Energy which nationally is still not bad.
Over half of it is nuclear too, so not like they’re just churning through trainloads of coal to keep costs down.
Wait, China wasn’t just wanting to keep buying Volkswagens forever? I am shocked, SHOCKED! Ok, not that shocked.
Closest is a “Shell” recharge station in front of the local Gelson’s. Next is, for some reason, at the Park&Ride. Bunch of Tesla chargers near a fancy movie house about 10 miles away. Some Noodoe chargers in apartment parking lots, I assume for dwellers therein.
I have no idea how to easily determine which is the least expensive versus the distance to them (and considering that I am doing something in that area). You know, like I do when I buy gasoline. Oh, “check each app, easy”? No, that sounds like additional time, and I value my time.
In SW Colorado we have several Charge Point Stations and a Tesla Destination Charger (not sure exactly what that is) at a large hotel. No Super Chargers near by me. I did notice a charger at a local church. I suppose if I went to confession I would have plenty of time to charge my car.
Unless you have a TON of sins, you’ll get about 3 miles of charge from that confession, cause it’s most likely a Level 2 charger.
I used one of these Tesla Destination Chargers a while back. It was a Tesla-branded Level 2 charger at a hotel. I just plugged in and let it charge overnight, just like my home charger. It wasn’t free to use, but reasonably priced, at $0.22 per kWh.
There’s new Tesla chargers being put in near me and it’s about time. We’re just off the interstate and in the middle of a major gap of charging infrastructure. They’re in a grocery store parking lot next to a Starbucks so a decent location if you need to spend twenty or so minutes waiting.
It is amazing how anyone can think that the federal money for chargers will not be clawed back. States that have already spend the money will have future federal highway funding reduced by the amount that they already spent.
I don’t think that’s how it works – care to expand? Money is money and no self respecting maga politician will give the feds a dime back, no matter who’s in charge.
It has to do with the reconciliation bill that needs to be passed with 50 votes in the senate. This has to be revenue neutral in order to not need 60 votes to get over a filibuster. The feds are going to get their dimes back in order to extend the expiring tax credits and possibly reduce corporate taxes even further, and without clawing back money there won’t be enough to do that.
They’re stupid and crazy but also greedy. So I hope you’re wrong and their greed wins. Crazy string of words, I know.
Maybe I am delusional but I am hoping for a bipartisan compromise
No state is going to pay the feds back. Doesn’t matter if it’s Trump or Biden in charge. They most likely will never see that money again. Most state governments are pretty smart and much more adept at managing money than the federal government, and they know that they won’t receive any serious consequences for just quietly forgetting about it. They’ll probably sue if they get funding cut too much in other areas.
If it is done though an act of congress states will have no recourse through the courts. States can sue about an executive branch decision, but the legislative branch has the right to pass laws about spending even if some states do not like it.
3 Tesla supercharger stations are nearby, but there isn’t much else.
The nearest supercharger was built this summer and it’s 10 miles from me.
Other than that there are a couple of non-Tesla chargers at the Ford and Nissan dealerships.
EV adoption here in NH seems to be going very slowly.
The contrast is especially sharp when I drive down south to MA once in a while, there are EVs everywhere now.
Re: “Both Germany and Volkswagen have to decide the value of the partnership going forward amid increasing pressure both at home and abroad”
If only there was a word… even better a German word for taking pleasure in the misfortune of another…
I think the word you’re looking for is Fahrvergnugen.
😉
There do seem to be a decent amount of EV chargers in the northeast. I only causally notice them since I don’t have a plug-in car, but most rest stops have L3 chargers and an increasing number of shopping plazas have L2 ones, at least any plaza built in the last 5 years seems to. The center of my little suburban town has had some for years, and just installed more on the other side of the main drag.
It’s still likely not enough to sustain you easily if you can’t charge at home, but it does feel like it’s turned the corner and will be a feature of most new large commercial developments from here on out.
Imagine if GM had spent $10 billion on a charging network instead of robotaxis. Typical GM.
Well, first they develop an innovative way to charge all batteries from 10-80% in 8 minutes. However, they would only roll out the system in North Dakota. Seeing a lack of demand, they would can the project. A couple years later, a different auto maker would come out with a similar system and reap huge rewards while GM scrambled to get back in the game.
That would be so GM.
Checks out.
usually GM does not do anything until someone else is already doing it with some amount of monetary success. 10 years of no profit is a hard pill to swallow for most companies, but Elon managed to make it work and now he is the darling of the charging world.
2019 was the 1st year Tesla had a YOY profit.
2003 is when Tesla started
2012 is when the stock went public
So Tesla went 17 years w/o a YOY profit
I was mostly referring to 2012, though I was thinking 2010 through 2020, but either way it was a long time. though I do suspect the green credits he was paid helped keep it going quite a bit. That and Celebritard endorsements that no longer exist.
there’s a row of 16 Tesla chargers like 5 min down the highway from me in a lowes parking lot. they never seem busy but seem to be reliably functioning and easy to get to.