For Today: Tesla Model 3 orders cancelled, Watching US-China relations

Model 3 orders:   Total orders for the Tesla Model 3 are now at 455,000 with about 63,000 cancellations having been made over the past year. CEO Elon Musk said that
cancellations came from people burning out over having to wait an hour and a half to complete the order process online. During a quarterly earnings call yesterday, the company announced that it had burned through about $1.16 billion in cash during Q2 to keep the Model 3 factory on schedule along with Gigafactory battery production. Stocks closed yesterday with a 7.4% jump to $350.13 as investors remained enthusiastic.

Used green car sales:  CarMax reports that the Toyota Prius last year was the most popular used hybrid/EV sold at its nationwide chain of stores. That was followed by the Ford
C-Max, Ford Fusion, Lexus CT, and Kia Optima. Ford will be taking the C-Max hybrid and plug-in hybrid out of production but it has been doing better lately in new vehicle sales; the Fusion has done well, too, being very competitive with the Prius in the hybrid space. The Prius has seen a lot of fluctuation his year in hybrid hatchback sales. The Prius Prime has been doing very well, competing with the Chevy Volt and Bolt, and the Tesla Model S and X in U.S. new vehicle sales.

Tension between U.S. and China:  U.S. relations with China continue to be tense under the Trump administration, with three leading Democratic senators urging the president to stand up to China. Trump’s issues have focused on protecting intellectual property and honoring trade practices between the nations. Senate Democratic leader Chuck Schumer was one of the three. Trump has been pressing China to cut steel production to cut oversupply and to rein in North Korea’s missile testing program. The Obama administration, while also concerned over high tariffs and equitable trade, had established strong relations with the country on vehicle electrification and renewable energy goals. Now it’s up to California and Gov. Jerry Brown to keep those goals going – electric cars, buses, and trucks. China is likely to adopt some version of California’s zero emission vehicle policy by the end of the year. But relations between the two nations could be a stumbling block.

Tesla seeking joint venture partner and other interesting news from China

If you take a look at which global automakers have joint ventures with government-backed Chinese companies, you’ll notice only one missing: Tesla. Even Chinese automaker BYD, the global leader in electric vehicle sales, has a JV partnership with Daimler through Shenzhen DENZA New Energy Automotive Co., Ltd.

Tesla’s place in China may be changing soon. Last week, Tesla CEO Elon Musk met with Chinese vice premier Wang Yang. China’s Xinhua news service posted a photo from their meeting on Twitter. It’s the first time that Wang has met with only one automaker executive, according to Li Anding, a former automotive reporter for Xinhua and now a consultant with automakers doing business in China. “Wang usually meets with groups of people,” he said.

Li predicts the meeting and Twitter post are part of talks between the carmaker and government about creating a joint venture partnership for Tesla to manufacture electric cars locally.

A high-level official from China’s auto lobby said that Tesla has been holding meetings with potential partners in Chinese cities. Musk’s meeting with Wang, who previously headed the Guandong province, suggests that the province is a potential region for Tesla to build another plant beyond Fremont, Calif., and its Nevada “Gigafactory” battery plant.

Going this route would eliminate the steep 25 percent tariff Tesla currently pays to China on its imported cars selling in that country. The market has become the most important in the world for plug-in vehicle sales, and it’s going that way for Tesla as Musk has said in the past. Tesla earned $1 billion in revenue there last year, compared to $4.2 billion in the U.S.; and the electric carmaker has been exploring building a new factory in China in recent years.

Tesla could be well positioned in the near future to reach China’s two market segments for plug-in vehicle sales:  wealthy consumers looking for luxury vehicles, and workers who’ve moved to the city and need their first car.

Luxury carmakers see China as being vital. The BMW Brilliance alliance is the German luxury performance carmaker’s platform in China. On the affordable end for new car buyers, the Tesla Model 3 is expected to be very competitive against BYD and others in the China market. Taking away the 25 percent tariff by establishing a JV production plant would be part of bringing down the price of all Tesla vehicles sold in China – and offering a much more profitable prospect for the U.S. company.

As covered last week in Green Auto Market, the Chinese government may very well enact a steep mandate that is making automakers quite anxious – and is moving them to increase their plug-in vehicles sales volume in that market.  China’s Ministry of Industry and Information Technology proposed last fall that “new energy vehicles” make up at least 8% of new vehicle sales as soon as 2018, and that would go up to 12% by 2020. Included in those zero emissions vehicle numbers (based on California’s ZEV structure) would be all-electric, plug-in hybrid, and fuel cell vehicles covering light, medium, and heavy duty vehicles. That includes all new cars, trucks, and buses sold in the country.

The national government is considering blocking or delaying these proposed measures after industry feedback concluded that the targets are overly ambitious. It may be finalized one way or another by June, according to a government official. Even if that measure fails, the move toward solidifying China as the world’s largest plug-in vehicle market isn’t expected to go away, but demand has started to soften this year.

Sales of plug-in hybrid and battery electric cars fell nearly 5% in January to March compared with the same period a year ago, China’s Association of Automobile Manufacturers said. Analysts say that demand has dropped this year from the dramatic increases over the past three years due to a 20% cut in subsidy payouts by the national government this year, barriers being raised for entry of new car models, and debate over easing the proposed sales mandate for new energy vehicles.

Another sign that foreign companies won’t be backing away from China came last week from Tesla’s battery partner, Panasonic. The Japanese company announced last week that it had an opening ceremony for a new automotive lithium-ion battery factory in Dalian, China.

The company says that the factory is Panasonic’s first automotive battery cell production site in China, and it’s part of a corporate goal to have strong footing in the plug-in vehicle battery market. “Panasonic will further strengthen its global competitiveness in the automotive battery industry by the establishment of production sites in Japan, the U.S., and China,” the company said.

Looking at the numbers behind China and California’s zero emission vehicle mandates

Auto Shanghai 2017 has been full of “new energy vehicle” announcements for the Chinese market from major and startup automakers. General Motors has plans to launch 10 all-electric and plug-in hybrid models by 2020. Ford, Volkswagen, and Nissan, all have aggressive plans for the market. Chinese startup NextEV displayed 11 vehicle concepts from its all-electric NIO brand.

Behind all of it is the top global market for plug-in electrified vehicle sales and proposed government mandates for increasing those sales. China is interested in following California’s zero emission vehicle (ZEV) structure mandating an even higher percentage of sales to hit these targets with a credit trading scheme backing it up. But how realistic is it for China to meet its mandates – and for California?

China’s Ministry of Industry and Information Technology proposed last fall that ZEVs represent 8% of new vehicle sales as soon as 2018, and that would go up to 12% by 2020. Included in those numbers would be all-electric, plug-in hybrid, and fuel cell vehicles covering light, medium, and heavy duty vehicles. That includes all new cars, trucks, and buses sold in the country.

Companies that fail to meet the 8% requirement would face fines or have to buy credits from those that exceeded the minimum. That percentage score comes from weighted averages assigned to various zero- and low-emission vehicles. As in California, automakers that fail to meet the requirement face fines or have to buy credits from those that exceeded the minimum.

Average production of new energy vehicles last year may have contributed only about 3% of the score required, 5 percentage points short of the proposed 2018 target, according to the China Association of Automobile Manufacturers.

During 2016, there were about 507,000 new energy vehicles sold in China. As for total new vehicles sold in the country, there were about 28.03 million sold. As for the percentage of sales, NEVs accounted for about 1.8% of new vehicles sold; the government’s weighted averages brought it up to 3% in the scoring system.

China is considering blocking or delaying these proposed measures after industry feedback concluded that the targets are overly ambitious. It may be finalized by May or June, according to a government official.

Automakers are backing China’s goals, but are feeling a lot of anxiety about getting anywhere near close to selling 8% of total sales as ZEVs by 2018 – even if credit trading and a flexible point system helps ease the burden.

For those consumers and fleets making vehicle purchases in China, large sedans and SUVs are quite attractive. Many of these consumers are experiencing their first-ever high incomes, and are supporting China’s economic growth by spending a lot of it on vehicles, housing, mobile devices, entertainment, travel, and personal investments.

For now, buying vehicles that consume a lot of fossil fuel is just fine with car shoppers. A clear example of this is that first quarter 2017 SUV sales soared 21% from a year earlier to 2.4 million in China, while electric vehicle purchases declined 4.4% to just 55,929, reports Associated Press. Incentives were down on NEVs after the first of the year, which was thought to have an impact on NEV sales. If the current rate continues, it could finish the year below last year’s 507,000 plug-in vehicles sold.

Last year, California saw 62,166 plug-in electrified vehicles sold. Overall, the state had 2.1 million in new vehicle sales, with PEVs making up about 2.96% of total sales.

California Governor Jerry Brown’s ZEV goal is for the state to have 1.5 million ZEVs on its roads by 2025. That means about 15% of new vehicle purchases will need by to be ZEVs by 2025, or about 12% of sales higher than where it is now.

Commercial vehicles, such as medium- and heavy duty trucks, vans, and buses, are included in California’s ZEV sales data, similar to China. Both governments also include hydrogen fuel cell vehicles in those totals. Those sales volumes are quite small, but California is still leading the way on fuel cell vehicles and fueling stations. China has yet to see any fuel cell vehicle sales, though Toyota and other automakers plan to enter that fuel cell market.

China’s national government has been cracking down on vehicle manufacturers committing fraud in their NEV production and sales numbers to tap into generous government subsidies. That’s always been a concern for advocates of emission reduction targets around the world – that subsidies could be a scam and that credit trading can water down the end goals of the mandates.

China and the European Union are expected to keep strict mandates in place for the sale of ZEVs in those markets. The U.S. is expected to soften fuel economy and emissions rules under the Trump administration, though some analysts expect that consumers and fleets will increase demand in fuel efficient vehicles and that the nation’s current level of about 1% of new vehicle sales going to PEVs will be seeing an increase soon.

Most of the studies on ZEV goals being met point to a few recommendations:

  • Staying with subsidies including low-interest loans and rebates to vehicle manufacturers, and rebates and tax incentives available to consumers and fleets. These will need to be supported by cash-back incentives and finance programs from OEMs sometimes tied to dealer programs.
  • Continuing to bring down acquisition cost by making the battery packs and electric drives more affordable and cost competitive.
  • Increasing the range of all-electric, plug-in hybrid, and fuel cell vehicles.
  • Speeding up charging time through faster charges and an infrastructure spreading through workplaces, public chargers, homes, and multi-unit dwellings.
  • Wireless charging is also raising hopes for wide adoption of PEVs.
  • Adding more hydrogen fueling stations.
  • Seeing more diversified and attractive offerings in plug-in and fuel cell vehicle launches for both passenger and commercial vehicles.
  • Globalizing new vehicle launches for efficiency and sales growth – with variations built in by automakers based on government regulations, left- or right-side steering wheels and pedals, types of electric outlets in each country, and consumer and fleet expectations.
  • Public awareness and education programs tied to larger greenhouse gas emissions reduction targets including ride and drive events, public chargers and hydrogen stations, and powering PEVs and fuel cell vehicles through renewable energy sources.

This Week’s Top 10: Ford wants to electrify China market, White House wants to pass cost of EPA vehicle emissions testing over to automakers

by Jon LeSage, editor and publisher, Green Auto Market

Here’s my take on the 10 most significant and interesting occurrences during the past week…….

  1. Ford joining China EV market: Ford Motor Co. is now in agreement with Daimler, Tesla, and General Motors on the importance of China in the global electric vehicle market. Ford is launching the Mondeo Energi plug-in hybrid in China early next year and an all-electric small SUV in that market within five years. The EV will go more than 280 miles on a charge, and will also be sold in the U.S. and Europe. The automaker said that 70 percent of all Ford nameplates will have an electrified option in China by 2025; that will include hybrids, plug-in hybrids, and battery electric vehicles. That lineup will include all vehicles manufactured jointly through Changan Ford JV, which is a collaboration with Changan Automobile. EV sales are expected to stay strong in China, whether or not the government cuts back on its generous subsidies. “The time is right for Ford to expand our EV lineup and investments in China,” said Ford CEO Mark Fields. “We are prioritizing our electrification efforts on China to reflect its importance as a global electrified vehicle market and to make lives better, simpler and more cost effective for Chinese consumers.”
  2. EPA lab fees: The White House would like to see automakers pay for testing in the Environmental Protection Agency’s emissions testing lab. The Trump administration is proposing a $48 million budget cut that would close down the lab and cut 168 jobs. It would mean “pretty much shutting down the testing lab,” said Margo Oge, who led the EPA’s Office of Transportation and Air Quality under the Obama administration. Funding would come in by increasing fees that automakers and engine manufacturers would be required to pay for testing.
  3. Cap-and-trade protected for now: California’s cap-and-trade system was solidified by a state court – at least until 2020. The state program allows companies to purchase carbon credits through an auction or a secondary market and has produced millions of dollars in funding programs for clean transportation and fuels. A state appeals court has found that it’s not an illegal tax due to voluntary participation and the purchase of something with value, which keeps it from being a tax, according to the ruling. The program will stay in place through 2020 before becoming vulnerable to legal challenges. Since its launch in 2012, California has taken in about $4.4 billion on auction proceeds to be spent on clean energy, low-carbon transportation, and other programs supporting reductions in greenhouse gas emissions.
  4. 4 in I.D. lineup: According to Volkswagen design chief Klaus Bischoff, the fourth I.D. all-electric vehicle, a concept sedan, will be revealed at the Frankfurt Motor Show in September. It won’t be revealed before then, but it got a lot of “wows” from VW colleagues when they saw it for the first time, he said. That’s the fourth in the I.D. series to be built on the new MEB modular electric platform. The I.D. hatchback compact concept, unveiled in September at the Paris auto show, was the first and is scheduled for production in 2020. The I.D. Buzz microbus concept was revealed in January at the Detroit auto show, and the automaker will be showing the third one, an I.D. SUV concept, soon at the Shanghai Motor Show. The company recently told analysts that the I.D. concept hatchback is expected to have its design approved this August for a 2020 launch.
  5. Hybrid police car: Ford is rolling out the first hybrid police car, which was designed to meet certification standards law enforcement agencies require to meet their full pursuit ratings. The Police Responder Hybrid Sedan is being built on the Fusion Hybrid. The automaker designed the pursuit vehicle for agencies to cut fuel costs and decrease emissions while driving and idling. Ford received an EPA-estimated mpg of 38 combined city and highway, more than double that of the Ford Police Interceptor with its 3.7-liter, V6 engine and 18 mpg combined EPA rating. The police departments in Los Angeles and New York City will be taking deliveries this summer.
  6. AutoDrive Challenge: General Motors is sponsoring AutoDrive Challenge, a university competition with SAE International in autonomous vehicles. At SAE World Congress Experience in Detroit, they announced these universities will be demonstrating automated Chevy Bolts during a three-year challenge. Kettering University, Michigan State University, Michigan Tech, North Carolina A&T University, Texas A&M University, University of Toronto, University of Waterloo, and Virginia Tech are now competing. GM and SAE have been heavily involved in student competitions for advanced vehicle technology for years. Formula SAE race car design competition started in 1980, and GM is now sponsoring EcoCar 3 with the U.S. Department of Energy.
  7. TurboDock chargers: AeroVironment Inc. announced today that Hartsfield-Jackson Atlanta International Airport will install 102 of its TurboDock EV charging stations in the airport’s parking structures. Packed with features specifically designed to make it ideal for airports, including modular charging configurations, 120V capability and mobile app based access control, TurboDock helps EV drivers proceed with certainty, the company said. The installation is the most recent effort by the City of Atlanta and the Hartsfield-Jackson Atlanta International Airport to turn ATL into one of the greenest airports in the world.
  8. March EV sales: Tesla took No. 1 and No. 2 in U.S. electric vehicles sales, with about 3,100 and 2,500 units sold, respectively. The Chevy Volt came in third with 2,132 units sold and has been the top performing plug-in hybrid in U.S. sales through the first quarter. The Prius Prime was fourth on the list with 1,618 units sold.
  9. ACT Expo autonomous vehicle panel: “The Future of Intelligent Transportation: Connected & Autonomous Vehicles” will be one of the speaker panels at the upcoming Advanced Clean Transportation Expo (ACT Expo 2017). Attendees can learn more about the latest advancements in innovative vehicle technologies that are disrupting the way vehicles interact with other vehicles, the environment around them, and drivers. Featured speakers include Mike Roeth, North American Council for Freight Efficiency, an industry leader who understands the phases of truck automation and the expected ROI; Bill Burns, City of Columbus, Ohio, who played an integral role in combining electric and automated technology to win DOT’s Smart City Challenge; and Joanna Wadsworth, City of Las Vegas on launching the first electric autonomous shuttle on U.S. public roads. For further details on vehicle displays at the conference, you can view the vehicles list.
  10. ZEV mandate not going away: Read all about Plug In America’s history, along with the film “Who Killed the Electric Car?”, that goes back to 2003 and the California Air Resources Board’s controversial decision to become heavily influenced by pressure from automakers and scale back the zero emissions mandate. Times have changed, with CARB unanimously deciding to stay with the ZEV program as planned without any changes through 2025.