Automotive News - August 31, 2020 - 22

22 * AUGUST 31, 2020

BATTERIES

Ford says EV plans
don't justify plant
continued from Page 1

"The supply chain has ramped up
since Elon [Musk] built his Gigafactory, and so there's plenty there that
does not warrant us to migrate our
capital into owning our own factory,"
outgoing Ford CEO Jim Hackett said
on the company's second-quarter
earnings call. "There's no advantage
in the ownership in terms of cost or
sourcing."

Varied strategies
The divergent strategies have huge
financial implications. Tesla's stock
jumped last week after CEO Musk
hinted that the automaker would reveal improved battery capacity in
September. Wall Street analysts have
spoken glowingly about GM's Ul-

tium technology and its potential to
support a spinoff EV business.
Sam Abuelsamid, a principal
e-mobility analyst at Guidehouse Insights, says both strategies have advantages.
"I don't know that there is a definitively better path," he said. "If you
source your own, you'll have a guaranteed supply, but you're potentially
stuck with that supply if you can't sell
them. If you source from suppliers, if
there's a technology breakthrough,
you've left yourself flexibility and
haven't made a big investment in
something that may be prematurely
obsolete. It's a bit of a crapshoot either way you go."
Ford's strategy is largely dictated
by the size of its EV ambitions.
"They're committing heavily to
electrification, but not all battery
EVs," Abuelsamid said. "They're doing a lot still with hybrids and plugin hybrids."
GM, meanwhile, envisions a zero-

Tight battery supplies will limit initial
production of the Mustang Mach-E.

emission future and plans to make
Cadillac an EV-only brand by the
next decade.

'Insufficient scale'
Hau Thai-Tang, Ford's head of
product development and purchasing, said this month on an analyst
call that Ford would need to produce
100,000 to 150,000 EVs annually for
its own battery plant to make sense.
"We don't have that volume initial-

ly to justify that capital expenditure,"
he said, adding that local content requirements in North America and
China further complicate the issue.
"There's insufficient scale for any
one OEM, other than somebody
who's a full-line battery-electric
manufacturer like Tesla, to justify
that spending."
He left open the possibility that
Ford could change its mind as its EV
portfolio expands.
A Trefis analysis from January concluded that Tesla's Gigafactory is
paying dividends. The study, published in Forbes, estimated the automaker's battery costs fell 45 percent
from 2016 to 2019, an average drop
of $7,000 per vehicle.
But Ford argues that its reliance on
suppliers also could reduce prices.
"It gives us the ability to access the
latest technology and innovation
across multiple suppliers," Thai-Tang
said. "So I know exactly what the
state of the art is from the Korean

suppliers, the Japanese suppliers,
the Chinese suppliers, and I'm able
to compare notes across them maybe better than they can. And then, of
course, we have the competitive tension with dealing with multiple suppliers, which allows us to drive the
cost down."
Despite its insistence that the supply base is prepared, Ford has said
tight battery supplies would limit the
upcoming Mustang Mach-E to
50,000 vehicles globally in its first
year of production.
Still, the company is hesitant to
lock itself into a certain type of battery, with Thai-Tang citing Toyota
Motor Corp. as a cautionary tale.
"They invested to vertically integrate nickel-metal hydride batteries
for their hybrids," he said. "And after
spending over $1 billion to do that,
the technology shifted to lithium ion,
and they were among the last to
switch over. I don't want to put Ford
in that position." a

DAMAGE

'You can't ever control
what these things do'

Hot wholesale used-car prices
could slide as demand cools

continued from Page 3

David Muller

For dealerships, the hurricane arrived at a
time of low used-vehicle inventory and high
prices because of the ongoing coronavirus
pandemic. Automakers continue to ramp up
vehicle production after U.S. auto plants shut
down for several weeks in the spring as cases
of COVID-19 soared. Dealers have reported
difficulty keeping popular models in stock as
demand rebounded and state restrictions on
business activity eased.

Inventory challenges
It's too early to gauge the severity of the hurricane's impact on used-vehicle inventory,
said Larry Dixon, senior director of valuation
services at J.D. Power.
Some severe weather events caused
used-vehicle prices in the U.S. to rise for
about two months afterward, with demand
and pricing dependent on the extent of the
damage, Dixon said. Used prices rose 2 percent after Hurricane Harvey in 2017, 3 percent after Hurricane Sandy in 2012 and 5 percent after hurricanes Katrina and Rita in
2005, he said. "It can be very much a disruptive force for a brief period of time," Dixon
said, adding that "we are already in an elevated price environment."
Inventory was on Texas dealer Mitchell
Dale's mind as he prepared for Hurricane
Laura. He moved 200 vehicles at his McRee
Ford store in Dickinson to higher ground
ahead of the storm and said last week that the
scarcity and cost of vehicles determined
which models were moved inside or to other
locations. For instance: Super Duty pickups
- "the scarcest inventory that we have," he
said, and also the highest priced - were
moved into the service department to protect
them from wind damage.

ID4 reservations
accepted online
continued from Page 3

interview to be broadcast this week
that ID4 supply is expected to be tight
for U.S. dealers at least until production of the BEV begins in 2022 in
Chattanooga.
"Right now, there are a lot more
mouths to feed than there [are] vehicles," Keogh said. "We're going to
continue to fight for every car. But we

dmuller@crain.com

Texas dealer Mitchell Dale moved Ford Super
Duty trucks into the service department.

Dale said the dealership did not experience
damage from the hurricane and reopened
Friday, Aug. 28.
Employees at JK Chevrolet and JK Subaru in
Nederland, Texas, parked as many vehicles
inside the service department as possible
and lined up additional customer vehicles
and some of the stores' inventory in rows several vehicles deep alongside the building to
protect against wind damage, said Daylyn
Turner, vice president of operations at both
stores and general manager at JK Subaru.
Inventory has been tight, especially at the
Chevrolet store, Turner said. He said he evacuated prior to the storm and had not heard of
extensive damage to the stores, adding that
he hoped the dealerships could reopen by
Monday, Aug. 31, depending on whether
electricity is restored. "We're very fortunate
with this particular storm, but it hasn't fared
out that well in the past, so you always have to
be on the safe side," he said. "You can't ever
control what these things do."

Wholesale used-vehicle prices, on fire for
several weeks after initially plummeting in the
spring, could finally be cooling off even as retail used-vehicle prices steadily climb.
For the week ended Aug. 23, wholesale auction prices dipped by an average of 0.7 percent, according to J.D. Power. That marked the
first material decline since the week ended
April 23 and the second consecutive week that
wholesale prices were flat or down, the company said.
"Used prices have been just insanely strong,
white hot, since May, after bottoming out in
the middle part of April," said Larry Dixon, J.D.
Power's senior director of valuation services.
"They rose week in, week out, really until just
two weeks ago."
J.D. Power is forecasting wholesale prices
will continue to move lower into September as
pent-up demand cools and headwinds related
to the coronavirus pandemic grow. The company expects prices at year-end to be slightly
higher than pre-virus levels.
That outlook could change given uncertainty
around new virus outbreaks, more federal
stimulus, employment conditions and the potential hit from Hurricane Laura to already-low inventory levels. The extent of damage to dealerships in Louisiana and Texas

Hitting a plateau?

Wholesale used-vehicle prices roared
back this summer after plummeting in
April following the start of the
pandemic. Though still high, they are
showing signs of cooling off, according
to these J.D. Power numbers
comparing used-vehicle prices for the
week ended Aug. 23 with:
Prices for the week ended Aug. 16
Retail used-vehicle prices up 0.4%

Wholesale auction prices down 0.7%

Pre-virus levels
Retail used-vehicle prices up 7%

Wholesale auction prices up 15%

April trough
Retail used-vehicle prices up 8%

Wholesale auction prices up 35%

from last week's storm was not known at press
time.
Cox Automotive Chief Economist Jonathan
Smoke said last week that used-vehicle supplies, after rapid declines this spring and summer, have "settled into a consistent level of
supply over the last few weeks."
Retail supply was at 38 days as of Tuesday,
Aug. 25, below the 44-day norm, Smoke said.
Wholesale supply was "normal" at 24 days. a

Assessing damage
Houston-based Group 1 Automotive Inc.
said Friday that it reopened six dealerships in
the Beaumont, Texas, area that it closed
ahead of the storm. The stores had little damage and lost no inventory.
In Louisiana, many dealerships closed in
preparation for landfall, Will Green, president of the Louisiana Automobile Dealers As-

could probably use a few more."
Volkswagen will use a centralized
online reservation system in North
America to accept initial $100 refundable deposits from consumers
either online or from a VW dealership to hold their place in line for an
ID4, Movassaghi said last week. Later, customers will be asked to go into
the dealership or continue online to
deposit an additional $400 to confirm their order and lock in their configuration. Both deposits will be fully
refundable until the car is delivered.
Once they sign up, consumers will
be able to see the status of their reser-

sociation, said in an email last week. After the
storm, several dealerships in the Lake
Charles area could not be reached by phone,
and some stores in Laura's path posted online
that they were closed.
"There are still many without power and
water in the areas most affected," Green
wrote Friday. "[I]t is too early to tell how long

vation and get updates through the
build and delivery process for their individual vehicle. Incentives, including
the $7,500 federal credit, will be automatically configured into the online
pricing by ZIP code.
The reservation system is similar to
the one Audi used when it launched
the e-tron compact crossover in the
U.S. in 2018, except that Audi deposits
were $1,000. While many automakers
have turned to taking reservations for
new models - including Ford's recent hit with the Bronco - this is the
Volkswagen brand's first time doing
so. Such reservations are "a vote of

dealerships will close and how inventory will
be affected.
"Right now dealers are concerned with taking care of their employees and families and
trying to get back to doing what they love as
soon as possible." a
David Muller contributed to this report.

confidence in our new products from
our customers and gives us a sneak
peek into purchase intention before
the car even hits our showroom," said
Dustin Krause, director of e-mobility
with Volkswagen of America.
The actual sales price will still be set
by the local dealer and could differ
from the sticker price, which has not
been disclosed. Keogh suggested that
the ID4's sticker price would be "a tick
over" $30,000, after available credits.
VW dealerships are undergoing individual reviews now to prepare
them to sell electric vehicles, with
Volkswagen subsidizing up to 85

percent of the costs of the needed
dealership infrastructure.
The ID4, based on Volkswagen's
modular battery-electric MEB platform, is expected to launch with an
estimated range in excess of 300 miles,
according to other VW executives.
The compact crossover is the second model in a series being produced by the company in Zwickau,
following the ID3, a Golf-size subcompact hatchback that went on
sale in Europe this year after a delay
caused by software issues. The smaller ID3 is not expected to be exported
to North America. a

https://www.forbes.com/sites/greatspeculations/2020/01/13/how-battery-costs-impact-teslas-margins-an-interactive-analysis/#1ed920475036 https://www.gm.com/our-stories/commitment/for-crashes-emissions-and-congestion-zero-is-more.html https://www.autonews.com/marketing/cadillac-ditch-alphanumerics-ev-transition https://www.autonews.com/marketing/cadillac-ditch-alphanumerics-ev-transition https://www.autonews.com/automakers-suppliers/teslas-musk-hints-battery-capacity-jump-ahead-event?utm_source=dlvr.it&utm_medium=twitter https://www.gm.com/our-stories/commitment/for-crashes-emissions-and-congestion-zero-is-more.html https://www.autonews.com/sales/restocking-dealer-lots-tough-task-industry https://www.autonews.com/sales/restocking-dealer-lots-tough-task-industry

Automotive News - August 31, 2020

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