THE SOUNDS OF VEHICLE MANUFACTURERS FIGHTING BACK
In Europe, and the UK, the political elite view ‘transport’ as just a means of going from A to B, by bicycle, bike, e-scooter or pure electric vehicle. There is no sound except for tyres on the road or the conversation between passengers. Even the road system is under political ‘consideration’ due to claimed tyre/road/brake system pollution. Policy and law are centred around ‘transport’ as a transactional necessity, utterly devoid of pleasure.
The whole point of the motor vehicle – the major enabler of wealth around the globe for more than 120 years so far – is it allows us to enjoy the experience of going from A to B – sight, acceleration and sound. The people who enjoy this include collision repairers and their customers.
Why do vehicle manufacturers flood some markets with electrified or even pure electric models? Quite simply they want to meet the needs of customers, reduce their taxation liability for building the ‘wrong’ type of vehicle, and attract investment where the Environment, Social and Governance (‘ESG’) score matters more than profitability. Again, purely transactional necessity.
Good ESG scores – no need for profit
ESG was a device created by the oil industry to quantify just how good they were. This was soon captured as the vehicle for carbon credit trading – where rules are set arbitrarily in the name of limiting man-made Carbon Dioxide to ‘save the planet’. Where an enterprise is able to meet the required obligations, they get to function normally. Where an organisation is able to meet the obligations with capacity to spare, they can ‘sell’ that to other organisations who otherwise would break the rules.
California was one of the first states to introduce the idea that a certain number of pure electric vehicles had to be sold in order to then sell profitable internal combustion powered vehicles, on a sliding scale. This was the market that made General Motors create EV1 with rather innovative power electronics, without which the EV sector would not exist today. Over the past 25 years these schemes have come and gone, each time throwing up anomalies such as Tesla building components through to entire pure electric drive conversions for various manufacturers.
Tesla has managed quite a feat. Not only did they not build any internal combustion engine powered vehicles, they were in fact, able to sell the ‘bonus’ – equivalent to four internal combustion engine powered vehicles for each Tesla – to other vehicle manufacturers. This was capped at the first 250 000 cumulative registrations in the US, but since extended by the Biden administration. Other vehicle manufacturers – notably Peugeot, Citroen and Fiat – have done this with similar schemes in other parts of the world.
ESG goes mainstream
Meanwhile, those who trade (bet) on financial performance opened up a whole new casino. Carbon trading had been discussed for years, but now it is a very high-profile device. Suddenly corporations need to have a whole set of behaviours in order to attract the attention of rather flaky investors, who see social profile is rather more important that the ability of the company to make a profit.
Sir Mark Carney was one of the first major figures to invent the term ‘stranded asset’ – a company that is not worth investing in because the ‘game’ has moved on. His motives for this have never been explained.
Now look to vehicle manufacturers
Each new vehicle programme takes between US$500 million (facelift) and US$3 000 million (new model range) which then takes some years to return. Further, the rate of return languishes between 4% and 10%. So, thanks to Sir Mark Carney and his mates, investors see huge demand for automotive business investment with relatively poor rate of return in the context of an outright environmental war on the sector.
As a side comment, Tesla routinely report margins of 25-30 percent. Of course, the calculation takes no account of accumulated investment and loan interest debt…. I wonder why?
Adapt to survive
Most vehicle manufacturers now see their companies split into two entities – one producing electric vehicles to generate a good ESG score, even if there is no profit, and the other section producing internal combustion engine-powered vehicles which are profitable. The whole point of the ESG compliant part of the company is to, in effect, assist the other part of the company, even though these are independent entities.
This is overall more profitable than relying on third party credit trading.
One company stands apart – a company with immense integrity: Toyota.
The CEO and President of Toyota, Akio Toyoda, is on record stating that whilst his organisation will build vehicles customers desire, they will not put any of the company at risk by following the ESG fashion. Toyota is not prepared to sell its soul.
Most other manufacturers go through the motions. For example, Honda Jazz, HR-V and Civic are available in Europe with a petrol engine coupled to a hybrid drive continuously variable transmission. Yet outside this region these models are also available with pure mechanical powertrains. Volvo will be ‘electrified’ by 2025, which in reality means more than 90%of sales will still be with MHEV or PHEV powertrains.
Every single manufacturer knows full well a pure electric vehicle is more expensive than the equivalent size internal combustion engine model, and that they make no or little profit without tax cash subsidies. Much like other aspects of traction battery technology, we are still waiting after 120 years for the equivalent energy density and cost of petrol or diesel.
Arise Mustang
Wall Street really went mad when Ford unveiled the model year 2024 Mustang – evolved from the existing car with further improvements to the two-litre EcoBoost four-cylinder petrol engine coupled to a 10-speed automatic transmission, and the 5.0-litre V8 petrol engine coupled to a six-speed manual or 10-speed automatic transmission.
No mild electric hybrid. No hybrid. No plug-in hybrid. No pure electric powertrain (yet).
Why?
Ford, like Ferrari and Lamborghini have realised something important. Sure, a pure electric ‘executive on expenses’ dragster can go from zero to 100 km/h in less than 2.0 seconds with three rather concerned passengers on board, and sure, the user will think they are saving the planet whilst doing that. Something is missing…
Sound
In launching the new model year 2024 Mustang, Ford know exactly what they are doing. The Mustang is aimed at a market that will happily pay for this, and they will make a decent profit too. For Wall Street, Ford are prepared to cut off the electrified models and put them into a new company, to attract the funding which seeks good ESG scores and leave the rest of Ford as a legacy company – which will make a profit anyway.
There is not an investor alive that will refuse to put money into a profitable business.
For Ferrari, Porsche, Lamborghini and more, the sound track is essential. Yes, outright performance belongs to pure electric vehicles, at least in a straight line, but the whole experience is sensual – acceleration, visual and aural.
Yes, a pure electric vehicle can have any sound track – we could make a Eleksa CityBug sound like a Ferrari or a jet fighter – but it becomes pointless. For some customers, knowing they are listening to sound as it is generated by the internal combustion engine matters. Just ask a biker.
It also raises the unanswered question – just what noise should a pure electric vehicle make? Amusingly some electric ‘executive on expenses’ dragsters in Europe are now offered with alternative noises including V8 internal combustion engines.
Big scale finance, government policy and execs on expenses will not dictate the free market. The choice of transport is down to the consumer, and that encompasses everything – not just what a government official says. For the collision repairer, this push back ensures a future of repairing all types of vehicles including electric ‘executive on expenses’ dragsters. Now that’s exciting.
By Andrew Marsh
Classic COrner & REStoration
Classic cars are the next big investment. As such the sector of restoration is growing in the realms of collision repair and it’s definitely the “sexier” side of the business. There are many opportunities to create exotic special-builds as well as keep timeless beauties in mint condition.
DRIVEN
With three motoring-journalists on our staff, we are able to test drive and review some of the latest models available on our roads as well as attend the latest model launches.
TRAINING
Knowledge is power. Training is key to up-skilling repairers as models launch onto our local roads faster than we can count. We also need to grow new talent into the collision repair industry. Courses are available to help and organisations are in place to train - this information is in Industry Index.
classic corner & resoration
Classic cars are the next big investment. As such the sector of restoration is growing in the realms of collision repair and it’s definitely the “sexier” side of the business. There are many opportunities to create exotic special-builds as well as keep timeless beauties in mint condition.
Driven
With three motoring-journalists on our staff, we are able to test drive and review some of the latest models available on our roads as well as attend the latest model launches.
TRAINING
Knowledge is power. Training is key to up-skilling repairers as models launch onto our local roads faster than we can count. We also need to grow new talent into the collision repair industry. Courses are available to help and organisations are in place to train - this information is in Industry Index.
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