Elon Musk becoming president, Toyota introducing a hydrogen piston-powered GR Corolla, and supply-chain shortages easing are a little of what’s ahead in the next 12 months
As portensions of impending (automotive) apocalypse go, few match having the fate of the world’s most valuable automaker decided by Twitter poll. Forget that used-car prices are tanking faster than at any time in history, or that Canada is about to enact a ZEV mandate that outpaces even greener-than-thou California. Hell, even the doom and gloom of the impending recession pales compared with having the future of a US$350-billion company — that was worth a cool trillion just a coupla months ago! — decided by folk who get their news just 280 bytes at a time. It is the harbinger of a truly volatile — that should be read “completely bonkers” — 2023.
Elon Musk will either step down or be demoted
TSLA is down almost 75 per cent in the last 12 months, used Tesla prices are positively tanking, and the company is now resorting to the cash-in-the-trunk discounts it used to ridicule so. Things are so bad that long-time sycophants — say, for instance, Fred Lambert, editor-in-chief of Electrek, whose prior commitment to brown-nosing Lord Elon resulted in permanent ring-around-the-collar — have started questioning Tesla’s leadership.
Then there’s the whole Twitter thing, the sudden — or not-so-sudden — dive into conspiracy theories, and, perhaps most importantly, a political shift that seems to have alienated even the most cultish of true believers. That’s why the call for an experienced automotive hand to manage Tesla’s day-to-day affairs is getting louder.
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Considering how quickly the stock price — Mr. Musk’s primary claim to fame amongst the moneyed who make such decisions — has dumped in the last 30 days, it can’t happen too soon. Oh, his leaving Tesla completely is probably not in the cards. Being demoted to Head Brainiac in Charge of Crazy Ideas, however, is not. Mr. Musk’s recent behaviour recently has revealed him to be mercurial, indecisive, and more than a tad juvenile, none of which are attributes that will get Tesla out of the abyss it now finds itself staring into.
Motor Mouth Probability Rating: Is Donald Trump going to say something stupid today?
Supply-chain issues and parts shortages will ease
Supply chains are being friend-shored, everyone under the sun is building new superchip factories, and, if the Wall Street Journal is to believed, the world is soon to be awash in semiconductors. Russia would appear to have done its worst in Ukraine, the Yanks seem determined to rebuild their automotive infrastructure, and, for the first time in memory, Canada has a true champion of its auto-parts industry in minister François-Philippe Champagne. So, look for the supply chain issues that have been stunting car sales to ease starting sometime this summer. Good news, right?
Unfortunately, said easing coincides with —
The massive economic downturn due this spring
Pretty much everyone under the sun is calling for a recession this summer. Whether it’s the mythical “soft landing” we’re all hoping for, or the landing gear breaks on touchdown, the auto industry is going to suffer. North American sales, at least according to The Economist’s Automotive Outlook 2023, will be down some 2.4 per cent.
The upside for consumers is that there’s a decent chance that the new-car price pressures that have led to $35,000 Corollas will finally ease. But said easing of pricing will be significantly tempered by skyrocketing auto interest rates and skittish consumers. Look for auto dealers to start crying “poor” no later than June next year.
Motor Mouth Probability Rating: As certain as anything gets when you’re seeing the quickest rise in interest rates in decades.
Cash will once again be king
So, the era of cheap money is over. What many thought was a new Modern Monetary Theory turns out to have been but a temporary aberration. Oh, interest rates will (please, God) hopefully head lower some time in the second half of 2023, but the days of 0.25-per-cent Bank of Canada “policy” rates and 2.15-per-cent five-year variable-rate mortgages will soon be lore we tell our children when we regale them with tales of “the good old days.”
With them will go eight-year auto loans, the last bastion of affordability for Canada’s working poor. Ditto subscription-based “mobility solutions.” And methinks those automakers looking to rent EV batteries in perpetuity — I’m looking at you, VinFast — are in for a rude awakening.
Indeed, according to Richr, American home buyers, wary of rising interest rates, are increasingly paying cash on the barrel for their new abode. Expect the same thing to happen in new-car sales, especially in the luxury-car segment, Cox Auto forecasting “All-Cash Deals Will Increase to Levels Not Seen in Decades.” That’s especially true in the luxury segment where, well, with the rich just getting richer, the top echelons of the automotive market are expected to grow faster than the bottom three-quarters.
Motor Mouth Probability Rating: You mean the rich aren’t like you and I?
Electric vehicles will continue to get more expensive
The cost of an EV electric battery will go up long before it goes down. It would not be impossible for a kilowatt-hour of lithium-ion to hit US$200 by 2026 or so before starting to slide back to its early-2022 low of US$130/kWh. Look for the spread between EVs and their gasoline-fuelled equivalents to widen, not narrow.
It’s a simple question of supply and demand. Raw materials account for some 50 per cent of the cost of an automotive battery and, as Motor Mouth has often noted, the International Energy Agency says we will need 40 times as much lithium and 25 times as much nickel as we currently produce to supply the EV batteries of the future.
Or, put another way, Benchmark Minerals Intelligence says we will need some 384 mines to dig up all the lithium, cobalt, nickel, and graphite needed to fill battery trays. All of which means we should not be looking for battery-powered vehicles to get cheaper in the near term. Indeed, recent EV pricing news has been of significant increases as automakers deal with rising costs and shareholder demands that EVs no longer be sold at a loss.
Motor Mouth Probability Rating: A whole bunch better than the chances of Tom Brady and Gisele Bündchen getting back together again.
ZEV subsidies are going to be with us for some time
First off, the federal gift cards to new-car purchaser are going to have to increase. Currently, the fed’s subvention to Canadian Consumer is worth CDN$5,000. By comparison, the U.S. will donate as much as US$7,500 of taxpayer monies toward the same purchase. That, at current exchange rates, is a little over twice what our Liberals have pledged.
And they don’t even have a ZEV mandate. Canada does. Oh, you might have missed it, the Liberals absolutely desperate to sneak their recent “Proposed Light Duty Zero-Emission Vehicle (ZEV) Regulations” under our radar. Not just any old ZEV quota either. No siree Bob, if the Liberals have their way, we’ll be the over-achievers in the force-feeding-EVs-down-consumer’s-throats competition, our (proposed) mandate the most aggressive electric-vehicle adoption rate in the Western Hemisphere. Zero-emissions vehicles will have to, for instance, make up fully 83 per cent of an automaker’s yearly sales by 2032. That’s an eight-fold increase in just eight years.
That’s not going to happen unless some serious money is thrown at consumers. My best guess is that EVs will have to be subvented until at least 2030. At today’s rates, that works out to be about CDN$5 billion a year. If anything, that’s going to be on the low side.
Motor Mouth Probability Rating: Have you seen Tampa Bay’s odds in the Super Bowl?
The cost of an EV electric battery will go up long before it goes down—it’s a simple question of supply and demand
Electric-vehicle sales will increase
With huge subsidies south of the border and the aforementioned ZEV mandate north of the border, sales of electric vehicles will continue to increase. Cox Automotive says EV sales will surpass one million in the U.S. in 2023, and we Canadians should see a commensurate increase. Worldwide, meanwhile, despite a slight slowing in the growth rate, EV sales will still increase by 25 per cent in 2023, says The Economist.
The limitations, at least locally, will be the diversity of support. Quebec, British Columbia, and some of the Maritime provinces, for instance, add their own provincial subsidies to the $5,000 from the federal government; Ontario and the West do not. The effect on battery-powered auto sales is as expected. Provinces that have doubled down on subvention — notably B.C. and Quebec — boast three and even four times the EV market share as the laggards. With no hint of a reversal of course — especially in Ford’s Ontario — eventually the pace of EV sales growth will diminish as sales in Canada’s heartland impede expansion.
Motor Mouth Probability Rating: As close to a sure thing as possible in these troubling economic times, but for how long?
China’s Nio will prove a bona fide competitor to Tesla’s hegemony
Not only is China’s premier manufacturer of electric automobiles expanding — it recently announced a serious bulking up of its presence in Europe — it’s looking to advance EV technology faster than Tesla. Or anyone else, for that matter.
Nio’s claim to fame so far has been battery-swapping stations. Taking a page out of Elon’s Musk’s playbook, the company isn’t waiting for an aftermarket supplier to build its infrastructure; it’s building its own. An ingenious proprietary system allows a quick swap of the entire battery, with no waiting for slow-charging to replenish the cells. So far, the Chinese market-leader has built over 1,000 such stations in China, there are a couple in Norway, and plans are afoot to expand the service to the rest of Europe.
Not content to revolutionize the battery-swapping biz, Nio has also released details on its first 500-kilowatt charging station. According to reports, the 500-kW 650-amp DC fast-charger can replenish a 100-kilowatt battery from 10 to 80 per cent in just 12 minutes.
Now, before you go thinking that your old Hyundai Kona is going to enjoy their flash-charging, there are some drawbacks to all this bonhomie. First, the battery-swapping stations only work with Nio batteries. Whether the company will expand it to service other brands is not known, but you can be darn sure if it does allow other marques to use its facilities, there’s going to be a significant charge.
Ditto for the 500-kilowatt charging stations. Current 350-kW chargers cost about $125,000 a unit, and Nio had to incorporate an extra-special super-duper liquid-cooling system so the charging cable could withstand the heat. Oh, and your EV needs to support an 800-volt architecture, still a rarity amongst electric vehicles. Nonetheless, Silicon Valley better watch out: the Chinese are coming.
Motor Mouth Probability Rating: Ain’t it about time someone other than Tesla is leading the charge?
Toyota will introduce a hydrogen-fuelled piston-powered Corolla
Despite the headwinds — non-existent infrastructure, high cost of production, and nay-saying by the battery-electric crowd — 2023 might be the year that H2 makes a comeback.
It will, of course, have to be on the back of the long-haul trucking industry for whom batteries mean reduced payloads and excessive down time, both problems that hydrogen can easily solve. But with refuelling infrastructure for those 18-wheelers will come the feasibility of FCEV-powered automobiles like Hyundai’s Nexo and Toyota’s Mirai.
But it might not all be boring fuel cells. Toyota is making noises that it wants to put hydrogen-fuelled ICEs on the roads. In fact, it’s been racing a hydrogen-powered Corolla for the last two years, the car recently completing almost 500 laps at the 24 Hours of Fuji. The even better news? The team is run by Gazoo Racing, the same crazies that build the GR Yaris and Corolla. Can you imagine a turbocharged zero-emissions GR Corolla pumping nothing through its tailpipes but unmuffled internal-combustion and water vapour? It’s enough to give a man religion!
Motor Mouth Probability Rating: Oh, Lord, please make it so.
Net-zero synthetic fuels will take off
Porsche just opened its much-anticipated synthetic fuel plant in Chile. Essentially, it captures carbon dioxide from the air, electrolyzes water into hydrogen, and then combines the whole shebang into a hydrocarbon capable of powering internal-combustion engines. Since the CO2 the synthetic fuel emits was itself scrubbed from the atmosphere, it’s essentially a zero-sum game.
For vehicles for whom batteries simply don’t work — long-haul trucks, motorcycles, classic cars, and even airplanes — such synthetic fuels offer an escape hatch until hydrogen or some form of wireless-charging-highway system can expand the zero-emission portfolio. Look for sports cars (Porsches, of course) and racing series to be the first converts, but eventually all ICE-powered vehicles will run on something similar. This is the future of internal combustion.
Motor Mouth Probability Rating: As much as ecoweenies might hate piston-power, synthetic fuels are a better (short-term) bet than hydrogen as an alternative to battery power.
Elon Musk will become president of the United States
Hey, don’t blame me for this last one. This comes straight from the second-most-powerful man in Russia, former premier Dimitry Medvedev. As the person now in charge of Putin’s military-industrial complex — I’ve been waiting to use those words in a car column for eons — Medvedev’s worldview for the upcoming year is that France and Germany take up arms against one another, the United States becomes embroiled in a civil war, and Elon Musk is crowned president.
Now I gotta say that, considering the polemics south of the 49th, the possibility of an armed conflagration between political extremes is certainly not out of the question. And, hey, France and Germany have already done this dance twice before. So, who knows? I guess it could happen again.
But Elon as president? No. Nyet. No way in Hell. He’s been so busy alienating absolutely everyone — the left thanks to his Breitbart-believing Paul-Pelosi-attack conspiracy theories; and the right, well, because he thinks climate change is really a thing — these last few months that he’ll be lucky, as I said off the top, if he’s still the CEO of Tesla at the end of the year.
Motor Mouth Probability Rating: About as likely as positive reviews for Air Canada’s handling of holiday travel this year.