Tag Archives: Ford

Cybertruck an almost certain success

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Leading up to the Cybertruck launch 4 weeks ago, the expert opinion was that it was a failure. Morgan Stanley, here dubbed it as one, as did Rolling Stone here. Without having driven the vehicle, the experts at Motor trend, here, declared it was worse than you thought, “a novelty” car. I’d like to differ. The experts point out that the design is fundamentally different from what we’ve made for years. They claim it’s ugly, undesirable, and hard to build. Ford’s F-150 trucks are the standard, the top selling vehicle in the US, and Cybertruck looks nothing like an F-150. I suspect that, because of the differences, the Cybertruck can hardly fail to be a success in both profit and market share.

Cybertruck pulls a flat-bed trailer at Starbase.

Start with profit. Profit is the main measure of company success. High profit is achieved by selling significant numbers at a significant profit margin. Any decent profit is a success. This vehicle could trail the F-150 sales forever and Musk could be the stupidest human on the planet, so long as Tesla sells at a profit, and does so legally, the company will succeed. Tesla already has some 2 million pre-orders, and so far they show no immediate sign of leaving despite the current price of about $80,000. Unless you think they are all lying or that Musk has horribly mispriced the product, he should make a very decent profit. My guess is he’s priced to make over $10,000 per vehicle, or $20B on 2 million vehicles. Meanwhile, no other eV company seems to be making a profit.

The largest competing electric pickup company is Rivian. They sold 16,000 electric trucks in Q3 2023, but the profit margin is -100%. This is to say, they lose $1 for every $1 worth of sales –and that’s unsustainable. Despite claims to the contrary, a money-losing business is a failure. The other main competitors are losing too. Ford is reported to lose about $50,00 per eV. According to Automotive News, here, last week, Ford decided to cut production of its electric F-150, the Lightning, by 50%. This makes sense, but provides Cybertruck a market fairly clear of US e-competition.

2024 BYD, Chinese pickup truck

Perhaps the most serious competitor is BYD, a Chinese company backed by the communist government, and Warren Buffet. They are entering the US market this month with a new pickup. It might be profitable, but BYD is relatively immune to profitability. The Chinese want dominance of the eV market and are willing to lose money for years until they get it. Fortunately for Tesla, the BYD truck looks like Rivian’s. Tesla’s trucks should exceed them in range, towing, and safety. BYD, it seems, is aiming for a lower price point and a different market, Rivian’s.

A video, here, shows the skin of a Cybertruck is bulletproof to 9mm, shotgun, and 45 caliber machine gun fire. Experts scoff at the significance of bulletproof skin — good for folks working among Mexican drug lords, or politicians, or Israelis. Tesla is aiming currently for a more upscale customer, someone who might buy a Hummer or an F-250. This is more usable and cheaper.

Don’t try this with other trucks.

Another way Cybertruck could fail is through criminal activity. Musk could be caught paying off politicians or cheating on taxes or if the trucks fail their safety tests. So far, Cybertruck seems to meet Federal Motor Vehicle Safety Standards by a good margin. In a video comparison, here, it appears to take front end collisions as well as an F-150, and appears better in side collisions.

This leaves production difficulty. This could prevent the cybertruck from being a big success, and the experts have all harped on this. The vehicle body is a proprietary stainless steel, 0.07″ thick. Admittedly it’s is hard to form, but Tesla seems to manage it. VIN number records indicate that Tesla had delivered 448 cybertrucks as Friday last week, many of them to showrooms, but some to customers. Drone surveys of the Gigafactory lot show that about 19 are made per day. That’s a lot more than you’d see if assembly was by hand. Assuming a typical learning curve, it’s reasonable to expect some 600 will be delivered by December 31, and that production should reach 6000 per month in mid 2024. At that rate, they’ll be making and selling at the same rate as Rivian or Ford, and making real money doing it. The stainless body might even be a plus, deterring copycat competition. Other pluses are the add-ons, like the base-camp tent option, a battery extension, a ramp, and (it’s claimed) some degree of sea worthiness. Add-ons add profit and deter direct copying (for a time).

Basecamp, tent option.

So why do I think the experts are so wrong? My sense is that these people are experts because of long experience at other companies — the competitors. They know what was tried, and that innovation failed. They know that their companies chose not to make anything like a Cybertruck, and not to provide the add-ons. They know that the big boys avoid “novelty cars” and add-ons. There is an affinity among experts for consensus and sure success, the success that comes from Chinese companies, government support and international banking. If the Cybertruck success is an insult to them and their expertise. Nonetheless, if Cybertruck succeeds, they will push their companies towards a more angular design plus add-ons. And they will claim cybertruck is no way novel, but that government support is needed to copy it.

Robert Buxbaum, December 25, 2023.

The UAW’s minimally-effective strike.

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The aim of a strike, generally, is the same as the aim of war: it is to win concessions fast. To do this, one must strike to the utmost extent, as Von Clausewitz points out. The target company must come to understand that they need the workers, and that they need a quick settlement. In the case of the current united auto worker strike, the UAW asked for 40% and concessions, but only struck at a few plants. The resulting strike lasted 6 weeks, with Ford settling for a 25% raise over 4.5 years, to April 2028. Viewed on an average, that’s a 5.6% raise per year, assuming the Ford workers accept the deal.

I’m not sure how the UAW boss chose which plants to strike AGAINST. They were mostly low-profit ones at first. Workers at other plants kept on working and received a full salary. The suffering was borne some 45,000 UAW workers (1/4 of the UAW autoworkers) who left the job for strike pay, $500/week. This is a tiny fraction of the 4.36 million auto workers in the US. Auto production was reduced by 80,000 vehicles, we’re told, again a small fraction of several million vehicles typically made in the US in a year.

The strike does not seem to have affected vehicle sales or profits, as best I can tell. The remaining plants ran at higher capacity, and some production was made up by imports from Canada, Mexico, and China. Inventories today are at 60 days, the industry target. In a sense, the major lessons of the strike are that the auto companies don’t need so many workers, and that the UAW can direct suffering to whichever workers they wish.

The gasoline-powered F-150, left, is the most popular vehicle in the US. The Tesla Cybertruck, right, is an EV challenger of a sort that will soon be mandated. EVs require fewer workers and manufacture is non-union.

Ford’s settlement sounds good, but if viewed as a 5.6% raise per year, it barely covers inflation. Inflation is 3.6% now and was 8% last year. Ford retained the right to shed workers and close plants as the economy slows or production shifts. That’s a minimal gain for a 4.5 year commitment.

Battery plants may be covered or not; we’ve not been told. Production is expected to shift to battery vehicles, and these require fewer workers per car. President Biden has mandated a shift as part of his plan to stop global warming (a plan that I find misguided). He’s provided financial incentives for EV owners too, under the “inflation reduction act,” an effort to cause consumers to buy cars they would not otherwise. Largesse of this type is problematic, and highly inflationary, at least in the short term (the next few years). It is supposed to help out down the road, but workers pay their bills in the short term, the here and now.

Despite Biden’s financial incentives to buy electric, most consumers prefer to buy gasoline. The gasoline F150 is the most popular vehicle in America, selling over 600,000 per year. Trump claims that US workers would be better off if we stopped pushing EVs. Less incentives means less inflation, more internal combustion cars, and more union jobs he says. Biden has recently funded a Chinese battery plant, non-union in Michigan, suggesting that Trump is on to something. The strike has produced a raise, but its main contribution, it seems was to punish those UAW workers that the union boss didn’t like.

Robert Buxbaum, October 29, 2023. As I write, Stellantis has offered a tentative deal, but GM is still holding out, and we’ve yet to see if the workers ratify any of these deals.