Toyota will produce 150,000 fewer vehicles globally this coming month than it originally planned, BMW could make its Mexico facility the base of its EV production operations and Sony is finding big business in supplying image sensors for the future of assisted and autonomous driving. All that and more in this Happy Friday edition of The Morning Shift for May 27, 2022.
1st Gear: Toyota Signals Trouble
The gift that keeps on giving — the ongoing global semiconductor shortage — and China’s latest round of COVID-19 lockdowns have snagged Toyota’s production targets for the month of June yet again. Three days after announcing it’d pump out 100,000 fewer cars next month, it returned Friday to say it’s predicting that target to slide by another 50,000. That might affect the company’s full-year production schedule — I don’t see how it wouldn’t, but predicting the future in this climate is a fool’s errand. From Reuters,
Toyota said there was “a possibility” that it could lower its full-year production plan of 9.7 million vehicles.
“It is very difficult to estimate the current supply situation of parts due to the ongoing lockdown in Shanghai,” it said.
That lack of certainty on parts has been a constant refrain for automakers, in both Japan and elsewhere. Given that China is both the world’s largest auto market and a global manufacturing giant, the lockdowns there have implications for both supply and demand, analysts have said.
This month Subaru Corp warned that its US dealers have a record low stockpile of around 5,000 vehicles left, while Honda Motor Corp said it would slash production by 20% at two domestic factories.
Toyota said that its Corolla, RAV4, Prius and 4Runner models would be among those impacted by the production suspension.
This is, of course, all happening at a time when automakers with especially hot products, such as Subaru, are finding their nationwide supply almost tapped. It’s going to be a cruel summer for anyone buying a car, particularly if that car is a Forester or RAV4,
2nd Gear: BMW Finds Its EV Home
BMW opened its San Luis Potosí, Mexico plant three years ago, where it makes the 2 and 3 Series. In April, Automotive News reported that the manufacturer was seeking to move some X3 production to the facility, and now rumor has it that Mexico will become the brand’s base for building the upcoming electric 3 series and iX3 in the coming years. From Auto News,
A source familiar with BMW’s product plans said the automaker is set to begin manufacturing the next-generation 3 Series electric sedan and iX3 electric crossover starting in 2027 in San Luis Potosi, Mexico.
The source said that production of the crossover will begin in the first half of 2027, followed by sedan output in the second half of the year.
A BMW declined to comment on future production plans.
In April, Automotive News reported on BMW’s plans to move some X3 production to Mexico.
The X3 crossover is BMW’s bestseller in the US The company sold 204,658 X-badged utility vehicles in the US last year, up 55 percent from five years earlier. In comparison, the overall luxury light-truck segment grew about 24 percent during that period, according to the Automotive News Research & Data Center.
BMW Group CEO Oliver Zipse last month said crossover production will come to Mexico, without revealing specific plans.
“Mexico will play an important role in our complete setup,” Zipse told Automotive News. “At some point in time, you will see X models because the market demand is so high. That’s all I can say right now.”
The plant only ran at 39 percent of its 175,000-vehicle capacity in 2021, Auto News adds. There’s certainly room to grow, then, and in time it’s likely more of that space will be taken up with BMW’s “Neue Klasse” EVs.
3rd Gear: Foreign EV Makers Fading in China
An interesting report from Reuters on Friday shed light on the way Chinese EV manufacturers have dominated their domestic market as of late. Foreign makes have historically performed very well in the region — especially in the years before Chinese companies were executing at the level of their international rivals. But those days are long over, as some buyers themselves have indicated. From Reuters,
For Beijing office worker Tianna Cheng, the main dilemma when she was buying a 180,000-yuan ($27,000) Xpeng electric crossover was whether she should go for a BYD car instead, or a Nio; she did not seriously consider overseas marques.
“If I was buying a gasoline car, I may have considered foreign brands,” the 29-year-old said as she drove home from work. “But I wanted an EV, and other than Tesla, I saw few foreign brands applying advanced smart technology properly.”
China’s list of the top 10 best-selling EVs reflects that perception:
There are no foreign brands among the top 10 automakers in the new energy vehicle (NEV) segment this year, with the notable exception of US electric pioneer Tesla in third place, according to China Passenger Car Association data.
All the rest are Chinese brands, from BYD and Wuling to Chery and Xpeng. China leader BYD has sold about 390,000 EVs in the country this year, more than three times as many as global leader Tesla sold there. The top-ranked traditional carmaker is Volkswagen’s venture with FAW Group, in 15th place for EV sales.
Cheng said that overseas marques, whether the Buick Velite 7 or Volkswagen’s ID. series, failed to provide what she was looking for: an EV capable of giving her the “comfort” of having a smartphone-like experience in her vehicle.
“Foreign brands are so far from my life and lifestyle,” said Cheng, whose digital assistant handles connections to apps like Alipay and Taobao and “does everything for me from opening the windows to turning on music”, while her car software provides over- over-the-air updates.
I’m fairly confident General Motors and Volkswagen regional execs wake up in a cold sweat weekly dreaming the phrase “foreign brands are so far from me and my lifestyle.” The deep software integration that China’s EV set is promote extremely vital to that market. Imagine if nobody bought an EV in the States unless it supported Apple Pay.
4th Gear: Sony Finds New Business
We’ve heard nothing of Sony’s prototype car and crossover in a while, but Financial Times reports that the company’s efforts to brand itself as an ADAS supplier are paying dividends:
Sony expects to supply imaging sensors to 15 of the world’s top 20 global automakers by 2025, underscoring the company’s ambitions for electric vehicles and autonomous driving as it tries to diversify beyond mobile phones.
The Japanese conglomerate flagged its intention to accelerate a push into the auto industry in 2020 when it unveiled a prototype EV called the Vision-S. This year, it has launched an EV division and announced a joint venture with Honda to make cars.
Sony has now said it aims to provide the sensors crucial to EVs and autonomous vehicles, as it diversifies beyond making smartphone camera parts for Apple, Google and Samsung.
“We expect to be doing business in automotive imaging sensors with 75 per cent of the top 20 global carmakers by financial year 2025,” said Terushi Shimizu, the head of Sony’s imaging and sensing business at a two-day event for investors that finished on Friday.
The 20 automakers would make about 80 per cent of cars sold globally within three years, he added. Sony plans to spend about 900bn ($7bn) to develop imaging sensors in the 2021-23 period, nearly three times as much as it spent between 2015 and 2017.
If you know a little about Sony and the wider tech industry, you likely know that one of the company’s big moneymakers is supplying image sensors for smartphones and other mobile electronics. Whether you own an iPhone, Pixel or Galaxy, chances are the camera sensors in your device come from either Sony or Samsung, Sony is shrewdly applying that know-how to semiautonomous driving, and has a promising outlook because of it.
5th Gear: Back to BMW
One more thing in BMW news: it has forged an agreement with existing battery supplier CATL to power its future electric vehicles, from 2025 onward, with cylindrical cells. Again, from Reuters,
Chinese battery giant CATL on Friday said it will start supplying cylindrical cells to BMW from 2025 to power its new series of electric vehicles.
The battery maker has signed an agreement with BMW in which it is nominated as the supplier of the cylindrical cells for the German carmaker, CATL said without elaborating.
BMW did not immediately respond to a request for comment.
CATL has been supplying BMW for a decade. The Chinese firm is looking at potential battery factory sites in the United States to supply carmakers including BMW, with a goal of production beginning in 2026, Reuters reported earlier.
There’s some differing opinion on the optimal style and arrangement of cells from the world’s top automakers. A Green Car Reports article from last October explained that many established brands tend to prefer pouch-style cells, while only a few — such as Lucid — have embraced cylindrical.
“Tesla was the range king and we’re going to take that mantle by the look of it,” [Lucid CEO Peter] Rawlinson said. “But it just amazes me that other companies don’t do cylindrical.”
Not everyone agrees. At its EV day last March, GM executives confirmed that while they’d considered cylindrical cells, large-format pouch cells were their clear choice. According to battery pack lead engineer Andy Oury, the pouch cell approach provides “the fewest number of the largest cells possible.” That meant GM could cut wiring and connectors within the modules, and each of those gigantic 100-Ah cells holds about as much energy as 20 typical cylindrical cells.
GM is not the only one. Hyundai has also turned to favor pouch-style cells in its E-GMP platform, and it’s what Ford plans to use in its F-150 Lightning electric pickup. There’s some momentum in a shift the other way, with BMW announcing a focus on prismatic cells, and signs of a shift to unified prismatic cells for the VW Group.
These preferences will likely shift as we move into the middle and second-half of the decade, once every automaker has its dedicated EV platform for the next 10 years. At the same time, it doesn’t surprise me that legacy brands have all kind of gone the same way on the battery tech question, while the startups have been more inclined to experiment.
Reverse: I’m More of a Galloping Gertie Guy Myself
Neutral: On That Note…
What a great ad.