I’m now back in the United States and I’ve got a cache of stories from Goodwood I’m excited to share, but there’s plenty of news here worth talking about so I’ll get to those in a bit. First up, a new study is out about electric car ownership and it turns out that it’s cheaper than owning a gas-powered car for just about everyone. I’m curious about the two places where it’s still more expensive.
Incentives are a big reason why the cost of ownership of electric cars is currently lower, though no one expects those to last forever. Eventually, prices have to come down by reducing the cost of batteries. That requires investment and investment in critical mineral mining is starting to look a little sketchy.
Is Stellantis boned? They’re highly profitable, so the assumption is they are de-boned like a nice rainbow trout, though I have some concerns. The first half of the year was bad for Stellantis, with Honda replacing them as the 5th biggest automaker by sales in the United States.
And, finally, the UAW continues to be in hot water as the new guy is starting to act a little like the old guys.
It’s Still Cheaper To Own An ICE Vehicle In West Virginia And Maine
What do Maine and West Virginia have in common? Both are more rural, more mountainous, and wilder places adjacent to more suburban/urban states. In some ways, Maine is the West Virginia of the Northeast, or vice versa.
I’m talking about these states because Automotive News commissioned a study from J.D. Power to determine how much cheaper/more expensive an electric vehicle is than a comparable gas-powered vehicle over five years. Nationwide, if you buy an electric car you’re going to pay more upfront (by about $13,000) but save enough in fuel, incentives, and other costs to make up the difference and net about $3,100.
The variability from state to state is huge, however.
If you live in New Jersey, those savings are more than $10,000 over five years, which leads the nation (some of this is due to a statewide sales tax break that’s going away), followed by places like Illinois, Nevada, and Colorado.
What’s the flip side of this? In Maine, you’re going to spend about $1,600 more over five years. It’s even worse in West Virginia, where that cost rises to almost $1,800. You could argue that swapping for a more advanced vehicle for less than $400 is a good deal, but try telling that to someone pay a lot more for an EV than a comparable hybrid or ICE vehicle.
So why Maine? Let’s look at the methodology, according to Automotive News:
Untangling the cost of owning a car is a complicated but essential exercise for buyers considering an EV over a gasoline-powered vehicle. J.D. Power analyzed many factors, including transaction prices, taxes, regional gasoline prices and electricity rates, and zero-emission vehicle incentives. The data suggests that long-term cost outweighs EV sticker shock for comparable vehicles.
The most obvious factor might be the cost of gasoline versus the cost of electricity. So let’s look at Maine first. According to AAA, Maine’s average $3.50 gas cost is pretty much bang on at the national average. West Virginia, too, is close at $3.45. So neither state seems to enjoy a big advantage or disadvantage when it comes to gas prices. The cost of electricity? According to this CNET article, West Virginia has average electricity rates but higher than average electricity bills (the 7th highest in the nation). Maine, as well, is in the top ten.
Maine “de-regulated” its energy sector in 2000, leading to much higher rates, as deregulation of power companies has handed a ton of money and monopolies to private companies in exchange for… I’m not sure what. Just ask Houstonians how they feel about turning a public utility into a private profit funnel.
Maine, at least, has EV incentives that help counter some of this negative cost differential. According to Hannah Lutz, the reporter who wrote the story, WV offers no state or utility incentives to support EV sales. Big shock: Only about 261 EVs were sold in the state in Q1 of this year.
All of this is to say that, with our current incentive regime, you’re better off getting an EV from a cost perspective almost everywhere.
“There Is A Lot Of Doubt Right Now” That EV Mandates Will Stick
The World Materials Forum was held in Paris last week and the big discussion at the conference, which focuses on mining/natural resources, was just how fast the transition to electric cars would happen.
The conclusion? Not as fast as government mandates might have you believe according to this Reuters report from the forum.
“I think there is a lot of doubt right now that this will happen,” Mathias Miedreich, former CEO of Belgium recycling and battery materials group Umicore, told the conference. “That makes it very difficult to invest.”
In May Miedreich stepped down from Umicore, which lowered its 2024 profit forecast the following month due to weak demand projections for battery materials due to a slowing EV market.
If you follow the money, players in the space say it’s still possible to get financing for projects focused on the minerals critical to EV battery production, but it’s not as easy as it once was.
Obviously, projections for cheaper EVs were partially premised on the idea of having cheaper raw materials. If we don’t get cheaper materials fast enough then that’s going to slow down and, as you can see above, cost is a big driver of acceptance.
Honda Is Kicking Stellantis’ Butt
I wrote earlier this year that I was concerned about Stellantis sticking the landing, which is to say that I’m not sure the company has the product mix to maintain the kind of sales volume it needs to remain as profitable as it has been over the past few years.
Those profits were built, in part, on cost-cutting, the continuation of old platforms, layoffs, and a well-timed global supply shortage. New products are coming and maybe it’ll all work out and this hand-wringing over the performance of the company is just everyone focusing on too narrow a point in a company’s transition period.
Or maybe it isn’t. Right now it sucks to be a Stellantis dealer as you’re losing market share to companies like Honda, which has seemingly exactly the right product for consumers.
In the first half of the year, Stellantis shrank to the 6th biggest automaker in the United States behind Honda. I like this analysis from Automotive News as it zeroes in one of the big changes in the market:
Sales of pickups and SUVs declined, while crossovers rose to account for 45 percent of the market. Compact crossovers alone outsold pickups of all sizes.
Although nearly every car segment shrank, strong performances for the Honda Civic, Toyota Corolla and Nissan Sentra helped compact cars to a 24 percent gain.
Stellantis has a bunch of compact crossovers and they’re fine, but hardly competitive with Honda has right now. Pickups are, generally, way more profitable, but companies like Honda can win on volume, especially when RAM truck sales are down 20% year-over-year during the first half of the year. In fact, Honda sold more CR-Vs in the first six months of the year than Ram sold all pickups.
UAW President In Trouble For Alleged Financial Misconduct
The former leaders of the United Auto Workers union were either tossed out of office or tossed into jail after numerous instances of taking money for personal use and otherwise engaging in shifty behavior. A new administration came in, led by Shawn Fain, and the UAW would go on to win historic contracts from the three major Detroit automakers and unionize a plant in the South for the first time ever.
Still, the UAW has a federal monitor in place to make sure there’s no backsliding into illegal activity, and that federal monitor is trying to look into claims that Fain used his position to punish senior leadership for not kicking money to his fiancee and her sister, both who work at the UAW’s National Training Center. The monitor says he’s getting stonewalled and has filed a motion to get access to more information.
From the Detroit Free Press:
The motion, filed by monitor Neil Barofsky, requests that the court confirm the monitor’s authority to receive access to records immediately and compel the UAW to produce documents that the monitor is asking for.
“Despite the monitor’s repeated requests, the union has not provided such access to union documents for these investigations, insisting that the union must engage in what has become a lengthy pre-production review and asserting that it will withhold or redact documents as it deems necessary to protect privilege and confidentiality … by taking that position, the union has effectively stalled the monitor’s work,” the motion said, which was filed in the U.S. District Court in Detroit Monday.
And what does the union have to say about this?
The federal government’s work rooting out the corruption in previous administrations is what allowed our members to take back their union. … We have cooperated and will continue to cooperate with the federal monitor and remain focused on building power for workers.”
A source familiar with the investigation said the benefit in question is not a benefit specific to Fain’s fiancee and her sister, but rather that National Training Center employees have not had a raise in several years and negotiations covering these employees are a routine aspect of negotiations with the Detroit Three automakers.
Time will tell what actually happened here and it’s possible there were no shenanigans. Either way, not cooperating with the federal monitor is a bad look.
What I’m Listening To On The Train While Writing TMD
Yesterday I was on a plane. Today I’m on a train, writing about cars, listening to a song about roads. That’s right, let’s listen to “Take me home, country roads” from John Denver who is, so far as I can tell, the freakin’ best.
The Big Question
How much cheaper does an EV need to be per year for you to consider it? Did you already do that math?