Tesla Quality Checking

An interesting insight into Tesla's assembly and delivery process over at Wired, here.

Tesla is testing every car they  build with a battery of tests which takes a whopping 5 hours to complete.  This compares with the end-of-line testing of a true high volume mass production auto plant, which takes typically several minutes.  At the end of the assembly line, the completed car is run on a rolls machine (chassis dyno) which takes the car through an automated test sequence which spot checks the engine, brakes, transmission, and other systems.  There are also final visual inspections. 

And that's it.  In a modern plant, the quality checks and reliability are built into the assembly process and design itself.  Most cars fire up at the end of the line and are ready for a consumer to drive them 150,000 miles.

If Toyota, for example, took 5 hours to test and quality check each Lexus they built, they would not be able to produce many cars, and the plant would not make money.

Is Tesla's extensive end-of-line testing due to a lack of confidence in upstream processes and parts?  

If Tesla hopes to be a major player, they will need to increase throughput and reduce  in-plant time. They won't be able to check each car for 5 hours. 

The Chicken Tax--Bad and Good

There is an interesting piece in the Detroit News today about the possible impact of the "Chicken Tax", the 25% import duty on foreign built (exa-NAFTA) pickup trucks.   According to "analysts", pickup trucks in the U.S. may have a several thousand dollar premium compared to what they would cost without the protectionist tariff. 

The average selling price of full-size pickups has grown at more than twice the rate of the overall industry — cars and trucks combined — since 2005. The average truck sells for more than $40,000, nearly $9,000 more than the average vehicle, according to automotive research firmEdmunds.com. Automakers in recent years have added more luxury items to pickup trucks — and cars, too — so it's difficult to pinpoint how much an uncompetitive market can be attributed to price.

But Jesse Toprak, an analyst for vehicle pricing website TrueCar.com, said in a telephone interview that weak competition in the truck segment results in a "couple-thousand-dollar premium" paid by consumers.

The Chicken Tax, like any other protection tariff, has both bad and good effects.

Bad Effects

• Less consumer choice--
  We can't have the globally built small/midsized pickups that are sold overseas because with a 25% tariff no one would buy them.
• Higher prices--
  local production is done in part by UAW labor, which is more expensive than overseas labor. 
  
• Foreign retaliation

Good Effects

• Local production means more jobs, and more business in U.S (and NAFTA region).  If you add up direct and indirect jobs, thousands of Americans (and Mexicans and Canadians) are employed because of local truck production.  Some are unionized but many are not.
• Higher quality pickup trucks.  Due to the high cost of entry, only large established players like Toyota and Nissan have the means to set up a local plant to build trucks--so they have to bring high quality, high margin products. Cheap junk won't fly.  Marginal brands like Mahindra or Great Wall have a hard time making a business case for low cost products, due to the high barriers of local labor costs and the regulatory environment.
  

Judging by the sales numbers (number one selling vehicle is F150, followed by Chevrolet Silverado) the higher prices do not seem to hurt pickup truck sales.  Trucks have become a luxury good, as much as a work tool, and people are willing to pay $40,000 for a loaded pickup truck. 

Tesla's Hungry Doorhandles

Edmunds discovered that the Tesla S motorized door handles will not detect your fingers if you have them in the way when they want to close--they will pinch your hand. 

Tesla, you might want to fix that.  Some little kid is going to try it and get hurt.

Top 20 Vehicles June 2013

Here is a list of the top 20 best selling vehicles in the U.S. through JUne, 2013.  Data table courtesy of Good Car Bad Car.

Rank	Vehicle	June 2013  YTD	% Change	June 2013	% Change
#1	Ford F-Series	367,486	+ 22.0%	68,009	+ 23.6%
#2	Chevrolet Silverado	242,586	+ 24.7%	43,259	+ 28.9%
#3	Toyota Camry	207,626	- 2.9%	35,870	+ 11.7%
#4	Honda Accord	186,860	+ 20.4%	31,677	+ 9.5%
#5	Dodge Ram	170,319	+ 22.9%	29,644	+ 23.8%
#6	Nissan Altima	167,787	+ 6.8%	26,904	+ 23.3%
#7	Ford Fusion	161,146	+ 17.8%	24,313	- 0.5%
#8	Toyota Corolla/Matrix	158,972	+ 4.8%	26,458	- 0.7%
#9	Honda Civic	158,704	- 2.4%	29,724	+ 8.1%
#10	Ford Escape	156,626	+ 23.2%	28,694	+ 0.7%
#11	Honda CR-V	145,763	- 0.6%	26,572	+ 14.1%
#12	Ford Focus	134,785	+ 2.6%	23,144	+ 9.2%
#13	Chevrolet Cruze	133,689	+ 17.4%	32,871	+ 73.2%
#14	Chevrolet Equinox	126,397	+ 14.0%	23,645	+ 13.7%
#15	Hyundai Elantra	126,244	+ 29.1%	22,163	+ 25.5%
#16	Chevrolet Malibu	111,100	- 21.4%	21,288	- 32.2%
#17	Hyundai Sonata	103,010	- 12.3%	19,454	- 7.1%
#18	Toyota RAV4	101,274	+ 13.2%	20,540	+ 35.8%
#19	Ford Explorer	101,243	+ 30.0%	16,597	+ 13.5%
#19.1	Ford Explorer	95,302	+ 25.9%	15,588	+ 11.2%
#19.2	Ford Explorer Police Interceptor	5941	+ 173%	1009	+ 67.3%
#20	GMC Sierra	87,633	+ 20.1%	16,568	+ 32.8%

Some interesting things going on here.

Full size trucks are still king -- Ford F-series, Chevrolet Silverado, and Dodge Ram are all in the top 5. 

Camry, Accord and Altima are the beset selling sedans, but Camry sales are slowing, while Accord and Fusion are accelerating.  Could Fusion overtake Altima and break into the top 3 sedans?  Malibu is slipping badly, down 21% YTD.

The Ford Escape is charging up the chart, with a 23% YTD gain in sales, and has beat the CR-V, Equinox,  and RAV4, the latter by a large margin. 

In small cars, Corolla is still king, and Honda Civic seems to be wilting a little.  Ford Focus is hanging on, but the big story is the Cruze, with a huge 17% increase. 

Another impressive achievement for Ford, the Explorer has cracked the top 20 list (once upon a time it was one of the most popular nameplates in the country), racking up 95,000 retail sales YTD.  The Explorer is the only larger SUV in the top 20.

Brands of the top 20: Chevrolet, Ford, Dodge, Honda, Toyota, Nissan, Hyundai, GMC. Notable in its absence is Chrysler, which can't seem to crack the big-volume game. 

Corporate prizes in the top 20:

• Ford: 5 vehicles (F-series, Fusion, Escape, Focus, Explorer)
• GM: 5 vehicles (Silverado, Cruze, Equinox, Malibu, Sierra)
• Toyota: 3 (Camry, Corolla, RAv4)
• Honda: 3 (Accord, Civic, CRV)
• Hyundai: 2 (Elantra, Sonata)
• Nissan: 1 (Altima)
• Dodge: 1 (Ram)

Conclusions: Ford and GM are doing great.  Toyota is showing some weakness in sales numbers.  Chrysler is MIA.

GM's eAssist: 25% improvement?

In a recent blog post, GM claims that their eAssist mild hybrid (starter/generator) system is good for an average 25% fuel economy improvement.

I'm not sure how they got this number, it doesn't pass the common sense test for me.

Here are the EPA ratings for the eAssist Malibu vs the 2.5L I4 gasoline Malibu, copied from the EPA's FuelEconomy.gov web site:

2014 Malibu eAssist

City: 25mpg

Highway: 36mpg
Combined: 29mpg

2014 Malibu 2.0L

City: 21mpg

Highway: 30mpg
Combined: 24mpg

So, comparing Malibu vs Malibu, by getting the eAssist system, you gain all of 5mpg for the EPA combined number, which is a 20% improvement, not 25%.

And these are EPA numbers!  In real life, where people will drive faster than the EPA does, the benefit of eAssist will drop further.

Musk: Batteries Are Expensive

"The biggest single challenge for electric vehicles is affordability." -- Elon Musk

This comment was made during a recent shareholder's meeting, reported by Inside EVs.

Musk thinks Tesla can produce in "three to four years" an EV which has sufficient range to be broadly practical, which is affordable to a large number of customers. 

Which is probably something like a $30,000 vehicle which has a real world range of 200miles or better.  Based on the sales numbers of the current crop of 100mile vehicles, which aren't great, I am guessing the range needs to double before the masses really take notice.

But doubling the range of a car like the Leaf will add approx. $10,000 to its price, at current battery costs of approx $500/kWh.

So the billion dollar question is, how will Tesla get ~45kWh of batteries for $10,000, leaving them $20,000 for the base vehicle and profit?

Spotted: 2014 Corvette Stingray

I saw this M-plate (GM test fleet car) 2014 Corvette Stingray at a local Lowe's.

The interior is a big improvement over the previous car.  The exterior design leaves me a little cold--I think it is a bit busy for my taste. 

NHTSA Delays Backup Camera Rule

The NHTSA has decided to delay the regulation requiring backup cameras until 2015,  announced in a latter to Senator Jay Rockefeller from Ray Lahood.  One reason stated was that NHTSA needed more time to study the cost/benefit equation for the backup cameras.

My issue with the proposal is that it will force carmakers to add expensive LCD displays to vehicles which may not already include them, driving up the price of the lower feature vehicles. 

If rear ultrasonic sensors are cheaper, I would suggest that method as an acceptable alternative.  The backup warning systems have the added benefit of reducing accidents that happen when people aren't careful when reversing the vehicle.  In theory, a backup warning mandate would reduce insurance costs.

Source: Bloomberg

iOS For Your Car?

Apple's recent announcement that they would be working with automakers, including heavyweights GM, Honda, and Hyundia + Kia, to integrate an iOS interface into their dashboard infotainment systems.

Notable in their absence from the announcement were the major automakers Ford, VW, Toyota, Fiat + Chrysler.

I think the holdouts have the right idea.  Getting married to Apple's iOS interface means giving up the branding of the infotainment system, and some control over how it behaves.  A better approach is to use a system designed to integrate tightly with the vehicle, which has the right interfaces built into it to talk to any smart (or dumb) phone using open standards such as BlueTooth.

According to recent sales numbers, Android and iOS about the split the market in the U.S., and internationally, Android is the runaway winner.  Any global automaker that embraces an iOS optimized infotainment system may be making a business error.

(Graph courtesy of Tech-Thoughts)

Should Chrysler Recall The Jeeps?

NHTSA wants Chrysler to recall 2.7 million vehicles to install some kind of crash mitigation hardware on the vehicle to reduce the likelihood of the fuel tank rupturing in a rear end crash. 

Should they?

On one hand, according to the data, the Jeeps in question are about 2x more likely to leak fuel and catch fire in a rear end crash than other vehicles.  NHTSA found that Jeeps were having rear crash fire deaths at a rate of 1 per million miles travelled, while the average for all vehicles is 0.5 fire deaths / million miles. 

On the other hand, recalling that many vehicles and repairing them will be a very large task, and very expensive for Chrysler.

Chrysler rightly argues that its vehicles met all safety standards that were in force at the time they were certified.  NHTSA is essentially asking for a retroactive safety recall.

I think a nice middle ground solution might be for Chrysler to develop a retrofit kit, and offer to repair customer vehicles on a request basis.  Those who are concerned will get the fix, and those who aren't will not bother.  Likely it will be much less than 2.7 million customers.

Fox News: Aptera Not Dead

The guy who bought Aptera's bones was trying to set up Chinese manufacturing for the chassis.  That isn't going so well, so now he says he is going to build them here in the U.S. 

Riiiiight.

http://www.foxnews.com/leisure/2013/06/10/200-mpg-aptera-still-in-works-says-owner/

Tesla Legislative Defeat In Texas

The Texas legislature failed to advance bills sponsored by Tesla that would allow direct-to-consumer sales.  This means that to sell in Texas, Tesla has to work through dealer franchises.   Tesla won't be able to try again until the next session, not due to start until 2015.

You can read the Automotive News article here.

Kudos to 2014 Impala

I took a look at a new Impala this morning, and I have to give GM props for the nice job they did on the body assembly.  All of the panel gaps were small, the trim alignment was good, the doors shut tightly.  The car looked expensive, even though it is a Chevrolet and not an Audi.

This car is a huge improvement over the car it replaces, the ancient w-body based 2006-2013 Impala.  That car was so out of date, it was difficult for me to understand why anyone but fleets purchased it.  And even the fleets had better choices.

The styling of the 2014 is clean, with a little sculpture and a little chrome, but a tasteful amount. 

(Photo courtesy of Edmunds.com)

Tesla Market Craziness

Tesla's stock drive through $100/share this morning, giving the company a market value of around $11 billion.  That is more than Fiat/Chrysler ($8b) and almost as much as Porsche ($12b)!

That's nuts.  This is speculation, I think. 

Sad News Down Under

Ford has announced that they will cease manufacturing operations in Australia in 2016.  Product engineering will continue.  However, this may be the end for the indigenous Falcon vehicles, which include RWD V8 sedans and Utes (cars with open pickup beds). 

GM has followed a different strategy, using Australia as an export base for the Holden based Pontiac G8 (defunct) and later the Caprice PPV, based on the same platform.

Tesla Pays Back ATVM Loans... But Why?

The big announcement yesterday in the auto business was that Tesla was paying off its ATVM loan off early.

I am puzzled by this, it seems from the outside like a bad business decision.

The ATVM loan was cheap money, carrying an interest rate equal to Treasury notes.  Current 10 year notes are below 2%.

By paying off the ATVM loan early, Tesla traded the cheap government money for stock and a public bond offering of their own notes, also running at about 2% interest. 

But Tesla could have done both--kept the ATVM loan and issued their own bonds--and had extra cash with which to develop the Model X and future less expensive vehicles. 

Was this as simple as Elon Musk not wanting to be under some government oversight, and not wanting to be seen as a government supported enterprise?  

Will BEVs put auto service shops out of business?

Inside EVs asks, "Will Electric Vehicles Drive Mechanics Out Of Business?", after an article in The Street.

The answer is yes, mass electrification will eventually put some mechanics out of business.

The low-skill places like quick-lube joints will be really hurt.  Independent ASE certified shops, and ASE certified chains like Midas will see a slow down, as brake changes will be much less often and exhaust systems will never need work.  However, BEVs will still require cooling system repairs, air conditioning work, and suspension fixes.

Tire shops that specialize in tires and suspensions will do fine.

I expect that some independents and many large chains will invest in specialized tools and training, to be able to do BEV specific jobs like battery pack diagnosis/replacements, battery cooling system repairs. 

I also expect that in time, a healthy market will develop in after-market high voltage batteries, where you will be able to buy a rebuilt battery pack for a competitive price from a 3rd party supplier, much like you can buy replacement 12v batteries today.

It may be very different, actually, than you expect, because we don't know which alternative fuel technology will win out.  If consumers balk at the high cost of BEVs, and we don't have the elusive super-battery breakthrough, then we may see a long term shift to other energy storage forms.  For example, we may have a large number of engines running on CNG in the future, as fracking accelerates and the prices continue to drop. 

Since CNG engines are still combustion based, that path would have a busy future for today's mechanics.

Telsa's Profit

Tesla's profit this first quarter, $11 million, was due in part to income from selling EV credits in California to other automakers.  Tesla made $85 million not from selling product, but from cashing in on environmental regulations. 

This means that when you look at profit and loss from selling cars, Tesla is still losing money, at a rate of about $74 million last quarter.  And this is after slowing down R&D work, delaying the Model X, likely to save cash.

Another ATVM Borrower Fails

VPG, which designed (and actually built) a purpose-built vehicle for handicapped transportation, has shut down.

The company ran out of money before it could become self-sustaining, after burning through about $400 million in private capital and a $50 million AVTM loan.

VPG's MV1 mobility vehicle was basically a homely body on top of a Ford truck frame, and uses many parts from existing vehicles.  It was well designed for transporting wheelchair bound passengers, with not much consideration for style.  Besides being ugly, the MV1 is heavy and thirsty, with EPA mileage of 11/14 for the gasoline version.

If you want to buy one, there are still a few for sale, priced around $40,000.  Since they use a common Ford 4.6L V8 powertrain, service should not be an issue.

VPG at least made it to production, unlike Carbon Motors, the other famous failure in the purpose-built service vehicle sector.

Source: Detroit Free Press.

Elio, stalled?

It sounds like Elio Motors is having a hard time raising capital to fund development.  According to KTBS, Elio has not raised enough money from private investors yet to build the next level of prototype, and is asking for seed money from the Louisiana parish where their plant would be located.

Caddo Parish should be very cautious.  While jobs are great to have, it takes many millions of dollars to bring as complex a product to market as an automobile. 

Chances are unfortunately high that Elio could wind up as another Fisker or VPG (who built cars and the flamed out) or Aptera (who never managed to actually deliver a finished vehicle.)

In the meantime, Elio is taking non-refundable reservations for the vehicle, and selling t-shirts.

I wish Elio luck, this would be a neat vehicle to see on the road, and it might be fun vehicle to drive if done right.  But in the current climate, after numerous failures, raising money for a new car company is probably very, very hard.