Tesla Warns the Model 3's Sweet Tax Subsidies Are About to Disappear
Tesla predicts the Model 3 will not get any cheaper in the next few days, everybody wants to run a Kia dealer, and a forgotten South Korean automaker vows “never [to] collapse again.” All that and more in this edition of The Morning Shift for Thursday, March 30, 2023.
1st Gear: The Tax Credit Party’s Over for the Tesla Model 3
As we continue to wait for the U.S. Treasury to issue its battery sourcing guidelines (so customers can have some idea of what they can expect to save on their next EV purchase), Tesla has put out a warning. The manufacturer stated Wednesday, per Reuters, that the existing $7,500 discount on the single-motor version of the Model 3 sedan will be reduced by Friday, the last day of March.
Tesla Inc said on Wednesday a $7,500 tax credit in place since January will be reduced for its Model 3 rear-wheel drive by March 31, subject to guidance due this week from the U.S. Treasury Department on the sources of battery components.
The Treasury Department is due to issue guidance on sourcing of electric vehicle (EV) batteries by Friday that will impact the credit available for some EVs. The credit is in effect for deliveries taken before the updated guidance is issued.
A U.S. official told Reuters that the Treasury Department’s guidance on the EV tax credit due March 31 would result in fewer vehicles getting full or partial credits.
While Tesla builds the U.S.-sold Model 3 at its Fremont, California plant, that alone won’t be enough to secure the maximum tax credit going forward. Under the new regulations, EV batteries must be built using a certain percentage of free-trade-sourced components and “critical minerals” to ensure full credit eligibility. The discount only applies to electric passenger cars priced below $50,000, and because the dual-motor version of the Model 3 starts at about $54,000, it hasn’t gotten the benefit of tax credits since the start of the year anyway.
As Reuters’ article notes, it’s almost certain that fewer vehicles in total will receive full or partial credits once these new rules take effect. But we don’t know precisely which ones, nor how many will be cut out, until the Treasury explains its interpretation of the Inflation Reduction Act’s language. Just know that if it makes buying an EV too convenient, Senator Joe Manchin is prepared to “stop it all” in court.
2nd Gear: Everybody Loves Kia
Kia’s image has very much been on the rise, at least if you ask car dealers eager to add the brand to their showrooms. From Automotive News:
Joe Ozog, president of Ozog Consulting Group in Scottsdale, Ariz., said he has been calling on dealers at the end of each quarter for more than 20 years to see what their target brands are. Recently, for the first time, he said, Kia made the top three most requested brands.
In February, Ozog’s firm represented the sellers in the sale of a Kia store in Lufkin, Texas. Some younger dealers think Kia is the next Toyota, he said.
“Ten years ago, there was the Kia-Hyundai stigma,” Ozog said. “This generation doesn’t have a Kia-Hyundai stigma. They look at it as how Toyota and Honda were 10 years ago.”
It’s a similar situation for Alan Haig of Haig Partners, a buy-sell firm in Fort Lauderdale, Fla. In the past, Haig said, his firm would hear dealers say they were only interested in buying stores selling such brands as Honda, Toyota, BMW, Lexus, Mercedes-Benz and Porsche.
“Now we’re hearing Kia included in that conversation as a brand that they want to have if they don’t yet have it, or they have one [and] they want to have another one,” Haig said.
The Kia-Hyundai stigma seemed pretty dead by 2013, though if the brand was merely tolerated then, it’s certainly desired now. You can thank the Telluride for that, maybe the EV6 too and the logo that’s confused everyone. Something tells me this could kick off a worrying trend with future badge redesigns.
3rd Gear: German Ford Plant’s Future Still Not in Focus
Last summer, Ford announced that the Saarlouis, Germany facility where it builds the Focus would be winding down activity after 2025, when the Focus is likely to end production. But now Ford has decided to give the plant a rather lengthy stay of execution — until 2032, as a matter of fact — though what it’ll be used to make, nobody really knows yet. From Automotive News via its sister publication Automobilwoche:
The plant will stay open at least until the end of 2032, with 1,000 jobs to be retained until then, employees representative Markus Thal told staff.
Currently, the workforce in Saarlouis, which builds the Focus compact car, is about 4,500. [...]
A Ford spokesman said it remains unchanged that no more Ford vehicles will be built in Saarlouis after 2025. Priority will be given to attracting investors to take over the factory, the spokesman said.
Ford had planned to shut the factory entirely in summer 2025, when production of the Focus ends.
In return for job security, employees have agreed to reduce the capacity of the plant. Instead of a daily construction rate of 860 units, this will be reduced to 600 units a day from April 1.
However, the planned annual capacity of 117,000 Focus units will remain in place. The cars will continue to be built in two shifts, but in the future there will be only 300 vehicles per shift.
So Focus manufacturing will drag on for about 18 more months until it peters out, at which point Ford will use Saarlouis for... something. Maybe Ford will sublet the factory, or maybe it’ll change its mind and retool it for an EV. It’s hard to predict what will happen, but the silver lining is that if you happen to live in a country where you’re still lucky enough to be able to buy a Focus, you have a bit of time to follow through before that becomes impossible.
4th Gear: Ford Teams Up for a Nickel Plant
In other Ford manufacturing news, the company has invested in a nickel processing facility in Indonesia, to tap into the country’s reserve of the necessary element. Courtesy Reuters:
U.S. carmaker Ford has joined PT Vale Indonesia and China’s Zhejiang Huayou Cobalt’s as their new partner in a $4.5 billion nickel processing plant in Indonesia, the companies said on Thursday.
The investment is Ford’s first in the Southeast Asian country and underscores growing appetite among automakers for raw materials used in producing electric vehicle (EV) batteries, which account for about 40% of a vehicle’s sticker price, aiming to cut costs and close the gap on EV market leader Tesla.
Volkswagen, Europe’s biggest automaker, this month said that it would invest 180 billion euros ($196 billion) over five years in areas including battery production and the sourcing of raw materials.
Indonesia, which has the world’s biggest nickel reserves, has been trying to develop downstream industries for the metal, ultimately aiming to produce batteries and electric vehicles.
Under the agreement, Ford will own 33 percent of the factory as partners PT Vale and mineral processor Huayou comprise the rest. Ford says it’s critical to allowing the company to meet its goal of producing 2 million EVs annually by 2026. The plan for 2023 is 600,000, if you were wondering.
5th Gear: ‘We Promise You That We Will Never Collapse Again’
Right after the start of the new year, we reported on how the Korean automaker formerly known as SsangYong had been acquired by a conglomerate that was intent on redefining the manufacturer in its own image, in hopes of “a less painful existence.” That existence will take the form of the KG Mobility Torres EVX, which was just unveiled at the Seoul Mobility Show this week. From Bloomberg:
The carmaker Thursday unveiled four new vehicles at the Seoul Mobility Show, including the Torres EVX, its first electric car since conglomerate KG Group bought a majority stake in the firm in September 2022. Using lithium-iron-phosphate batteries made by BYD Co., the SUV has a driving range of 500 kilometers (310 miles) on a single charge.
It will be available in South Korea and Europe in the second half of this year. In Korea, it will be priced at less than 40 million won ($30,700) after subsidies.
“We successfully completed all processes for a restructuring and now have a new major shareholder,” Chief Executive Officer Jeong Yong Won said. “We promise you that we will never collapse again.”
According to CEO Jeong Yong Won, the lithium-iron-phosphate batteries in the Torres were so chosen because they are safer and younger EV buyers in South Korea are especially concerned about battery fires. The kids over there hate thermal runaway, it turns out.
Reverse: There’s Going to Be Some Changes ‘Round Here
On this day 14 years ago, the Obama administration set some conditions for General Motors and Chrysler to meet if they wanted federal bailout money. From History.com:
President Obama’s auto task force determined that Chrysler was too focused on its sport utility vehicle (SUV) lines and was too small a company to survive on its own. In his March 30 announcement, Obama gave Chrysler a month to complete a merger with Italian car maker Fiat or another partner. Shortly before its April 30 deadline, Chrysler said it had reached agreements with the United Auto Workers union as well as its major creditors; however, on April 30, Obama announced that Chrysler, after failing to come to an agreement with some of its smaller creditors, would file for Chapter 11 bankruptcy protection, then form a partnership with Fiat. The merger was complete in 2014.
As for General Motors, according to the conditions Obama announced on March 30, the auto giant had 60 days to undergo a major restructuring, including cutting costs sharply and getting rid of unprofitable product lines and dealerships. Over the next two months, GM said it would shutter thousands of dealerships and a number of plants, as well as phase out such brands as Pontiac. Nevertheless, on June 1, 2009, GM, which was founded in 1908, declared bankruptcy. At the time, the company reported liabilities of $172.8 billion and assets of $82.3 billion, making it the fourth-biggest U.S. bankruptcy in history. GM returned to profitability in 2010.
Today, Chrysler is of course renowned for its selection of reasonably sized and fuel-efficient cars. In all seriousness, both companies are indeed profitable these days. In fact, the only one of the Big Three that finished last year shaking its head in its hands is the one that didn’t take TARP money — though it certainly tapped into taxpayer funds in other ways.
Neutral: And Welcome to MotorWeek
Your friend and mine Collin Woodard compiled a bunch of cars at least 25 years old that members of the Jalopnik community wish they had for themselves. Collin assembled this list in the best way one possibly could — appending MotorWeek review segments for every vehicle mentioned. Want to lose the rest of your work day to John Davis’ dulcet tones? Sure you do.
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