Volkswagen and BMW Really Need to Save Money on EVs

Image:  BMW
Image: BMW

Two German automakers are spending worrying sums on electric cars, Volvo will reduce its headcount for similar reasons and very powerful companies are determined to make flying taxis a thing and it doesn’t care how you feel about that. All that and more in this edition of The Morning Shift for Thursday, May 4, 2023.

1st Gear: When Will Costs Come Down?

Many automakers reported their first-quarter earnings this week, and Volkswagen and BMW’s results took an uncannily similar tone. Both automakers saw a noticeable rise in deliveries, with BMW seeing sales dip slightly over the quarter as a whole, offset by higher margins on every vehicle. Neither is adjusting guidance for the rest of 2023. The common thorn in their sides is spending on electric cars. From Reuters:


Read more

Asked how the carmaker would respond to the wave of electric vehicle (EV) price cuts, [Chief Financial Officer Arno] Antlitz said: “Our focus is on quality of the business, rather than on volume. This is specifically true for EVs... we don’t want to lose our margin parity target out of sight.”

Volkswagen aims to achieve the same margin from combustion engine cars as EVs, though the latter are still far more expensive to produce, in part because of high prices of raw materials.

Volkswagen’s software unit, Cariad, lost a whopping 400 million euros in Q1. Meanwhile, BMW is floating the possibility of raising prices even further, just to offset what it’s bleeding on EVs from material as well as research and development expenses:

BMW will not cut electric vehicle (EV) prices in China and may raise some car prices at a global level, to help weather the higher input costs of EV production, it said on Thursday following first quarter results.

The carmaker reported a higher earnings margin for its cars segment, at 12.1% from 8.9% a year earlier, but kept its outlook unchanged in the face of ongoing high costs and rising competition.

BMW said in March it intended to keep prices stable this year after two years of passing on rising costs to customers, but Chief Financial Officer Nicolas Peter said some more moderate hikes could still be expected.

“When it makes sense, we could adjust a price here and there,” said Peter, who will from this month be replaced in his role by Walter Mertl.

Every EV maker wants Tesla’s sales, but no EV maker can yet claim Tesla’s margins. They better sort out the latter before the former happens.

2nd Gear: Volvo’s Next

The same week Ford announced restructuring that will see the automaker cut its worldwide workforce to give itself some wiggle room — again, because EVs are costing it too much money — Volvo has announced it’ll shed around 1,300 jobs in Sweden. Outside Sweden, nothing’s been announced, but CEO Jim Rowan says there’s more opportunity to downsize. Courtesy Reuters:

While an earlier efficiency drive had begun to show results, more was needed, CEO Jim Rowan said in a statement.

“Economic headwinds, increased raw material prices and increased competition are likely to remain a challenge to our industry for some time,” he said.

The 1,300 positions equate to 6% of Volvo Cars’ workforce in Sweden.

Rowan told Reuters the group did not yet know how much it would save from the new measures. “We’re still working the details through on that,” he said in an interview.

The company said it had issued redundancy notices for 1,100 employees, while the remaining 200 white-collar positions would be identified following a review of the business across Sweden.

It said it also expected to cut jobs and reduce costs across its global operations in the coming months, including its consultancies.

Rowan said he could not yet specify where those jobs would be cut, but that focus would primarily remain on office-based positions.

“We sell in over 80 countries or so worldwide, so I think there’s opportunities for us to become more efficient across the entire network,” he told Reuters.

Right now Volvo offers two EVs in North America — the XC40 and C40 — with the big EX90 soon on the way and another teased-yet-unannounced compact SUV due later this year. That’s an ambitious showing for a company that has always occupied a niche, at least on this side of the pond. It also means Volvo has to be diligent about its bottom line.

3rd Gear: Ferrari Keeps Rolling

The only new Ferrari tends to share these days is good news, so it should come as little surprise that increased shipments drove up the brand’s first-quarter revenue by 27 percent. This came off the back of several models, none of which were the Purosangue SUV because it’s not ready yet. I can only imagine how loud the bells will be ringing in Maranello when it is. From Automotive News:

Results were driven by sales of the Portofino M, the 296 GTB and the 812 Competizione models, as well as pricing capacity, the company said in a statement on Thursday.

CEO Benedetto Vigna said demand for Ferrari’s cars stretched into 2025.

Ferrari had decided to reopen orders for its new Purosangue, which had been suspended “due to an initial unprecedented demand,” Vigna said. [...]

Deliveries of the 390,000-euro Purosangue are due to start in the current quarter.

Ferrari, which unveiled the Roma Spider in March, has promised a total of four new models this year.

Ferrari’s margin on adjusted EBITDA grew 2 percentage points to 37.6 percent, compared to the same quarter last year.

Revenue was $1.5 billion.

Hybrid cars comprised 35 percent of Ferrari’s deliveries over the last four months, which would seem to bode well for the company’s slow transition to a mostly-electrified lineup. That sort of thing would scare customers of any other prestige make, but Ferrari can do whatever the hell it wants.

4th Gear: Lanes in the Sky

The dream of flying taxis refuses to die, and the Federal Aviation Administration seems to think we’ll start seeing them buzzing overhead and ferrying passengers to and from major transit hubs as soon as next year. To that end, the department has drawn up a new regulatory blueprint to inform aircraft manufacturers and traffic controllers how this is all supposed to work. Good thinking, FAA. From The Wall Street Journal:

“If we’ve gotten it right—from the regulatory framework, from the level of safety that the public expects, and if all that comes together—then it’s a world that we only thought about as science fiction before that becomes science fact in the moment,” [Acting FAA Administrator Billy] Nolen said Wednesday at The Wall Street Journal’s Future of Everything Festival in New York.

At the event, Mr. Nolen announced that the agency had issued a new blueprint for flying taxis, called its concept of operations for urban air mobility.

Flying taxis are likely years away from becoming a common presence in U.S. cities. A number of prototypes are in various stages of development and certification by the FAA, which must issue safety approvals for the vehicles, operating procedures and integration into the nation’s complex airspace. Mr. Nolen said he expects the first air taxis to win FAA approval as soon as next year.

It isn’t yet clear how much flying taxi rides may cost, or whether the flying public will embrace them as a safe alternative to public transit or car services.

Mr. Nolen said he expects the public to welcome flying on the vehicles once regulators demonstrate they come with the same level of safety that passengers expect on commercial flights.

“What I’ve said to the industry: When you put the first paying passenger on board, it has to meet the same standard, whether I’m on a Cessna, whether I’m on a Gulfstream corporate jet, or whether I’m on a Boeing 787,” Mr. Nolen said.

I remember attending the Consumer Electronics Show in Las Vegas in 2020, about two months before the world stopped and I probably unknowingly contracted COVID. At that event, Uber and Hyundai co-unveiled a flying taxi they expected to begin commercial service in 2023. Three years later, that never happened, VTOL taxis still don’t exist and the conversation around them still hasn’t moved past “it’d be really great if nobody died in one.”

5th Gear: Waymo Gets Bigger

The Google-affiliated driverless taxi service doubled its footprint in the Phoenix metro area and expanded its areas of operation in San Francisco this week. From Automotive News:

The self-driving technology company said Thursday it has doubled the service area in which its Waymo One ride-hailing fleet operates in metro Phoenix. Its vehicles will now carry customers across 180 square miles in the region, connecting Phoenix and its major suburbs. Previously, the company operated in two distinct areas, downtown Phoenix and the East Valley, that were not connected.

Now the company, a subsidiary of Alphabet, says its operating area will be largest contiguous area in which a driverless ride-hailing service is offered. For the first time, the operating area includes Arizona State University in Tempe, a potentially lucrative market. Waymo is also opening a second pick-up and drop-off location at Phoenix’s Sky Harbor International Airport.

In San Francisco, Waymo will give its “Trusted Testers” group of approved customers access to new locations, including Fisherman’s Wharf and the North Beach neighborhood.

Waymo is still not permitted to charge for rides in San Francisco, and it’s been waiting to receive approval from the California Public Utilities Commission for some time now. Today, the company says it runs about 10,000 trips per week. It hopes to increase that ten-fold 16 months from now; wouldn’t it be great for Waymo if it actually made fares on all those trips?

Reverse: Sergio Was Right

It was on this day in 2009 — 14 years ago — that Fiat’s Sergio Marchionne, off the heels of subsuming Chrysler, announced that he’d set his sights on yet more brands: Opel and Vauxhall, which at the time were under General Motors’ control. Marchionne never got to see his grand plan come to pass before his unexpected death in 2018, but it all worked out the way he would’ve wanted in time. Peugeot Citroen snapped up Opel and Vauxhall in 2017, and then that whole group merged with Fiat Chrysler to make the behemoth we know today as Stellantis in 2021.

Fiat Makes A Case For Opel

Neutral: Up and Away

There is a lot of flying in my immediate future, which is a problem because I don’t like flying! I need all your thoughts and prayers during this trying time. And advice. How do you get through it?

More from Jalopnik

Sign up for Jalopnik's Newsletter. For the latest news, Facebook, Twitter and Instagram.

Click here to read the full article.