The writer, a Los Angeles freelancer and former Detroit News business reporter, blogs at Starkman Approved. This column is an expanded version of what originally ran on Eric Starkman's LinkedIn page.
By Eric Starkman
Increasingly I finish reading articles and find myself asking, “Did I just read what I think I read?” This Bloomberg article by veteran auto writer Keith Naughton was my latest instance.
Electric vehicles are supposedly the future, yet GM’s and Ford’s EV sales declined in the second quarter. Demand for EVs in the U.S. is so weak that the supply of EVs on dealer lots ballooned to 92 days in June, well above the 51 days of inventory for all models. Unlike Tesla, where a delivery is when a vehicle is paid for and turned over to a customer, GM and Ford record deliveries when their vehicles are dumped on dealers’ lots.
Ford's Jim Farley and GM's Mary Barra
Unsold vehicles aren’t like fine wines – they don’t get better with age. There are carrying costs for these vehicles, and in short order dealers must make room for the 2024 models. I recall that GM cut the price on its Chevy Bolts by about $6,000 amid reports that dealers had about 50 days of inventory of those vehicles. EV buyers seem to have money to burn, but those who are diligent about their finances should hold off buying their vehicles because in short order they can expect some sweetheart deals.
Little wonder that only 31% of dealers see EVs as the future, compared to 53% of the public.
“Dealers, staring at almost 100 days supply, perhaps are a bit more realistic,” Mark Schirmer, a Cox Automotive spokesman, told Naughton. “The extra inventory is making some dealers a bit concerned.”
A bit concerned? Dealers should be sweating bullets.
What is painfully obvious is that GM and Ford can’t compete with Tesla, which has been singularly focused on manufacturing electric vehicles for more than 20 years and is overseen by a CEO whose technical competence exceeds the combined talents of Barra and Farley. Tesla had the foresight and understanding that electric vehicles would require an easily accessible and reliable charging network and the company was building out its Supercharging network when GM was still challenging California’s fuel economy standards.
For the record, Elon Musk wasn’t responsible for Tesla’s Supercharging network. It was JB Straubel, the company’s former chief technology officer, who this year was elected to Tesla’s board.
Tesla’s charging network is fast becoming the industry standard, giving even more power to Elon Musk, who is mercurial and seemingly unstable. Details of the agreements GM and Ford have with Tesla haven’t been disclosed, but I’d wager that Tesla has some competitive advantage.
Tesla's Dominance
Tesla car (Company photo)
Tesla is mercilessly pounding GM and Ford on the EV front. The company in the first half of the year delivered nearly to 337,000 EVs in the U.S., compared to GM’s 36,322 and Ford’s 25,709. Adding to GM’s and Ford’s shame, South Korea-based Hyundai-Kia ranks No. 2 for EV sales in the U.S., having delivered 38,457 vehicles.
Volkswagen Group even bested Ford, having delivered nearly 27,000 EVs. VW’s ID.4 all-electric SUV was recently ranked No. 6 in Cars.com survey of most American-made vehicles when assembly location, parts content, engine origin, transmission origin and U.S. manufacturing workforce are considered.
The ID.4 doesn’t qualify for IRA sales tax breaks, but Ford’s Mustang Mach-E, which the company proudly manufactures in Mexico and doesn’t even rank in Cars.com’s top 100 survey, does.
Barra has repeatedly promised that she will sell more EVs than Elon Musk by mid-century. As an example of the auto media’s blind devotion to Barra, GM in the first half of this year delivered 49 electric Hummers. The company announced with great fanfare last September that it had more than 90,000 reservations for the vehicle, which lists for more than $100,000. The automotive press hasn’t held Barra to account for the Hummer’s pathetic sales performance so far.
Given a Pass
Barra has also been given a pass for GM’s decline in China, the world’s biggest automotive market. GM once had a 15% market share; it’s now less than 10% and falling. That’s because China has a more mature EV market and there are about a half dozen domestic companies that are giving Tesla a good run for its money.
Then there’s the statement Barra posted on LinkedIn more than a year ago saying GM’s robotaxiCruise unit is “on the cusp of commercialization.” San Francisco officials and residents will tell you otherwise. The city’s police and fire fighters say GM’s Cruise vehicles are a hazard, and have repeatedly interfered with emergency first responders.
Although so far there have been no serious injuries or deaths, Jeanine Nicholson, San Francisco’s fire chief, told a local TV station, “it’s only a matter of time before something really, really catastrophic happens.”
The reason Cruise can continue to operate is because it is regulated by California’s Public Utilities Commission, which is comprised of appointees of Gov. Gavin Newsom. One of the PUC’s five commissioners is John Reynolds, who most recently served as Cruise’s top attorney.
Michigan isn’t alone functioning as a Banana Republic.
Cousin Chris Farley in SNL's skit, "In a Van Down by the River."
Ford’s Farley, a cousin of the late Chris Farley of SNL fame, has demonstrated he’s also quite the media entertainer, and his leadership has made Ford a laughing matter. Farley’s mandate when he was named CEO nearly three years ago was to improve the company’s quality control.
In the past 18 months, Ford has issued about 100 safety recalls, far and away the most of any automaker. Some of these recalls involve vehicles manufactured since Farley took over and involved recalls on previous recalls.
Ford said a retooling of its Mexico plant earlier this year was responsible for limited availability and therefore low sales of its Mustang Mach-E. According to this report in the trade publication Ford Authority, at the beginning of June there was a 112 days’ supply of Mach-E’s on dealer lots – more than double the average Blue Oval SUV or pickup.
Offering Discounts
Not surprisingly, Ford was offering a “secret” $3,000 “inventory discount,” as well as a special 2.9 percent APR financing deal for 60 months through Ford Credit.
Ford’s performance in China is an embarrassment. A China-based publication reported that Ford China was forced to reverse plans to sell the Mustang Mach-E under a separate entity because of poor sales and massive losses. Ford’s Mustang Mach-E sales reportedly peaked at 1,535 units last December. In April, the company sold a mere 332 units.
Farley isn’t looking too smart on the timing of Ford’s dumping of most of its Rivian shares last year, on which the company took a $1.7 billion write down. Rivian’s shares have since rebounded by nearly 40% and Wall Street again has become bullish on the stock.
Barra and Farley aren’t being held to the same performance standards of CEOs of other global brands. Audi one week ago fired CEO Markus Duesman reportedly because of declining sales in China and a sluggish rollout of electric vehicle products.
VW a year ago fired Herbert Diess because of concerns of his EV implementation strategy. Diess was one of Europe’s most respected CEOs, whose credentials include a PhD in mechanical engineering and production technologies.
RJ Scaringe, CEO of Rivian, has a PhD in automotive manufacturing from MIT. Barra’s only technical training is an undergraduate degree in mechanical engineering she earned decades ago. Farley is an empty suit with an MBA and no technical training.
It’s beyond me how Barra and Farley can keep their jobs, particularly given the $58 million and the $44 million in compensation they’ve received over the past two years. For that kind of money, GM and Ford should be performing a lot better on the EV front.
Reach the writer at eric@starkmanapproved.com. Confidentiality is assured.
