Road Safety

Harley’s horrible huffing contains plenty of puffing

HDQ1US

When companies won’t give guidance, we must find ways to see where we were relative to history to get a picture of the future. Harley-Davidson (HOG) makes a good case study. Coronavirus may be one factor but the company has already produced results that have undercut the worst levels experienced during the GFC. We have long criticised HOG for fuzzy maths under the disastrous leadership of the recently ousted CEO Matt Levatich.

While there are strictly no direct apples for apples comparisons on the timing of coronavirus and the GFC (the latter requiring no lockdown), we note the weakness in Q1 2020 unit sales in the chart above.

This is what the trend of Q2 looks like.

HDUSQ2

If we assumed a similar slowdown for April and May then theoretically the company would comfortably breach the Q2 2009 unit sales level of 58,179 which is only 18.6% below the Q2 2019 level. Q1 2020 global sales fell by 17.7%, even though the company made a very misleading statement which we’ll get to in a moment.

One thing that struck us was the steadily rising value of quarterly inventory as a percentage of quarterly non-finance revenues since Q1 2014. While the former value is a balance sheet item and the latter P&L, Q1 is generally a period where new models are rolled out ahead of the busiest Q2 & Q3 seasons to ensure the distribution network can move metal.

HDQ1Inv

Shipments reflect this. The inventory metric drops off into Q2 although exhibits a similar type of trend to Q1. Given Q2 2009 was the beginning of the tough times post-GFC, will we see the high watermark breached or will the slowdown in production offset it? How badly are revenues affected such even flat inventories lead to a deterioration of this measure?

In Q4 2019, inventories to motorcycle revenues surged to 69.1%.

We note that Q1 2020 shipments equated to an inventory of 12,534 units (+29.0%YoY).

HDq2Inv

Here is where it gets interesting. By HOG’s own admission in the quarterly investor presentation pack (p.7), it noted that Q1 2020 US retail sales were on target to be one of ‘the strongest quarters in the last 6 years through to mid-March‘, until COVID. 6 years ago US Q1 unit sales hit 35,730 units. US sales in Q1 2020 ended up at 23,732.

By deduction,

In Q1 2014, over 90 days HOG shifted on average 397 bikes per day. (35,730/90 = 397)

In Q1 2020, over the 74 days to mid-March, HOG was moving on average 321 bikes per day. (23,732/74 = 320.7027).

If we assumed that HOG was to hit that magic target over the 16 days stolen by COVID19, it would have had to punch out 750 bikes a day. (11,998/16 = 749.875).

We would love to see the order book for these magical beasts that were waiting for a home…it would seem the sales and marketing department cherry-picked one strong day and multiplied it over the quarter to create such a questionable statement.

Here is a chart of motorcycle related revenue for Q1 since 2008. No wonder the shares have underperformed since 2014, even with a small fortune squandered on share buybacks.

HSQ1rev

The Q2 revenue book doesn’t look too flash either if April is wiped out. At present 50% of dealers are shut since late March. Is the market prepared for a sub Q2 2009 print? The share price has rebounded strongly after the Q1 results even though there is no guidance to speak of.

HDq2Rev

But it gets worse. So poor has the Q3 season become for HOG that its unit sales have missed the Q3 2009 post-GFC low for seven out of the last 10 years. Are we to believe if the world is out of lockdown by Q3 that there will be a miraculous surge in new bike sales when unemployment is likely to remain at troubling levels potentially above that of GFC?

HDq3US

HOG is a great example of a divine franchise. It wasted far too much money on share buybacks (now suspended) and sits with a credit rating just two notches above junk.

The annualised Q1 2020 loss experience for the finance business sit at 10-year highs even before it has been thumped by the coming turndown. People buy HOGs as a hobby, not transport. A purely discretionary purchase. We imagine that restoring household balance sheets will take precedence to stumping up serious coin for a Harley cruiser.

Sadly Levatich and his 2027 vision have not been consigned to the dustbin of history which is the only logical filing cabinet for it. Completely unrealistic, devoid of reality and totally in denial of the shifting sands in the global motorbike market.

The new “Rewire Plan” (p.5) while sketchy on detail (as it would with an interim CEO) is a reheat of Levatich’s plan. Sad.

In our view, the entire motorcycle industry needs a strong HOG. New management is a good start but it won’t help if they intend to convince investors that they were on course to shoot Q1 to its best level in 6 years with questionable math. How quickly can inventory be pared? What models will revive its fortunes?

HOG needs to get in touch with its core customer base the way Willie Davidson did after the dark days of AMF ownership. It needs to build products which hark back to its former glory rather answer questions in segments that no one is asking it to fill.

Indian, its rival of 100 years ago is killing it with the FTR1200. Indian’s parent company, Polaris Industries, posted a small single-digit increase for motorcycles in Q1 2020. Enough excuses HOG. You are running out of time and your retained earnings are 1/5th what they were 5 years ago!

Why is the market giving it the benefit of the doubt when the worst is still ahead?

HOG

Harley needs a crisis manager. Will the incoming CEO possess those skills?

Colonialism and Comcars

Image result for robert menzies car

Senator Mattias Cormann has admitted he was behind the decision to change the colour of our government Comcars – which ferry politicians around – from white to dark grey in order to remove any remnants of our colonial past, which in his words were “a better reflection of a modern, forward-looking Australia.” Forget the fact that most government cars were painted black, including Sir Robert Menzies’ Bentley (above). Might have been better to channel the founder of the Liberal Party as inspiration instead some woke nonsense. Or just let the drivers, who need to clean and maintain the vehicles, choose. 

Seriously though, what % of Australians have ever thought that our white Comcars harked to a colonial past? Best put it to a plebiscite and waste more time. 

Dark Grey? Isn’t that a gloomy hue? Should Aussies prepare for dark days ahead? Truth be told the colour is probably quite representative of where our economy is heading, even without coronavirus.

Interestingly, according to car insurer youi,

Our accident frequency research reveals that dark coloured cars are more likely to be in an accident than lighter coloured cars, likely because they are less visible to other drivers on the road. Grey coloured cars topped the list, followed by black and charcoal.

Who says that politicians don’t make sacrifices for us?

If we study where the proportion of cars coloured in colonial white is highest, perhaps parliament should be spending up big on a reeducation program in Tasmania for their unconscious colonialism. youi claimed,

Tasmania has the highest percentage of white cars at 33.80% versus the national average of 30.45% (silver 19.4%, blue 11.29%)

White cars seem to be connected to toxic masculinity too. Best run a campaign on unconscious sexism if youi is to be believed.

Compared to females, white is more popular for males relative to other colours (34.34% for males, 26.46% for females)

Take it a step further and question how much more Cormann could have done to reduce the racist footprints of colonialism.

Why are we buying cars from a maker that powered the Nazi Luftwaffe, SS and Wehrmacht, based in a nation that at the time was hell-bent on world domination and genocide? If we went for Lexus or Toyota we’d be buying cars built by a country that was also determined to colonize The Pacific. Jaguars or Range Rovers would be off the list, even though the Indians now own the brands. Rolls-Royce & Bentley are German-owned. Italians were colonialists. Maserati, Fiat, Lancia and Alfa Romeo banned. The French? Colonialists. Renault and Peugeot-Citroen are out. The Spanish? Colonialists. No SEATs, although that is owned by the Germans. America? Someone is bound to raise an issue with their CIA operative endorsed post-war military hegemony. So no Caddies, Fords or GM cars, especially after the axing of the Holden brand. China? Buying Haval or Great Wall cars would at the very least cut down on the overall cost of Comcars, especially with the generous 10-yr unlimited kilometre extended warranty.  That is how we cut the budget deficit. 

Maybe we should just buy Volvos. Maybe that way we could appeal to be supporting the home team of climate activist, Greta Thunberg to shore up the youth vote while acknowledging that the Viking hordes of 1000 years ago was far back enough in history to upset anyone today. If we’re lucky, the Swedish Riksbank may consider buying our sovereign debt again

Seriously, haven’t our pollies got anything better to do than conjure up such illogical nonsense like this? Given we’re at this level of discourse, perhaps walking, cycling or public transport would be a better bet for our lawmakers. At the very least it would put them in touch with how commoners live.

A deadly problem: should we ban SUVs from our cities?

Activists, including one wearing a Angela Merkel mask, outside the Frankfurt International Auto, holding signs reading ‘gas guzzling vehicles off the road’ and ‘Stop petrol and diesel’.

More junk journalism from The Guardian. Why can’t the paper make sensible commentary on the auto industry? Essentially it pushes a narrative that we should ban SUVs, a long term growth market for automakers because they advertise the segment too much. Shame on trying to act in the interests of shareholders. The article encourages the movement to push for a ban of SUVs in cities. Why? The socialisation of transport!

The article makes the early assertion that passengers are 11% more likely to die in an SUV accident than a regular passenger car. Unfortunately, it cited an article written 15 years ago. In that time, SUVs have evolved leaps and bounds. A far greater proportion of SUVs are made using a monocoque chassis as opposed to the old ladder frames. Even those SUVs with ladder chassis hold 5-star safety NHTSA ratings in 2019:

2019 Jeep Grand Cherokee – 5 star (ladder) vs 2004 Jeep Grand Cherokee – 3 star

2019 Ford Expedition – 5 star (ladder) – 2004 Ford Expedition – 5 star

2019 GMC Acadia – 5 star (ladder) – 2007 GMC Acadia – 4 star

2019 Toyota RAV4 – 5 star (monocoque) – 2004 Toyota RAV4 – 4 star

2019 Mazda CX-9 – 5 star (monocoque) – 2007 Mazda CX-9 – 4 star.

Some may recall in the early 2000s when the Ford Explorer/Firestone tyre rollover incident killed 261 people. Since then, carmakers have installed so many safety items – passive and active. Automatic braking, lane departure detection, forward collision warning, electronic brakeforce distribution (which prevents rollovers). SUVs are safer than ever, including pedestrian facing features.

Never mind the huge leap in safety. Let’s shame the automakers and buyers instead.

The Guardian noted, “In Germany, in 2018 they spent more on marketing SUVs than on any other segment; they actually spent as much as they spent on other segments together” says Stephan von Dassel, the district mayor of Berlin-Mitte. “This is not some accident that people suddenly are really into these cars, they are heavily pushed into the market.”

Wow, so carmakers actually made a sensible advertising budget allocations and convinced new buyers to voluntarily select their SUVs. Those wicked capitalists. They should be burnt at the stake for being in touch with their customers. Perhaps politicians could learn from the carmakers about being in touch with their constituents?

The Guardian then noted the following,

In Europe, sales of SUVs leapt from 7% of the market in 2009 to 36% in 2018. They are forecast to reach nearly 40% by 2021. While pedestrian deaths are falling across Europe, they are not falling as fast as deaths of those using other modes of transport.

So even though the sales of these vehicles have skyrocketed, pedestrian deaths are falling. Reading the paper published by the Insurance Institute for Highway Safety, stated

“A total of 5,987 pedestrians were killed in crashes in 2016, accounting for 16 percent of all crash fatalities. The number of pedestrians killed each year has declined 20 percent since 1975…”

Surprisingly, The Guardian waits till the end to point the finger at the pet issue facing SUVs – emissions.

“Transport, primarily road transport, is responsible for 27% of Europe’s carbon emissions. A decade ago the EU passed a law with a target to reduce carbon emissions to 95g/km by 2021 but a recent report by campaign organisation Transport and Environment highlights what is calls it “pitiful progress”. “Sixteen months from before the target comes into force carmakers are less than halfway towards their goals,” the report adds. The car industry faces hefty fines in Europe of €34bn in a few months for failing to meet emissions targets.”

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How is it that diesel engines, the increasingly preferred powerplant in SUVs, have had emissions cut 97% over the last 25 years? That is monumental progress.

Yet why have legislators tried to ban petrol and diesel cars and looking to force adoption of dirtier EVs which have done 150,000km equivalent CO2 emissions before leaving the showroom? Because ideology distorts reality. Even Schaeffler AG, an auto supplier, admitted it is almost impossible for automakers to comply with the different demands of over 200 cities in Europe with EV rules. No common standards and the quest of woke city councils trying to outdo each other on being climate-friendly. Then governments need to consider the 5% of total tax revenue that fill the coffers they would be giving up, although already in the US, Illinois is looking to impose a $1,000 a year EV tax.

Shouldn’t the EU and other countries face the realities that consumers (taxpayers) like the utility these SUVs provide for their individual needs over and above saving the planet? Shouldn’t politicians realise that consumers make conscious decisions when making the second largest purchase for the household?

One can absolutely bet that if some maker came out with a Hummer sized EV, these cities that want to ban SUVs from driving in them would grant the monster truck an exemption and special parking zones.

Julia Poliscanova, director of clean vehicles and e-mobility at Transport and Environment, says regulators must step in to force car manufacturers to produce and sell zero-emission and suitably sized vehicles, for example, small and light cars in urban areas.”

What if consumers don’t want to buy small and light cars? Force car makers to produce cars their customers don’t want? That is a winning strategy. If carmakers must sell zero-emission vehicles, why on God’s earth are politicians with absolutely no engineering pedigree dictating technology to the experts? Why not let necessity be the mother of invention? If carmakers can get fossil fuel-powered vehicles to be zero-emission and keep their brand DNA at the same time, imagine the billions that could be saved on reckless waste rolling out often unreliable charging infrastructure? Maybe then carmakers could build cars its customers wanted and make money to literally fuel the economy. Politicians would still be able to virtue signal! Win-win.

Maybe the modus operandi is to socialise transport. Poliscanova said, “Smart urban policies are also key to drive consumers towards clean and safe modes…Mayors should reduce space and parking spots for private cars and reallocate it to people and shared clean mobility services.

That is the ticket – force everyone off the road. That is a sure vote winner!

The thrill of the charge

CM has often made reference to the uselessness of EV police vehicles. The idea is that a fossil-fueled vehicle is ready to go ASAP. This radio transcript from Freemont Police in San Jose serves to highlight the biggest flaw of using EVs. When an emergency is in progress will, “sorry, in our quest to save the planet you’ll have to wait another 3 hours before we can attend to your domestic violence dispute. Bear with us. The car is on the charger” cut it?

Note the police in the Democratic People’s Republic of Victoria has selected Teslas for police cars.

Yet we already have so many beta test examples to reject the use of EVs.

In 2016, the LAPD bought $10m worth of BMW i3s to show its commitment to climate abatement. Sadly, the cars went largely unused as they were unsuited for police work.

CBS reported,

LAPD Deputy Chief Jorge Villegas said of the purchase, “Money well worth itIt’s all a part of saving the Earth, going green … quite frankly, to try and save money for the community and the taxpayers.”

But sources say some personnel are reluctant to use the electric cars because they can only go 80-100 miles on a charge. And the mileage logs we obtained seem to back that up.

From April 2016 when the project started through August 2017, we found most of the electric cars have only been used for a few thousand miles…And a handful are sitting in the garage with only a few hundred on them.

One in service since May 27, 2016, had just 400 miles on it!

That’s an average use of 6 miles a week!

With the monthly lease payment of a little more than $418, this one costs taxpayers over $15 a mile to use!… It just doesn’t make any sense!”

CM one posted this question to someone from the NSW St Johns Ambulance with respect to discussions about EV ambulances. He said unequivocally,

We have Webasto heaters in our cars in the colder areas. Running off the diesel they can operate 24/7 if needed. If we don’t have them some of our equipment doesn’t work like our tympanic thermometers, the blood glucose reader and then there is the problem of having cold fluids in the car. This is a problem if we are giving them an IV because we can make a patient hypothermic if it’s cold. Then there’s just the general environment inside the cab. It needs to be warm in winter.

That is the point. Emergency services need to be able to operate on call. 5 minutes to fill up with gasoline or diesel means that efficient utilisation and dispatch is guaranteed for at least 500km+.

If end users have to weigh having their lives saved or rescue the planet, it is a no brainer which they will choose. We already know that Tesla P100Ds have done 167,000km in CO2 before they’ve left the factory. “To Protect and serve after a fast charge” should be emblazoned on the doors.

NSW Chair pleads for a truce

Could it be that those who are fed up with political correctness have proved their pockets are way deeper than Rugby Australia (RA) ever imagined? For the Rugby NSW Chair Roger Davis to pipe up that, “the game is paying too high a price for RA to be proved right in this matter” speaks volumes. Sounds like fear that RA might lose.

The ACL suspended the Folau fund raising as it went over $2m in two days. Now he can comfortably fund an excellent team of silks to prosecute the case against RA. Plenty more ammunition behind that one imagines too. RA is outgunned unless Qantas intends to deploy shareholder capital?!?

Once again, this has moved way beyond Folau’s contractual dispute. People are fed up with the lecturing from the left. Regardless of whether one agrees with what he said or not or the GoFundMe stunt, the people have spoken with their wallets. They don’t want to have corporates tell them how or what to say or behavioral awareness officers at the games marshaling their stress outlets.

Rugby Australia’s problems started way before Folau’s tweets. The attendance and performance of the Wallabies stems from the incompetence at the top. The numbers are abysmal. The identity politics obsessed board which keeps a coach despite the worst track record in the team’s history. Australia will be lucky to make the play offs.

As David rightly said, It’s not about rights or wrongs now, it’s about pragmatics. I don’t think rugby should be defining freedom of religion rights or freedom of expression rights. I don’t think it’s our job,

Exactly. Which is why $2m was lined up to let RA know it should drop all of the gender and identity political garbage period and focus on who pays the bills – the fans.

Woke Vic Police should have called the LAPD before selecting EVs

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Victoria Police is renowned for its commitment to inclusion and diversity. Who could forget the push for segregated sessions in the recruitment drive? Stands to reason the coppers have introduced the Tesla Model X to the fleet to show “green” credentials. The point of a police car is instant dispatch when required to attend to a crisis situation, from thwarting a terrorist in the Melbourne CBD or rushing to a domestic dispute. It won’t look good when the police have to wait for the fast charger at the base to provide enough juice to make it the scene of the crime. Now that Hazelwood coal-fired power plant has been closed, good luck waiting on renewable energy to charge these cars for practical police use. Don’t be surprised when the shortcomings force a rethink.

What will they tell Victorians? “Sorry, in our quest to save the planet you’ll have to wait another 3 hours before we can attend to your domestic violence dispute. Bear with us. The car is on the charger!

In 2016, the LAPD bought $10m worth of BMW i3s to show its commitment to climate abatement. Sadly, the cars went largely unused as they were unsuited for police work.

CBS reported,

LAPD Deputy Chief Jorge Villegas said of the purchase, Money well worth itIt’s all a part of saving the Earth, going green … quite frankly, to try and save money for the community and the taxpayers.”

But sources say some personnel are reluctant to use the electric cars because they can only go 80-100 miles on a charge. And the mileage logs we obtained seem to back that up.

From April 2016 when the project started through August 2017, we found most of the electric cars have only been used for a few thousand miles…And a handful are sitting in the garage with only a few hundred on them.

Like this one in service since May 27, 2016, with just 400 miles on it!

That’s an average use of 6 miles a week!

With the monthly lease payment of a little more than $418, this one costs taxpayers over $15 a mile to use!… It just doesn’t make any sense!”

CM one posted this question to someone from the NSW St Johns Ambulance with respect to discussions about EV ambulances. He said unequivocally,

We have Webasto heaters in our cars in the colder areas. Running off the diesel they can operate 24/7 if needed. If we don’t have them some of our equipment doesn’t work like our tympanic thermometers, the blood glucose reader and then there is the problem of having cold fluids in the car. This is a problem if we are giving these IV because we can make a patient hypothermic if it’s cold. Then there’s just the general environment inside the cab. It needs to be warm in winter.

That is the point. Emergency services need to be able to operate on call. 5 minutes to fill up with gasoline or diesel means that efficient utilisation and dispatch is guaranteed for at least 500km+.

If end users have to weigh having their lives saved or rescue the planet, it is a no brainer which they will choose. We already know that Tesla P100Ds have done 167,000km in CO2 before they’ve left the factory. “To Protect after Charging” should be emblazoned on the doors.

Ding dong the switch is dead

Morgan Stanley has finally lowered its bearish scenario on Tesla from $97 to $10. CM wrote in October 2017 that the shares based on production of 500,000 vehicles was worth no more than $28 (refer to report page 5). That was based on rosy scenarios. Sadly CM thinks Tesla will be bought for a song by the Chinese. Maybe $4.20 a share instead of $420 “funding secured” levels.

The stock breached $200 yesterday for the first time since late 2016.

Morgan Stanley analyst, Adam Jonas, has still kept its base case scenario at $230 per share. His bull case is $391.

Where is the conviction? To drop a bear case target by 90% must surely mean the base case is far lower than presently assumed.

Jonas must assume the bear case is actually the base case. Sell side brokers love to hide behind scenario analysis to cop out having to get off the fence. His compliance department probably prevents him from realizing $10 is his true heart.

Tesla was always playing in a market that it had no prior experience. It is not to say the products didn’t have promise. The problem was the execution. Too much senior management turnover, missed targets, poor quality and too many Tweets from Musk.

The amount of bad press arising from a lack of service centers has driven customers to moan on social media at its amateur approach. The fragile dreams of being an early adopter are being shattered. Cash burn remains high and deliveries remain low. Some pundits think Tesla orders are under real pressure in 2Q 2019.

The recent all share deal with Maxwell Technologies has seen those holders -20% since the transaction a few weeks ago. CM argued how a company with such revolutionary technology could sell itself for all shares in a debt-ridden loss making like Tesla? If the technology was of real value PE funds would have snapped it up or at the very least made a bid in cash. That none was made speaks volumes about what was bought.

All of the arguments hold true in the above link, “Tesla – 30 reasons why Tesla will be a bug on a windshield

Tesla below $200 after a successful cap raise is not a good sign. It’s the faithful slowly tipping out. Await another imaginary Musk-inspired growth engine to be announced shortly to try prop up the stock price. Yet the momentum will continue to sink. The market is losing confidence in Musk. The 1Q results were diabolically bad.

Major holder T Rowe Price has stampeded out the door. The stock is too risky. Musk is a brilliant salesman but he has bitten off more than he can chew.

CM always thought that Toyota selling its Tesla stake was a major sign. Acknowledging that under the hood the company possessed no technology that Toyota didn’t already own.

Watch the free fall. The Tesla stock will be below $100 by the year end.

(CM does not hold Tesla stock)

Japan has the best drink driving laws – socialized punishment

NSW Police will take away one’s license for breaking drink-driving laws (even at low end) after May 20.

Japan has the best method of all. The driver is fined up to ¥1,000,000 ($14,000) and up to 5 years jail. Passengers are fined up to ¥500,000 ($7,000) and up to 5 years each for allowing the same person to drive while intoxicated. Socialized responsibility!

In 1993 Japan had 1,480 excess alcohol related road fatalities. In 2017 it was 213 (-85%). Against total road deaths of 10,650 and 3,904 respectively. Therefore drink driving fell from 14% to 5.5% of all road deaths in Japan.

In 1993 there were around 80 fatalities in NSW. In 2017 it was 42. Perhaps a socialized drink driving fine schedule would cut it further than just losing one’s license. Against total road deaths NSW had 581 and 405 respectively. Or 14% to 10% of all road mortalities over the same period.

Bill Shorten’s electric dreams are our nightmare

Image result for fuel bowser out of use

When will politicians wake up? How can they honestly believe their targets are remotely achievable if the industry is not even in the ballpark to being able to supply those promises? Take the ALP’s plan to make electric vehicles (EVs) 50% of new car sales by 2030.

In 2018, 1,153,111 new automobiles were sold across Australia. This plan is so easily destroyed by simple mathematics, something CM did in 2017 when Macron waxed lyrical about 100% EV sales by 2040. The only 100% certainty is that Bill Shorten won’t hit the 50% target by 2030. Do we need the government to tell us what cars we wish to buy?

The first problem he will encounter is overall consumer demand for EVs. Few suit the diverse needs and utilities (e.g. boat enthusiasts who require towing capacity unmet by all current EVs or parents who need 7-seaters to ferry kids to footy) of individual buyers. If the types of EVs available don’t match the requirements of the users then few will see the point to buy one no matter what the subsidy. In 2008, SUVs were 19% of Aussie new car sales. It is 43% today. So much for the climate change fearing public voting with their wallets! That is the first problem.

Why is the government meddling in an industry they know next to nothing about? Having a zero emissions (ZE) target is one thing they might aim for, however why not tell auto makers they need to attain that goal but will be granted complete technological freedom to achieve it? If the auto makers see necessity as the mother of invention, who are regulators to dictate the technology? If an internal combustion engine can achieve ZE does that not meet the goal?

It stands to reason we should question those with the least idea on the technology to dictate the future. The ZE appeal of EVs is an ineffective virtue signaling device to voters.

If we look at Euro emissions regulations introduced since 1993, substantial progress has been made in the last 20 years. Euro 6 started in 2015. For diesel particulate matter, emissions are 97% down on Euro 1 (1993) and NOx down by 95% over the same period.

The irony here, is that governments have these thought bubbles and then consult the industry afterwards to see if those promises can be fulfilled. CM spoke to multiple global auto suppliers in the EV space at the Tokyo Motor Show in 2018 and this is what was said,

“So haphazard is the drive for EV legislation that there are over 200 cities in Europe with different regulations. In the rush for cities to outdo one another this problem will only get worse. Getting two city councils to compromise is one thing but 200 or more across country lines? Without consistent regulations, it is hard for makers to build EVs that can accommodate all the variance in laws without sharply boosting production costs…

…On top of that charging infrastructure is an issue. Japan is a good example. Its EV growth will be limited by elevator parking and in some suburban areas, where car lots are little more than rental patches of dirt where owners are unlikely to install charging points…

…Charging and battery technology will keep improving but infrastructure harmonisation and ultimately who pays for the cost is far from decided. With governments making emotional rather than rational decisions, the only conclusion to be drawn is unchecked virtuous bingo which will end up having to be heavily compromised from the initial promises as always.

So the suppliers aren’t on board for a start. They know their car manufacturer clients rather well and if they aren’t buying it, auto makers can’t sell it. Slowing sales worldwide adds to reluctance to add to expensive fixed cost capacity at the top of a cycle.

We have proof of this. Note what we wrote in 2017:

It isn’t a big surprise to see national governments virtue signal over climate abatement. The UK swiftly followed French plans to ban the sale of petrol/diesel cars from 2040. However, let’s get real. Government proactivity on climate change may appear serious but the activities of the auto industry are generally a far better indicator of their lobby power. As a car analyst at the turn of the century, how the excitement of electric vehicle (EV) alternatives to internal combustion engines was all the rage. Completely pie in the sky assumptions about adoption rates…

…In 1999 industry experts said that by 2010  EVs would be 10% of all units sold. Scroll forward to 2019 and they are near as makes no difference 2.5% of total vehicle sales…talk about a big miss. 10 years beyond the prediction, they’re only 25% of the way there. Pathetic. 

CM also discussed in this report, 30 reasons Tesla would be a bug on a windshield;

“To prove the theory of the recent thought bubbles made by policy makers, they are already getting urgent emails from energy suppliers on how the projections of EV sales will require huge investment in the grid. [Mr Shorten, will we have all these cars recharging overnight using renewables? Solar perhaps?] The UK electricity network is currently connected to systems in France, the Netherlands and Ireland through cables called interconnectors. The UK uses these to import or export electricity when it is most economical. Will this source be curtailed as nations are forced into self-imposed energy security by chasing unsustainable products?

The UK’s National Grid said that the extra capacity required just to charge EVs would require another new Hinkley C nuclear plant to cover it. Will people choose between watching  premiership football on Sky Sports or charging their car?

Car makers can’t produce at the desired speed and energy suppliers don’t have the excess capacity required to charge. Slightly large problems. We don’t need to look at failed EV policy to show government incompetence. Germany totally fluffed its bio-fuel promise back in 2008 that even a Greens’ politician ended up trashing it.

“The German authorities went big for bio-fuels in 2008 forcing gas stands to install E-10 pumps to cut CO2. However as many as 3 million cars at the time weren’t equipped to run on it and as a result consumers abandoned it leaving many gas stands with shortages of the petrol and gluts of E-10 which left the petrol companies liable to huge fines (around $630mn) for not hitting government targets.”

Claude Termes, a member of European Parliament from the Green Party in Luxembourg said in 2008 that legally mandated biofuels were a dead end…the sooner it disappears, the better…my preference is zero…policymakers cannot close their eyes in front of the facts. The European Parliament is increasingly skeptical of biofuels.” Even ADAC told German drivers to avoid using E10 when traveling in other parts of continental Europe.

Starting with the basics for Australia.

If we take 50% of total car sales in 2018 as the target by 2030, Shorten needs to sell 576,556 EVs per annum to meet his bold target.

Let’s deal with the elephant in the room – note that petrol excise is currently around 4.7% of total federal tax take (c. $19bn) and likely to grow to c.$23bn by 2021. Even if we were to assume that we achieved Shorten’s targets based on a flat overall car market by 2030, Shorten’s tax receipts from the fuel excise would collapse and only be amplified by subsidies paid on 576,556 EVs. Throw the global average of $6,000-10,000  in incentives per EV and we’ve quickly racked $3-5bn per annum in subsidies.

Then will he offer cash for clunkers (C4C) for the poor owners of fossil fuel cars? Many car owners would require a hefty slug of C4C to offset the massive depreciation that would ensue on a trade in of a fossil fueled powered car. People are going to want decent trade ins, not 5c in the dollar of what they would have got had the government not attacked car owners. The changeover price matters. Shorten  may well get his 50% by halving the industry.

Should we also consider whether fuel taxes should be replaced by electricity taxes? If that ends up all we drive who is to stop it? Surely the maintenance of roads and related infrastructure which we’re told our fuel taxes pay for the upkeep will still need to be funded by heavier EVs.

Take the Tesla Model X 100D. It weighs 2,509kg, 49% heavier than an equivalent BMW 5-series. The heavier the car, the more damaging to the road. Such is the progress of the Nissan Leaf that the kerb weight has risen in the new model to 1,538kg on the original, or 400kg heavier than a petrol Toyota Corolla. EVs are fat.

Global EV sales units were 2.1mn last year. Total car sales were 79m odd. Let’s assume auto makers could conceivably increase capacity by 2m every 2 years (plants take 2 years to build and those poor Congolese child slave laborers will be run off their feet digging for cobalt to go in the batteries) then conceivably 30mn cumulative EV units could be built by 2030. Unfortunately VW gave the real answer on how they view EVs.

“Volkswagen makes an interesting case study. After being caught red handed cheating diesel emissions regulations (a perfect example of how little VW must believe in man-made global warming) they were in full compliance at the 2017 Frankfurt Motor Show telling the world of their $80bn investment in EVs out to 2030, 300 new EV models comprising 3 million units in 25 years of which 1.5mn would be sold in China. 3 million cars would be c.30% of VW’s total output today.”

However auto makers are faced with a conundrum. Chinese car sales are slowing. US car sales are slowing. European car sales are drifting and Aussie car sales are weak. Capex into EVs will be a very gentle process. They don’t want to plug in massive investments into new capacity if end demand is likely to remain soft. That is basic business sense. Note parts manufacturers need to be convinced that building new plants alongside makers is sustainable. Many are gun shy given the OEMs sent many parts suppliers into receivership the last cycle.

Ahh but EVs are less harmful to the environment. Are they?

The IVL Swedish Environmental Research Institute was commissioned by the Swedish Transport Administration and the Swedish Energy Agency to investigate lithium-ion batteries climate impact from a life cycle perspective.

The report showed that battery manufacturing leads to high emissions. For every kilowatt hour of storage capacity in the battery generated emissions of 150 to 200 kilos of carbon dioxide already in the factory. Regular EV batteries with 25–30 kWh of capacity will result in 5 metric tonnes CO2, which is equivalent to 50,000 km driving in a regular, fuel-efficient diesel vehicle.

Another study by the International Council on Clean Transportation (ICCT) showed that depending on the power generation mix, an all EV Nissan Leaf in the US or China was no better than a 2012 Prius. Countries with higher relative nuclear power generation unsurprisingly had lower CO2 emissions outcomes for EVs. By deduction countries with higher shares of coal or gas fired power negated much of the ‘saving’ of an EV relative to gasoline power.

So pretty much on all measures, Bill Shorten’s misadventure on EVs will be a complete dud. If only he’d consulted with the industry before celebrating how “woke” he is. He’s simply not.