Image: Ferrari
Ferrari can do no wrong, Tesla’s suppliers are peeved at its price shenanigans and electric semis have a big problem. All that and more in this Thursday edition of The Morning Shift for February 2, 2023.
1st Gear: Never Bet Against the Horse
It must be a ball running Ferrari, the one manufacturer that can truly claim an insatiable, undying demand for its products. No need to advertise, nor follow the lead of competitors; all Ferrari ever has to do is make the best sports cars it can, and maybe one SUV. The rest always sorts itself out, as it did last year. The company just reported its 2022 earnings, and it capped the year with a 13 percent jump in annual profits. Courtesy CNBC:
For the full year, Ferrari earned 939 million euros, or 5.09 euros per share, on revenue of 5.095 billion euros. Both were above expectations: Wall Street analysts polled by Refinitiv had expected full-year earnings per share of 4.94 euros on revenue of 4.977 billion euros.
The results also beat Ferrari’s own guidance. Ferrari had raised its 2022 guidance in August and again in November, most recently telling investors to expect revenue of about 5 billion euros and adjusted earnings per share of about 5 euros for the full year.
Despite the strong results, Ferrari’s fourth-quarter operating margin slipped to 21.8% from 22.6% in the year-ago period. That year-ago profit margin was boosted by the first of Ferrari’s seven-figure Icona models, the Monza SP1 and SP2; shipments of the Monza’s successor, the Daytona SP3, didn’t begin until the very end of 2022.
Altogether Ferrari moved 13,221 cars last year — a record, and 19 percent better than its 2021 full-year shipments. The 2022 performance was bolstered by the Portofino M, SF90 Stradale, and Spider. The 296 GTB and 812 Competizione helped as well, though those are only coming out of the ramp-up phase now.
Given that Ferrari shattered its own guidance and had to raise its full-year expectations twice last year, it’s perhaps no surprise that the company sees further growth in 2023, with projected revenue of 5.7 billion euros — about 600 million higher than the 2022 figure. Need I remind you the Purosangue hasn’t even started rolling out of Maranello yet.
2nd Gear: Tesla’s Suppliers Hate This
“There’s no such thing as a free lunch,” my high-school economics teacher — indeed, every high-school economics teacher — used to say. When Tesla obliterates prices on a whim, it not only pulls a smaller profit; its suppliers and partners have no choice but to walk away with less, too. You could probably guess how they’re feeling these days, but thanks to a Reuters story, you don’t have to.
While Tesla and other automakers enjoyed higher vehicle prices and strong margins during the pandemic, suppliers were not able to fully pass along higher costs and their margins fell, according to a study by consultancy Bain. Automakers’ profit margins were nearly 3 percentage points higher than suppliers in the third quarter of last year.
More price cuts could be painful in a sector where some suppliers are already struggling, industry officials said.
For example, Gissing North America, which had counted Tesla as its biggest customer, filed for bankruptcy last year, partly due to high labor costs and commodity pricing, said Steven Wybo, chief restructuring officer of the Michigan-based maker of acoustic systems and headliners for car ceilings.
“There’s certain things that I think will ease, but there’s this labor component that’s built in to the price of everything, and I don’t see that easing any time soon and potentially never,” he said.
[Dan] Sharkey, [an attorney who represents suppliers to Tesla and other automakers] warned: “All of these suppliers are not charities. They need to make money and if they lose money, then they’re in financial distress.”
One semiconductor manufacturer which has not disclosed Tesla as a client but appears to work with the EV maker told Reuters that it hasn’t received much pushback from the car companies it works with, despite having to raise prices due to material cost inflation. Elsewhere, Tesla reportedly haggled with a supplier in China to reduce the cost to the automaker by 10 percent, according to an anonymous source who spoke to the news agency. If other car companies decide to follow Tesla down this path — as only Ford has so far — things could get really ugly.
3rd Gear: Honda Won’t Let Hydrogen Go
Honda retired the Clarity fuel-cell vehicle in 2021, but don’t think for a minute that the company has bid farewell to fuel cells for good. Quite the contrary, actually — it’s now dragged General Motors into it, to develop a hydrogen-powered CR-V to be sold in the U.S. and Japan. From Automotive News:
The fuel cell CR-V will be built in Ohio and will launch in in the U.S. and Japan by the end of next year. Europe sales are still under consideration, Honda said in a statement.
Honda executives said engineers have cut the cost of the next-generation system to one-third that of the system used in Honda’s previous fuel cell car, the Clarity sedan that debuted in 2016.
Among other improvements, the durability of the system will be doubled and the low-temperature performance will be boosted, executives said at a briefing here.
The new system starts up significantly faster at temperatures as low as minus 22 degrees Fahrenheit (minus 30 degrees Centigrade).
The new technology is an outgrowth of a joint development between Honda and GM dating back to 2013.
Honda and GM have been pooling resources on hydrogen fuel cell development to defray the high costs of the technology, which is seen as a critical stepping stone toward carbon neutrality goals.
Honda expects to sell 60,000 fuel-cell cars globally by the end of this decade, while expanding the technology to “commercial vehicles, construction equipment and even to companies using fuel cells as station power plants.” It’s worth noting that 15,000 fuel-cell vehicles have been sold in the U.S. in the past 11 years, per data from InsideEVs.
What’s especially weird about this news is that Honda’s CEO has gone on record saying hydrogen’s applications are limited, and Toyota’s bet on it as a mainstream energy source is misguided. Somehow that attitude has manifested as putting a fuel-cell powertrain in the brand’s biggest seller, and tapping GM for support.
4th Gear: Electric Freightliners and Nowhere to Charge Them
If you’ve been curious as to why electric semi trucks haven’t been embraced to the same degree other battery electric vehicles have been, read this illuminating report from Automotive News. The biggest barrier, as ever, is infrastructure. Large electric trucks can’t get by on the stations passenger cars use, so what trucks are out there are pretty much withering on the vine.
Electric truck builders are sounding the alarm on the lack of charging infrastructure and the time it takes to build as the freight and logistics industry transitions to zero-emission transport.
Daimler Truck North America CEO John O’Leary told Automotive News his company has both the manufacturing capacity and customer interest to sell 2,000 Freightliner eCascadia electric trucks this year, but there is a lack of chargers to support them.
“Our customers need to be able to charge any of their trucks anywhere they are,” O’Leary said as Daimler prepared to unveil the SuperTruck II, an extra-efficient concept model of its diesel Freightliner, on Wednesday at the Manifest freight and logistics conference here.
There is almost no public infrastructure to power large electric trucks. The charging systems going into distribution centers and other facilities are only trickling forward, hindered by long delays from utilities and the local government permitting process.
Charging is the single largest barrier to electric truck deployment, said Mike Roeth, executive director of the North American Council for Freight Efficiency.
That has created a vast mismatch between customer interest and charger access.
“There is not going to be enough, fast enough” to satisfy demand, O’Leary said.
This is only a brief snippet of the story, which also contains quotes from personnel at Daimler, Volvo, UPS and Tesla Semi-customer PepsiCo. Local utility and construction companies can’t work fast enough to support the trucks that are already in production, while the trucks aren’t selling well enough to accelerate work or justify investments. It’s the classic chicken/egg problem of alternative energy, now playing out in the commercial sector.
5th Gear: Berkshire Hathaway Keeps Doing the Thing
Every few weeks, Berkshire Hathaway unloads yet more shares of Chinese EV maker BYD. And every few weeks, investors get increasingly nervous as Warren Buffett offers no explanation for his moves. Wouldn’t you know it just happened again on Thursday, per Reuters.
Berkshire Hathaway, the investment company owned by Warren Buffett, has sold 1.55 million Hong Kong-listed shares of electric vehicle maker BYD (002594.SZ) for HK$351.81 million ($44.85 million), a stock exchange filing showed.
The sale lowered Berkshire’s holdings in BYD’s issued H-shares to 12.9% on Jan. 27, down from 13.04%, the filing to the Hong Kong Stock Exchange showed on Thursday.
Berkshire, which started selling the BYD shares in late August, has accumulatively reduced its holding by more than a third.
Buffett’s company acquired 225 million BYD shares in 2008, giving it a 7.73% stake, equal to the 20.49% stake in H shares, according to BYD’s annual report.
Its’ not like BYD isn’t successful; it sold 1.86 million battery-electric and plug-in hybrid vehicles last year, and is expanding at a pace quicker than Tesla. For what it’s worth, the company line is that Buffett has been and will “always be” BYD’s biggest supporter.
Reverse: Happy 110th Birthday, Grand Central Terminal
It opened on this day in 1913…
The transportation hub as we know it today began construction in 1903, but before that 89 E 42nd was home to an older steam train station built in 1879. Even though the station had been updated to deal with an increased volume of commuters coming from suburbs outside the city, a collision between outdated steam trains in 1902 killed 15 people, and made it clear that a more substantial renovation was needed.
That same year, engineer William Wilgus and railroad tycoon Cornelius Vanderbilt began planning the landmark that Grand Central is today. They proposed a station with new electric trains that would not emit exhaust fumes and could, for the first time, operate underground. Planning officials also changed the station’s name. Technically a station, because trains no longer went south of Grand Central Station, the hub was renamed Grand Central Terminal. While these renovations and improvements had practical value, the more significant impact that both Wilgus and Vanderbilt hoped to create was cultural.
Neutral: How Are You?
My car’s tire pressure light keeps going off in this increasingly cold weather, despite repeated refills from the air compressor, so that’s annoying. Also, I’m painting a room this weekend, which is exciting but slightly worrying because the last time I tried to paint this room it did not go well. The permanence of paint gives me agita.
On the flip side, I am getting a haircut today. Ah, the little victories.
Keyword: Ferrari Couldn't Be Stopped Last Year