The most important kind of company to have as a nation was, for much of the 20th century, an automaker. It signified a level of technological achievement and manufacturing prowess that many leaders aspired to, with the added benefit of being able to be switched over to make bombs and tanks. That was something else people cared a lot about for the very good reason that the world had gone to war a couple of times.
Making cars remains a key industry, but far from the only one, or even the most valuable. So why are so many countries committed to building factories and never letting them go? The Morning Dump shall explore this notion, and to support this inquiry is Canada, which is doing what it can to save its car industry.
Volkswagen’s overcapacity issue is both a political issue and a demand one, as fewer people want the cars the company makes. Could a Ford-based Bronco fighter help? Maybe! What about an autonomous VW ID.Buzz? Softer maybe.
If Only They Started Remaking The Ford Probe, Those 57 Million Cars Would Be Sold
There’s a big opinion piece by Liam Denning in Bloomberg, and the thrust of it is that there’s way, way, way too much automotive factory capacity. This year the world will buy about 85 million new cars, but can make 142 million vehicles, leaving that big deficit number.
Why is that a big deal? From the piece:
Building assembly lines is capital-intensive, so profitability rests on running them as much as possible to spread fixed costs across as many vehicles as possible. The breakeven point to cover costs, in terms of capacity utilization, isn’t set in stone, but industry analyst Glenn Mercer posits a threshold of 80% or more. This makes the current global level of 60% look dismal. Barring South Korea, none of the major automaking nations or regions look particularly good on this front. The US has notably lost the leading position it held beforethan the pandemic.
Roughly 28 million vehicles’ worth of new manufacturing capacity has been added over the past decade, and four-fifths of that is in China. Yet sales have risen by only 5 million over that same period. China’s own vehicle market has plateaued, leaving the country with enough capacity to make more than two cars for every one sold there. Domestic automakers are now pushing millions of vehicles overseas in order to keep their plants running; without that, their utilization would be below 50%, rather than a merely dismal 60%. China is exporting its excess car capacity problem across the world.
You can sense all of the drama in the car world over the last couple of years in those numbers. The concern over China, the rising protectionism, the misplaced investments. The EV ‘head fake’ also hasn’t helped, with carmakers building out assembly lines to make products they’ve suddenly canceled. Or, in the case of EV automakers, building out new factories. It’s sort of odd to think that Rivian is building a new facility in Georgia when there’s excess capacity out there, but that’s the way it goes. And it’s not like it’s all evenly distributed. Ford would love to have a little more capacity to build F-150s, or at least more aluminum production.
The piece makes the point that, in a rational universe, none of this is how an efficient industry would work. Efficiency is not what this industry does well, and with a mix of tariffs and other headwinds, the average margin is under 4%, meaning that all car companies in the world combined made less money than just Apple last year.
The negative political ramifications of a plant closing are huge, as are the positive ones if a new plant is opened, which is why tax breaks and incentives flow to attract this kind of manufacturing.
Canada Will Invest To Save Its Car Industry
Canadian and American relations aren’t great right now, and a lot of that has to do with Canada wanting to have a car industry and the United States being a little less interested in that.
What’s Canada’s next move? As the Canadian Press reports, it’s putting the country’s money into a plan to support itself sans the US:
Ford said it’s clear the Canada-U.S. relationship has changed permanently.
“No matter what happens in the midterms, no matter who sits in the White House, we’re not going back to the way things were and we need to plan accordingly,” he said.
The wide-ranging plan includes $2.5 billion for the automotive sector, with the federal government chipping in $1.5 billion. Carney said that is aimed at helping automakers pivot to meet the growing demand for electric vehicle.
So, yeah, capacity is not going down anytime soon.
Will Ford Make A VW Truck Or Not?
When it became clear that Volkswagen was going to sell a truck in the United States, I sort of assumed they’d use the Scout factory they’re planning to build. But what if Ford could do it?
That’s the discussion going on, according to Bloomberg:
A partnership with Ford would be the fastest and most direct way to jumpstart the effort. The US automaker already builds the VW Amarok, a midsize pickup based on its Ranger model, in South Africa. But Ford executives are reluctant to extend the collaboration to the US and risk cannibalizing its light-truck franchise, the people said.
Should Ford reject an industrial tie-up, Blume’s executive team in Wolfsburg reckons Volkswagen can bring a Bronco rival to market within two to three years, drawing on suppliers and the offroad expertise at its Scout unit, according to some of the people.
Scout’s South Carolina factory, currently slated to start deliveries in 2028, could provide extra capacity, the people said. Audi, meanwhile, has no US plant and an entire American lineup exposed to tariffs. It is studying local production of larger SUVs that could tap spare capacity within the group, the people added.
Could… VW rival Ford in a Bronco? I am skeptical, but I’m into them trying.
VW Shows Off An Autonomous ID.Buzz
Volkswagen has finally found a customer for its ID.Buzz: no one! Well, no driver. I suppose commercial clients are people, too.
What’s all this then? From VW:
The vehicle displayed in Berlin is a long-wheelbase autonomous ID. Buzz with a mobility-as-a-service interior. Its NVIDIA DRIVE AGX Hyperion 10 reference configuration comprises 14 cameras, nine radars and three lidars. The compute and sensor architecture illustrates how an advanced Level 4 technology stack can be integrated into a vehicle developed to series-production standards.
The technology showcase underlines the platform strategy of Volkswagen Commercial Vehicles: autonomous-driving developers and operators can combine their high-tech solutions with a robust, series-production-based vehicle instead of developing vehicle integration from the ground up. This can reduce complexity and support the scalable deployment of different passenger and commercial transport applications on a common vehicle foundation.
The world is flush with NVIDIA chips, so why not toss them in some vehicles?
What I’m Listening To While Writing TMD
My daughter was trying to tell me the name of a song the other day and, oh boy, this was hard to parse. We eventually figured out it was “Bourgeoiseses” by Conan Gray. It’s very much an ’80s throwback.
The Big Question
What would you do with that excess 57 million capacity?
Top photo: Ford
The post The World Can Build 57 Million More Cars Than It Needs appeared first on The Autopian.
