While everyone continues to disparage Tesla after its disappointing Q1 2024 sales performance, the market is favoring Toyota even more. The Japanese automaker’s share prices are up 32% year to date, whereas Tesla is down 33%, which Elon Musk’s company attributed to arson attacks at the Berlin Gigafactory, the shipping crisis in the Red Sea, and the production ramp-up of the Model 3 facelift in California. But as the laggard in the EV race transitions into a late-bloomer, its sluggish approach is after all being rewarded.
Welcome to Critical Materials, your daily round-up of news that’s shaping up the future of mobility. Today, we’re discussing how Toyota is benefitting from the narrative of “slow-down” in the electric vehicle race, another blow to Fisker as the National Highway Traffic Safety Administration (NHTSA) opened a third probe into the Ocean electric SUV, and the beginning of battery production at General Motor’s Ultium Cells plant in Spring Hill, Tennessee.
30%: Toyota Is Loving The EV Price Wars
Toyota staunchly lobbied against the urgency of EVs to the ire of environment and climate advocates. It influenced a favorable emissions policy from the Environmental Protection Agency (EPA) that now requires a more gradual ramp-up towards EVs. And in the meantime, it watched a brutal price war playing out across the globe.
To be honest, Toyota couldn’t have envisioned a more favorable scenario. The company just had a banger first quarter in terms of sales. Half a dozen Toyota hybrids and PHEVs had their best-ever sales growth in the first three months of the year. But the trajectory of two of the world’s most valuable car companies is contrasting—Toyota shares are up 32%, whereas Tesla is down 33% from the start of the year.
Comparing the two head-to-head is unfair, of course, they’re not direct rivals. Tesla is a different beast, selling only battery electric vehicles, whereas Toyota offers everything from a gas-guzzling Land Cruiser to the Prius Prime plug-in hybrid and the lackluster bZ4x electric crossover.
But many experts consider that the EV industry here in the U.S. is past its first- and second-wave early adopter phase. The next wave of EV buyers want affordable EVs priced under $30,000, and they don’t want to worry about charging and range. That's exactly where Toyota's hybrids come into the picture.
Here’s a solid take from market analysis firm TipRanks this morning:
Naturally, the price war is helpful for TM stock for two main reasons. First, the reason for any price war centers on a lack of demand. It’s an especially powerful dynamic when Tesla—the EV market leader—is the one initiating the bitter competition. If it was an upstart entity looking to make a name for itself, that’s understandable.
Tesla? The company shouldn’t need to resort to such tactics because it has tremendous social cachet. So, something must seriously be wrong with the broader EV market.
Second, the price war should theoretically help Tesla weed out the competition. However, it would also help Toyota. When the automaker is ready to embrace electrification, it will have less competition to deal with. In the meantime, the aggressively low pricing has wreaked havoc on Toyota’s mainline rivals, many of which jumped a bit too far into the deep end.
While carmakers rush to build affordable EVs to thwart Chinese automakers's potential attempt to penetrate the U.S. market with irresistibly cheap EVs, Toyota can just continue doing what it does best. That includes selling conventional hybrids, PHEVs, and gas-powered models while working behind the scenes to bring 10 new pure electric cars to the market by 2026.
To be clear, this isn’t a Toyota versus Tesla narrative—it’s Toyota in the context of an increasingly complex EV space. Environment advocates write off hybrids as more efficient gas cars—an oversimplification of the technology in my opinion—and that might be devastating for the climate. But it could be good for consumers in the interim as hybrids allow them to familiarize themselves with electric propulsion and hopefully lead to better education.
All said, Toyota isn’t backing off from the ultimate goal of complete decarbonization. It recently said that it was committed to “catching up” to rivals. The laggard could certainly be a true late bloomer, after all.
60%: No End To Fisker’s Woes
The NHTSA is probing over a dozen new complaints regarding the 2023 Fisker Ocean. Complainants allege a failure of the door latch that prevents the opening of all four doors. What’s worse, the NHTSA report said the doors had trouble opening from the inside and the outside, and that the “emergency override mechanism” didn’t work as intended.
Read the NHTSA’s summary here:
The Office of Defects Investigation (ODI) has received 14 complaints alleging failure to open the door on model year 2023 Fisker Ocean vehicles manufactured by Fisker Group Inc.
The complaints allege an intermittent failure of the latch and handle preventing the opening of the driver, front passenger and/or rear doors. Some reports allege the inability to open the door from either the interior or exterior door handle, resulting in the need to use another door to egress.
The reports allege that the emergency override mechanism also fails to open the door. Some of the 14 ODI reports did not mention these allegations in the report and instead made ODI aware during consumer outreach after the report was submitted.
This is NHTSA’s third open investigation into the Ocean SUV. The first concerns nine complaints regarding loss of braking performance and four relating to unintended vehicle movement. They all sound terrifying. Getting locked in or out of your brand-new cutting-edge electric crossover is the last thing you'd expect, so I can’t imagine what these customers must have experienced IRL. All this doesn’t bode well for a company that’s already on a downward spiral.
According to leaked reports accessed by Business Insider last week, more than 40,000 of the Ocean’s 70,000 reservations have been canceled. This means the company has to reimburse roughly $9 million in what it accrued in reservations. All this comes in the wake of Fisker's inability to raise funds, and horror stories from owners regarding quality issues.
90%: General Motors Makes More Batteries At Home
This one won’t raise your eyebrows or boil your blood, I promise. General Motors announced yesterday that the second of its four joint venture battery plants began shipping cells for GM EVs. The plant in Spring Hill, Tennessee is a joint venture between the American carmaker and LG Energy Solution. The cells made here will go into the Cadillac Lyriq starting now, and other EVs in the future.
This plant has faced delays as GM had trouble ramping up its EV plans. “It was supposed to originally start at the end of [2023]. There was a couple of weeks due to some construction delays but it now is on track, and it will ramp with all the benefit of the learnings,” GM CEO Mary Barra said in an earnings call last year.
GM is part of four joint venture battery plants in the U.S. The first one is operational in Ohio and another one is in Lansing, Michigan. The latter is under construction—also delayed by two odd years—and is expected to begin making low-cost battery cells by the end of 2024. A fourth plant worth $4 billion will be constructed in Indiana in partnership with Samsung SDI.
2024 is GM's opportunity to come back into vogue. We'll find out soon how its upcoming models like the Equinox EV and a less buggy Blazer EV fare in the real world.
100%: Are Competitors Chipping Away From Tesla Sales?
The zeitgeist of sluggish EV sales might apply to Tesla this quarter, but not to its rivals.
To name a few, Hyundai Motor Group saw robust sales growth in the first quarter for its Ioniq 5 and 6, and the Kia EV6. The Cadillac Lyriq continues to be the best-performing Ultium-based EV with its quarterly sales up 52%, becoming the brand’s second best-selling car behind the XT5.
Rivian delivered 71% more EVs this quarter. Audi EV sales were also up 29% thanks to the Q4 E-Tron and Q8 E-Tron—the futuristic design of the latter’s nose massively appeals to this pair of eyes. So the next time you read EV slowdown narratives, maybe take a moment to look at these numbers.
Lastly, let us know in the comments if you think non-Tesla EVs are finally gaining momentum. Will Elon Musk’s brand bounce back in the next quarter, or will competitors continue to grab a larger share of the EV space?
Contact the author: suvrat.kothari@insideevs.com
