Automotive

Tricking the auto-pilot 73% of the time

So much faith is put in the hands of computers nowadays but the idea of driverless cars is still fraught with danger.  Car & Driver reports “Researchers at the University of Washington have shown they can get computer vision systems to misidentify road signs using nothing more than stickers made on a home printer. UW computer-security researcher Yoshi Kohno described an attack algorithm that uses printed images stuck on road signs. These images confuse the cameras on which most self-driving vehicles rely. In one example, explained in a document uploaded to the open-source scientific-paper site arXiv last week, small stickers attached to a standard stop sign…using an attack disguised as graffiti, researchers were able to get computer vision systems to misclassify stop signs at a 73.3 percent rate, causing them to be interpreted as Speed Limit 45 signs..”

Sure systems will improve over time but we already have a plethora of people already putting too much “blind” faith in systems being fool proof as this video demonstrates

Exactly

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From Car Buzz – Mazda’s SVP in North America talks total sense with respect to allowing automakers to come up with the best solution rather than be dictated to on how they should run their businesses. Let them live and die by the sword of their own decisions in challenging technology even if it means zero emissions targeting and let necessity become the mother of invention rather than forcing inefficiency through regulation which governments excel at.

In case you haven’t noticed, Mazda does not offer a single EV in its entire global lineup, and it has no immediate plans to do so. How come? Because it believes the internal combustion still has a future. Automotive News has reported about the speech Robert Davis, Mazda senior vice president in charge of special assignments for North America, gave at a recent seminar. But let’s make one thing clear: Mazda is still very much committed to fuel efficiency, hence its ongoing development of its SkyActiv line up gasoline and diesel engines.

But it’s in no rush to develop EV tech for several reasons. For example, Davis made this point: “Take the $7,500 EV credit off the table? At the same time, you take the EV mandate off the table. Let the government keep the $7,500 and let the industry find the best way to meet the clean air standard. Make it C02, make it grams per mile, fuel economy, whatever feels best. But don’t mandate the particular powertrain.” One of the reasons why Mazda has taken this approach is due to its small size; it simply cannot keep up with larger global automakers, so it’s forced to take its own path. Another EV related issue Davis mentioned was concerns regarding lithium-ion batteries; what will happen to them once they’re worn out?

Unlike, say, cellphone batteries, EV batteries are much more difficult to recycle. “This is where the great thinkers of our industry need to speak up and be heard and make sure the manufacturers can do what they do best: compete against each other for the customers’ hearts and minds,” Davis added. “We’re all better than this. We can do better than this. We need to consider that this not zero emissions. This is remote emissions, or displaced emissions.” But his bottom line point regarding internal combustion engine technology is that there’s more innovation to be done, and Mazda will continue doing just that.

However, the Japanese automaker is not afraid to adopt new technologies, such as batteries and plug-in hybrids, “but they all share the internal combustion engine. So before we go into the time and effort and expense of adding electrification, we were convinced that a solid, efficient internal combustion engine was critical.”

Tesla Model 3 – proof that it is still amateur hour

The press are already fawning over the new Model 3. Subscribing to the Tesla Owners Worldwide forum page I’ve learnt it is something more akin to a cognitive dissonance based cult. All of the mutual backslapping between owners trying to justify their purchase as if they know something we don’t. Despite this, Musk – for all of his rent seeking powers – is revealing his amateur status where it matters most – first in production and second in distribution. Yet the press is hailing this as the iPhone type game changer. According to automotive analysts Tesla hadn’t secured a production manager, after the Model 3 was green lighted over 1.5 years ago. Car production is a nightmare. It requires supreme coordination across the entire supply chain.

As the Tesla Model 3 is being rolled out to customers around two dozen of his staff are being given cars to iron out any bugs that haven’t been found before final fill out. Normally car makers go out of their way to iron out bugs or defects before release. Such is the emergency to keep to a schedule, Tesla reminds me of Michael Keaton (plays Hunt Stevenson) in Working Class Man (Gung Ho) where the Japanese are trying to fix the quality control issues of the poor work ethic of its American factory. Such is the sloppiness of manufacturing that the workers say “let the dealer worry about it”

Tesla has a small dealer footprint compared to major auto makers. This idea that dealers are a thing of the past is nonsense. If there is a funny clunk on an individual car or a major recall, dealers bring peace of mind and smooth out the process. Yet Tesla, which has well known quality problems has an underbaked dealer network as evidenced by the following complaint by a customer

“I was on my way to pick up my new Tesla today, when I got a call from the delivery specialist telling me that my car had mistakenly been given to another customer over the weekend. Now they want to deliver the car to me after it had been used by someone else. This diminishes the joy and experience of expecting your new car. Not a happy camper at all. Very unprofessional. After all, don’t they check VIN numbers before delivering cars?”

Wait for production nightmares to arise. Musk, who recently admitted efficient production was pretty much the whole ballgame,  has nothing in terms of experience or quality control of say a Toyota which has coined pretty much every global manufacturing efficiency jargon there is – JIT, Kansan and kaizen for starters. That didn’t come from pushing its luck – it has been decades of refinement not 1.5 years with crossed fingers.

The non motoring press can write whatever they please about how wonderful it is because it’s trendy to like Tesla. However Toyota says it is close to perfecting solid state Li-ion batteries which will be infinitely better than the antiquated things Tesla is using now. That aside, the Tesla Model 3 will be like every other Tesla venture – run in the hope nothing goes wrong. My bet is that this company that is still to turn a profit and relies on the taxpayer to fund its sales can’t compete with the incumbents when they flood the market with attractive product. By the way the centre control dashboard shows that form is being put over function.

Elon Musk may well be the modern day version of Hunt Stevenson. Got the gift of the gab but lives on endless promises that he knows is always a huge long shot. Never forget Toyota had a stake in Tesla but sold it. Be sure Toyota’s tech team went over its technology with a fine tooth comb. It found nothing it didn’t  have already and so let it go.

EVs impact on the grid according to MIT

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The boffins at MIT are forecasting that EVs charging with home fast chargers could add the equivalent power consumption of 3 houses to the grid. According to MIT, “Electric cars being sold today can draw two to five times more power when they’re charging than electric cars that came on the market just a couple of years ago.”

Utilities are now prioritizing areas that are seeing a higher proportion of EVs sold as the risk is that failure to upgrade the connectors could lead to more frequent blackouts. The upgrade costs are borne by all ratepayers, not just the EV buyer.

According to a UK National Grid report, peak demand for electricity will add around 30 gigawatts to the current peak of 61GW – an increase of 50%.

It is doubtful whether most governments have factored in the true costs of EVs on electricity markets other than vague commissioned reports that get them to the result their looking for. Then when it’s too late and EVs potentially start crashing the grid then comes all the regulation around when you can charge and the decade of planning required to set up a new back up electricity facility to make up for the shortfall.

Watch it unfold. Governments doing what they do best. Making promises by which time they’ll be out of office when the true costs must be borne.

2040? Watch auto lobbyists water down the EV legislation

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It isn’t a big surprise. The UK is following French plans to ban the sale of petrol/diesel cars from 2040. However let’s get real. Why is it that SUVs remain one of the most popular vehicle classes around? Could it be that the guy who likes to sail needs a V8 Land Cruiser to haul his 7000lb boat that a Tesla 22” rim Tesla can’t manage even half that? Could it be that a mother with 3 kids who often takes her parents on trips to the beach needs a minivan? Have they considered the single bachelor who wants a BMW sports car? Or the DINKs who want a Range Rover because they love to ski in the winter.

What about emergency services vehicles? Have these governments considered the impact of having reliable heat exchangers (from combustion engines) to power life saving equipment in ambulances? From one of my high school mates who works as a paramedic tells me, “We have Webasto heaters in our cars in the colder areas. Running off the diesel they can run 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.”

What about LCVs? Will light commercial vehicles be exempt? Just watch the auto makers classify their SUVs as LCVs and dodge the rules! The Hummer is a perfect example of this. It was so heavy that it managed to be excluded from the passenger vehicle qualifications on fuel economy.

Let’s not forget the actions of VW (and all of its sub brands) who use the same technology blatantly lied about emissions and found a way to cheat the system. That isn’t to condone their behaviour for corporate malfeasance but certainly shows their true colours on what they feel about climate change. Now they will be forced to sell plenty of brands to pay for the penalties imposed on it.

Take California’s new $3bn plan to support EV sales – effectively a deeply Democrat state fritting away tax dollars to subsidise the wealthy. The poor guy who has to drive a 20-yo petrol pick-up truck because he can’t afford a new one is probably paying taxes to subsidise the guy who pays him to mow his lawn to buy a Tesla.

Have these governments consulted the auto industry? It wouldn’t seem so. Automakers are dead against full EV because it ruins the most fundamental part of their DNA – the drivetrain. When you read all the blurb on the pamphlets what is the one area car makers can milk consumers for? Power and performance. Mercedes can sell you a C180 for a little bit of profit and absolutely gouge out your eyeballs for the high performance C63 and basically vaporize your wallet with the options. Auto makers don’t want to go full EV.

What is it with these governments getting involved in every aspect of our lives? Have they considered the huge hole in the budget to come from a reduction in petrol excise taxes? Fuel duties in the UK are expected to fetch around $35bn in 2017 or c.4% of total tax receipts.

Have they considered that consumers are already clearly showing their belief in ‘climate change abatement’ by the cars they buy? When the subsidies were torn from Tesla in HK, sales went to ZERO while in Denmark Tesla registrations fell 94%. Isn’t that evidence enough of how these vehicles are only tax avoidance devices, not the action of deep seated ecologists?

So before running for more mad green schemes to save the planet perhaps they should look at the evidence and listen to their constituents. Moreover when governments get heavily involved in subsidizing industries it generally results in disaster by creating massive oversupply like we saw in solar and wind industries. Spain perhaps provides the strongest evidence of this. Around 2004 it wanted to get 1GW of solar under its feed in tariff over 4 years. Instead it got 4GW in 1 year meaning its budget exploded 16x and it had $100bn in tax liabilities over the course of the promise. In the end the government reneged. So much for the assurance of government programs.

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.

So for all of the grandstanding of governments this push for mandated EVs will not be a plus, much less achievable. I remember as an auto analyst in Europe in 2000 when law makers were saying EVs would be 10% of the market by 2010. It is 2017 and they’re 1%. Once again governments are clueless as ever. They’ve achieved only 10% of their goal in effectively twice the time. Then again what do we expect of governments who do their math on the back of an envelope and never let we, the tax payer, properly evaluate how they got there? Then when targets aren’t reached and costs associated with their incompetence end up a double whammy for taxpayers. Anyway by 2040 most of the current crop of politicians won’t be there in parliament to defend their legacy, or what is left of it.

The reality is that the automakers will skillfully lobby these bureaucrats to water down the laws which will allow hybrids and all other types of loopholes to exist making the “ban” more like a “request”. Appeal to industry wide job losses and technical hurdles (which are immense by the way) and it will be bumped. Even in the US, Corporate Average Fuel Economy laws continually got pushed out, reclassified and adjusted to suit the industry.

Group think alive and kicking

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It is hard not to laugh at the headlines in media these days. Group think pervades. The headline that 19/20 nations agree by definition must mean the 1/20 (no guessing who) is dead wrong. Sort of like one kid answering the question incorrectly to a teacher and being ridiculed by the rest of the class). This is sadly the kind of mentality which carries far more risk. Consensus is bunk. Consensus is basically the euphemism for complacency. No matter how many scandals break about homogenized temp data (even from government bodies (i.e. IPCC & NOAA to name two), deliberate concocting of data which serve a purpose or confirmation that 98% of the models using this bogus data have overestimated ‘warming’. The point is that so deeply entrenched are 19 nations in group think that they are basically falling into cognitive dissonance. That is to say they only look for the confirmation bias rather than truly seek alternative theories which might hold merit.

If one objectively reads the Paris Climate Accord the US is spot on to refuse chipping in $3bn to a pot where the three other largest polluters have openly confessed they are doing   next to nothing to combat climate change. Sure rosy press releases push the idea that they’re fully on the climate crusade bus but reality is China has no plans to actively reduce CO2 emissions til at least 2030. Do people honestly believe Premier Xi will guarantee he’ll sacrifice Chinese economic prosperity for climate abatement? President Putin? PM Modi? Will they risk putting a bullet in the brain of the economy to save the planet? Not a chance.

The French plans to ban the sale of petrol/diesel cars after 2040 is also laughable. If you want to bury relatively technology starved French automakers like PSA Peugeot-Citroen. 23 years isn’t much of a lead time in the auto industry if one is decades behind to catch up. Will the grid be able to handle the 2mn new cars France sells annually? Will anyone do the math on the toxic gunk that goes into a Li-ion battery? Will special provisions be given to emergency services which require combustion engines to power the heat exchangers that help life saving equipment function?

No. But think of it the other way. How smart is Trump to make the rest of the world do all the hard yards  at no penalty to the US? That is the art of the deal.

Yellen’s Fedtime stories

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US Fed Chair Janet Yellen uttered perhaps some of the most bizarre words to come out of a central banker. So much so that Alan Greenspan’s “I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.” seems almost comprehensible by comparison. Yellen told an audience that she believes we won’t see another severe financial crisis in our lifetimes. Either Ms Yellen is not long for the world or denial is running deep within her veins. One of her own FOMC board members (James Bullard) wrote a piece on why the Fed needs to trim its balance sheet from $4.47tn to around $2.5 trillion) so they can prepare for the next horror that awaits.  Even Minnesota Fed Reserve Bank President Neel Kashkari said the likelihood of another financial crisis is 2/3rds. We have a world with debt up to its eyeballs and global interest rate policies that have only led to the slowest post slowdown growth in history. The signs of a global slowdown are becoming ever more obvious even in the US. Slowing auto sales and rising delinquencies are but one signal. The imminent collapse of so many public pension funds another.

Had she not seen the European Commission’s decision to let Italy spend up to 17 billion euros to clean up the mess left by two failed banks? The news is not only another whack for Italian taxpayers but a setback for the euro zone’s banking union, and a backflip for the EU’s stance on non-standard bailouts. The Italian government wound down Banca Popolare di Vicenza and Veneto Banca, two regional lenders struggling under the weight of non-performing loans which averages 20% across the nation and up to 50% in the south. Intesa Sanpaolo bought the banks’ good assets for one euro, and was promised another 4.8 billion euros in state aid to deal with restructuring costs and bolster its capital ratio. Italy’s taxpayers get to keep the bad loans, which could end up costing them another 12 billion euros. Even the Single Resolution Board — whose purpose is to take the politically difficult decision of whether to close a bank out of the hands of governments — chose not to intervene.

Last year four Italian banks were rescued and it seems that since Lehman collapsed in 2008 non performing loans (NPLs) have soared from 6% to almost 20%. Monte Dei Paschi De Siena, a bank steeped in 540 years of history has 31% NPLs and its shares are 99.9% below the peak in 2007. Even Portugal and Spain have lower levels of NPLs. The IMF suggested that in southern parts of Italy NPLs for corporates is closer to 50%!

Italy is the 3rd largest economy in Europe and 30% of corporate debt is held by SMEs who can’t even make enough money to repay the interest. The banks have been slow to write off loans on the basis it will eat up the banks’ dwindling capital. It feels so zombie lending a la Japan in the early 1990s but on an even worse scale.

Not to worry, the Italian Treasury tells us the ECB will buy this toxic stuff! But wait, the ECB is not allowed to buy ‘at risk’ stuff. So it will bundle all this near as makes no difference defaulted garbage (think CDO) in a bag and stamp it with a bogus credit rating such that the ECB can buy it. In full knowledge that most of the debt will never be repaid, the ECB still violates its own rules which state clearly that any debt they buy ‘cannot be in dispute’.

The Bank of Japan has no plans to cut back on the world’s largest central bank balance sheet. It continues to Hoover up 60% of new ETF issues at such an alarming pace it is the largest shareholder of over 100 corporates. Then there is the suggestion of buying all $10 trillion of outstanding JGBs and convert them into zero-rate (+miniscule annual service fee) perpetuals.

Australia’s banks are now the most loaded with mortgage debt globally at 60% of the total loan book.  Second is daylight and third Norway at 40%. Private sector debt to GDP is 185%. We have a government who can’t tighten its belt basing its budget on rosy scenarios that will be improbable. Aussie banks have been slapped with a new tax and with the backdrop of a rising US rate environment, the 40% wholesale funded Aussie banks will be forced to accept higher cost of funds. That will be passed straight onto consumers that are already being crushed under the weight of mortgages. One bank survey by ME Bank in Australia said that 1/3rd would struggle to pay a month’s mortgage if they lost their jobs.

Had Ms Yellen forgot to read the St Louis Fed’s survey which revealed that 45% of Americans can’t raise $400 in an emergency without selling something? USA Today reported that 7 out of 10 Americans have less than $1,000 in savings to their name.

“Last year, GoBankingRates surveyed more than 5,000 Americans only to uncover that 62% of them had less than $1,000 in savings. Last month GoBankingRates again posed the question to Americans of how much they had in their savings account, only this time it asked 7,052 people. The result? Nearly seven in 10 Americans (69%) had less than $1,000 in their savings account…Breaking the survey data down a bit further, we find that 34% of Americans don’t have a dime in their savings account, while another 35% have less than $1,000. Of the remaining survey-takers, 11% have between $1,000 and $4,999, 4% have between $5,000 and $9,999, and 15% have more than $10,000.”

So Chair Yellen, we are not sure what dreamland you are living but to suggest that we won’t see another financial crisis in our lifetime almost guarantees it will happen. The Titanic was thought unsinkable until history proved otherwise. Money velocity is not rising and every dollar printed is having less and less impact. I thought it nigh on impossible to surpass the stupidity of Greenspan but alas you have managed it.