Tesla

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.”

Related image

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.

WeWorked

WeWork Financials.jpg(770×481)

WeWork has delayed the IPO. According to Zerohedge, the initial appraisal value of $47 billion appears to be entering the realm of $10 billion. This has ‘canary in the coalmine‘ written all over it. The kaleidoscope of razzle-dazzle in the free money world looks to have stopped spinning.

The company looks toxic. Most people point fingers at the co-founder Adam Neumann,  who, according to WSJ,  reportedly sold $700 million in a mixed debt and equity transaction. CM may be a contrarian, but even he sees the pre-IPO sale as somewhat suspicious. Selling part of your stock as part of an IPO is one thing. Doing it prior doesn’t pass the pub test.

How can IWG plc (better known as Regus) make profits (albeit sideways) with the same concept? 2018 IWG revenue and profit after tax increased 51% over 2014 levels. Revenue increased 13.5% since 2016, but post-tax profit slumped 24%.

WeWork seems like the Tesla of the office space world. Huge promises but the numbers are struggling to stack up. Maybe WeWPresumably, due to a combination of intensifying shared office competition, start-ups spoilt for choice or simply failing to grow.ork should leap into insurance as a way to generate cash flow like Tesla has started to do?

Atlassian should back the Minerals Council of Australia, not knock it

Atlassian co-CEO Mike Cannon-Brookes (MCB) has apparently been on a campaign trying to get the already left-leaning board of BHP to ditch ties with groups like the Minerals Council of Australia. But why?

CM believes that nothing shows the prosecution of a cause than leading from the front. MCB should use the might of Atlassian’s $32 bn market cap and seek to buy a controlling stake in BHP whereby it can behave like an activist shareholder and achieve those goals from within. A bit rich to demand a company like BHP fold to the whims of another listed corporate which has no direct business with it. That would be terrible governance for BHP to pay MCB any mind.

How would MCB react if BHP CEO Andrew Mackenzie turned around and demanded that Atlassian cut ties with ANZ for being embroiled in the Hayne Banking Royal Commission? MCB would rightly tell him to take a hike.

One doubts that MCB has much of his superannuation buried in BHP shares but why pick on the Minerals Council of Australia? After all, if he had a good look at what Australia’s mineral industry enables, Atlassian should be a backer not a knocker. Why not influence the debate by being part of it?

Here is a list of 30 things Australian minerals companies provide, including vital materials used in wind farms and solar panels, the very forms of renewable energy MCB wants Atlassian to rely on 100% to power its future. MCB’s Tesla is reliant on Aussie minerals to make the batteries. So does his smartphone, tablets, laptops and desktops. And so do the white goods that chill his food and the copper pipes that deliver hot water in his lovely mansion in Sydney. His dentist uses those minerals to maximise his oral hygiene.  The list goes on.

No one can take away the success MCB has achieved in the corporate sphere. However, it would appear that being an expert in the software world doesn’t always translate to being a sage on the environment much less hold any authority to dictate the boardroom discussions of a company that is more crucial to its existence than the other way around.

Buhahahahaha

In 1999, CM was told by the pro-EV lobby that electric cars would be 10% or the market by 2010. In 2019 EVs are struggling to nudge 1.3%. If EV’s have managed to achieve much more than 10-12% by 2035 it will be a miracle.

10 reasons it will be highly unlikely:

1) Australia sold just over 1.15m cars in 2018. In 2008, SUVs comprised 19% of total sales. Today 43%. So much for the unbridled panic about catastrophic climate change if consumption patterns are a guide.

2) Australian fuel excise generates 5% of total tax revenue. It is forecast to grow from $19bn today to $24bn by 2021. If government plans to subsidize then it’ll likely to add to the deficit, especially if it lobs $5,000 per car subsidies on 577,000 cars (50% of 2018 unit sales in Australia).

CM has always argued that governments will eventually realize that moving to full EV policy will mean losing juicy ‘fuel excise’. Point 16 on page 19 for those interested.

Cash strapped Illinois has proposed the introduction of a $1,000 annual registration fee (up from $17.50) to account for the fact EVs don’t pay such fuel taxes. Note Illinois has the lowest investment grade among any other American state and has to allocate 40% of its budget just to pay outstanding bills. It is also home to one of the largest state pension unfunded deficits per capita in the country.

3) cash for clunkers? If the idea is to phase out fossil fueled powered cars, surely the resale/trade in values will plummet to such a degree that trading it on a new EV makes no sense at all. False economy trade where fossil fuel owners will hold onto existing cars for longer.

4) Global EV production is 2.1m units. Looking at existing production plans by 2030, it is likely to be around 12mn tops on a conservative basis. Australia would need want 5% of world EV supply when were only 1.2% of global car sales. Many auto makers are committed to selling 50% of EV capacity into China. So Shorten will be fighting for the remaining pie. No car makers will export 10% of all EV production to Australia without substantial incentives to do so.

Don’t forget Alexandria Ocasio-Cortez also intends to get every fossil fueled powered car off the road in a decade. The US has 270 million registered vehicles, the overwhelming majority being petrol powered. The US sells 16-17mn cars a year (sadly slowing). Therefore in the US, 16 years would be required to achieve that target.

5) Ethics of EVs. To save the planet, the majority of cobalt to go into making the batteries comes from African mines which use child slave laborers. There is a moral scruple to keep a virtue signaling activist awake at night!

Not to worry, Glencore has just announced last week it is closing its cobalt capacity in DR Congo which will flip the market from surplus to deficit (at 1.2% global market share). Oops.

6) EV makers aren’t happy. In Europe there are over 200 cities with EV programs but none are alike. In the quest to outdo each other on the virtue signaling front, car makers are struggling to meet such diverse requirements meaning roll outs will be slow because there is no movement to standardize.

7) EV suppliers aren’t convinced. Because of the above, many EV suppliers are reluctant to go too hard in committing to new capacity because global car markets are slowing in China, US, Europe and Australia. High fixed cost businesses hate slowdowns. Writing down the existing capacity would be punitive to say the least. New capacity takes a minimum of 2 years to come on line from conception.

8) The grid! In the UK, National Grid stated that to hit the UK targets for EVs by 2030, an entirely new 8GW nuclear plant would be required to meet the demands of EV charging. Australia can barely meet its energy needs with the current policies and doubling down on the same failed renewables strategy that has already proved to fall well short of current demand ex any EVs added to the grid.

9) in 1999 automotive experts hailed that EVs would make up 10% of all vehicle sales by 2010. In 2019 EVs make up around 2.5%. So 9 extra years and 75% below the target. The capacity isn’t there much less consumers aren’t fully convinced as range anxiety is a big problem.

10) charging infrastructure is woefully inadequate. Await another taxpayer dollar waste-fest. Think NBN Mark II on rolling EV chargers out nationwide. The question then becomes one of fast charger units which cost 5x more than slower systems. If the base-load power capacity is already at breaking point across many states (Vic & SA the worst) throwing more EVs onto a grid will compound the problem and drive prices up and potentially force rationing although people look to Norway.

Norway is a poor example to benchmark against. It is 5% of our land mass, 1/5th our population and new car sales around 12% of Australia. According to BITRE, Australia has 877,561km of road network which is 9x larger than Norway.

Norway has around 8,000 chargers countrywide. Installation of fast chargers runs around A$60,000 per unit on top of the $100,000 preparation of each station for the high load 480V transformer setup to cope with the increased loads.

Norway state enterprise, Enova, said it would install fast chargers every 50km of 7,500km worth of main road/highway.

Australia has 234,820km of highways/main roads. Fast chargers at every 50km like the Norwegians would require a minimum of 4,700 charging stations across Australia. Norway commits to a minimum of 2 fast chargers and 2 standard chargers per station.

The problem is our plan for 570,000 cars per annum is 10x the number of EVs sold in Norway, requiring 10x the infrastructure.

While it is safe to assume that Norway’s stock of electric cars grows, our cumulative sales on achieving plan would require far greater numbers. So let’s do the maths (note this doesn’t take into account the infrastructure issues of rural areas):

14,700 stations x $100,000 per station to = $1,470,000,000

4,700 stations x 20 fast chargers @ A$60,000 = $5,640,000,000 (rural)

4,700 stations x 20 slow chargers @ A$9,000 = $846,000,000 (rural)

10,000 stations x 5 fast chargers @ A$60,000 = $3,000,000,000 (urban)

570,000 home charging stations @ $5,500 per set = $3,135,000,000 (this is just for 2035)

Grand Total: A$14,091,000,000

Uh Oh! Tesla’s next big problem

Glencore.png

Glencore reported on p33 of its half-yearly results that it is suspending its cobalt mining in the DR Congo. It noted that, “Mutanda’s economic viability has deteriorated since the update provided at the 2018 Results presentation in February 2019

Note that Mutanda provided 25kt of cobalt, a vital ingredient in making batteries for electric vehicles (EV). In Darton Commodities ‘2018-2019 Cobalt Market Review,’ it forecast total global cobalt supply of 140kt in 2020 vs. total global demand of 132kt. Knocking out Mutanda will push the market into 19kt deficit.

For a company like Tesla that is trying to ramp volumes at lower/discounted prices, higher raw input prices will only make life harder in making sustainable profits.

How lucky we are that Bill Shorten never got his 50% EV sales by 2030 plan into effect.

Tesla is good at digging holes

Tesla shares have rebounded from the $180s so CEO Elon Musk has come out of the woodwork suggesting mining might be on the agenda to lock in its future battery supply.

Tesla might be adept at digging financial holes for itself but we shouldn’t think that will turn it into an efficient miner.

Just typical Musk banter.