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- Today's Smart Brevity count: 1,280 words, a <5 minute read.
1 big thing: Tesla is mirroring Detroit's worst habits
Tesla is beginning to behave like the Detroit Three carmakers during their most desperate days.
Why it matters: By pumping incentives and slashing prices, the electric car manufacturer is signaling that it prioritizes vehicle deliveries and cash generation over margins.
- Analysts expect the hit to profits will be evident in next week's second-quarter results, following a $702 million first-quarter loss as deliveries slowed.
- But longer term, Tesla also risks alienating loyal customers and destroying its considerable brand equity — problems Detroit is all too familiar with.
What's happening: A dizzying string of recent price adjustments on Tesla cars is a sign of internal chaos over how to deal with shrinking U.S. incentives, aging model lines and pressure to boost deliveries, Bloomberg reports.
- This week's $6,410 price cut on a fully loaded performance edition of the Model 3 sedan was a "bitter pill to swallow" for Tesla loyalist Laurence Blau, who paid $68,400 for the car less than three weeks ago, per Bloomberg.
- Tesla, which sells direct to consumers rather than through franchised dealers, prides itself on pricing transparency.
- In a quarter-end push, Tesla also offered bonuses to employees to hit a record 95,200 deliveries in the second quarter.
- After 9/11, GM's "Keep America Rolling" campaign helped restore consumer confidence and keep factories humming.
- Its 0% financing and employee pricing offers began an era of winning sales with expensive incentives.
- The tactics pulled ahead natural demand but masked high labor costs and other problems.
- To cover those high fixed costs, Detroit kept overproducing cars and slapped big discounts on the hood — until eventually the industry collapsed in 2009.
Today, Tesla has its own motivations to pump up sales, even if it means sacrificing profits, writes Barclay's automotive analyst Brian Johnston in a note to clients.
- With future capital raises likely (maybe as soon as next year), it's important to show growth to potential investors.
- Tesla also makes money selling zero-emission credits to other carmakers, so the more cars it sells (even at a loss), the more revenue it makes from credit sales.
- Since 2010, Tesla has reaped nearly $2 billion in revenue from selling regulatory credits to competitors that need to offset sales of their own polluting vehicles.
What to watch: Tesla reports its Q2 financial results on July 24.
- The outlook remains tough: As demand for more expensive Tesla models S and X wanes, Tesla's average selling prices will likely keep declining, making it that much tougher to achieve profitability.
2. EVs face headwinds in major markets
Policy changes in the U.S. and China could slow electric vehicle sales growth, Axios' Ben Geman writes.
The big picture: Rapidan Energy Group's updated "decarbonization policy tracker" looks carefully at what's happening in China, the world's largest auto market and the global leader in EV deployment.
- In China's complicated market, subsidies for EVs with more than 250 miles of range will fall 50% to $3,600 per car, and "subsidies for lower-range vehicles are being similarly reduced." But Rapidan emphasized that other important changes are afoot too.
- "China is easing certain licensing restrictions that have made it nearly impossible for car buyers in large cities to purchase an internal combustion vehicle," a summary of the report notes.
The combined effect will likely slow, or even reverse, what has been rapid EV sales growth there, Rapidan said.
Meanwhile, in the U.S., Rapidan says Trump administration plans to weaken Obama-era fuel economy and emissions rules will also affect EVs.
- Part of that plan would revoke California's special authority to implement rules that a number of other states follow.
The bottom line: "Because of the changes occurring in the U.S. and Chinese vehicle markets, Rapidan Energy Group sees the following 6–12 months as a period during which projections of peak oil demand may be adjusted by the major forecasting agencies," they said.
3. Uber offers blueprint for safe self-driving cars
Deciding when a self-driving car is safe enough for public roads is debatable, but Uber has a method it's willing to share with the rest of the industry.
The big picture: Around the world, regulators, AV developers and industry groups are pushing to define safety metrics and validation methods for self-driving vehicles, though an industry-wide standard has yet to emerge and for now, the technology remains self-regulated.
Driving the news: At this week's Automated Vehicles Symposium in Orlando, Florida, Uber shared details of how it's measuring safety, and said it would open-source its safety case framework to others, reports Quartz.
Uber's offer follows a flurry of recent announcements.
The details: Uber's safety guidelines are a cross between a checklist and a decision tree, Quartz says.
- They start with the premise that its vehicles are safe to drive on public roads, then work top-down to define all the conditions and factors that are necessary to make that true.
- The framework touches everything from safety driver training to cybersecurity and legal requirements that Uber says should be considered as self-driving systems are built, tested, and brought to market.
The bottom line: As the technology slowly progresses, it's important that the industry settle on safety standards they can all get behind as they try to win public confidence for self-driving cars.
4. Driving the conversation
Luminar's Iris: This lidar is so cheap it could make self-driving a reality (Alex Davies — Wired) [link needed]
- Why it matters: Luminar's 3rd-gen lidar unit is about the size of a soda can and weighs just under 2 pounds — small enough to fit into a car's bumper — plus it draws just 15 watts of power and has a range of 250 meters.
- Most important, it will cost as little as $500 — cheap enough to work not just on robotaxis, but on personal AVs.
Whispers: Tesla floats fully self-driving cars as soon as this year. Many are worried about what that will unleash. (Faiz Siddiqui — Washington Post)
- My thought bubble: As the Post found, regulators and industry executives complain privately that Tesla is misleading the public with its plan to unleash "full self-driving" robo-cars within the year, but few have the courage to challenge Tesla's claims publicly.
Elderly drivers: Japan's demographics make good case for self-driving cars (Kana Inagaki — Financial Times)
- The big picture: 25% of Japan's population is over 65 and nearly 56% of road traffic deaths are caused by elderly drivers. That's triggering a government plan to issue a new license for the elderly that would encourage them to drive cars equipped with automatic braking systems and other extra safety measures.
5. What I'm driving
My weekly vehicle test drive, with a focus on advanced technologies...
This week I'm driving the 2019 Mazda3 hatchback, which starts at $23,600, but with the premium all-wheel-drive package, sells for $28,900.
What's new: The hatchback's Polymetal Gray is a newly developed exterior paint option that fuses the hard appearance of metal with the glossy smoothness of plastic for a unique look.
- Inside, the red and black interior's soft-touch materials gives this compact car a real premium feel.
- It's available with a manual transmission, but my test vehicle had an automatic mated to the standard 2.5-liter four-cylinder engine.
Overall impressions: Like all Mazdas, it's fun to drive and high quality, but the back seat is cramped, rear visibility is limited and the infotainment system is difficult to use, with many tasks requiring at least two steps.
Advanced safety stuff: Mazda's i-ActiveSense suite of advanced safety features is standard on most versions, including a driver attention alert, blind spot warning, and rear cross traffic warning.
- Yes, but: The base Mazda3 doesn't even come with standard automatic emergency braking, which, through a voluntary industry agreement, should be standard in virtually all cars by 2022.
The bottom line: I've always been a Mazda fan, and the Mazda3 is excellent, but a handful of disappointments, like the clunky infotainment system, could cause me to choose another model.