Apr 3, 2020

Axios Navigate

Welcome back! Have you noticed how confusing the passage of time is these days? I hope you're all doing your part by staying home, if you can, and staying healthy.

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Smart Brevity count: 1,678 words, a 6-minute read.

1 big thing: Robotaxis revisited

Illustration: Sarah Grillo/Axios

In two weeks, the coronavirus has brought the entire U.S. auto industry to a screeching halt. When it finally sputters back to life, many companies may be forced to change, defer — or even abandon — their ambitious plans for self-driving vehicles.

The big picture: Auto factories are shut down across North America to prevent the spread of the virus among workers, while stay-at-home orders have kept car shoppers away from showrooms. The resulting financial shock means carmakers have shifted their focus to survival, not investing in expensive technologies with no clear payoff.

The uncomfortable truth about self-driving cars is that there's no clear business model yet.

  • Most carmakers, tech giants and start-ups racing to develop the technology assume urban robotaxis are a good place to start, because their 24/7 operation makes the economics work better.
  • But after this pandemic, shared anything seems less appealing, especially a car where there's no driver available to disinfect between passengers.
  • Spray disinfectants and ultraviolet lighting, along with antimicrobial materials, could help, along with more voice commands to replace touchscreens.
  • Even so, "I think there's a very good chance that autonomy for robotaxis may be reexamined," says Gartner Group vice president Mike Ramsey.

Autonomous delivery seems made for a pandemic like this, on the other hand. People who are afraid to go out have discovered the convenience of home delivery in huge numbers.

  • Small delivery robots like Starship, Kiwibot and Amazon's Scout were already piloting delivery services before the coronavirus hit.
  • Nuro, whose low-speed driverless delivery vans just received federal approval, could be the beneficiary of exquisite timing.
  • Other AV companies like Waymo, Cruise and Argo AI, might pivot away from driverless ride-hailing and focus more of their efforts on automated deliveries, analysts predict.
  • "This is a tremendous market opportunity for them, and I think they're definitely going to go for it," says Gary Silberg, head of automotive consulting at KPMG.

Yes, but: When the economy does begin to recover, investment capital could be hard to come by.

  • Traditional carmakers will be focused on getting their core business back up and running and might be forced to choose between spending limited resources on new vehicles or future technologies.
  • AV startups, meanwhile, could find it more difficult to secure investment capital because the timeline for self-driving cars has likely been extended, says RBC's Robert Spak.
  • Ride-hailing firms like Uber and Lyft could also struggle to keep funding their own internal AV efforts, he said.

Cruise CEO Dan Ammann told Axios his company is focused on keeping employees safe and sticking to its mission.

  • "We're fortunate in that we're stable, well-funded and have a crystal clear mission, and that's a good position to be in right now."

What's next: Industry consolidation is likely to accelerate within the next six to 12 months.

2. Safety analysis questioned in new emissions rules

Photo: David L. Ryan/The Boston Globe via Getty Images

The Trump administration's final rules weakening Obama-era vehicle mileage and emissions standards through the mid-2020s include some surprising safety claims.

Driving the news: In what is shaping up to be a major legal battle with environmentalists, the federal government said it will require 1.5% annual increases in fuel efficiency through 2026 — far weaker than the 5% increases under the previous rules that the industry said it couldn't meet.

  • Instead of Obama's requirement for a fleetwide average of 46.7 miles per gallon, vehicle fleets will average 40.4 miles per gallon by 2026, per Reuters.
  • The new rules will save automakers upwards of $100 billion in compliance costs.

Context: It's important to note that conditions have changed dramatically since Obama crafted the original rules in 2012.

  • Consumers are buying many more trucks and SUVs than the Obama rules had anticipated, while fuel prices are much lower.
  • Hence, automakers asked the Trump administration to reconsider the standards.

What they're saying: The government claims that by making newer, safer, and cleaner vehicles more affordable for American families, more lives will be saved and more jobs will be created.

  • While it admits consumers will pay about $1,000 more in fuel costs over the life of their vehicle, cars will be cheaper — about $1,000, conveniently, the administration says — without the huge regulatory burden on carmakers.
  • Overall, the total cost of ownership over the vehicle's life will be $1,400 lower, the administration claims.

The details:

  • The administration argues cars will be safer because automakers won't be pressured to reduce vehicle weight and because people will be able to afford newer vehicles, which have more safety features.
  • The change in CO2 standards will result in 3,269 fewer fatalities, the analysis shows.

But, as Reuters' David Shepardson points out on Twitter, most of the safety gains from the new rule are not from improved vehicles but from Americans driving less.

  • With a projected 605 billion fewer miles traveled under the new rule, there will be 2,584 fewer highway fatalities.
  • Less driving accounts for 80% of the lives saved.
  • Less driving also means cars won't need to be replaced as often, undermining the government's argument.

My thought bubble: I'm a journalist, not a mathematician. But something doesn't add up.

3. Ventilators: Not too little but too late for many

On their first day, auto workers at GM learn how ventilators go together. Photo: GM

Sadly, it's clear the wartime mobilization effort to produce ventilators and medical supplies got started too late to help patients and medical personnel before the coronavirus peaks in some cities like New York.

  • But those supplies will be available for the next wave of the pandemic.

Driving the news: American manufacturers are saying it will be months before they meet demand for high-quality masks, the Wall Street Journal reports.

Most of the 100,000 ventilators President Trump promised the U.S. would obtain won't be available until June, Federal Emergency Management Agency officials told the House Oversight Committee this week, Politico reports.

  • On Thursday, the president invoked the emergency Defense Production Act to push 3M and six major medical device companies to produce more protective masks and ventilators.
  • Earlier, he used the act to push General Motors and a ventilator partner, Ventec Life Systems, to produce the life-saving machines.
  • The new order is intended to help the companies overcome supply chain obstacles "that threaten the rapid supply of ventilators."

By the numbers: 3M and a half dozen smaller competitors are making about 50 million protective N95 masks per month, well below the 300 million per month the Department of Health and Human Services says are needed to fight a pandemic.

In an exclusive interview with Axios, Rear Adm. John Polowczyk, the senior Navy officer now in charge of fixing America's broken medical supply chain, acknowledged that lining up new manufacturers will take weeks or longer.

  • "You can't just make masks in volume in a matter of days," he said.
  • But, by the time we get to "the other side," he added, "we're going to end up with more capacity domestically."

The bottom line: American industries are scaling as fast as they can, but global demand far outweighs the supply of needed equipment.

4. GM and Honda partnership grows deeper

GM's new modular platform and battery system, Ultium. Photo: Steve Fecht for GM

General Motors and Honda are jointly developing two new electric vehicles for Honda that will be based on GM's new flexible EV platform and manufactured at GM plants.

Driving the news: Their timing is interesting — two days after the Trump administration rolled back fuel efficiency rules through 2026.

Why it matters: No company can go it alone when it comes to funding advanced technologies like electrification, especially after the hit the auto industry has suffered from the global pandemic.

It's a win-win for both companies, and for consumers.

  • While Honda is known for efficient gasoline-powered engines and hybrids, it needs help with battery-electric vehicles.
  • GM gets added scale for its new Ultium battery platform, which should help its effort to create a profitable EV business.
  • Those economies of scale should make EVs more affordable for consumers, too.

The companies already work together on many fronts, including hydrogen fuel cells.

  • Honda is an investor in GM's self-driving unit, Cruise, and helped GM develop the Cruise Origin, an electric, shared robotaxi unveiled earlier this year.

The intrigue: GM and Honda may be partners, but they are aligned on opposite sides of the debate over auto emissions policy, notes my Axios colleague Ben Geman.

  • Honda — along with Ford, VW, BMW and Volvo — are part of a preliminary deal with California to meet CO2 standards that are stricter than Trump administration rules.
  • GM is among the automakers on the administration's side in litigation to block California (and states that follow its lead) from imposing separate standards.
5. Driving the conversation

Driven: How self-driving star fell off course (Pete Bigelow — Automotive News)

  • Why it matters: It's a great profile of one of the most controversial characters in the self-driving car industry.

Apnea: Tesla fumbles ventilator gift (Bill Hampton — AutoBeatDaily)

  • Why it matters: CEO Elon Musk was said to have airlifted 1,200 badly needed ventilators from China in recent days. It turns out the devices are used by people who suffer from sleep apnea, not the critical care breathing machines that hospitals need to treat seriously ill COVID-19 victims.
  • It's a reminder that the market for desperately needed medical equipment is a chaotic free-for-all, as the New York Times reports.

Mission-critical: Mayo Clinic starts using autonomous vehicles to deliver coronavirus tests and medical supplies (Kyle Wiggers — Venture Beat)

  • What's happening: The Mayo Clinic in Jacksonsville, Florida, is using four automated shuttles from Beep and Navya to transport COVID-19 tests from the testing site to a processing laboratory on the hospital's campus, demonstrating how AVs could be deployed in an emergency.
6. What I'm driving

Genesis G70. Photo: Genesis

This week I'm driving the 2020 Genesis G70 RWD Sport, a compact performance sedan that should have BMW and Mercedes-Benz worried.

The big picture: Hyundai's new luxury brand is making a name for itself. While Genesis has only three sedan models to date — the G70, G80 and G90 — its first SUV, the GV80, debuted earlier this year in South Korea.

The entry-level G70, starting at $36,445, goes straight at the the BMW 3-series and the Mercedes C-Class and more than holds its own.

  • There's even a base model with a manual stick, but I haven't driven that yet.

I'm driving the G70 3.3T version, with an upgraded 365 horsepower twin-turbo engine an 8-speed transmission with paddle shifters, and tons of standard convenience and safety features.

  • The 3.3T starts at $44,650, but with three premium option packages added, it tops out at $51,245, which is still a great deal.
  • One gripe: Genesis should have splurged on a premium infotainment system. The G70's is pulled from an ordinary Hyundai.
  • Standard safety features include: adaptive cruise control, forward-collision warning with automated emergency braking, lane-departure warning and lane-keeping assist, among others.

The bottom line: The G70 offers a powerful combination of beautiful styling, lively handling and great value.

Bonus: 1 fun thing

Image: Ford

If the kids are driving you crazy at home, introduce them to this activity book from Ford.

  • They can color a Mustang or solve car-related puzzles. Who knows? Maybe they'll develop a love for car design!