Jan 31, 2020

Axios Navigate

By Joann Muller
Joann Muller

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Electric vehicles are taking their sweet time to catch on but we're seeing a lot of action in the electric, automated truck space. Today's newsletter focuses on these recent developments.

Today's newsletter is 1,292 words, a 5-minute read.

1 big thing: A lower-cost path to EVs

Illustration: Sarah Grillo/Axios

A massive GM investment and the sudden emergence of a U.K. startup are flip sides of the same huge story: The auto industry is beginning a major shift toward electrification, but taking different paths to get there.

The big picture: Carmakers are compelled to introduce EVs to meet rising emissions standards.

  • But the transition is expensive and fraught with risk, and consumers aren't yet on board.
  • Electric delivery fleets could catch on faster, especially with new approaches to design and production.

Driving the news: GM just committed billions of dollars to mass-produce electric pickups, SUVs and a shared robo-taxi at a plant in Detroit that it had planned to mothball.

  • The $2.2 billion factory overhaul doesn't include another $800 million GM will invest in supplier equipment to support EV production or the $2.3 billion a GM joint venture is investing in a new battery cell manufacturing plant in Ohio.
  • GM president Mark Reuss acknowledges there's still buyer reluctance. "The customer will tell us" when they're ready to buy EVs.

It's the same upfront risk faced by other carmakers, who have committed $225 billion to electrification between 2019 and 2023, creating a near-term "profit desert" until the EV tipping point occurs, according to consulting firm AlixPartners.

The intrigue: There's another potentially faster and cheaper path to EV adoption.

  • This week a 5-year-old startup named Arrival emerged with a $440 million order in hand for 10,000 electric UPS trucks.
  • Its business model is radically less expensive — and lower-risk.
  • The U.K.-based company is focused only on commercial vehicles, which often have fixed routes and can be charged at a central location.
  • Priced about the same as a diesel truck, they're cheaper to operate because they run on electrons not fuel, are made of lightweight composites and are built on a customizable, modular EV skateboard.
  • And they would be built in inexpensive micro-factories that Arrival says can be up and running in just six months.

Between the lines: Arrival is putting much less capital at risk to produce small batches of purpose-built EVs for customers like UPS, says Mike Ableson, the former GM executive who is now Arrival's North American chief.

  • 10,000 customized trucks are difficult for a legacy auto manufacturer to produce because their business model depends on economies of scale for 200,000 vehicles or more.
  • "Our whole system is set up to deliver bespoke vehicles in smaller volumes," said Ableson. "It's the perfect match between what UPS needs and what we can develop."
  • UPS said it is a minority investor in the company, two weeks after Hyundai and Kia invested $110 million for a 3.3% stake. At the time, JPMorgan valued Arrival at $3.3 billion.
  • Prior to that deal, it had been mostly self-funded by founder Denis Sverdlov, a Russian-born entrepreneur now living in London.

My thought bubble: Both GM and Arrival are placing big bets on electrification, albeit at a different scale.

  • But while GM has to wait for consumers to come around to EVs and robotaxis, there's a ready-made market for commercial EVs that's already getting a corporate boost.

Go deeper: UPS to buy 10,000 electric trucks from U.K. startup Arrival

2. Electric pickup war escalates

Grille of the upcoming GMC Hummer EV (left) and prototype of Tesla Cybertruck. Photos: Courtesy of GM and Tesla

Automakers are competing to make the buzziest, strongest, fastest electric truck that would fare well in a dystopian future — albeit one with a reliable grid and eco-conscious drivers, Axios' Ben Geman writes.

Driving the news: GM is reviving the gas-guzzling Hummer as a fully electric and powerful "super truck" with seriously gaudy specs — 1,000 horsepower, 0–60 miles per hour in 3 seconds, and 11,500 lb.-ft. of torque.

  • The company has bought Super Bowl advertising to promote it and plans to sell the Hummer EV as a GMC model starting in 2021.
  • "It is pretty ironic that the nameplate of the biggest gas-guzzling beast that consumers rebelled against during the recession is now going to be resurrected as an EV," says Edmunds auto analyst Jessica Caldwell.

Where it stands: The announcement comes just two months after Tesla unveiled its powerful Cybertruck that's explicitly designed to look like something out of a science fiction movie.

  • Tesla CEO Elon Musk, on this week's fourth-quarter earnings call, said they wanted to build a "badass, futuristic, armored personnel carrier."
  • Ford, Lincoln and Rivian, a well-funded startup, also have e-trucks coming.

My thought bubble: There could be a market for electric pickups, especially if they make work easier by acting as a generator, too. But it seems a number of automakers hope people will pay a premium for plug-in pickups that do something more than just help the environment.

Go deeper

3. Waymo's trucking ambitions

Photo: Courtesy of Waymo

Waymo, whose driverless minivans are already shuttling a limited number of passengers in suburban Phoenix, will soon begin delivering packages for UPS as part of a new strategic partnership announced this week.

Why it matters: Waymo's ambition is to use the same self-driving technology in its minivans to automate big rigs and delivery trucks like the ones UPS uses every day. This is an important step toward that goal.

Details: In the first phase of their partnership, Waymo's self-driving Chrysler Pacifica minivans (with a trained operator on board) will shuttle packages from UPS Stores in the Phoenix area to the UPS sorting facility in Tempe.

  • The goal is to explore faster turnaround times in preparation for on-demand delivery.

Background: Last year, Waymo started using minivans to deliver car parts for AutoNation, a business partner that helps manage the fleet of Pacificas.

What they're saying: Waymo sees four potential markets for its self-driving technology: ride-hailing, long-haul trucking, package delivery and eventually, personally owned vehicles.

  • "Right now the movement of things is a bigger market than the people ride-hailing market," Waymo CEO John Krafcik said in an interview with Axios. "But in 10 years, the movement of people with automated ride hailing will be substantially larger."
4. Driving the conversation

Scoop: Techstars Detroit accelerator is shutting down (Kirsten Korosec —Techcrunch)

  • Why it matters: The accelerator that launched 54 mobility startups in 5 years ran out of funding. "It's clear the entire automotive mobility industry is tightening as sales slump and we hit the trough of disillusionment with autonomy," managing director Ted Serbinski wrote in an email to supporters.

Meteoric: Tesla is "Bitcoin on wheels" (Jonathan Garber — FoxBusiness)

  • Why it matters: Tesla lost $862 million in 2019, yet its 150% stock run to $640 since last October defies logic. But on an earnings call with investors this week, CEO Elon Musk said the only thing holding the company back is battery production capacity.

Turn signal: The new Cadillacs are getting automatic lane-changing, thanks to updated Super Cruise (Andrew J. Hawkins — The Verge)

  • Why it matters: GM is finally expanding the hands-off highway-driving system first introduced in 2017, and making it more capable. Tesla has offered automated lane-changing since 2015, but Cadillac's system has one big safety advantage: an in-car camera to make sure drivers stay engaged.
5. What I'm driving

2020 Hyundai Santa Fe. Photo: Courtesy of Hyundai

This week I'm driving the 2020 Hyundai Santa Fe, an underrated mid-size crossover SUV.

The big picture: There are so many crossovers on the market these days, it's hard to tell them apart. But I like the styling of the Santa Fe, whose athletic lines help distinguish it from the rest.

Details: The Santa Fe features two engines — the standard 185 hp, 2.4-liter four-cylinder, or the optional 235-hp, 2.0-liter turbocharged engine.

  • The all-wheel-drive Limited version I'm driving with the 2.0-liter engine gets 20/26 mpg city/highway, but you can get up to 29 mpg highway with the base front-wheel-drive model.
  • The Santa Fe's starting price is $26,995, and the SEL, at $28,745, comes with most of the convenience features you'd want.
  • My $36,745 Limited includes includes a blind-view monitor that displays a camera feed of the vehicle's blind spot in the digital gauge cluster when you hit the turn signal.
  • All versions come with standard forward-collision warning and automated emergency braking, adaptive cruise control with stop-and-go technology, and lane-departure warning and lane-keeping assist.

The bottom line: The Santa Fe offers a comfortable ride and a lot of standard features, making it a great value.

Joann Muller