Good morning! It’s Thursday, December 5, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: GM May Slow EV, Hybrid Rollout If Trump Allows It
General Motors is prepared to shift away from its all-electric strategy and its plans to bring in more plug-in hybrids to North America in 2027 if the Trump administration eases environmental regulations on new vehicles. I’m not shocked. I’m just disappointed.
The automaker is apparently still maintaining its long-term goals to offer an all-electric lineup in the 2030s, but depending on regulatory changes created by Donald Trump’s White House II, its near-term products might get a change. This is all according to GM CFO Paul Jacobson. That’s all well and good that GM wants to keep its all-electric plans, but I wouldn’t be shocked if those go away too. Big business is gonna big business. From the Detroit Free Press:
“In a world where compliance is eased, you could see where you don’t necessarily need as much plug-in, you might not need as much (battery electric vehicles) as well,” Jacobson said. “But we’ll cross that bridge.”
For now, Jacobson said GM remains on track to meet its goal of variable profitability for its current EVs. That means the EV sales revenue covers the fixed costs to make them. Jacobson said hitting that goal is “a really important milestone for us.”
“Obviously, the next step is (pretax) profitability, and as we said at investor day that’s going to be a function of where the adoption rates are, and obviously there’s a lot of uncertainty as to administrative priorities as we see turnover in the White House,” Jacobson said.
President-elect Donald Trump has expressed disdain for EVs and is expected to remove the $7,500 federal tax credit that has helped spur EV adoption to date. Jacobson said no matter what a new administration does in the near-term, GM is well-positioned to hit short-term EV targets.
“As you look at our EV products, we’re actually stimulating demand at a higher rate than where the industry is,” Jacobson said, noting the automaker sold 15,000 EVs in November, second to Tesla in the U.S. GM expects to end the year with a 12% market share in EVs. “As we get into the 2025 guidance, we still expect to have that $2 billion to $4 billion of profit improvement in EVs, and we’ll see where the volume settles out.”
There’s also speculation that the Trump Administration, in its goal to fuck up the Earth further, could roll back corporate average fuel economy standards. Right now, they require an industry-wide fleet average of about 50.4 mph in the 2031 model year for passenger cars and light trucks. If that happens, GM may change its planned future product portfolio.
“We’ve always said that the plug-in hybrids were really … an option for compliance with regulatory standards,” Jacobson said. “So in the event that those change and you don’t need that or they’re lessened, then maybe that could be something we could look at: Getting down some of those models.”
Jacobson said from a performance perspective, GM currently offers diesel versions of pickups and SUVs that are cheaper and get better mileage and performance than some of its hybrid competitors.
Lowered regulatory requirements would mean GM’s gasoline-powered lineup will remain its main moneymaker longer, but, “that’s a business we can keep up and extend,” Jacobson said.
Here’s what Jacobson had to say about the present and future of EVs at GM, according to Freep:
“As far as electric vehicles go, we still see that as the future long term, and you can see the trend globally,” Jacobson said. “Many of the customers that are new to General Motors are coming in through the EV channel. That’s in a nurturing stage. We’ve got to get it to profitability, but that doesn’t change if the regulations ease.”
An ease in regulations might force GM to reduce the cost to make EVs faster, produce them in lower volumes and not take advantage of some economies of scale, “but those are tweaks to the strategy, rather than a full-blown pivot,” he said.
I could sit here and tell you this is a shocking development, but it really isn’t. When given the chance, a mega-corporation like GM is going to take the path of least resistance and highest profits.
2nd Gear: Infiniti Dealers Moving In With Sibling Nissan
Infiniti is in a tough spot right now as its share of the U.S. luxury market has dropped by more than half since 2019. Its 197 stories sell an average of just 24 new vehicles per month, which isn’t enough to justify a standalone dealership’s cost.
Now, it’s doing what all hard-up siblings do when they’re going through a rough patch: moving in with family. The automaker is letting some of its retailers abandon their own facilities in favor of co-locating with Nissan stores. Sharing back-office and service operations across both brands would lower overhead and increase sales per dealership. From Automotive News:
“If you’re selling 24 new units a month, it’s hard to pay the mortgage and salaries,” Haig Partners President Alan Haig said. “It’s just so low volume that it’s hard to make a go.”
[…]
The majority of U.S. Infiniti dealerships have standalone buildings, and about 43 percent of the network also owns at least one Nissan store.
According to several people familiar with the matter, Infiniti is approving consolidations case-by-case in competitive markets where the Japanese brand can’t afford to lose representation.
“It’s something that they will consider but are not advertising,” said one of the people, who asked not to be identified.
Infiniti did not say how much interest it has received in co-location but said several factors are considered.
“Our evaluation, first and foremost, prioritizes the health of the retailer and Infiniti business,” Steve Milette, Nissan North America division vice president for dealer network development, said in an emailed statement. “Additionally, we consider expected sales, cost and availability of automotive real estate, and size of the existing facilities, among other factors.”
Don’t get too worried if you think a $100,000 QX80 buyer will have to deal with the $20,000 Versa buyer riff-raff. Infiniti will still mandate separate entrances, showrooms and service lounges as well as different drive, sales and service teams.
Infiniti said combined stores will continue to offer a luxury customer experience.
[…]
Store consolidations will require dealers to spend on building work and new materials such as furniture and signage. Infiniti declined to disclose investment details.
This isn’t something entirely new for Infiniti, though. In 2021, the automaker allowed its Canadian retailers to drop their standalone stores and move in with Nissan. Infiniti said it expects to have 70 percent of its Canadian stores connected with Nissan locations.
It’s got to do something. I mean, Infiniti stores were operating at an average net loss of $79,581 through the first three quarters of 2024. That’s just not sustainable.
3rd Gear: GM Just Took A $5 Billion Hit In China
General Motors is gearing up to take an over-$5 billion hit in non-cash charges in China during the fourth quarter because of a weakening business in the country that is forcing the automaker to close plants and offer fewer models. That is… a lot of money to lose. From the Wall Street Journal:
GM on Wednesday said it will write down the value of its stake in partnerships with China’s state-owned SAIC Motor by $2.6 billion to $2.9 billion, or nearly half of their value. The move is in recognition of the company’s dimmer long-term outlook for the business, it said in a securities filing.
GM separately expects a $2.7 billion hit from restructuring actions such as factory closures, aimed at returning its China operations to profitability.
GM has been losing money in China throughout this year, a marked change from the past decade, when the company reliably padded its bottom line with about $2 billion a year from the country.
Homegrown automakers like BYD and Geely have dominated China’s car market. They’ve captured the market with affordable, tech-heavy vehicles. Another thing that is helping them and hurting GM is the fact that Chinese consumers have been incredibly quick to adopt electric vehicles and plug-in hybrids.
The retrenchment in China is particularly jarring for GM, which leaned on the world’s largest auto market as its core growth driver for years, especially in the wake of its 2009 bankruptcy. For more than a decade, the Detroit automaker’s vehicle sales in China eclipsed its U.S. totals, before that trend reversed last year.
GM Chief Executive Mary Barra said in October that the company would take actions in the current quarter to make the business sustainable and profitable. “The operating environment in China continues to be challenging, and there is more hard work to do with our partner,” Barra said then.
GM Chief Financial Officer Paul Jacobson said during an investor conference Wednesday that the company doesn’t expect that the turnaround efforts in China will require more cash from the parent company. He added that the company is working toward returning to profitability there in 2025.
In a note to clients Wednesday, Bernstein analysts said there is a risk that “headwinds in China remain too great to create meaningful profitability.”
Right now, Barra says the company is going to stick it out in China, but who knows how long that will really last. Since taking over, she has overseen GM’s exit from Europe, India, Australia and parts of Southeast Asia.
4th Gear: VW CEO, Workers Clash At Meeting Over Pay, Plant Closures
Volkswagen’s CEO and the folks who lead its workers clashed during a staff meeting on December 4 as management continued to push for major cuts and workers threatened strikes if plant closures remained part of wage negotiations. From Reuters:
The gathering of around 20,000 workers at Volkswagen’s main plant in Wolfsburg was also attended by German Labour Minister Hubertus Heil. The two sides will meet for a fourth round of talks on Dec. 9.
Volkswagen insists that plant closures and pay cuts are needed in Germany to respond to Chinese competition, but workers describe both measures as red lines while threatening further strikes after a first round of walk-outs earlier this week.
“As management we’re not operating in a fantasy world. We are making decisions in a rapidly changing environment,” Volkswagen Group CEO Oliver Blume told workers in Wolfsburg, warning new competitors were entering the market with unprecedented force.
The executive’s speech was interrupted repeatedly by booing from workers, according to sources in attendance, including when he brought up that he had grown up in the region and Wolfsburg was close to his heart.
Right now, Europe’s entire car industry is sort of a mess. Thousands of jobs are on the line at both automakers and their suppliers, according to Reuters. They’re all dealing with a weakening market and and much slower-than-expected adoption of EVs.
“The price pressure is immense,” Blume said, adding VW had to work its way back up sales rankings in China, its single biggest market and a stable earnings contributor until recently, and that labour costs in Germany were too high to compete.
“We therefore urgently need to take measures to secure the future of Volkswagen. Our plans for this are on the table.”
Daniela Cavallo, who leads Volkswagen’s labour council and has repeatedly criticised Blume for not getting involved enough in the conflict, said that all sides, including management and shareholders, had to make sacrifices.
She said unions remained committed to trying to get a deal done before Christmas.
“That will mean compromises. Concessions too. Things that you don’t like and that sometimes hurt you one way or another. But that has to apply to all sides,” she said. “Otherwise it’s not a compromise.”
According to sources present at the meeting, labour minister Heil urged all sides to find a solution that excludes plant closures or forced layoffs, securing future investment to support Germany’s struggling industrial sector.
This is all just a preamble for what could come after next week’s round of negotiations. Union officials have implied that further contract issues could lead to longer or even open-ended strikes.
