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Moody’s downgrades auto industry outlook from stable to negative on falling demand

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Weakening demand for cars and trucks has pushed credit rating company Moody's to cut its outlook for the auto industry from stable to negative.

Slowing economic growth, a better-than-expected end to 2018 and a host of potential political pitfalls are all expected to dampen global auto sales in 2019, Moody's said in a research note Monday.

The company cut its 2019 growth forecast for worldwide light vehicle sales by more than half, saying they won't totally recover from a slowdown in the latter part of 2018.

Moody's expects global auto sales to grow by 0.5 percent this year, down from its previous forecast of 1.2 percent, “which had assumed a stronger finish in 2018.” For 2020, Moody's forecast growth of 0.8 percent.

Auto sales are likely to continue falling in the first half of 2019, before regaining lost ground in the last two quarters of the year, Moody's said. It's forecasting a slowdown in global economic growth as well, with stronger growth in developing markets such as China. U.S. sales are expected to drop by nearly 3 percent in 2019 and 0.6 percent in 2020, largely due to a drying up of a financing environment that had buoyed sales for so long.

Of course, the threat of U.S. import tariffs and the United Kingdom's potential exit from the European Union are also risks.

The industry is also faced with declining sales at a time when many companies are racing to invest in new transportation tech, including self-driving cars, connected cars, and advanced safety features.

Auto manufacturers also face ever more stringent emissions guidelines, which are forcing investments in hybrid and electric vehicles, and other options for passengers and freight.

Volvo may not sell its Tesla rival electric car in the US over tariffs

Wang Zhao | AFP | Getty Images
A man uses his mobile phone to take a picture of a Polestar 1 car at the Beijing auto show on April 26, 2018. –

Volvo Cars may not sell its high-performance Polestar electric vehicles in the U.S. if Washington slaps tariffs on imports from China, the Financial Times reported Wednesday.

The automaker recently revealed its Polestar 2, which executives said is priced competitively with Tesla's Model 3 sedan.

But Volvo is owned by Chinese auto company Geely, and the group has so far intended to make the cars at a factory in China. It expects to sell more than 50,000 Polestar vehicles.

A lot of those cars won't make it to the United States if tariffs on Chinese imports are too high, Polestar CEO Thomas Ingenlath told the FT.

The Polestar 2 is one of several vehicles automakers are hoping will draw customers from Tesla.

Competition is expected to heat up around the 2021 model year, said CFRA analyst Garrett Nelson. Competitors are already on the market at a midrange price that's competitive with the Model 3 and higher prices where Tesla's more premium Model S and Model X vehicles sit.

The global automotive industry has found itself caught up in President Donald Trump's trade war with China, leading many automakers to re-evaluate where they build and sell their products.

Read the full story from the Financial Times.

Tesla issues $13.8 million in stock to buy trailers to take cars from factory floor to customers

Andrei Stanescu | Getty Images
Car transporter carries Tesla Model 3 vehicles along the highway.

Tesla issued $13.8 million in stock to pay for trucks and trailers to transport its electric vehicles from the factory floor to customers, according to a new securities filing.

Instead of cash, the electric car maker used 49,967 shares at a maximum price of $277.05 a share as of Feb. 12 to buy the trailers from Central Valley Auto Transport, a California company that specializes in car carriers, Tesla said Monday in a filing with the Securities and Exchange Commission.

Central Valley Auto Transport hung up the phone during two attempts by CNBC to get comment. An email to the CEO wasn't immediately returned outside of normal business hours. Tesla declined to comment on the filing.

Tesla finally launched its standard Model 3 starting at $35,000 — Here's what it means for investors
12:21 PM ET Fri, 1 March 2019 | 02:03

Tesla said in its fourth-quarter shareholder letter that it is “continuing to purchase our own car-hauling truck capacity for vehicle shipments.”

Getting its cars from the factory to customers has been a challenge for Tesla in the past. Tesla CEO Elon Musk said in September that the company had moved on from its troubles producing the Model 3 midsize sedan to “delivery logistics hell,” but that the problem was “far more tractable.”

Tesla shares were about flat Monday morning. The company's market value is approximately $50 billion.

Elon Musk says Tesla will raise prices and slow down store closures

Mike Blake | Reuters
Elon Musk

Tesla CEO Elon Musk told employees in an e-mail late Sunday night that the electric car maker would shift its sales plans yet again — raising prices by about 3 percent on most of its cars and keeping more stores open than it had previously planned.

In addition to the e-mail to all employees, Tesla also published a blog post Sunday night, conveying these details to shareholders and the general public.

Tesla caused controversy in recent weeks announcing it would shut its stores and shift worldwide sales to online only. The move was presented as a full embrace of e-commerce, and a cost-cutting measure that would enable Tesla to sell the base version of its electric sedan, the Model 3, at the long-awaited price of $35,000 finally.

Many Tesla sales employees were left wondering whether their stores — and jobs — would be among those immediately cut.

The internal e-mail Musk sent on Sunday may help calm those who remained at Tesla after lay-offs in January, and ongoing job cuts after that.

Tesla did not immediately respond to a request for further information, including which specific stores would be reopening.

Here's the memo in its entirety.

From: Elon Musk
To: Everybody
March 10, 2019
We are making an adjustment to our plans and will, at least for the next several months, retain more stores than previously announced. For the most part, the roughly 10% of Tesla sales locations we closed recently don't pass the Sherlock Holmes test. Meaning, most of these stores are in such difficult or obscure locations, only Sherlock Holmes could find them! Even if selling through stores were our only means of sales, we would still have closed them down. A few stores in high visibility locations that were closed due to low apparent demand generation will be reopened, but with a smaller Tesla crew.
There are another 20% of locations that are under review. Depending on their effectiveness over the next few months, some will be closed and some will remain open.
As a result of keeping significantly more stores open, Tesla will need to raise vehicle prices by about 3% or so on average worldwide. All things considered, this seems like a reasonable compromise between current and future customers. We will only close about half as many stores, but the cost savings are therefore only about half.
Potential Tesla owners will have a week to place their orders before prices rise, so current prices are valid until March 18th. Note, there will be no price increase to the $35,000 Model 3. The price increases will only apply to the more expensive variants of Model 3, as well as Model S and X.
To be clear, all sales worldwide will still be done online, in that potential Tesla owners coming in to stores will simply be shown how to order a Tesla on their phone in a few minutes. And the generous return policy of 1000 miles or 7 days, whichever comes first, should alleviate the need for most test drives at stores at the potential Tesla owner's request. Stores will also carry a small number of cars in inventory for customers who wish to drive away with a Tesla immediately.
Thanks,
Elon

Nissan says its electric car has become the first to break 400,000 in sales

Chris Ratcliffe | Bloomberg | Getty Images

Japanese car giant Nissan says its compact hatchback called Leaf has become the first electric car to exceed 400,000 in sales.
In an announcement Thursday, the business said the landmark figure had solidified the Leaf's “leading role in the global shift toward more sustainable mobility.”
Since its launch in 2010, owners of the vehicle have, in total, driven over 10 billion kilometers. Nissan added that the number of Leaf cars sold since its launch was enough to have saved 3.8 million barrels of oil annually.
The model was the bestselling electric vehicle in Europe last year, Nissan said. In the U.K., the Leaf's newest version has a recommended retail price starting at £27,995 ($36,576).

Overall, 408,000 plug-in vehicle units were sold across Europe in 2018, according to analysis from EV-Volumes. In 2017, there were more than 3 million electric and plug-in hybrid cars on the planet's roads, according to the International Energy Agency's (IEA) Global Electric Vehicles Outlook. This represents an increase of 54 percent compared to 2016.
Almost 580,000 electric cars were sold in China in 2017, according to the IEA, while around 280,000 were sold in the U.S.
While electric vehicles are becoming the car of choice for an increasing number of drivers, they nevertheless face challenges, not least when it comes to perceptions surrounding range and charging infrastructure.
According to the U.S. Department of Energy's (DOE) Alternative Fuels Data Center, electric vehicles (EVs) generally have, at present, a shorter range “per charge” than conventional vehicles with a tank of gas. Driving conditions and driving habits can influence both the efficiency and range of EVs, the DOE says.

One of the current issues for EVs is ensuring there are enough charging stations for longer journeys to be completed. At present, for the U.S. as a whole, there are just under 21,000 public, Level 2 electric vehicle charging station locations. Level 2 refers to equipment that uses a 240 volt, alternating current plug.
Efforts are being made to remedy this, however, and a number of major businesses are investing in charging infrastructure. In January, for example, Volvo Group Venture Capital, a subsidiary of the Volvo Group, invested in a company that specializes in the “high power wireless charging of electric vehicles.”

The wireless charging business, called Momentum Dynamics, is based in Pennsylvania. It is developing and commercializing “high power inductive charging for the automotive and transportation industries.”

Also on Thursday, the City of Edinburgh's Transport and Environment Committee granted approval for the installation of electric car-charging infrastructure in the Scottish capital.
The plan would see the introduction of 66 on-street charging points spread across 14 hubs, authorities said in a statement.
The City of Edinburgh Council added that rapid, fast and slow chargers would be installed around the city, with equipment set to be placed on roads instead of pavements. Installation is due to take place between January and December 2020.
“We've seen an exponential rise in the popularity of electric vehicles over the last few years, and we want to see this continue,” Lesley Macinnes, transport and environment convener, said in a statement.
“Encouraging drivers to choose environmentally friendly modes of transport over diesel or petrol cars will have a real impact on air quality so it's essential that we provide the infrastructure to allow this,” Macinnes added.

Tesla enters into agreement with Chinese lenders for Shanghai Gigafactory

Getty Images
Tesla boss Elon Musk (L) walks with Shanghai Mayor Ying Yong during the ground-breaking ceremony for a Tesla factory in Shanghai on January 7, 2019. – Musk presided over the ground-breaking for a Shanghai factory that will allow the electric-car manufacturer to dodge the China-US tariff crossfire and sell directly to the world's biggest market for 'green' vehicles.

Tesla said on Thursday it signed an agreement with lenders in China for a 12-month facility of up to 3.5 billion yuan ($521 million) for the electric carmaker's Gigafactory in Shanghai.

The company broke ground on the factory in January, and a Shanghai city government official said on Wednesday that the facility is expected to be completed in May.

Tesla has said that the Gigafactory will cost around $2 billion.

Producing cars locally is likely to help the company minimize the impact of the U.S.-China trade war, which has forced Tesla to adjust prices of its U.S.-made cars in China.

Keeping prices in check will also help Tesla fend off competition from a swathe of domestic electric vehicle startups such as Nio Inc, Byton and XPeng Motors.

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Tesla doesn’t know where it will build the Model Y as it rolls out more layoffs and cost cuts

Mike Blake | Reuters
Elon Musk

Tesla executives still have not decided where to manufacture the company's forthcoming crossover SUV, the Model Y, according to six current and former employees. This despite the fact the company is planning to formally unveil the vehicle for the first time on March 14 at the company's design center in Hawthorne, California.

Two other people who work for Tesla vendors said the automaker did not contact them about working together on Model Y production until after CEO Elon Musk teased the unveiling in a tweet on March 3. That's one indication Tesla has barely begun planning for Model Y manufacturing, they said.

Musk has already said the Model Y should cost about 10 percent more than the Model 3, which starts at $35,000.

Along with a pickup truck that Tesla plans to unveil later this year, the Model Y could ensure that Tesla's lineup stays competitive versus offerings from other electric truck and SUV makers. Those rivals include Rivian, a newcomer funded by Amazon, and established automakers like BMW and Hyundai, who are honing in on Tesla's territory with electric cars.

Employees say Tesla executives, including its president of automotive, Jerome Guillen, are wavering between two options for Model Y production. They are trying to decide whether Tesla should allocate space in the Gigafactory, the company's massive battery plant outside of Reno, Nevada, or combine the Model S and Model X body lines at its car plant in Fremont, California, to make room to build the crossover SUVs.

One employee said if executives have made a decision, they haven't given a green light to employees who will be involved in setting up the Model Y lines and eventually building the vehicles.

A Tesla spokesperson pointed to a February letter to shareholders, but declined to offer an update on Model Y planning. The letter said, “This year we will start tooling for Model Y to achieve volume production by the end of 2020, most likely at Gigafactory 1.”

Tesla video teases unnamed vehicle under a sheet, and new Roadster accelerating
2 Hours Ago | 00:51

Why the Model Y

According to forecasts from LMC Automotive, SUVs are expected to comprise 50 percent of all car sales in the U.S. by 2020, up from about one-third in 2013. The Model Y could help Tesla tap into that wave of demand and gather up customer's reservation payments meanwhile before production begins.

In its fourth-quarter update, Tesla said that the Model Y should share about 75 percent of its components with the Model 3. Car companies typically share parts between models to save on development and production costs. Tesla has never made cars with that many parts in common before, but it intended to. Its Model S and Model X wound up sharing less than one-third of their parts, Musk told analysts on the fourth-quarter earnings call Jan. 30.

Current and former employees say that setting up a Model Y line at the Gigafactory may require buy-in from Panasonic, Tesla's battery cell supplier and a major partner in the Gigafactory.

A Tesla proponent at Panasonic, Yoshio Ito, the Japanese company's executive vice president of automotive, recently resigned, the company disclosed at the end of February. When Tesla and Panasonic established their Gigafactory partnership in 2014, their agreement said the two companies would have to mutually agree on how to manage “the land, building and utilities” at the facility.

Panasonic did not reply to requests for comment.

Employees noted the Gigafactory is constantly under construction, and not currently set up to handle things like body stamping, glass and seat installation, painting of cars and end-of-line quality control for assembled vehicles. Parts of the Gigafactory are cramped already, they added, so it's hard for them to imagine how Tesla can make room for increased battery production, material flow and workers needed to make the Model Y there in high volumes.

Salwan Georges | The Washington Post | Getty Images
A rear view of Tesla's new Model 3 car on display on Friday, January 26, 2018, at the Tesla store in Washington, D.C.

Deep cuts

At the same time, Tesla is in the midst of extreme cost-cutting measuresin its quest to become profitable, and to make its electric vehicles mainstream.

Last week, the company announced it would move all vehicle sales online and close most of its retail stores, letting go of thousands of employees in the process. The ongoing workforce reduction follows a 9 percent layoff Tesla implemented in January 2019, and an earlier 9 percent layoff in June 2018.

Some Tesla stores will convert into galleries where customers can get information about its cars and maybe buy Tesla-branded merchandise the company said in a blog post Feb. 28.

One sales employee said Tesla has left workers in the dark about whether or not their stores are closing, and whether or not they will have a job when the transition to online sales is finished.

On Tesla's website, the company listed 129 stores and galleries as of March 1. On March 6, the website listed 106 stores and galleries. Current and former Tesla employees said head count fell about 8 percent within the last week, basing their estimates on internal data.

A Tesla spokesperson said that as of the week of March 4, the company employed more than 40,000 people. In its 2018 annual report, Tesla said it had 48,817 employees. Subtracting an estimated 9 percent for January's layoffs brings that total down to 44,423 and subtracting another 8 percent — following Tesla's move to close most stores — would put Tesla's head count around 40,869 today.

An inside look at Tesla's Gigafactory
10:27 AM ET Thu, 15 Nov 2018 | 03:31

Machine that builds the machine

Meanwhile, Tesla management has asked employees to limit their travel and work remotely whenever possible, as one of many ways to save costs.

In a recent e-mail that Musk sent to Tesla employees the CEO warned of more belt-tightening to come. He wrote:

“In the coming weeks, we will be evaluating all areas of our sales and marketing organization to understand where there are operational efficiencies, and how best to support the transition to online sales, while also continuing to deliver a truly awesome and educational Tesla buying experience.”

In Fremont, small items like rivets and fasteners have been in limited supply recently, when there used to be a surplus on-site, one employee said.

At the Gigafactory, management has sent hourly workers home mid-shift or asked them to take personal time off or volunteer for unpaid time off in recent weeks, leaving some with less income than they planned to earn. These people said that some Gigafactory shifts were canceled due to snow-related closures on Donner Pass, a highway Tesla relies on for consistent flow of supplies to and from the Gigafactory.

Workers at the Gigafactory also said that while the company's semi-automated battery production lines have improved by leaps and bounds in the past year, Tesla is still not consistently making 7,000 vehicle batteries a week there. Workers said they are striving to hit an 8,000 per week goal, which should allow Tesla to make 416,000 cars in a year.

Tesla gave guidance in its fourth-quarter earnings update that it was aiming to deliver 360,000 to 400,000 vehicles in 2019, about 45 percent to 65 percent more than its deliveries last year. More recently, Musk reiterated in a series of controversial tweets that Tesla should hit an “annualized production rate” of around 10,000 cars per week by the end of 2019, and still expected to deliver about 400,000 cars this year.

In 2016, Musk said: “What really matters is the machine that builds the machine — the factory. And that is at least two orders of magnitude harder than the vehicle itself.”

That level of operational excellence remains a work-in-progress at Tesla.

— CNBC's
Salvador Rodriguez
contributed to this report.

Tesla finally launched its standard Model 3 starting at $35,000 — Here's what it means for investors
12:21 PM ET Fri, 1 March 2019 | 02:03

Connectivity and digitization driving change in car industry, CEO of Samsung’s Harman says

Auto sector having an awakening with digitalization, Harman CEO says
22 Hours Ago | 02:35

Personalization, digitization, user experience and live connectivity in cars are driving change in the industry, according to the CEO of Samsung's American subsidiary Harman.
“Cars used to be where we spent a lot of time, and very private time,” Dinesh Paliwal told CNBC's Annette Weisbach at the Geneva Motor Show on Wednesday.
People felt disconnected in their cars through not having the “same ecosystem” as the one outside their vehicle, Paliwal said.
Today's cars boast a broad range of technological features, from Bluetooth and automated parking to digital assistants and inbuilt satellite navigation systems.
Earlier this week, for example, the Hyundai Motor Group announced it had developed a digital key that enables drivers to unlock, start and drive their car using a smartphone.

According to Paliwal, there had been a “major awakening” in the industry. “They're saying, 'this is an existential issue, we need to keep up and catch up the digitization and personalization in the car'.”
This was fueling a whole new discussion, he explained. “It's not about brakes, it's not about the new lights, it's not about… new luxury, it's about new digital ecosystems.”
Harman specialises in the design and engineering of connected technology. The business was acquired by Samsung Electronics for $8 billion in 2018.

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Grab is now valued at $14 billion after landing $1.46 billion from SoftBank’s Vision Fund

Brent Lewin | Bloomberg | Getty Images
The Grab logo is displayed on a taxi in Bangkok, Thailand, on Friday, March 9, 2018.

Southeast Asian ride-hailing giant Grab said Wednesday it has secured $1.46 billion in new funds from the SoftBank Vision Fund.

In its current funding round, Grab has raised more than $4.5 billion with investments from car makers Toyota and Hyundai Motor, tech giant Microsoft, China's Ping An Capital and U.S.-based asset management company OppenheimerFunds.

Following the fresh financing from the Vision Fund, Grab's valuation now stands at $14 billion, according to a source familiar with the matter.

Grab President Ming Maa said in a statement the company has seen “overwhelming shareholder support in our current fundraising round, with strong interest both in terms of capital invested and the quality of strategic partners.”

He added Grab continues to “receive new investor interest” and that it looks forward to “welcoming more global industry leaders as partners in 2019.”

The current funding round started after U.S. ride sharing giant Uber sold its Southeast Asia business to Grab and acquired a 27.5 percent stake in the business, according to Reuters.

Grab said it plans to use the funds to build more everyday services onto its platform and expand its presence in financial services, food delivery, parcel delivery, content and digital payments.

“This investment will help the company explore exciting new opportunities across on-demand mobility, delivery and financial services as it continues to grow its offline-to-online platform across Southeast Asia,” David Thevenon, partner at SoftBank Investment Advisers, said in a statement.

While Grab started out with ride-hailing, the start-up has over time introduced many services including food and grocery delivery, mobile payment, and micro-lending to the unbanked or underbanked in Southeast Asia. Earlier this year, the company said it struck a partnership with regional video streaming start-up Hooq that will allow users to stream movies and TV shows on the Grab app.

The idea of bundling multiple services inside a single app stems from the fact that users tend to use only a handful of applications everyday, even if they might have hundreds of apps downloaded onto their smartphones.

Last year, Grab said it was forming a joint venture company with Chinese health care services platform Ping An Good Doctor to provide integrated medical services including artificial intelligence-assisted online consultations, appointment bookings and medicine delivery.