Vroom! Ferrari Plans To Double Production Shifts - On Track To Smash Earnings, Production Targets

On 2 November 2017, Ferrari NV, which was spun-off from Fiat Chryslerr, announced a 23% rise in adjusted EBITDA to 778 million euros (629 million euros) for the first nine months of 2017. The company increased its EBITDA target for the full year to 1 billion euros versus the previous estimate of more than 950 million. As Bloomberg notes.

The manufacturer raised its 2017 profit target last month as rollouts of limited-edition supercars, including the FXX K Evo racing model, help it achieve a long-held profit goal two years early.

If, like us, you were wondering what a Ferrari FXX K Evo looks like, here it is. It has a 6.3 litre V12 engine and an electric motors, generates 1,036 bhp with the motor providing an additional 187 bhp and is very fast (last time we checked Ferrari hadn’t released top speed or acceleration data).

In 2013, former Chairman, Luca Montezemolo, said that Ferrari would limit production to around 7,000 cars to defend the brand.

“My focus this year and in the years to come is not to grow volume but to increase the exclusivity of Ferrari,” di Montezemolo said. “This protects our margins and residual values for our customers.”

It didn"t last long. With Sergio Marchionne in control and the prospect of a listing on the NYSE, Ferrari outlined a plan to increase production to as many as 9,000 cars by 2019. Production is expected to reach 8,400 cars (including supercars) in 2017 and the target can be achieved a year early as Ferrari doubles the number of shifts at its manufacturing facilities. According to Bloomberg.

Ferrari NV, fabled for its fast cars on roads and race tracks, is packing some extra speed into its factories, too. The Italian supercar maker, spun off from Fiat Chrysler Automobiles NV in 2016, plans to boost production by doubling assembly shifts to two a day in 2018 as deliveries are on pace to reach its 9,000-vehicle target a year earlier than scheduled, according to people familiar with the matter, who asked not to be named as the matter isn’t public. A Ferrari spokesman declined to comment.

The increase is part of Chief Executive Officer Sergio Marchionne’s plan to boost profit by expanding Ferrari’s line-up while maintaining the exclusivity of its $200,000-and-up models. Marchionne, 65, will present the carmaker’s latest mid-term strategy early next year, his final one at the helm of the Italian iconic brand.

The Ferrari IPO in October 2015 priced at $52/share which was at the top end of the $48-52 range. The stock, which trades under the ticker RACE, has more than doubled to $106.9, valuing the company at $20.2 billion.

Bloomberg “helpfully” provides us with an explanation for the ramp in Ferrari production. 

Sales growth is being driven as the population of wealthy individuals surges. The number of millionaires worldwide surged 36 percent to 13.6 million people in the 10 years through 2016 and may rise another 37 percent in the following decade, according to the Wealth Report by real estate company Knight Frank. The number of billionaires increased 45 percent in the period, boosted by gains in the Asia-Pacific area.

Besides the global increase in wealth, the extension to the company’s product range will also have a positive impact on sales volumes during the next few years. For example, Marchionne commented that “We’re dead serious about this” when referring to the potential for manufacturing Ferrari’s first  ever SUV – termed a “Ferrari Utility Vehicle” or FUV. As Bloomberg explains.

The plan will include Ferrari’s first-ever sport utility vehicle as it targets annual sales exceeding a self-imposed 10,000-car limit that until now has enabled it to operate under less-stringent fuel-economy rules, people familiar with the matter said in August. Goals include doubling operating profit to about 2 billion euros ($2.35 billion) by 2022, they said.

For now, there is no threat to Ferrari’s prospects, nor its exclusivity. Waiting lists for most models exceed twelve months. Marchionne has said before that Ferrari can preserve its exclusivity as long as it always sells one car less than the market demand, echoing the words of founder, Enzo Ferrari.

If he was still alive, we question whether Enzo Ferrari would have realised that the biggest risk to his company is probably the bursting of the latest equity bubble.

There Is Just One Thing Preventing Elon Musk"s Vision From Coming True: The Laws Of Physics

When Elon Musk stepped on stage at Tesla’s product-launch event earlier this month, he knew the market’s confidence in Tesla’s brand had sunk to an all-time low since he took over the company a decade ago. So, he resorted to a tactic that should be familiar to anybody who has been following the company: Shock and awe.

While the event was ostensibly scheduled to introduce Tesla’s new semi-truck – a model that won’t make it’s market debut for another two years, assuming Tesla sticks to its product-rollout deadline – Musk had a surprise in store: A new model of the Tesla Roadster that, he bragged, would be the fastest production car ever sold.

Musk made similarly lofty claims about the battery life and performance of both vehicles. The Tesla semi-trucks, he said, would be able to travel for 500 miles on a single charge. The roadster could clock a staggering 620 – more than double the closest challenger.

There was just one problem, as Tesla fans would later find out, courtesy of Bloomberg: None of it was true.

In fact, many of the promises defy the capabilities of modern battery technology.

Elon Musk knows how to make promises. Even by his own standards, the promises made last week while introducing two new Tesla vehicles—the heavy-duty Semi Truck and the speedy Roadster—are monuments of envelope pushing.

 

To deliver, according to close observers of battery technology, Tesla would have to far exceed what is currently thought possible.

 

Take the Tesla Semi: Musk vowed it would haul an unprecedented 80,000 pounds for 500 miles on a single charge, then recharge 400 miles of range in 30 minutes. That would require, based on Bloomberg estimates, a charging system that"s 10 times more powerful than one of the fastest battery-charging networks on the road today—Tesla’s own Superchargers.

 

The diminutive Tesla Roadster is promised to be the quickest production car ever built. But that achievement would mean squeezing into its tiny frame a battery twice as powerful as the largest battery currently available in an electric car.

 

These claims are so far beyond current industry standards for electric vehicles that they would require either advances in battery technology or a new understanding of how batteries are put to use, said Sam Jaffe, battery analyst for Cairn Energy Research in Boulder, Colorado. In some cases, experts suspect Tesla might be banking on technological improvements between now and the time when new vehicles are actually ready for delivery.

 

“I don"t think they"re lying,” Jaffe said. “I just think they left something out of the public reveal that would have explained how these numbers work."

While Jaffe seems inclined to give Tesla the benefit of the doubt, there’s little, if anything, in Musk’s recent behavior to justify this level of credulity. In recent months, Musk has repeatedly suffered the humiliation of seeing his lies and half-truths exposed. For example, the self-styled “visionary” claimed during the unveiling of the Model 3 Sedan that he would have 1,500 copies of the new model ready for customers by the end of the third quarter. Instead, the company managed a meager 260 models as factory-line workers at its Fremont, Calif. factory struggled to assemble the vehicles by hand as the Model 3 assembly line hadn’t been completed.

Increasingly agitated customers who placed deposits with Tesla back in March 2016 have begun asking for refunds, only to be chagrined by the company’s sluggish response. While nobody in the mainstream press has (somewhat bafflingly) made the connection, Tesla revealed earlier this month that it burned an unprecedented $1.4 billion of cash during the third quarter - or roughly $16 million per day - despite Elon Musk"s assurance that Tesla had its "all-time best quarter" for Model S and X deliveries.

And let’s not forget the fiasco surrounding Tesla’s autopilot software. Musk has repeatedly exaggerated its performance claims. And customers who paid more than $8,000 for a software upgrade more than a year ago have been repeatedly disappointed by delays and sub-par performance.

Musk’s exaggerations about the Tesla Roadster were particularly egregious.

Tesla claims that its new $200,000 Roadster is the quickest production car ever made, clocking zero to 60 in 1.9 seconds. Even crazier is the car’s unprecedented battery range: some 620 miles on a single charge. That"s a longer range than any battery-powered vehicle on the road—almost twice as long as Tesla"s class-leading Model S and Model X.

 

To achieve such power and range, Musk said the tiny Roadster will need to pack a massive 200-kilowatt-hour battery. That’s twice the size of any battery Tesla currently has on the road. Musk has previously said he won"t be making the packs bigger on the Model S and Model X because of space constraints. So how can he double the pack size in the smaller Roadster?

 

BNEF’s Morsy has a twofold answer. First, he expects Tesla will probably double-stack battery packs, one on top of the other, beneath the Roadster"s floor. That creates some engineering problems for the battery-management system, but those should not be insurmountable. Still, Morsy said, the batteries required would be too large to fit in such a small frame.

 

“I really don’t think the car you saw last week had the full 200 kilowatt hours in it,” Morsy said. “I don’t think it’s physically possible to do that right now."

Is it possible that, thanks to incremental improvements in battery density and cost, Musk somehow manages to hit these lofty targets? Perhaps, though, as Bloomberg points out, the fact that Musk is basing these claims on a set of projections that haven’t yet been realized is hardly confidence inspiring.

To be sure, there’s an important caveat to Musk’s claims. While they may be staggeringly exaggerated, there’s still the possibility that incremental improvements in battery technology will make these targets more feasible by the time the models hit the market.

Again, Musk may be banking on the future. While Tesla began taking deposits on the Roadster immediately—$50,000 for the base model—the first vehicles won"t be delivered until 2020. Meanwhile, battery density has been improving at a rate of 7.5 percent a year, meaning that by the time production starts, packs will be smaller and more powerful, even without a major breakthrough in battery chemistry.

 

“The trend in battery density is, I think, central to any claim Tesla made about both the Roadster and the Semi,” Morsy said. “That’s totally fair. The assumptions on a pack in 2020 shouldn’t be the same ones you use today."

However, in its analysis of the feasibility of Musk’s claims, Bloomberg overlooked one crucial detail: Back in August, the company"s veteran director of battery technology, Kurt Kelty, unexpectedly resigned to "explore new opportunities," abruptly ending a tenure with the company that stretched for more than a decade, and comes at a critical time for Elon Musk.

Kelty’s resignation – part of an exodus of high-level executives that is alarming in and of itself - hardly inspires confidence in Tesla’s ability to innovate. We’ve noticed a trend with Tesla: The more the company underdelivers, the more Musk overpromises.

In our opinion, this is not a sustainable business strategy.  
 

Tesla Unveils Its "Mind-Blowing" Semi And New Roadster, The "Fastest Production Car Ever Made"

Update 2: there were some rumors of a surprise during tonight"s presentation, and Musk did not disappoint when just as the semi-introduction was ending, Tesla also unveiled a new Roadster, the new version of its original sports car. According to Musk, It’s the fastest production car ever made, with speeds of just 1.9 seconds for 0 to 60 and 4.2 seconds for 0 to 100. It can handle a quarter mile in 8.9 seconds.

“This is the base model,” Musk said, then went on to mention that its top speed is above 250 mph. and it has a 200 kWh battery pack that offers 630 miles of highway driving range.

This just drove out of the Tesla Semi. A next gen Roadster!!!!! #TeslaSemiTruck pic.twitter.com/3gmyzhPHkl

— Lance Ulanoff (@LanceUlanoff) November 17, 2017

* * *

Update 1: this is what the new Semi truck, which Tesla will give a 1 million mile guarantee for, looks like:

This doesn"t look bad #TeslaSemiTruck pic.twitter.com/VrwHXb6qN8

— Madi ?????? (@Phalanxia) November 17, 2017

* * *

Tonight"s the night!! In what has been promised to "blow your mind," Elon Musk will unveil an all-electric Class 8 semi truck.

In the works for two years, it’s a project that’s aimed squarely at cleaning up the freight industry, which accounts for one-fifth of global oil demand... and which Goldman Sachs has warned will cost 300,000 jobs per year.

As Bloomberg notes, Chief Executive Officer Elon Musk has promised a truck that will “out-torque any diesel semi” and drive “like a sports car.” Seeing what an all-electric semi is capable of may be the most entertaining part of the night, even if it’s not a key metric for Tesla’s trucking customers.

It can transform into a robot, fight aliens and make one hell of a latte pic.twitter.com/8h9vvWu4f5

— Elon Musk (@elonmusk) November 15, 2017

“If you had a tug-of-war competition,” Musk bragged at a Ted Talk in April, “the Tesla Semi will tug the diesel semi uphill.”

The show is due to start at 8pmPT, 11pmET.

If the transmission is interrupted, readers can go to Tesla’s website by clicking the image below...

Here"s what to watch for - including some potential wild cards (via Bloomberg)

1. How Long Is Long Range?

The range of any electric vehicle is the critical metric—it defines how the vehicle can be used and the size of its potential market. Five years ago, few would have thought that a long-range heavy duty-truck was even possible. That’s changing fast. Daimler, the leader in Class 8 diesel trucks, recently unveiled a 220-mile range electric big rig, establishing a new bar for the industry. Long-range hauling across vast stretches of the U.S. would likely require more than 500 miles of range.

2. At What Cost?

Batteries are the single most expensive component of any electric truck, and the battery of a cross-country hauler could cost $100,000 even before you build the truck around it. The sticker price, regardless of size, is going to be higher than its diesel equivalent because of those pricey batteries.

Can Tesla keep the upfront price low enough to be offset by cheaper operating costs from fuel savings and simpler maintenance? Tesla may provide such figures, though many fleet operators will want to put them to the test with hundreds of thousands of road miles before they’ll be convinced.

Source: Bloomberg analysis

3. Platooning on Autopilot

Will the truck, expected to roll out by 2020, come with some level of autonomous driving? Tesla has been in talks with California and Nevada regulators about testing semis that can automatically follow a lead vehicle, a technique known as “platooning.” Platooning cuts fuel costs by reducing wind drag. And if the autonomous driving system is good enough to run without a driver, it could also dramatically cut labor expenses.

A teaser animation released by Tesla on Wednesday suggests the realization of one of Musk’s design aspirations: cameras instead of side door mirrors.

Tesla Semi unveil, 8pm PT tomorrow — watch live at https://t.co/8uVlhvzpu5 pic.twitter.com/hCIm5iCW6J

— Tesla (@Tesla) November 15, 2017

 

4. Who Are the First Customers?

The biggest players in freight are good at keeping their trucks in top driving condition and averse to messing with the supply chain. Convincing companies like Swift, Ryder, and Wal-Mart Stores Inc. to bring an electric drivetrain into their fleets will be a tough sell. Musk says Tesla has been gathering feedback from trucking companies throughout the development process (at least one, Ryder, confirmed it), so it would be a good sign if Tesla comes out of the gate with some early partnerships.

It could be that Musk’s own empire will be the first demonstration customer of the big rig. Tesla’s automotive reach is growing, and its SolarCity arm is the biggest rooftop solar installer in the U.S. Musk"s SpaceX could potentially use the vehicles to transport rockets, satellites, capsules, and equipment.

During earlier unveilings of Tesla’s passenger cars—the Models S, X and 3—the company started taking paid reservations immediately, at least 18 months before the first deliveries. Is that a strategy that can work with commercial trucks? How long until the first rigs hit the road?

A new 40-stall Supercharger station and customer lounge opens in Kettleman, California.

Source: Tesla

5. Infrastructure Solutions

A lot of infrastructure goes into servicing big rigs. Truck stops line the world’s highways, and fleet operators stand by with mountains of replacement parts ready to fix anything that might go wrong. How does Tesla plan to deal with these hurdles? Will they introduce a whole new type of charging system, with ultrafast chargers or a robot that swaps out used batteries for fresh ones? Who will build out and operate the charging network? Who handles maintenance and roadside assistance?

6. Location, Location, Location

Tesla’s car factory in Fremont, California, is running out of room. Musk wants to build 500,000 electric passenger cars there next year, and even if he misses that goal by half, it’s very unlikely Tesla would be able to squeeze in a big rig assembly line. Tesla’s massive battery factory near Reno, Nevada, which is still under construction, seems like a more natural fit. That factory is also where Tesla makes electric motors and drivetrains—primary components for an electric semi.

7. “Driver Comfort Features”

In a profile in this week’s Rolling Stone, Musk hinted at an unspecified “driver comfort feature” that he’s fond of. “Probably no one will buy it because of this,” he said, “but if you’re going to make a product, make it beautiful.” One possibility? A sweet coffee maker. In a Twitter post on Wednesday, Musk joked that the truck “can transform into a robot, fight aliens and make one hell of a latte.”

The Model 3 motor sits in line with the wheel axle. The semi will use multiple Model 3 engines in tandem to power the big rig semi trucks.

Source: Tesla

8. Shared Parts

Perhaps Tesla’s biggest advantage over other truck makers is that its Semi will share some core parts with its first mass-market car, the Model 3. Musk disclosed during an earnings call in May that the Semi uses “a bunch” of Model 3 motors, which sit in line with the truck’s axles. These relatively cheap electric motors will give the Semi unparalleled electric torque for getting quickly up to speed with a heavy load.

Tesla’s foray into commercial trucking is coming at an impossibly tough time for the company. The Model 3 is already months behind schedule, and Tesla is spending $1 billion a quarter to get things cranking.

But if Musk can get Model 3 production lines up to their promised rates, and the motors and battery cells are truly interchangeable between the Semi and the new passenger car, the scale of those operations would be profound. While traditional diesel truck makers are testing truck-suitable electric motors by the hundreds, Tesla could be making them by the hundreds of thousands—even before its first big rig hits the road.

*  *  *

Tesla shares have been on the downtrend since mid-September...

So this event could be just what Musk needs to turn things around and distract investors from the massive cash burn the company is suffering while hand-making Model 3s...

Musk Fires Back: Blasts "Hotbed Of MISinformation" In Racial Discrimination Lawsuit

A couple of days ago we noted a lawsuit filed against Tesla in the Superior Court in Alameda County which, among other things, alleged that his Fremont manufacturing facility was a "hotbed for racist behavior" in which employees and supervisors "regularly use the "N word."" Bloomberg summarized the case as follows:

Tesla Inc.’s production floor is a "hotbed for racist behavior," more than 100 African-American employees claimed in a lawsuit in which they alleged black workers at the electric carmaker suffer severe and pervasive harassment.

 

The employees are seeking permission from a judge to sue as a group and are seeking unspecified general and punitive monetary damages as well as an order for Tesla to implement policies to prevent and correct harassment.

 

"Although Tesla stands out as a groundbreaking company at the forefront of the electric car revolution, its standard operating procedure at the Tesla factory is pre-Civil Rights era race discrimination," the employees said in the complaint, filed Monday in California’s Alameda County Superior Court.

 

The lawsuit was filed on behalf of Marcus Vaughn, who worked in the Fremont factory from April 23 to Oct. 31. Vaughn alleged that employees and supervisors regularly used the “N word” around him and other black colleagues. Vaughn said he complained in writing to human resources and Musk and was terminated in late October for "not having a positive attitude."

But, in an angry blog post published on Tesla"s website, the embattled electric car darling has fired back saying that media reports of a "hotbed of racist behavior" at Tesla are nothing more than a "hotbed of misinformation" spread by a trial lawyer who "has a long track record of extorting money for meritless claims and using the threat of media attacks and expensive trial costs to get companies to settle."

There are a number of other false statements in the class action lawsuit alleging a so-called “hotbed of discrimination”:

 

- There is only one actual plaintiff (Marcus Vaughn), not 100. The reference to 100 is a complete fabrication with no basis in fact at all.

 

- The plaintiff was employed by a temp agency, not by Tesla as claimed in the lawsuit.

 

- Marcus was not fired, he was on a six month temp contract that simply ended as contracted.

 

- His email to Elon was about his commute and Tesla’s shuttles, which was addressed as he requested. There was no mention of racial discrimination whatsoever.

 

- The trial lawyer who filed this lawsuit has a long track record of extorting money for meritless claims and using the threat of media attacks and expensive trial costs to get companies to settle. At Tesla, we would rather pay ten times the settlement demand in legal fees and fight to the ends of the Earth than give in to extortion and allow this abuse of the legal system.

Given those silly fiduciary duties he has as a Tesla board member, Elon may not want to openly flaunt his willingness to "pay ten times" more in legal fees just to settle a personal vendetta...just a thought.

Meanwhile, Elon also decided to address a portion of a firm-wide email published by Bloomberg suggesting the Tesla employee who felt discriminated against should have been more "thick-skinned" by publishing the entire email that, in fact, confims that Elon said the guy should be more "thick-skinned."

We would also like to clear up the description of Elon’s prior email to employees. It is dedicated to ensuring that Tesla employees always try to do the right thing, that being a jerk is not allowed, that everyone should be contributing to an atmosphere where people look forward to coming to work in the morning and that no one should feel excluded, uncomfortable, or unfairly treated. As one of many points in that email, Elon also explained that if someone makes an offensive or hurtful statement on a single occasion, but subsequently offers a sincere apology, then we believe that apology should be accepted. The counterpoint would be that a single careless comment should ruin a person’s life and career, even if they truly regret their action and do their best to make amends. That would be a cold world with no forgiveness and no heart.

Of course, somehow we suspect that Tesla shareholders would prefer that Elon focus on learning how to weld rather than spend his time publicly responding to what he clearly views to be a "frivolous" lawsuit.

Why Goldman Just Downgraded GM To Sell

After GM"s stock surged over 35% in the past two months, Goldman finally decided they had seen enough this morning and downgraded the stock to sell with a $32 price target. 

So what caused the downgrade?  Well, Goldman figures GM is facing just a few "minor" headwinds over the next couple of years which include collapsing industry volumes and declining margins on crossover products which should result in a ~22% decline in EBIT next year...oh, and the fact that the company suddenly trades at an historically high multiple, just as earnings are about to collapse, was also viewed negatively by Goldman"s auto team.  Here"s the summary of their downgrade:

"Looking ahead into 2018 and given the current valuation level, we see a downward infection in GM earnings and consequently downgrade shares to Sell. We expect that a normalization in SAAR coupled with the company’s product launches in 2018 will weigh on GMNA pro?tability. Our work on pickup trucks and crossovers suggest that GM likely experiences volume and mix headwinds that exacerbate the cyclical pro?t headwinds. Combined, we see this driving 2018E EBIT -adjusted down by 22% yoy and compressing overall corporate margins. We see 28% downside to our 12-month price target of $32."

On overall industry volume, Goldman sees a 15% decline in U.S. SAAR over the next couple of years to 15mm which they think will be prompted by, among other things, "challenging consumer affordability" which will result from rising interest rates and a tightening of auto credit.

US cycle peaked, and production cuts likely continue: We believe cleared through pent-up demand (given sales above normalized levels since 2013) and challenged consumer affordability (rising interest rates, tightening auto credit) will drive a normalization in US SAAR beginning in 2018, ultimately translating into declines in utility vehicles and passenger cars. As GM generates 106% of Automotive pro?t and 108% of FCF in North America, we expect this cycle normalization to pressure GMNA results going forward.

Meanwhile, Goldman sees GM share loss on pickup trucks in 2018 and declining pricing power on crossovers due to a flood of competitive models in that segment.

Pickup truck changeover leaves GM vulnerable to share loss in 2018: Historically,n pickup truck refreshes drive market share losses of 100bps to 300bps in the year during the launch. As GM approaches a 2018 changeover with incremental downtime and given Ford’s recently refreshed F-Series, we expect share shifts to pressure GM. We see a $2bn headwind in volume/mix at GM related to its 2018 pickup refresh.

 

Growing competition in crossover utility vehicles (CUVs) should weigh onn pricing: As the industry has bene?tted from a mix shift to higher variable pro?t crossovers (from passenger cars), OEMs have shifted their product strategy and 40% of vehicles launching over the next few years are CUVs. As a result, competition in the segment has been intensifying and GM’s CUV pro?tability has begun to compress; we believe this trend likely continues particularly as overall sales slow. As CUVs represent 27% of GM’s portfolio (vs. 22% at Ford), we believe the company will see more pressure relative to its peer, and competition in this segment will weigh on GM’s ability to drive positive pricing.

All of which should result in a "minor" 24% decline North American EBIT in 2018.

Oh, and Goldman figures it also doesn"t help that GM"s stock recently soared to record high multiples just as earnings are getting set to collapse.

Meanwhile, GM shareholders are finally starting to take notice that at a 35% surge in share price, or $18.5 billion in market cap, might not have been completely warranted just because a couple of hurricanes wiped out a few cars in Texas and Florida.

Daimler One-Ups Elon Again; Reveals Electric Semi-Truck Weeks Before Tesla

Weeks before Tesla was supposed to shock the world by revealing their battery-powered semi-truck, Mercedes has once again one-upped the Silicon Valley darling by beating them to the punch.  As Bloomberg points out, earlier today Daimler revealed their E-Fuso Vision One prototype, an electric semi-truck that can carry 11 tons of cargo some 220 miles before having to recharge. 

Daimler AG is jumping the gun on Tesla Inc. by showing off a battery-powered heavy-duty truck weeks before the California electric-car maker’s own planned unveiling, in a sign of the growing rivalry between the companies.

 

The E-Fuso Vision One prototype can carry 11 tons of cargo as far as 350 kilometers (220 miles) before recharging, the world’s largest maker of commercial vehicles said Wednesday in a statement. The truck, which would be geared to shorter intra-city trips, could go on sale within four years in Europe, Japan and the U.S.

 

The truck is part of plans by Daimler’s Fuso brand to add electric and hybrid options across its range of trucks and buses. The announcement steals a march on Tesla, which plans to show off a concept truck on Nov. 16. Chief Executive Officer Elon Musk engaged in a Twitter tussle with Daimler, a former Tesla shareholder, about electric-vehicle spending last month. Daimler’s Mercedes-Benz is also ramping up a line of battery-powered luxury cars to challenge Tesla models.

Of course, this comes as Elon was recently forced to delay Tesla"s much anticipated reveal celebration due to his Model 3 "production hell."

Tesla Semi unveil now Nov 16. Diverting resources to fix Model 3 bottlenecks & increase battery production for Puerto Rico & other affected areas.

— Elon Musk (@elonmusk) October 6, 2017

As we recently pointed out (see: Porsche And Mercedes Plot Musk Offensive With "Anything Tesla Can Do, We Can Do Better" Strategy), Tesla, once the only real electric car game in town, is suddenly facing an onslaught of competition from major auto OEMs who have already figured out how to weld steel on an assembly line.

Daimler AG plans to spend $1 billion to start production of Mercedes-Benz electric vehicles at its Alabama factory, setting the world’s largest luxury-car maker up to battle with battery-car specialist Tesla Inc. on its home turf.

 

The German automaker will build its fifth battery plant globally and create more than 600 jobs in the region, the company said Thursday in a statement. The Alabama factory will assemble electric sport utility vehicles, taking on Tesla’s Model X and making Stuttgart-based Daimler the first European company to assemble plug-in autos in the U.S.

 

“We’re celebrating our 20th anniversary at our production facility in Tuscaloosa, Alabama, and we’re taking this as an opportunity to expand the operation and further fuel growth,” production chief Markus Schaefer said in a Bloomberg TV interview. “We’re very confident for future growth in the U.S. in the long-term. ”

 

Daimler’s investment shows the carmaker’s shift to electric vehicles is taking shape. The German manufacturer is also in talks to expand its Denza joint venture with BYD Co. in China with additional models, Chairman Wang Chuanfu told a group of reporters in the southern Chinese city on Thursday.

As Sanford Bernstein analyst Max Warburton recently noted, companies like Mercedes and BMW are pursuing an "anything Tesla can do, we can do better" strategy.

The company is pursuing an "anything Tesla can do, we can do better" strategy, Sanford Bernstein analyst Max Warburton said in a recent note to investors. "Mercedes is convinced it can match Tesla battery costs, beat its manufacturing and procurement costs, ramp up production faster and have better quality. It is also confident its cars will drive better."

Of course, the only question now is when will Tesla shareholders finally realize that their monopoly is slowly coming to an end?

Inventory Levels Of These GM Plants Still In "Danger Zone" Even After 2 Hurricanes And 6,000 Job Cuts

Over the past two months, General Motors" stock has rallied nearly 30% on the notion that hurricanes in Texas and Florida solved the company"s nagging inventory problem.  But, even after two of the most devastating hurricanes in U.S. history wiped out hundreds of thousands of vehicles and GM"s preemptive elimination of some 6,000 jobs, Automotive News says the company still has a ways to go at certain plants if they want to bring system-wide inventories down to healthy levels. 

Even after cutting more than 6,000 jobs this year, General Motors might need to further shrink its manufacturing operations to address bloated inventories of some vehicles amid plateauing U.S. sales and pressure from Wall Street to avoid overproduction.

 

The majority of GM"s U.S. assembly plants, including some where a shift already has been eliminated, produce vehicles that on average have at least an 80-day supply, 33 percent more than what the industry generally considers healthy, according to estimates from the Automotive News Data Center.

 

"The danger zone is definitely consistently staying in that 80 to 100 days," said Joe Langley, a senior analyst at economic forecasting and data company IHS Markit. "The ultimate red flag is when volume is at that 120 days or more consistently and incentives aren"t moving the needle."

 

GM has at least seven U.S. assembly plants that on average produced vehicles with greater than an 80-day supply entering October, including four that have more than 100 days, according to the estimates. That does not include GM"s two U.S. plants for the Chevrolet Silverado and GMC Sierra, because pickups commonly have higher inventories to meet demand for a variety of trim and feature configurations.

Making matter worse, it"s not just small passenger cars where GM is currently oversupplied as the company is sitting on 125 days worth of GMC Canyons and roughly 80 days worth of other "popular" pickup truck models.

Inventory numbers point to the potential for a cutback in Wentzville, which has run around the clock since spring 2015. It makes the Chevrolet Express and GMC Savana full-size vans and the Chevy Colorado and GMC Canyon midsize pickups. Slowing sales have left GM with an estimated 84-day supply of those vehicles as of Oct. 1, including 81 days" worth of Colorados and 125 days" worth of Canyons.

 

"The Colorado and Canyon have sold far better than they thought they would," said Ron Harbour, a consultant with Oliver Wyman. "At this point, they"re trying to figure out if this is a long-term trend or not."

 

Langley, the IHS analyst, said he thinks GM would need to cut a shift in Wentzville by next summer if inventories remain elevated.

 

"That"s the one big plant on the truck side that concerns me for getting a shift reduction," Langley said. "That plant is running at a level it was never designed for either. That"s been the story for a lot of these factories."

Of course, no matter how bad the company"s persistent inventory problem looks on paper, there is one group that simply couldn"t care less: GM shareholders.

Look Out, New Yorkers: GM To Begin Testing Driverless Cars In The Big Apple

If you happen to see a driverless car trundling down Fifth Avenue, don’t panic.   

Compounding the misery that Elon Musk is likely feeling right now, General Motors has scored yet another victory in its quest to build the first commercially viable self-driving car.  
New York Gov. Andrew Cuomo on Tuesday granted GM’s Cruise Automation division permission to begin testing fully autonomous vehicles on New York City roads – meaning GM will become the first automaker to begin testing autonomous cars in the northeast.

The company will begin testing the cars early next year. The New York decision follows a similar move by California regulators, who earlier this month granted GM’s request to nearly double the size of its autonomous test fleet being tested in San Francisco, ignoring a troubling spike in accidents that has unnerved automobile safety groups.

Specifically, Cuomo granted GM permission to begin testing a “level 4” autonomous vehicle, which is considered fully autonomous with no option for human intervention. While a level 3 car still needs a steering wheel and a driver who can take over if the car encounters a problem, level 4 promises driverless features in dedicated lanes, Reuters reports. Meanwhile, a level 5 vehicle is capable of navigating roads without any driver input and in its purest form would have no steering wheel or brakes.

GM, along with many of its competitors in the self-driving car space – a group that includes Google/Waymo, Uber, Audi, Tesla and Ford – has been testing its automated cars in a number of ities, but busy San Francisco has been the most important testing ground because it allows cars to collect data from congested and often chaotic urban environments, an effort that one might expect to be fraught with complications given that the slightest error on the car’s part can be easily amplified given the volume of traffic.

GM and Cruise Automation will begin conducting tests in Manhattan with an engineer in the driver’s seat to monitor the performance, and a second person in the passenger seat, according to the governor’s statement.

The company will deploy a fleet of self-driving Chevrolet Bolt electric cars early next year in a 5-square-mile section of lower Manhattan that engineers are mapping, said Kyle Vogt, chief executive of Cruise Automation, the driverless-car developer GM acquired last year. The move could be seen as a threat to the thousands of taxi drivers piloting yellow cabs around New York, as autonomous robot-taxis operated by GM and its rivals are seen eventually displacing human drivers, according to WSJ.

While GM appears to be pulling ahead in the race to build the first driverless car, it has passed over more than a few bumps in the road. GM’s self-driving cars were involved in 6 accidents during the month of September – a month where the company finished expanding its fleet of self-driving cars from around 30 or 40 cars to more than 100.

As WSJ pointed out, Deutsche Bank analyst Rod Lache said in a research note earlier this month he believes GM could launch a commercial autonomous-ride service—without anyone at the wheel—“within the next few quarters, well ahead of competitors.” Citing recent briefings with company officials, he thinks GM will offer its own service that could be “highly disruptive” to ride-hailing giants Uber and Lyft Inc.

Cars are already driving themselves on roads in California, Texas, Arizona, Washington, Pennsylvania, and Michigan. One-quarter of miles driven in the U.S. by 2030 could be through shared, self-driving vehicles, according to an estimate from the Boston Consulting Group.

But of course, whether the driverless-car future is three years – or 30 – years away remains to be seen.

Read the full statement from Cuomo’s office below:

Governor Andrew M. Cuomo today announced General Motors and Cruise Automation are applying to begin the first sustained testing of vehicles in fully autonomous mode in New York State in early 2018. Through Governor Cuomo"s recent legislation allowing the testing of autonomous technology, GM and Cruise are applying to begin testing in Manhattan, where mapping has begun in a geofenced area. All testing will include an engineer in the driver"s seat to monitor and evaluate performance, and a second person in the passenger seat. In support of this work, Cruise is expanding its presence in New York and will begin building a team of employees in New York City.

"Autonomous vehicles have the potential to save time and save lives, and we are proud to be working with GM and Cruise on the future of this exciting new technology," Governor Cuomo said. "The spirit of innovation is what defines New York, and we are positioned on the forefront of this emerging industry that has the potential to be the next great technological advance that moves our economy and moves us forward."

The legislation, included in the FY 2018 budget, allows for the testing of autonomous technology in New York through a pilot program. Cruise"s planned testing would be the first time Level 4 autonomous vehicles will be tested in New York State, presenting opportunities for future autonomous vehicle development in the state and cementing New York"s role as the hub of autonomous vehicle innovation in the nation.

Kyle Vogt, CEO of Cruise Automation, said, "Testing in New York will accelerate the timeline to deploying self-driving cars at scale. New York City is one of the most densely populated places in the world and provides new opportunities to expose our software to unusual situations, which means we can improve our software at a much faster rate. We look forward to working with Governor Cuomo as we work toward bringing next-generation transportation solutions to New York."

The Department of Motor Vehicles and State Police will work with Cruise and GM to ensure all testing meets relevant safety, vehicle and insurance requirements.

In June, Audi of America Inc. performed New York State"s first autonomous vehicle demonstration. Lieutenant Governor Kathy Hochul took a test drive in the vehicle. Also in June, Lieutenant Governor Hochul participated in road testing of an autonomous Cadillac SUV organized by University of Buffalo on campus roads. The demonstration was part of the annual summer meeting of the Council of the University Transportation Centers, a Washington, D.C.-based organization that represents more than 90 universities and colleges nationwide, including UB. In September, Cadillac embarked on the first official Coast-to-Coast hands-free drive on freeways, in New York City. The cars used were Cadillac CT6s equipped with Super Cruise - the first hands-free highway driver assist system. This was also the first-time self-driving cars were officially driven on New York City roads.

Lieutenant Governor Kathy Hochul said, "The time to embrace this revolution in transportation technology is now, which is why Governor Cuomo is positioning New York State at the forefront of autonomous vehicle testing and research. I have taken part in three AV demonstrations in 2017, and there is no question that we are on the brink of a breakthrough for the automotive industry and our state economy. This partnership with General Motors and Cruise Automation is an exciting step into that future."

Manhattan Borough President Gale A. Brewer said, "New York is the ultimate proving ground for autonomous vehicle technology. We have a streetscape that is unrivaled in its scale and complexity, and so it"s fitting that General Motos and Cruise Automation are finally bringing this technology here for testing and development. I thank Governor Cuomo for pushing the legislation that paved the way to this milestone. I"m proud and excited that more and more, the future itself is being made in New York."

Matt Mincieli, Northeast Region Executive Director for TechNet, a trade association comprised of over 70 of the nation"s leading technology companies, said, "Governor Cuomo"s announcement of the Cruise Automation partnership proves that New York State is serious about bringing AV technology to the Empire State and taking a leadership role in safely, but aggressively, testing this rapidly evolving technology. This private/public partnership spearheaded by the Cuomo Administration is the type of innovative approach to adopting burgeoning technology that will ensure New York State continues to attract the talented workforce and venture capital dollars necessary to remain a top tech hub."

Julie Samuels, Executive Director of Tech:NYC, said, "GM and Cruise"s autonomous vehicle testing in New York City demonstrates a significant step forward and ensures New York continues to lead the tech industry. From landmark investments in broadband and policies to support emerging technologies like autonomous vehicles and drones, New York is helping advance U.S. innovation. We applaud Governor Cuomo"s efforts to invest in New York"s tech industry and welcome GM and Cruise to New York City."
 

Kobe Steel Collapses 37% After Admitting Falsifying Data: "Could Destroy International Faith In Japanese Manufacturing"

Japan"s third-biggest steel producer is in trouble. After admitting falsifying data about the quality of aluminum and copper it sold, shares in Kobe Steel have collapsed 37%,  -20% limit down yesterday and another -17% at the open today following news that the falsification also involved iron powder product, in the biggest bloodbath the company has ever seen.

Bloomberg provides a quick Q&A:

1. What exactly did Kobe Steel falsify?
Data related to the products’ strength and durability. Kobe Steel says it discovered the falsification in inspections on goods shipped in the 12 months through August, affecting some 4 percent of shipments of aluminum and copper parts as well as castings and forgings. As yet, the company, which employs about 37,000 people, says there have been no reports of safety issues.

2. Was this a rogue event?
Hardly. The fabrication of figures was found at all four of Kobe Steel’s local aluminum plants in conduct the company described as “systematic.” For some items, the practice dated back some 10 years ago, according to executive vice president Naoto Umehara. Details have yet to emerge.

3. What do its customers say?
Here’s a taster. Toyota is “rapidly working to identify which vehicle models might be subject to this situation and what components were used,” according to spokesman Takashi Ogawa. "We recognize that this breach of compliance principles on the part of a supplier is a grave issue.” Toyota found the materials in question in hoods and doors, as did Honda Motor Co. Boeing, which gets some parts from Kobe Steel customer Subaru Corp., said there’s nothing to date that raises any safety concerns. Hitachi Ltd. said trains it has exported to the U.K. contained compromised metal as well as bullet trains in Japan. Mazda Motor Corp. also confirmed it uses aluminum from the company, while Suzuki Motor Corp. and Mitsubishi Motors Corp. all said they were checking whether their vehicles are affected.

After yesterday"s limit down open (and no shift), today"s 17% plunge following a report in the Yomiuri newspaper that Kobe may also have fabricated data on iron powder products used typically in components such as automotive gears, the stock smashed back to 12 month lows (and erased $1.7bn of the company"s $4.5bn market cap as of Friday)...

This is the biggest 2-day drop and the heaviest volume in the history of the stock...

The scandal that is reverberating through the global supply chain...

And casting a new shadow over the country’s reputation for precision manufacturing, and as The New York Times reports, the fallout has the potential to spread to hundreds of companies.

Manufacturers of cars, aircraft and bullet trains have long relied on Kobe Steel to provide raw materials for their products, making the steel maker a crucial, if largely invisible, pillar of the Japanese economy.

The scandal hits a tender spot for Japan.

The country relies on its reputation for quality manufacturing as a selling point over China and other countries that offer cheaper alternatives. But its reputation has been marred by a series of problems at some of Japan’s biggest manufacturers.

Last week, Nissan Motor said unqualified staff members had carried out inspections at its factories, prompting the carmaker to recall 1.2 million vehicles, though it was not clear if the quality of the vehicles had been affected. Mitsubishi Motors and Suzuki Motor both admitted last year that they had been exaggerating the fuel economy of their vehicles by cheating on tests.

Perhaps the biggest blow to Japan’s reputation for quality has come from Takata, the airbag maker that was at the center of the largest auto safety recall in history, involving tens of millions of vehicles. Its faulty airbags have been blamed for more than a dozen deaths. Takata declared bankruptcy in June.

The extent of the problems at Kobe Steel are still unfolding: "The falsification problem has become an issue that could destroy international faith in Japanese manufacturing,” the Japanese financial newspaper Nikkei said in an article on Tuesday.

Tesla's Dirty Secret: It Was Banging Out Parts Of The Model 3 By Hand

As it turns out, Elon Musk’s warning earlier this year that the Tesla Model 3 roll out would be “production hell” was an understatement.

In a damning – if unsurprising – report, the Wall Street Journal revealed Friday that Tesla managed to produce only a tiny fraction of the 1,500 Model 3 sedans that it promised customers because key parts of the cars are still being assembled by hand, far away from the assembly line at the company’s Fremont factory. As of a few weeks ago, the advanced assembly line that Tesla has long boasted about - and which it had spent billions upon billions in capex to build -  wasn’t ready and the company was working frantically to try and finish it, while keeping the arrangement a secret from purchasers and investors.

More apropos, the report strongly suggests that Tesla’s Monday warning about “production bottlenecks” might not be its last as Elon Musk’s dream of building millions of the "everyman’s electric car" melts before his eyes. 

Unknown to analysts, investors and the hundreds of thousands of customers who signed up to buy it, as recently as early September major portions of the Model 3 were still being banged out by hand, away from the automated production line, according to people familiar with the matter.

While the car’s production began in early July, the advanced assembly line Tesla has boasted of building still wasn’t fully ready as of a few weeks ago, the people said. Tesla’s factory workers had been piecing together parts of the cars in a special area while the company feverishly worked to finish the machinery designed to produce Model 3’s at a rate of thousands a week, the people said.

As one analyst quoted by WSJ snydely pointed out, “that’s not how mass production vehicles are made.”

Automotive experts say it is unusual to be building large parts of a car by hand during production. “That’s not how mass production vehicles are made,” said Dennis Virag, a manufacturing consultant who has worked in the automotive industry for 40 years. “That’s horse-and-carriage type manufacturing. That’s not today’s automotive world.”

When called for comment by WSJ, an angry Tesla spokesperson delivered a statement that could have been taken right out of Trump"s playbook, slamming what Tesla described as a "decade-long campaign of misleading reporting" by the WSJ.

In a statement, a Tesla spokeswoman declined to answer questions for this article and said, “For over a decade, the WSJ has relentlessly attacked Tesla with misleading articles that, with few exceptions, push or exceed the boundaries of journalistic integrity.

While it is possible that this article could be an exception, that is extremely unlikely.” The Journal disagrees with the company’s categorization of its journalism.Musk has staked Tesla’s future (not to mention the company’s massively inflated valuation) on the success of the Model 3, which was intended to be Tesla’s first attempt at building an electric vehicle for “mass market” consumers, priced at a relatively affordable $35,000 a car.

As WSJ pointed out, a memorable statement made by Musk during the July launch event for the Model 3 has proven unusually prophetic. Given Musk’s warnings about “production hell”, it’s surprising that the company’s investors are only now learning about the primitive methods employed by the company.

Tesla introduced the Model 3 at an event outside the company’s factory in July, when Chief Executive Elon Musk drove a shiny red Model 3 onstage as hundreds of his employees cheered the first sedans rolling off the production line.

Within minutes of stepping out of the new vehicle, Tesla’s leader warned his engineers and designers the coming months would be challenging. “Frankly, we’re going to be in production hell. Welcome, welcome!” he said to laughter. Behind the scenes, Tesla had fallen weeks behind in finishing the manufacturing systems to build the vehicle.

Or, as the philosopher said, hell is other people, not other conveyors.

Last Monday, Tesla announced it had produced only 260 of the promised 1,500 sedans, an average of only three cars per day. Musk blamed unspecified “production bottlenecks” for the shortfall. That unconscionably charitable characterization of the company’s production problems has now been exposed as totally misleading.

“Although the vast majority of manufacturing subsystems at...our California car plant...are able to operate at high rate, a handful have taken longer to activate than expected,” the company said at the time.

Then on Friday, Musk came up with another excuse, when in the late afternoon, he tweeted that Tesla was ramping up production of its solar-powered Powerwall home batteries, ostensibly to deliver them to Puerto Ricans in need – which is now the reason for both the Model 3 delay and the delay in the unveiling of the Tesla Semi; furthermore it is also an attempt by Musk to cynically use the tragedy in Puerto Rico as cover for his company"s production failure.

Tesla Semi unveil now Nov 16. Diverting resources to fix Model 3 bottlenecks & increase battery production for Puerto Rico & other affected areas.

— Elon Musk (@elonmusk) October 6, 2017

Worse, as the WSJ points out, although Tesla has struggled with production issues in the past – most notably during the rollout of its 2015 sports-utility vehicle – the obstacles facing the Model 3 are far more threatening to the company’s long-term financial health.

Tesla’s rollout of the Model X sport-utility vehicle in 2015 also was plagued by quality and design issues that left suppliers scrambling and hourly workers having to rush to meet lofty goals. And with employees at the company’s Fremont factory telling WSJ that it could be another month before the assembly line is ready, the production problems plaguing the Model 3 could pose a much bigger threat to the company’s long-term financial health.

Painting a comical scene of primitive, ad hoc production methods more appropriate for some Lada factory deep in the bowels of Russia and certainly not the pinnacle of modern production, the WSJ described a factory where workers struggled to perform tasks typically reserved for heavy machinery as they strained to piece the cars together.

One worker who spent time in the Model 3 shop—dubbed by some as Area 51 because of the limited access and secretive nature—described watching young workers in September struggling to move large pieces of steel to weld together instead of using robots as is traditionally the case.

“In place of the robots…you’ve got two associates lining up with a big, old spot welder hanging from the ceiling by a chain, and you’ve got one associate kind of like balancing it and trying to get the welder in position, and you’ve got another welder with his arm guiding it,” this worker recalled seeing. “Sparks go flying.”

It almost makes one wonder where all those billions in capex spending are going?

Finally, the report also contradicts a claim Musk made while speaking to analysts in August that the Model 3s would be “full production cars.”

In August, Mr. Musk told analysts that the Model 3s coming out of the factory were “not engineering validation units.”

“They’re fully certified, fully DOT-approved, EPA-approved production cars,” Mr. Musk said, referring to the Department of Transportation and the Environmental Protection Agency. “These are not prototypes in any way. They’re not validation anything. They are full production cars.”

The bottom line is that as much as we’re sure Musk would "love" to help the good people of Puerto Rico rebuild their devastated energy grid - especially if it involves billions in US taxpayer subsidies - he’s not the savior that the Isle of Enchantment needs right now. And while we are confident that Tesla shareholders will soon get what they deserve, we look forward to what the next inevitable "mule with a spinning wheel" product will be...

Despite Spike In Accidents, California Allows GM To Expand Self-Driving Car Fleet

California regulators have largely acquiesced to General Motors’ requests to expand its fleet of self-driving robot cars. But that doesn’t mean there haven’t been a few, uh, bumps in the road for GM’s Cruise Automation division.

Reuters reported Thursday that the number of accidents involving GM’s self-driving cars has continued to climb, even as California and one powerful Senate committee have done everything in their power to hasten advances in the technology by allowing companies broad remit to increase the size of their fleets, while simultaneously green lighting a bill that would allow automakers to expand testing programs across the US.

To wit, GM’s self-driving cars were involved in 6 accidents during the month of September – a month where the company finished expanding its fleet of self-driving cars from around 30 or 40 cars to more than 100.

As the company increases the size of its test fleet, it has also reported more run-ins between its self-driving cars and human-operated vehicles and bicycles, telling California regulators its vehicles were involved in six minor crashes in the state in September.

“All our incidents this year were caused by the other vehicle,” said Rebecca Mark, spokeswoman for GM Cruise.

We’re not certain the unsuspecting cyclists, drivers and pedestrians who comprised the other party in many of these incidents would agree with GM"s characterization of events.

The company has been testing the automated cars on busy San Francisco streets as part of its effort to develop software capable of navigating congested and often chaotic urban environments, an effort that one might expect to be fraught with complications given that the slightest error on the car’s part can be easily amplified given the volume of traffic.

Ford and GM have been richly rewarded by investors for their pioneering efforts in the world of self-driving car technology (Wired, the tech bible, even published a story proclaiming that “Detroit Is Stomping Silicon Valley in the Self-Driving Car Race”). GM shares are up 17% this year.

However, California’s permissiveness has raised hackles with some vehicle safety groups, who claim the state is giving too much latitude to automakers.

In filings to California regulators, Cruise said the six accidents in the state last month involved other cars and a bicyclist hitting its test cars.

The accidents did not result in injuries or serious damage, according to the GM reports. In total, GM Cruise vehicles have been involved in 13 collisions reported to California regulators in 2017, while Alphabet Inc’s (GOOGL.O) Waymo vehicles have been involved in three crashes.

Last year, a Tesla owner died in a fatal crash while the company’s autopilot feature was engaged. Excuse us for being morbid, but much longer until a car with no driver is involved in a deadly crash?

And what will happen to GM’s share price when that happens?
 

Hurricane Harvey Surge-Nado: Auto SAAR Soars To 30-Year High On Hurricane Replacements

Last month, when we reported auto sales data, we noted that this month would be all about replacement demand from Hurricane Harvey and thus largely irrelavant.  Fast forward 30 days and that appears to be exactly what has happened as annualized auto sales for the month of September suddenly surged to a 30-year high of 18.5mm units, up 15.2% sequentially from a 16.0mm run-rate last month.

That is, of course, unless you believe CNBC"s Phil LeBeau who took to the airwaves earlier today to argue that a substantial portion of the sudden surge in auto sales was not necessarily attributable to the fact that a couple hundred thousand cars were destroyed in last month"s hurricanes but rather just a reflection of an abrupt rebound in consumer demand after months of weak data...

...once you"re done with the laughing fit we can continue to review this month"s auto data...

Not surprisingly, almost every OEM, with the exception of Fiat Chrysler, managed to post a significant YoY increase in sales courtesy of Hurricane Harvey.  The only surprising takeaway was just how wrong wall street was in their estimates for the quarter.

Meanwhile, per the charts below from Stone McCarthy, the transition from cars to trucks continued during September with car sales dropping 2.8% YoY versus and 8.1% increase in truck sales. 

All of which likely contributed to Ford"s announcement after the close today suggesting, among other things, a shift in future capital allocation to increased production of SUVs and trucks away from cars...which should be complete right about the same time that oil prices spike back to $100 per barrel rendering those SUVs/Trucks completely unaffordable again.  Here are the highlights from Ford"s press release:

Accelerating the introduction of connected, smart vehicles and services customers want and value. By 2019, 100 percent of Ford’s new U.S. vehicles will be built with connectivity. The company has similarly aggressive plans for China and other markets, as 90 percent of Ford’s new global vehicles will feature connectivity by 2020.

Rapidly improving fitness to lower costs, release capital and finance growth. Ford is attacking costs, reducing automotive cost growth by 50 percent through 2022. As part of this, the company is targeting $10 billion in incremental material cost reductions. The team also is reducing engineering costs by $4 billion from planned levels over the next five years by increasing use of common parts across its full line of vehicles, reducing order complexity and building fewer prototypes.

Allocating capital where Ford can win the future. This starts with the company reallocating $7 billion of capital from cars to SUVs and trucks, including the Ranger and EcoSport in North America and the all-new Bronco globally. Ford also has plans to build the next-generation Focus for North America in China, saving capital investment and ongoing costs. Further, Ford is reducing internal combustion engine capital expenditures by one-third and redeploying that capital into electrification – on top of the previously announced $4.5 billion investment.

Of course, with this non-recurring, one-time surge in demand helping to offset the industry"s pesky inventory crisis (per table below GM was able to reduce inventory MoM by over 70,000 units), the question now becomes whether OEMs will maintain some discipline and restrict production to reflect a normalized SAAR environment or if they"ll just flood dealer lots all over again...we have a guess.

Of course, while today"s results were largely just noise, shareholders still loved the headlines...

Brits Have Suddenly Stopped Buying Cars

 Unless the press or Robert Mueller come up with a smoking gun, a dead body, and a cache of rubles, we can assume Donald Trump will be our president for a full four-year term. But Trump as President continues to sabotage himself. He risks becoming irrelevant because no one will take him seriously. Which might be a good thing.

Elon Musk Magically Extends Battery Life Of Teslas Fleeing Irma

In what is either a generous act of charity or an unnerving example of the control Tesla exercises over the vehicles it producers, or perhaps both, Tesla CEO Elon Musk has magically unlocked the batteries of every Tesla in Florida to maximize the distance that people fleeing from Hurricane Irma can travel before stopping to refuel at one of the company’s “superstation” charging centers.

Typically, these types of over-the-air upgrades can cost thousands – if not tens of thousands – of dollars.

But Musk is temporarily offering full battery capacity to all owners of Model S/X 60/60D vehicles with 75 kilo watt battery packs, according to Electrek, a blog that covers electric vehicles.

The upgrade will surely help Floridians who are still rushing to escape as the now category 3 storm makes its second landfall near Naples. The upgrade will last through Saturday.

As a Tesla spokesperson explained to Electrek, the company decided on the mass-unlocking strategy after a customer called and asked if the company could upgrade his battery because he was trying to flee the storm. Tesla’s Supercharger network is fairly extensive in Florida and most owners should be able to get by even with a Model S 60 (the shortest range option).

A Tesla Model S 60 owner in Florida told Electrek that his Tesla was getting 40 more miles without a charge after Tesla had temporarily unlocked the remaining 15 kilo watts of the car’s software-limited battery pack.

“The company says that a Tesla owner in a mandatory evacuation zone required another ~30 more miles of range to optimize his evacuation route in the traffic and they reached out to Tesla who agreed to a temporary access to the full 75 kWh of energy in the battery pack, an upgrade that has cost between $4,500 and $9,000 depending on the model and time of upgrade.”

The company also decided to temporarily unlock other vehicles with the same software-lock battery packs in the region.

Tesla’s supercharger network is fairly extensive in Florida and most owners should be able to get by even with a Model S 60 (the shortest range option), but sometimes that 30 more miles of range can make a big difference.

Most of the supercharger stations in the state are still open:

Though a handful in the affected area have closed...