Brian Wang and Warren Redlich Talk the Future of Car Companies

Brian Wang talked with Warren Redlich which car companies will go bankrupt first. I had written about this topic a few days ago.

My main point is that the car companies other than Tesla already have very weak balance sheets. There are ongoing smaller scale bailouts now and there were bailouts in 2008-2014. The bailouts and bankruptcies will continue and will be more frequent as we go through huge transitions in electrification and self-driving.

Volkswagen has about $260 billion in debt. $30 billion of this comes from fees and penalties from the diesel gate emissions scandal. Macroaxis gives probability of financial distress of 73% in the next two years for Volkswagen. Other car companies are rated at having a 38-49% chance of financial distress in the next two years.

Those risk probabilities are the usual too much debt and facing regular market ups and downs.

The car industry have had a long history of going bankrupt. Chrysler went bankrupt multiple times. Nissan and Renault have had recent reorganizations. T

The regular companies are coming into the next ten to 20 years of transportation disruption in a weak state. The transformations that are clearly happening are electrification, ride sharing, robotaxi and self-driving.

Tesla will be stressing Volkswagen-Audi, BMW, Lexus and Mercedes over the next two years with about 1 million per year more Model Y sales increases in 2022 and another 1 million per year more Model Y sales in 2023.

Tesla starting the Berlin factory means the prices of Tesla cars will face $10000 less in import fees and $1000-2000 less per car in shipping costs.

The carmakers need to spend $5 to $10 billion to convert factories for each 1 million car per year to shift over to electric car production. This increases the debt on already debt-heavy balance sheets. The new electric car launches could fail. This would mean they have more debt and the expected revenues are not created.

Tesla and other upstarts will be taking market share on the core car segments of the ICE carmakers. Volkswagen will see its mid-luxury cars and European market attacked. Ford and GM will see their truck and SUV segments attacked.

In previous decades, GM went from 45% of the car market to 17% when they lost market share to European and Japanese carmakers. This time they will not be able to just abandon sedans and small cars to shift over to trucks, vans and SUVs.

Increased ride sharing and self driving will reduce the overall demand for cars.

The carmakers are weak and facing their greatest challenges.

I believe they will keep getting the bailouts they have already had for many years. But eventually they shrink and shrink like Nokia and Blackberry in the cellphone-smartphone world.

16 thoughts on “Brian Wang and Warren Redlich Talk the Future of Car Companies”

  1. There was an attempt in India to build a series hybrid diesel scooter/motorcycle with power takeoff that looked promising, but vanished into thin air.

    Some sort of cassette style range extender running on diesel that fits into a EV to turn it into a hybrid would also be interesting. Mazda was allegedly reintroducing a new wankel range extender recently, and I believe that was a single rotor packed flat. Liquid Piston's inverse-wankel motor running on diesel would also flat pack well.

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  2. Would not be surprised to see German regulations that severely inhibit Tesla’s impact on local car makers.
    These are incredibly high paying jobs and massive sources of taxes. The government will not just let these go away.
    None of those companies will go bankrupt because of Tesla, Graft and corruption will win the day in Germany.

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  3. Well, it worked for Marx. And kind of for the Americans (Federalists/anti-federalists – which if I recall is what Ender's Game modelled on?)

    Maybe it's a matter of who reads the tweets and gets influenced. Influence me and it stops there. Influence academics and journalists, and your ideas might spread a lot.

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  4. I've read that serial hybrids in general are less efficient on highways than just using an ICE engine – not a lot of regenerative braking, and of course there's some loss in generating the electricity.

    Of course if the serial hybrid has enough batteries, it's essentially an EV with a range extender engine. If you mostly run off charge taken from the grid, that kind of serial hybrid should be fine – but that doesn't address the battery shortage issue as well.

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  5. It's kind of weird that the two main options over the past two decades for low fuel use have been diesels and hybrids, but nobody much does diesel hybrids.

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  6. Just one of the ridiculous things about Ender's game.
    "Having a couple of intelligent people posting tweets will influence the world opinion."

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  7. It would be interesting to see a layout shift to series hybrid with ICE boost modes, even with a small battery pack. Diesels work more efficiently at their optimized power zones, so operating functionally as range extenders would be a new market. It also suits work trucks well, as electrical output for tools can be complemented with air and hydraulic compressors.

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  8. I'm sure they'll resolve that by requiring personally owned self driving cars to be equipped for remote monitoring and police overrides.

    I think we're looking at a future where if an arrest warrant is put out for you, the next time you step into a vehicle more advanced than a bicycle, it locks the doors and drives you to a police station.

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  9. I'm slowly buying into the "robotaxis will be as or more convenient (in net) than a personal car". I am still a little concerned about issues of privacy and personal power.

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  10. At a guess, if Tesla EVs do force ICE automakers into a crisis, the latter will shift heavily to 'light hybrids' – electric motors, regenerative braking, small battery, somewhat smaller engine. Plug-in hybrids for those who want to be even greener, bigger and more powerful batteries for those who crave Tesla-like acceleration or high towing capacity.

    That gets around the battery shortage and they can claim to be 'about as green as an EV', given the current fossil-fueled electric grid. Even if they use Li-Ion batteries with a relatively high cobalt fraction, they can claim that their cars use less cobalt than some Tesla models (since they use fewer batteries).

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  11. With respect, the blogosphere is not remotely powerful enough to meaningfully contemplate, let alone achieve, this. Pace "Ender's Game," blogs don't overpower economics, but the reverse: economics dictates what blogs discuss.

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  12. Batteries have a pretty steep C cost upfront. May get better, but consider: batteries cannot flow thru pipes. Batteries have to have full connection at all times, do not sit in a tank waiting. H does both. And, consider: wires are connected at both ends permanently. Power beams are switchable or freedom of electron movement. So, H plus Earth to Earth power beaming wins over batteries and wires. H cars, too.

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