Apple, BYD Decisions Let U.S. BEV-Makers Breathe a Bit Easier

Tesla and legacy automakers trying to sort out their battery-electric-vehicle growth plans have been given a trifecta of gifts in the past week: Apple killed its BEV program; a top BYD executive said the Chinese company has no plans to enter the U.S. market; and the industry’s chief lobbying group is making headway getting the White House to consider slowing the mandate for BEV sales.

Apple: Seeds of Discontent

Apple says this week that it is disbanding its team that has been working since 2015 on a fully autonomous BEV. According to one supplier executive with knowledge of the decision at Apple, the electronics giant looked at the horizon for consumer adoption of BEVs, the lagging U.S. charging infrastructure and the obstacles to fully autonomous vehicles scaling up and decided the enterprise would be a drag on its share price and return-on-capital.

“Software-derived passenger cars are coming fast, and that would seem to favor an Apple or Google getting into the game, but clearing regulatory hurdles for autonomous vehicles, and the infrastructure needed for selling and servicing cars, is a very different business than phones, tablets and laptops,” says the executive, who adds the company has no interest now in a full joint-venture with a legacy carmaker to make Apple-branded vehicles.

A drone’s-eye view of the BEV market favored an Apple car in terms of consumer interest, trust and cachet. According to Interbrand’s annual Top 100 Brands study, for example, Apple is the No.1 brand in the world ranked by value. Worse news for legacy automakers fearing more Silicon Valley EV entrants after Tesla’s success is that Amazon is No.3 and Google No.4. Some legacy automakers rank high in the ranking as well: Toyota is No.6, while Mercedes-Benz is No.7 and BMW is No. 10.

Apple’s dominance in brand value and trust would have meant it would have avoided the hurdles of start-ups such as Rivian, Lucid and Fisker fighting for brand recognition, awareness, and trust. If the company had a product it believed in, the sales and service infrastructure in place and competitive pricing, it likely would have had long lines waiting for the first “i-car.”

BYD Staying South of the Border

Chinese automaker BYD has been rattling legacy automakers for a few years as its lower-cost BEV business model has been surging at home in China and making its entry to Europe an early success. Its brand awareness and trust has been building for years outside of China as the company has set up battery-powered bus businesses in Europe and the U.S. long before it began exporting BEV passenger cars.

The cost of building BYD’s Seagull BEV, because it is a vertically integrated battery company, is roughly $11,500, according to analysis done by Ford and discussed recently at an industry conference. That is a cost basis that legacy automaker cannot match.

The company’s recent activity scouting a manufacturing site in Mexico has been seen as a hub to supply Mexico, South America and the U.S. “We’re not planning to go to the U.S.,” Stella Li, executive vice president of BYD and CEO of BYD Americas, said at the Geneva how this week in an interview with Yahoo Finance. “It’s an interesting market, but it’s very complicated,” she added, citing growing political pushback against Chinese companies and the slowing rate of BEV adoption.

Indeed, both major political parties seem united in keeping anti-China protectionist measures in place for the foreseeable future. The latest is a legislative proposal by Missouri Sen. Josh Hawley to hike tariffs on Chinese cars, even if they are built in Mexico under the current trade pact with Mexico that does not tax vehicles built south of the border.

Slow-Walking the Mandates

The Alliance for Automotive Innovation, helped by the automotive caucus in Congress and an election year, is getting traction with the White House to slow-walk the BEV sales mandates proposed by the EPA, according to multiple media reports.

The change, which would keep a mandate of BEVs comprising 50% of industry sales by 2030, would mean that for the rest of this decade, electric vehicle sales would be mandated to grow more slowly and incrementally than EPA had originally projected.

By 2032, more than two-thirds of new cars and light trucks sold in the U.S. would be electric, just as the EPA had projected last year. But milestones prior to 2030 would be relaxed as the industry grapples with high prices for BEVs and building out a reliable public-charging infrastructure.

But the willingness of a Democratic White House to back off its more aggressive BEV mandates is an indication of the party’s inclination to bend with voters and consumers, a majority of which have still not embraced the transition from ICE vehicles to BEVs.

The industry has nothing to fear from Republicans in terms of penalties for not meeting BEV mandates. Republicans have made the mandated switch to BEVs a tentpole issue in their campaign rhetoric against Democrats and “big government,” emphasizing a loss of manufacturing jobs that come with BEVs versus internal-combustion vehicles. But even UAW President Shawn Fain has made his and his union’s support of President Biden clear.

All in all, it has been a great week for Tesla and legacy auto companies trying to execute a strategy for the messy transition from ICE vehicles that consumers and voters have been used to for over 100 years to BEVs, which governments are mandating en route to achieving a zero-emission fleet of passenger cars.