A global price war on electric vehicles is already underway. Automakers here in the U.S. are fighting for their share of the market, scrambling to offer competitive vehicles at an attractive price—and if they can use any form of government subsidization to throw some free cash at their plans, you better believe they're going to make use of it.

Welcome back to Critical Materials, your daily roundup for all things EV and automotive tech. Today, we're chatting about General Motors' and Stellantis' share of a huge federal EV manufacturing grant, the lack of progress for in-car subscriptions, and a look into the projected profitability of China's EV industry. Let's jump in.

30%: GM, Stellantis To Share In $1.7 Billion Federal EV Grant

GMC Hummer EV Top
InsideEVs

GMC Hummer EV Top

General Motors and Stellantis will receive $1.1 billion in funding for new EV projects as part of a quiet initiative put in place by the Biden administration that was made public today.

The pair will receive the largest chunk of $1.7 billion in recently awarded Domestic Manufacturing Auto Conversion Grants spearheaded by the U.S. Department of Energy as part of the Inflation Reduction Act.

The idea is to help U.S. automakers make the transition from combustion-only to electrified power. It specifically bolsters EV, fuel cell EV, and hybrid projects and carries the goals of creating jobs, retaining existing workers, and driving innovation in an industry where the U.S. is facing some serious pressure from its rivals in the East.

GM will get the largest single slice of the grant ($500 million) for its Lansing Grand River Assembly plant. The automaker has previously committed to spending $1.25 billion at Lansing to rejuvenate it to manufacture EVs and components the upcoming wave of new electric cars.

Rival Stellantis, formerly Fiat Chrysler, will end up receiving more of the metaphorical money pie after it receives $334.8 million for its idled Belvidere, Illinois assembly plant and a $250 million grant to build EV drivetrains at an Indiana transmission plant. The automaker shuttered Belvidere last year, dooming to jobs of 1,200 workers. Stellantis committed to spending $1.5 billion to re-open the plant following negotiations with the United Auto Workers Union. It will serve as a parts depot and battery manufacturing facility through 2027, and will then become the assembly plant for a new midsize pickup.

In addition to creating an estimated 2,900 jobs, the projects propped up by this grant will reportedly help to retain a whopping 15,000 workers across the U.S. auto industry, according to the DoE.

This grant may also help to provide a bit of a competitive advantage for U.S. automakers currently preparing for a war with China's EVs—which are notoriously subsidized by government incentives. While it won't exactly level the playing field, it does help to set up U.S. automakers with a bit of taxpayer cash to help with the expensive transition from gasoline to electrons.

60%: In-Car Subscription Revenue Is In The Toilet

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Automakers are lighting piles of cash on fire to make connected cars work. Now, we're not talking about functionality, because they do work just fine (most of the time). It all comes down to the biggest get for their bottom line: annual recurring revenue. That hasn't happened for them yet. 

Historically, the automotive industry hasn't been good at that. Sales drive profits, and if automakers have a bad sales year, there's nothing to really prop up those numbers other than dealer services. That's where software comes into play. According to Automotive News, automakers have since shoveled money at the problem with the outlook of a $200 billion in revenue projection being on the horizon. 

The actual income is a sliver of that at just $6 billion. That's only 3% of the annual revenue projected to be reached by 2030, which is a bleak outlook for any OEM that has staked a large sum of cash on consumers subscribing to in-car functions, ordering food through their infotainment system, or hosting a marketplace for connected apps. It's just not working out well so far. In all, 30 car companies charged for an update for the first time ever in 2023.

One of the largest hurdles automakers have to overcome is consumer willingness to pay. It's no secret that drivers don't want to shell out more cash for a feature that uses the hardware already installed in their car. For example, BMW tried to charge for heated seats (something Tesla toyed around with the idea of too), Mercedes charges for extra performance in the EQS unless you shell out a yearly fee, and Audi even charges an upgrade fee for its Function-on-Demand headlight package.

Tesla somehow managed to get the positive attention of owners after it made its $12,000 Full Self-Driving package just $99 per month, though reportedly only 2% of owners who trialed the software actually bought it.

Automakers are now effectively competing with Netflix, Hulu, Spotify, and the myriad other monthly pay-per-month services that play into subscription fatigue. Sure, some folks are willing to shell out the cash for a feature they like, but many others aren't. And when the hardware is already installed in the car but paywalled for an arbitrary reason—such as just to generate revenue—it could lead to a loss of brand loyalty when it comes time to trade up for a new money.

"You're not competing only with another car," said S&P Global Mobility analyst Stephanie Brinley in a statement to Automotive News. "You're competing with everything in that person's household."

The faltering interest from consumers may contribute to automakers putting connected car revenue on the back burner. After GM and others were recently slammed for selling off driver data, consumer trust feels to be at an all-time low. This seems to have created a bit of a gap in ways for automakers to indirectly earn revenue with their connected cars outside of charging for connected services via a mobile app.

"With data security and privacy concerns, I think some automakers have just chosen to put this in the try-to-figure-it-out-later bucket," Morningstar Research Services equities strategist Seth Goldstein told Automotive News. He continued: "Whoever figures it out first does have an opportunity to then sell the software to other automakers, and that could be an interesting sort of ancillary revenue stream."

90%: Profitability Of Chinese EV Brands In Question

BYD Seagull and Chinese EVs global sales top shot

BYD Seagull and Chinese EVs global sales top shot

Just 19 of China's EV brands are expected to be profitable by 2030, according to a new study by consulting firm AlixPartners.

That number might seem like a lot of companies, especially since people in the U.S. point their fingers at "the big three" as being the largest domestic-based players in the State. However, keep in mind that there are currently 137 brands selling EVs in China today—making that figure just 14% of all Chinese electric car brands.

Chinese EVs are notoriously inexpensive. You can thank an ongoing price war for driving down new EV costs by thousands.

The industry's cut-throat competition on other global markets has led to protectionist tariffs being waged on Chinese EVs and components in the U.S. and Europe just so domestic players can compete against "unfair subsidization." Meanwhile, Chinese EVs are continuing to cut operating margins and lower the consumer-facing cost of their vehicles.

From Bloomberg:

While the average sale price of cars in China fell 13.4% in the past year, the average margin of automakers rose to 7.8% in 2023 from 6.3% the previous year, according to Alixpartners. Manufacturers have cut costs by squeezing suppliers and moving fast to bring new models to market.

By the end of 2030, Chinese automakers are set to held 33% of the global auto market, and 45% of new-energy vehicle sales.

"As long as big players like BYD still have a gross margin, there’s always room for a further price war," said Stephen Dyer, AlixPartners' managing director.

The firm believes that the price war will end up leaving just 19 of China's EV brands in a profitable state by the top of the decade. The ones that do profit will likely reach it by continuing down the road of vertical integration to cut costs, taking risks like shipping cars with features to be delivered later through software updates, as well as making heavy use of national and local government subsidies.

Until then, these EV makers are expected to continue driving towards the goal by moving quickly to gain market share by shipping new products.

100%: Have You Subscribed To Any In-Car Features?

Tesla FSD V12.4.1

Tesla FSD V12.4.1

By now, you know just how much automakers plan to continue the push of automotive-based subscriptions. Whether it be something in-car like Mercedes uncorking the EQS performance and Tesla's FSD suite (both costing about $100 per month), or something to augment your car's convenience (like remote start, or automaker-adjacent applications like Tessie that serve as a third-party service to help automate functions)—options exist that consumer to buy today.

Have you purchased any in-car subscriptions, or perhaps any apps that integrate with your car? Let me know in the comments.

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