Su$tainable Mobility, Volume 23
This newsletter aims to separate the signal from the noise for making money in all things sustainable transportation: Electrification, mode shift, active and public transit, and mobility aggregation, across both people and goods movement.
This week we have a Deep Dive on Why Ford is Splitting Up.
Here’s another great newsletter (Movements) to read/subscribe to, with a focus on mobility services, software products, and infrastructure rather than AVs and Auto OEMs.
Also, LACI’s spring Power Day (think demo day) is coming up on April 7 for a curated audience of investors and those in government and corporate roles in tech partnerships, procurement, and biz dev. If you haven’t received your invitation and wish to attend, please reply to this email or DM me on Twitter at @iamalexmitchell.
🔌 Ashni Technologies (India): EVSE designed for both 4 wheelers and 2 wheelers
📨 Courial (California, USA): Gig-based courier platform
🚲 Clip (New York, USA): Aftermarket clip-on device to turn pedal bikes into e-bikes
🛴 Foldergo (Hungary): Manufacturer of a foldable kick scooter
🛴 Leon Mobility (Germany): Charging network for micromobility operating under XOO brand
🚲 Mokumono (Netherlands): Lightweight urban bikes & e-bikes
📦 Vuleka (South Africa): Last-mile delivery platform for informal business sector
🔌 We Can Charge (Portugal): White label charging network operator
🏬 Vancouver is cracking down on mini warehouses. Everyone wants last-mile delivery, but objects when the mini depot is close to their home.
🎧 France is taking on street noise generated by vehicles. Fascinating to see the direct link between noise pollution and health outcomes.
🚌 Toyota will build e-buses. It’s still not a complete 180 on Toyota’s fuel cell stance, as the announcement included a nod to potentially doing a hydrogen bus at some point as well.
🛴 Tier is acquiring Spin from Ford. This fully vaults Tier into global player status, alongside players like Lime and Bird.
👨🏼🏭 Gig workers in Singapore frequently work 59 hours a week. If some thirty percent of your people are working 59 hours a week on a frequent basis without any meaningful labor protections, that’s not business innovation, that’s externalizing your cost of operations.
🚲 SF may ditch Lyft bikeshare and run bikeshare as a city operation. This doesn’t seem to be the harbinger of a secular shift away from private bikeshare concessions nationwide, but more the inevitable swinging of the pendulum on cost versus control.
🚟 Virgin Hyperloop lays off half its staff to shift focus away from people movement to goods movement. The real-world advantages of hyperloop (as opposed to white paper claims) still aren’t very clear.
🚙 Rivian backtracks on price hike. Rivian botched how it announced the price hike, but CEO RJ Scaringe’s retraction showed that he leads while listening.
DEEP DIVE: WHY FORD IS SPLITTING UP
Over time, the auto industry has been highly cyclical, enormously capital intensive, and low margin. Which is exactly why most car companies suffer from low enterprise values and market capitalizations.
But something changed in the last few years, namely Tesla. Starting about 2 years ago, Tesla’s stock price soared. More recently, EV newcomers like Nio, Rivian, and Lucid have experienced similar valuation surges. The market is betting on the future growth of EVs and the competitive advantage that EV-only players may generate.
Legacy OEMs like GM, Ford, and VW have not seen a corresponding valuation boost, despite gradually converting more of their business to EVs. This creates a real handicap for the legacy players: among other challenges, a low, stagnant share price makes M&A and top talent recruitment much more difficult.
Some Wall Street analysts have called for legacy OEMs to partially spin off their EV operations as separately quoted operations, hoping that the quoted EV operations would yield a similar (or better) valuation multiple than Tesla, Rivian, et al.
I think that’s fundamentally the wrong way to solve the issue: having new shareholders in the EV-only operations versus the legacy operations will inevitably create divergent shareholders expectations that will be hard to manage from a management perspective. It also sends fundamentally the wrong signal to the market: if anything, the legacy business needs to be eventually spun off like a “bad bank” type of business.
So it wasn’t fully surprising when Ford announced this week that it is splitting its business into EV and legacy units. Both units will have the same shareholder base and same ultimate CEO, but Ford will report financial results separately for both internal combustion engine (ICE) and EV, forcing an apples-to-apples comparison with EV-only competitors. This is probably the most feasible way for Ford to achieve a (partial) valuation premium afforded its EV-only competitors.
This may also be the lever by which dealership risk is managed. In the end, the traditional dealership model may not be compatible with the economics of EVs, which generally don’t offer the dealers the very lucrative maintenance and repair stream that ICE vehicles do. Ford may choose to isolate the legal risk of the dealer transition in the legacy business (at least in North America) which will eventually be spun out or dismantled.
Expect the more progressive legacy OEMs to follow suit in some way, and the legacy laggards to head down the Nokia path.