HYPE, INC.

By Peter M. DeLorenzo

Detroit. We’re living in a strange Twilight Zone-like moment in the automobile business. As we sit here waiting for the “Grand Transition” to Battery Electric Vehicles to come to fruition, manufacturers are scrambling to keep and hold your attention, even if the EVs they’re bringing to market are months, if not years, away. 

Setting aside the current silicon chip crisis, which has resulted in empty dealer lots and sticker – and above – prices, we’re seeing ads for vehicles that are barely on the horizon. And we’re also having to endure orchestrated PR-hype campaigns from the various auto manufacturers, aided and abetted, of course, by certain card-carrying members of the media who just can’t help themselves. 

The question I’m getting the most right now is “Why?” As in, why the constant hype over EVs that are so many moons away? And why the intense PR barrage talking about budgeted plans and programs that won’t be online until 2025 and 2026 – and beyond?

And the simple explanation? Wall Street. After a steady diet of hype generated by the ongoing Muskian Nightmare, which they have lapped up with glee and, in turn, boosted Tesla stock to ridiculous levels, it has been proven that the denizens of Wall Street absolutely love EV hype, no matter what shape or form it takes. And the other manufacturers definitely want in on that action, especially if it means boosting stock prices.

Though this business has always been about The Product, and always will be about The Product, beyond that, boosting the stock prices of these companies is what it’s all about. It not only makes shareholders happy, but it just makes everything easier for these companies. And if they have Wall Street-types in their pockets –lapping up every hint, fantasy “what if” projection and battery-laden thought balloon – then these manufacturers get rewarded with aggressively elevated stock price targets and bullish outlooks. And that translates into serious ca$h-ola.

But there’s no doubt that this hype-fest has its limits. For instance, it has gotten to the point that the hype begets more hype, with the number of advanced reservations taken for future products being touted as a bellwether of success to come and a reason to jerk the stock price up even more – at least according to Wall Street – even though it has basically nothing to do with anything other than a $100.00 refundable deposit made on a whim. The current EV frenzy is so warped right now that Wall Street has been guilty of bidding up EV startups that don’t even offer a whiff of a product beyond a digital image and a few platitudes and promises. Or even less than that. (Lordstown Motors is a different deal. Let’s call that the “bait-and-switch” hype. There’s no question that company’s fifteen minutes are up.)

So, understanding all of this, the portrayal of Cap’n Jimmy as the New Messiah of the auto biz as crafted by Mark Truby’s PR minions and embellished by the Detroit Free Press ad nauseam is going to continue. After all, it has worked sensationally well with the Wall Street-types. It has boosted Ford’s stock value, and as long as enough EV models – and even better, EV battery plants – are mentioned, Wall Street is good with that. Make that very good.

A similar reaction from Wall Street has embraced GM, as it announced plans last week to build its third and fourth Ultium battery plants to support its wave of new EV models to come, and upped its total spending on new EV technology to $35 billion from 2020 through 2025. Needless to say, Wall Street lapped that up like parched dogs after a 5k run.

But then again, it’s a funny thing about hype. It’s easy to generate, and it’s easy to absorb and react to positively with a bullish burst of optimism from the practicing swells on Wall Street, which translates into euphoric statements after analyst calls and rosy predictions from the more notorious and self-absorbed analysts. But even the most creatively crafted hype has a shelf life of, oh, about five minutes in this 24/7 media-saturated world we exist in today. And even though the denizens of Wall Street may give their blessings to the latest maneuvers coming from Detroit and anoint a New Messiah (no matter how undeserved), it won’t take very long before the inevitable chorus of “What have you done for us lately?” descends over the Motor City like a black cloud of doubt.

That means if there’s a hint of a missed product intro date, or if there’s even a rumor of fundamental product issues that translate into a less-than-stellar – or even a flat-out botched – launch, all of that hype will have gone for naught and count for absolutely nothing. In fact, the negative reaction will be profoundly worse due to that original hype because Wall Street-types don’t like to be made to look like fools (even though it’s a role they’re often seemingly comfortable with).

Where does all of this leave the car-buying consumer? As you might imagine in big, fat, limbo. In fact, between the shortage of cars due to the chip crisis and the endless wait for the new wave of EVs yet to come, consumers are left having to deal with an entirely new dimension of Hype, Inc. That means seeing ads for cars that won’t be available for 12 to 36 months (or more), as automakers continue jockeying to control mindshare by projecting strength and technical prowess as they tease their future products. (As I’ve been saying for a long time now, 2025 is going to be huge.) So, if the Hype, Inc. wars don’t interest you and the EV future is too far out ahead to worry about, you’re left to scrounge around dealer lots to find something to drive.

Good luck.

And that’s the High-Kilowatt Truth for this week.