Raphael Stevens

Tesla is losing its lead over legacy automakers in the quality of its new all-electric vehicles, according to an annual influential study conducted by J.D. Power.
The study attributes Tesla’s growing problems to a negative response from customers after the company removed traditional feature controls, such as turn signals and wiper stalks.
Overall, the study found electric vehicles are plagued with more problems compared to traditional gas- and diesel-powered vehicles with internal combustion engines.

A dog looks out the window from a Tesla electric vehicle charging at a Tesla Supercharger location in Santa Monica, California on May 15, 2024. 
Patrick T. Fallon | AFP | Getty Images

Tesla is losing its lead over legacy automakers in the quality of its new all-electric vehicles, according to an annual influential study conducted by J.D. Power.
The 2024 U.S. Initial Quality Study found the quality of Tesla’s battery-electric vehicles, or BEVs, and those of traditional carmakers were the same, at 266 problems reported per 100 newly sold or leased vehicles.

Previously, Tesla models had outperformed the electric vehicles of legacy automakers in the annual survey. Last year, the Tesla received a rank of 257 problems per 100 vehicles, compared with 265 problems per 100 vehicles on average for EVs from traditional automakers.
The study attributes Tesla’s growing problems to a negative response from customers after the company removed traditional feature controls, such as turn signals and wiper stalks.
Across the broader industry, not just BEVs, Tesla has consistently ranked toward the bottom in initial quality since J.D. Power began including Tesla in the study in 2022.
Overall, the study, which included repair visits data of franchised dealers for the first time, found electric vehicles such as BEVs and plug-in hybrid electric vehicles (PHEVs), are plagued with more problems than traditional gas- and diesel-powered vehicles with internal combustion engines.
“Owners of cutting edge, tech-filled BEVs and PHEVs are experiencing problems that are of a severity level high enough for them to take their new vehicle into the dealership at a rate three times higher than that of gas-powered vehicle owners,” J.D. Power’s senior director of auto benchmarking, Frank Hanley, said in a news release.

The study found that plug-in vehicles require more repairs than gas-powered vehicles across all repair categories.
BEVs averaged 266 problems per 100 vehicles, 86 points higher than gas- and diesel-powered vehicles, which averaged 180 problems per 100 vehicles, according to the study. A lower score indicates higher vehicle quality.
Top concerns included features, controls and displays as well as wireless smartphone integration, as customers reported frequent difficulties with Apple CarPlay and Android Auto.
The study also reported frustration over false warnings, unnecessary traffic alerts and automatic braking features. Specifically, rear seat reminders contribute 1.7 problems per 100 vehicles across the industry, as owners report receiving signals even when no one is in the rear seat.
“It is not surprising that the introduction of new technology has challenged manufacturers to maintain vehicle quality,” Hanley said.
— CNBC’s Michael Wayland contributed to this report.

Don’t miss these insights from CNBC PRO More

Nike cut its full-year guidance and said it expects sales to drop 10% during its current quarter as it warned of soft sales in China.
For the fiscal fourth quarter, the sneaker giant handily beat earnings estimates but fell short on Wall Street’s sales expectations.
Nike executives told CNBC the revenue miss was attributable to a slowdown in lifestyle sales, among other factors.

Nike shoes and logo are seen at a store in Nice, France on May 28, 2024.
Jakub Porzycki | Nurphoto | Getty Images

Shares of Nike plunged on Thursday after the retailer cut its full-year guidance and said it expects sales to drop 10% during its current quarter as it warned of soft sales in China and “uneven” consumer trends across the globe.
The expected 10% first-quarter slump is far below the 3.2% drop that analysts had expected, according to LSEG.

The sneaker giant now expects fiscal 2025 sales to be down mid-single digits, compared to analyst estimates of a 0.9% increase. Nike previously expected sales to grow. The company also expects sales in the first half to be down in the high single digits, compared to previous guidance of declines in the low single digits.
“A comeback at this scale takes time,” the retailer’s finance chief Matthew Friend said on a call with analysts. “Although the next few quarters will be challenging, we are confident that we are repositioning Nike to be more competitive with a more balanced portfolio to drive sustainable, profitable, long-term growth.”
The company cut its guidance as it contends with slower online sales, planned declines in classic footwear franchises, “increased macro uncertainty” in the Greater China region and “uneven consumer trends” across Nike’s markets, Friend said. It also expects sales into wholesalers to be slower as it scales new innovations and pulls back on classic franchises.
Shares plunged roughly 11% in extended trading.
For the fiscal fourth quarter, the company handily beat earnings estimates as its cost-cutting efforts continue to bear fruit, but Nike fell short on revenue.

Here’s how Nike did during the period compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

Earnings per share: $1.01 adjusted vs. 83 cents expected
Revenue: $12.61 billion vs. $12.84 billion expected

The company’s reported net income for the three-month period that ended May 31 was $1.5 billion, or 99 cents per share, compared with $1.03 billion, or 66 cents per share, a year earlier. 
Sales dropped to $12.61 billion, down about 2% from $12.83 billion a year earlier.
In fiscal 2024, Nike posted sales of $51.36 billion, which is flat compared to the prior year. It’s the slowest pace of annual sales growth the company has seen since 2010, excluding the Covid-19 pandemic.
Nike executives attributed the sales miss to a range of factors. They said its lifestyle business declined during the quarter and that momentum in its performance business, such as its basketball and running shoes, wasn’t enough to offset it.
Online performance was soft because Nike had a higher share of lifestyle products, more promotions and fewer sales of classic franchises, such as its Air Force 1. It also saw traffic in China decline across all channels beginning in April due to macro conditions in the region.
Despite the traffic decline in China, sales in the region exceeded Wall Street expectations, according to StreetAccount, coming in at $1.86 billion, compared with estimates of $1.79 billion. It was the only geographical segment to top estimates for the period.
Sales in North America, its largest market, came in at $5.28 billion, below StreetAccount expectations of $5.45 billion. 
In Europe, Middle East and Africa, Nike posted revenue of $3.29 billion, compared to estimates of $3.32 billion. In Asia Pacific and Latin America, Nike saw $1.71 billion in sales, compared to estimates of $1.77 billion. 
Still, Friend later warned of the “softer outlook” in China and said had it not been for Chinese marketplace Tmall’s early start to the region’s 618 shopping holiday, sales in the country would’ve fallen short of Nike’s internal expectations.
“The China marketplace remains highly promotional, and we continue to manage both Nike and partners’ inventory carefully,” said Friend. “While our outlook for the near term has softened, we remain confident in Nike’s competitive position in China in the long term.”
Nike’s Converse brand was once again a significant underperformer in the overall results. The division saw revenue plunge 18% to $480 million, largely due to declines in North America and Western Europe.

Sneaker leader loses its crown

Over the last few months, the longtime leader of the sneaker and athletic apparel category has found itself in a rough patch, working to stay ahead of a slew of upstart competitors. Its revenue growth has slowed, it’s been criticized for falling behind on innovation and it’s in the process of walking back its direct-sales strategy, which failed to produce the results the company had anticipated. 
Under the strategy shift, Nike had been working to drive sales through its own website and stores rather than through wholesalers like Foot Locker, but it recently began walking back that initiative, telling CNBC in April that it went too far when it moved away from wholesalers.
The strategy can be more profitable and gives companies better control over their brands and customer data, but it can also create logistical headaches and come with unexpected — and costly — hiccups. 
During the quarter, Nike direct revenues came in at $5.1 billion, down 8% compared to the prior year period. Meanwhile, wholesale revenue was up 5% to $7.1 billion, reflecting Nike’s change of heart on direct selling.
According to some analysts, the company’s focus on building out its direct sales strategy led Nike to take its eyes off of innovation — the main attribute that had long made the company stand out. 
As the retailer churned out more and more old favorites, such as the Air Force 1, upstarts like On Running and Hoka wowed runners with brand new designs — and snatched them up as customers. 
Nike has said that it would reduce the amount of products it had on the market in favor of new innovations and is betting that a suite of new styles, along with the 2024 Paris Olympics, can get the company back on solid footing. 
During the company’s conference call, CEO John Donahoe said Nike was accelerating its plans to reduce supply of classic franchises because the brands had performed poorly online, which is expected to affect fiscal 2025 revenue.
“We are taking our near-term challenges head-on, while making continued progress in the areas that matter most to NIKE’s future — serving the athlete through performance innovation, moving at the pace of the consumer and growing the complete marketplace,” Donahoe said in a release. “I’m confident that our teams are lining up our competitive advantages to create greater impact for our business.”
Some of Nike’s challenges are also outside of its control. It has contended with a rough macroeconomic environment that’s seen consumers pull back on sneakers purchases, and it also may be finding itself on the wrong side of trends. Some analysts expect the overall athletic category to face a slowdown this year as denim makes a comeback with consumers and shoppers look to dress up after years of dressing down. 
In the meantime, Nike has focused on cutting costs so it can at least deliver strong profits against unsteady sales. 
In December, it announced a broad restructuring plan to reduce costs by about $2 billion over the next three years. Two months later, Nike said it was shedding 2% of its workforce, or more than 1,500 jobs, so it could invest in its growth areas, such as running, the women’s category and the Jordan brand.
— Additional reporting by CNBC’s Sara Eisen and Jessica Golden

Don’t miss these insights from CNBC PRO More

The cost of prescription medications in the U.S. has increased 37% since 2014, far surpassing the rate of inflation, according to data from drug savings company GoodRx.
Though the price increases have slowed this year in comparison to the past decade, the average American spends $16.26 out of pocket per prescription, according to the data.
On average, Americans pay two to three times more for prescription drugs than consumers in other developed countries, according to the White House.

Mike Mergen | Bloomberg | Getty Images

The cost of prescription medications in the U.S. has increased 37% since 2014, far surpassing the rate of inflation, according to data from drug savings company GoodRx.
Though the price increases have slowed this year in comparison to the past decade, the higher costs are raising out-of-pocket expenses for consumers. The average American spends $16.26 out of pocket per prescription, according to the data.

“When things increase … inevitably, they do trickle down to consumers, especially those who are in a high deductible plan or who don’t have insurance or find themselves paying substantially out of pocket,” said GoodRx director of research Tori Marsh.
GoodRx said the patients’ share of the cost continues to grow due to rising copays, coinsurances and deductibles. The company found that over the past 10 years, the average person’s deductible nearly doubled, and copays are rising as the majority of plans are adding another tier of drugs with higher copays.
It is a dynamic GoodRx deems “the big pinch.” High medication costs are coupled with reduced insurance coverage. Analyzing coverage for more than 3,700 Medicare Part D plans between 2010 and 2024, GoodRx found that the portion of medications covered dropped 19% during that period.
“The impact is really kind of threefold,” Marsh said. “Rising costs or rising prices are a big part of it, but it’s really that with the combination of increased friction. … It’s hard for people to, in some ways, access their medication or access a pharmacy. And then on top of that, insurance is not what it used to be. It’s not covering as much as it used to.”
On average, Americans pay two to three times more for prescription drugs than consumers in other developed countries, according to the White House.

Drug costs have become a focus for President Joe Biden, particularly as he approaches the 2024 election. The Biden administration has taken several measures to lower out-of-pocket drug expenses.
On Wednesday, the White House announced it would lower prices on 64 prescription drugs for some Medicare beneficiaries as a result of inflation penalties on drugmakers.
The lower costs, effective during the third quarter, will benefit roughly 750,000 people who use the drugs annually, some of whom could save up to $4,593 per day, according to the release.
“Despite efforts by policymakers and industry leaders to break down affordability and accessibility barriers, a patient’s actual out-of-pocket cost continues to increase and is often a huge surprise to them,” said GoodRx interim CEO Scott Wagner in a news release.
— CNBC’s Annika Kim Constantino contributed to this report.

Don’t miss these insights from CNBC PRO More

Rivian’s investor event on Thursday that focused on cost-cutting efforts, efficiency gains and in-house technologies wasn’t enough to build on the company’s significant share growth this week.
Rivian shares fell about 2% to 6% for much of the event on Thursday, eating into their 23% gain the day before on news of an up to $5 billion investment by Volkswagen Group.
The EV startup on Thursday reconfirmed its 2024 guidance and outlined longer-term plans to achieve positive adjusted earnings before interest, taxes, depreciation and amortization in 2027.

2025 Rivian R1S

A Thursday investor event for Rivian Automotive that focused on cost-cutting efforts, efficiency gains and in-house technologies and software wasn’t enough to build on the company’s significant share growth this week.
Shares of the all-electric vehicle startup fell by about 2% to 6% for much of the event, eating into some of its 23% gain in shares the day before on news of an up to $5 billion investment by Volkswagen Group. Rivian’s stock closed Thursday down 1.8% to $14.47 per share, off by roughly 39% year to date amid investor concerns regarding cash burn and a slowdown in EV sales.

Rivian on Thursday reconfirmed its 2024 guidance that included production of 57,000 vehicles and a path to positive gross profit during the fourth quarter, including regulatory credits. It also outlined longer-term growths, such as plans to achieve positive adjusted earnings before interest, taxes, depreciation and amortization in 2027.
“Everything that you’re hearing from us, around our product, around how we’re running the business, around how we’re driving toward profitability, my hope is that you’re seeing really an extreme sense of urgency,” Rivian CEO RJ Scaringe said during the event. “We’re very, very fast driving towards the improvements necessary to get to positive free cash flow and, before that, positive margins this year.”

Stock chart icon

Rivian’s stock performance

Rivian also outlined long-term financial targets of a roughly 25% gross margin, 10% free cash flow and adjusted profit margin in the “high teens.” The company did not release a time frame for these targets.
Scaringe spent much of his time during the roughly four-hour presentation discussing efficiencies in products and manufacturing, which he said are expected to lead to 20% material cost reductions in its current vehicles, followed by 45% targeted reductions in its upcoming “R2” vehicles, which are projected to begin production in early 2026.
The reductions range from physical savings, such as a 54% decrease in design costs of its R2 vehicles compared with current models, to lower costs on more complex systems such as battery packs and electrical hardware. For example, the company is using 10 fewer in-house electronic control units, or ECUs, in its recently redesigned R1 vehicles, allowing it to remove 1.6 miles in wiring harness length and 44 pounds out of the vehicle.

Rivian’s software expertise is at the center of VW’s plans to invest $5 billion in the automaker by 2026, including an anticipated joint venture between the companies to create electrical architecture and software technology.
Volkswagen is expected to use Rivian’s electrical architecture and software stack for vehicles beginning in the second half of the decade, Scaringe said during the investment announcement. He said the joint venture does not include anything with battery technologies, vehicle propulsion platforms, high voltage systems or autonomy and electrical hardware.

A provided image of Oliver Blume, CEO of Volkswagen Group and RJ Scaringe, founder and CEO of Rivian, as the companies announce joint venture plans on June 25, 2024.
Courtesy: Business Wire

Rivian finance chief Claire McDonough reaffirmed Thursday that the capital from VW is expected to strengthen the startup’s balance sheet, which ended the first quarter with $7.9 billion in cash.
The capital influx is expected to carry Rivian through the production ramp-up of its smaller R2 SUVs at its plant in Normal, Illinois, starting in 2026, as well as production of its midsize EV platform at a currently paused plant in Georgia.
Rivian is betting on its next-generation all-electric vehicles to carry the automaker’s growth and targeted profitability during the second half of this decade.
The company said Thursday it expects production of its R2 next-generation vehicles to represent up to 72%, or 155,000 units, of its more than 200,000-unit production capacity at its plant in Illinois. The plant currently has the capability to produce 150,000 commercial delivery vans as well as its flagship R1 SUV and pickup EVs.
The automaker’s $2 billion plant in Georgia, construction of which was suspended earlier this year to save capital, is expected to be capable of producing 400,000 units on two lines.
That construction suspension was a major part of the company’s plans to reduce planned capital expenditures by $2.5 billion through 2025, including reductions of 55% in manufacturing and 20% in product development. The company still expects to spend about $2.7 billion through 2025, McDonough said Thursday.
“We’ve focused on material cost and really reducing the overall cost of goods sold, as well as our operating expenses,” she said. “Capex is another key lever for us that we focused on as well over the course of the last few years that will be central to our long-term success in bringing and scaling our R2 in the market.”

Don’t miss these insights from CNBC PRO More

Chinese automakers are expected to continue rapidly expanding outside of China to achieve 33% of the global automotive market share by 2030, according to consulting firm AlixPartners.
Much of the growth, up from a forecast 21% market share this year, is expected to be outside of China.
Sales outside of China are expected to grow from 3 million this year to 9 million by 2030, representing growth from 3% to 13% of market share by the end of this decade.

A GAC Aion Hyper SSR electric sports car is on display during the Auto Guangzhou 2023 at China Import & Export Fair Pazhou Complex in Guangzhou, Guangdong Province of China, on Nov. 17, 2023.
Vcg | Visual China Group | Getty Images

Chinese automakers are expected to continue rapidly expanding outside of their home country to achieve 33% of the global automotive market share by 2030, according to a new report released Thursday by prominent consulting firm AlixPartners.
Much of the growth, from a forecast 21% market share this year, is expected to come outside of China. Sales outside of China are expected to grow from 3 million this year to 9 million by 2030, representing growth from 3% to 13% of market share by the end of this decade.

The rapid expansion of Chinese automakers is a growing concern for legacy automakers and politicians globally. Many fear that the less-expensive, China-made vehicles will flood the markets, undercutting domestic-produced models, especially all-electric vehicles.

AlixPartners said it expects the Chinese brands to grow across all markets globally. However, the firm added that it expects far smaller expansion in Japan and North America, including the U.S., where vehicle safety standards are more stringent and a 100% tariff on imported Chinese EVs has been announced.
“China is the industry’s new disruptor – capable of creating must-have vehicles that are faster to market, cheaper to buy, advanced on tech and design, and more efficient to build,” Mark Wakefield, global co-leader of the automotive and industrial practice at AlixPartners, said in a statement.
In North America, Chinese automakers are forecast to only achieve a 3% market share, largely in Mexico, where one in five vehicles are expected to be Chinese brands by 2030. In most other major regions of the world, AlixPartners reports that the share of Chinese automakers is expected to exponentially grow. Those areas include Central and South America, Southeast Asia and the Middle East and Africa.
Chinese brands in China also are expected to grow from 59% to 72% in market share, according to AlixPartners. Legacy automakers such as General Motors have lost significant ground in China in recent years amid the rapid rise of China’s domestic automotive industry and companies such as BYD, Geely and Nio.

Models presenting the Chinese automaker’s electric car, the BYD Song MAX, at the 45th Bangkok International Motor Show 2024 in Nonthaburi Province, on the outskirts of Bangkok, Thailand, on March 30, 2024. 
Nurphoto | Nurphoto | Getty Images

In Europe, where Chinese automakers have quickly grown in recent years, the market share of Chinese automotive brands is expected to double from 6% to 12% by 2030, according to AlixPartners.
Chinese automakers are expanding because they have cost advantages, localized production strategies that will enable a build-where-you-sell strategy in non-China markets, and highly tech-enabled vehicles that meet evolving consumer preferences for design and freshness, according to the report.
“Automakers expecting to continue operating under business-as-usual principles are in for more than just a rude awakening – they are headed for obsolescence,” Andrew Bergbaum, global co-leader of the automotive and industrial practice at AlixPartners, said in a statement.
Chinese EV automakers create new products in half the time of legacy automakers — 40 months vs. 20 months — mainly by designing and testing to sufficiently meet standards versus overengineering. They also have a 35% “Made-in-China” cost advantage.
Wakefield said for traditional automakers to compete with the Chinese automakers, they need to rethink their business development processes and pace of vehicle development. More