+++ AUDI has agreed to deepen collaboration with Chinese internet technology groups to offer more digital services in the world’s largest car market. Audi and FAW-Volkswagen, VW’s joint venture with FAW Car, have signed letters of intent with Alibaba, Baidu and Tencent, Audi said on Sunday.
Financial terms were not disclosed. Parent Volkswagen has been hobbled by a scandal over the rigging of emissions tests, distracting it in a race with global carmakers to develop computer-aided services for drivers. VW’s CEO told a newspaper on Sunday that it has to remain in control of its relationship with car users, which is why it stopped talks with U.S. ride-hailing service Uber and technology giants Google and Apple. Under the agreement with online search company Baidu, Audi aims to improve the use of smartphone apps in its cars. Its projects with social network and online gaming group Tencent include helping drivers to make better use of the WeChat communication app. The alliance with Alibaba aims to develop more real-time traffic news services and 3D maps. VW in May took a $300 million stake in smaller ride-sharing company Gett. +++
+++ Hyundai Motor Group Chairman Chung Mong-koo is following other global automotive companies and starting production in Mexico to improve sales in the Americas. KIA, South Korea’s second-largest automaker and key affiliate of Hyundai, on Wednesday opened a plant that can manufacture 400,000 vehicles annually in Pesqueria, Mexico. The plant, the sixth overseas factory for Kia Motors, is expected to increase the company’s annual global capacity to 3.6 million vehicles per year. The Mexico plant’s annual production is Kia’s second-largest after its plant in Yancheng, China, whose annual production amounts to 890,000 units. The last plant that Kia opened was in the U.S. state of Georgia in 2010. Including plants that make Hyundai-branded vehicles, the Korean automotive group now has a total of 17 overseas plants across the globe. “The new plant here in Mexico represents the next step in Kia, ambition to become one of the world’s leading automakers”, said Hyundai Motor Group Chairman Chung at the inauguration ceremony of the factory. “With the new productivity, we are going to target not only the Mexico market, but also export to all over the world”, he added. Ildefonso Guajardo Villarreal, Mexico’s Secretary of Economy, and Jaime Rodriguez Calderon, governor of the state of Nuevo Leon, were among 500 people who attended the ceremony. Kia and its suppliers invested $3 billion in its first plant in Mexico, which will be equipped with high-tech features, including 420 robots. Since May the plant has been manufacturing the company’s compact sedan K3, known as the Forte in overseas markets. It is expected to produce 100,000 units by the end of the year. Next year, the fourth generation compact vehicle Pride, also known as the Rio, will be made there. Some 80 percent of the vehicles produced at the Mexican plant will be exported, particularly to the U.S. Mexico has become a hub for major global automakers including GM, Toyota, Nissan and most recently Ford, whose plant is expected to be completed in 2018. BMW broke ground on a plant in March and is investing $1 billion with a target of operating the plant in 2019. Mexico is attractive to automakers because it is adjacent to the U.S., the second-largest automotive market after China, with 17.4 million new cars purchased last year. Mexico is a member of the North American Free Trade Agreement and has bilateral free trade agreements with 49 countries. Cheap labor is another attraction. According to the Mexican Automotive Industry Association, Mexican laborers’ daily wages average $40, which is 20 to 30 percent of wages in the United States. It is even cheaper than the wages of Chinese laborers. Hyundai Motor Group’s overseas sales exceeded sales in Korea in 1998. Of the 8 million vehicles sold last year, 84 percent were sold overseas. The Mexican automotive market has been enjoying an average 10 percent annual growth since 2010 and became the second-largest car market in Latin America last year after 1.3 million new vehicles were sold. The largest market in that region is Brazil. Mexico’s 20 percent duty on imported cars has limited sales. Kia currently has a 3.4 percent share of the Mexican auto market, ranking in 9th place. “We aim to expand our market share to 5 percent of Mexico’s auto market by 2020”, said the company spokesperson. +++
+++MERCEDES maintained the No. 1 spot in the South Korean imported car market, accounting for more than a 30 percent share last month. The carmaker overtook BMW, which held the top spot for 7 consecutive years, in the first half of the year and is now widening the gap. According to the Korea Automobile Importers and Distributors Association on Tuesday, Mercedes-Benz sold 4,835 cars, up 32 percent from the same month last year. “Mercedes-Benz passed the 30 percent mark in terms of market share for the first time last month”, said Yoon Dae-sung at the association. BMW took the second spot by selling 3,047 cars, seeing its market share fall 16 percent. The German carmakers were followed by Ford (912), Land Rover (866) and Toyota (824). Volkswagen, which used to sell over 3,000 cars a month a year ago, sold only 76 cars in August, following its emissions-rigging scandal. But Audi managed to rank 10th with 476 cars sold, partly because customers do not associate the name Audi with Volkswagen. +++
+++ MITSUBISHI, raided 3 times by the transport ministry over its decades-long fuel economy scandal, could be searched again by the regulator as a planned rescue by Nissan falls behind schedule. The ministry may raid Mitsubishi Motors’ offices a fourth time if the evidence collected during its latest inspection isn’t enough to fully understand the scope of the automaker’s misdeeds, said Yuki Ebihara, an official in the regulator’s recall division. Another search also may be warranted if the ministry’s findings point to bigger problems, he said. “You can’t deny the company has a culture that’s prone to malpractice”, Ebihara said in a phone interview. “Compared with other makers, we have to give them a closer look”, Yuki Murata, an MMC spokesman, said the company regrets that its scandal has led to distrust and will cooperate with the ministry’s investigation. The possibility of another raid underscores how Mitsubishi has struggled to move past a scandal that emerged four months ago, when it admitted to improperly measuring fuel economy and manipulating testing data. A mea culpa by Chairman Osamu Masuko led to the carmaker’s planned rescue by Nissan, which has continued with due diligence it aimed to complete last month on the purchase of a $2.2 billion stake. Nissan expects to close its deal with MMC before the end of the year and remains convinced of the merits of the transaction, Nick Maxfield, a spokesman for the Yokohama-based company, said by email. The transport ministry is reviewing documents obtained Sept. 2 from Mitsubishi’s head office in Tokyo and its research and development center in Aichi Prefecture, Ebihara said. The regulator is also holding hearings with Mitsubishi executives including Masuko, 67, to get to the bottom of the company’s wrongdoing. 3 days before its latest raid, the ministry said 8 of the 9 MMC models it tested fell short of the company’s advertised fuel economy figures. The regulator tested the models itself after MMC provided recalculated mileage figures to the ministry on May 18 that were still inaccurate. Nissan Chief Executive Officer Carlos Ghosn stepped up with plans to buy a 34 percent controlling stake in Mitsubishi in May, after the scandal had led the company’s shares to plunge more than 40 percent. 2 minicars Mitsubishi produces for Nissan through a joint venture were among the models that initiated the company’s woes in April. Mitsubishi named former Nissan executive Mitsuhiko Yamashita to revamp its R&D department and help prevent a recurrence of misconduct from June 24. Ghosn also assigned Chief Competitive Officer Hiroto Saikawa to lead a team finding ways the 2 companies could save costs and boost production efficiency. +++
+++ TESLA Chief Executive Elon Musk said Sunday the automaker is updating its semi-autonomous driving system Autopilot with new limits on hands-off driving that likely would have prevented a fatality in May. Musk said the update, which will be available within a week or two through an “over-the-air” software update, will rely foremost on radar to give Tesla’s electric luxury cars a better sense of what is around them and when to brake. New restrictions of Autopilot 8.0 are a nod to widespread concerns that autopilot lulled users into a false sense of security through its “hands-off” driving. The updated system now will temporarily prevent drivers from using the system if they fail to respond to audible warnings to take back control of the car. “We’re making much more effective use of radar”, Musk told journalists on a call. “It will be a dramatic improvement in the safety of the system done entirely through software”. Tesla’s Autopilot, introduced in October, has been the focus of intense scrutiny since it was revealed in July that a Tesla Model S driver, Joshua Brown, was killed while using the technology in a May 7 collision with a truck in Florida. The National Highway Traffic Safety Administration (NHTSA) has been investigating Tesla’s Autopilot system since June because of the fatal accident. The agency said it had been briefed on the changes by Tesla. “NHTSA will review those changes”, spokesman Bryan Thomas said of the new version of Autopilot. He declined to offer an update on the Tesla investigation. Musk said it is “very likely” the improved Autopilot would have prevented the death of Brown, whose car sped into the trailer of a truck crossing a highway, but he cautioned that the update “doesn’t mean perfect safety”. “Perfect safety is really an impossible goal”, Musk said. “It’s about improving the probability of safety. There won’t ever be zero fatalities, there won’t ever be zero injuries”. One of the main challenges of using cameras and radars for a braking system is how to prevent so-called false positives, in which a car might think an overhead highway sign, for example, is an obstacle to be avoided. Using radar and fleet learning, rather than relying primarily on cameras, would solve that problem, Musk said. “Anything metallic or dense, the radar system we’re confident will be able to detect that and initiate a braking event”, he said. Silicon Valley-based Tesla is known for its innovation in luxury electric vehicles but some critics have said it was hasty in rolling out Autopilot. Tesla stood by Autopilot after the fatality, saying it was not a “hands-free” system intended to replace the driver. Still, the fatality underscored concerns about the safety of systems that take partial control of steering and braking from drivers. The revised system will sound warnings if drivers take their hands off the wheel for more than a minute at speeds above 45 mph (72 kph) when there is no vehicle ahead. The warning will sound after the driver’s hands are off the wheel for more than three minutes when the Tesla is following another car at speeds above 45 mph. The dashboard also will flash a pulsing light. If the driver ignores 3 audible warnings in an hour, the system will temporarily shut off until it is parked, Musk said. +++
+++ VOLKSWAGEN, which has been largely absent from bond markets since its emissions-cheating scandal broke a year ago, plans to return soon in a sign that creditors may be ready to put their concerns about the carmaker’s financial health behind them. While the company’s financing is not back to pre-crisis terms, “we still have a plan to come back to the market during this calendar year”, Volkswagen Chief Financial Officer Frank Witter said in an interview with Bloomberg. VW, traditionally the biggest corporate issuer of euro notes, has been effectively shut out of the market in the wake of the diesel scandal that pummeled its stock price and credit rating. Witter assumed his position in the immediate aftermath of the revelations as the Wolfsburg, Germany-based company reshuffled top management. In April, Volkswagen said “the window should be open” for bond sales this year. The automaker in November put bond financing on hold, saying it needed time to update the documentation required to sell bonds and other financing instruments to reflect potential fines and penalties. While VW hasn’t issued euro-denominated bonds in the past year, the carmaker has placed asset-backed securities, commercial paper and sold a yuan-denominated bond through a Chinese arm. The company signed a 20 billion-euro bridge loan with 13 banks in December, creating a financial cushion as it dealt with the fallout from the scandal. It remains to be seen whether the 18 billion euros that the company has earmarked to cover the costs of the scandal will suffice. Volkswagen has agreed to lawsuit settlements with U.S. federal regulators, states and car owners, and is also also the target of potentially costly criminal probes in the U.S., Germany and South Korea, among others. “Nobody can guarantee that the 18 billion will fully be it, but we know much much more about the risks we’re exposed to than we knew in September, October or even December 31 when we closed the books for 2015”, Witter said. “We have a pretty good handle on it”. S&P Global Ratings, Moody’s Investors Service and Fitch Ratings have negative outlooks on Volkswagen’s debt. S&P cut the company’s credit rating twice in the wake of the scandal. While the worst of the scandal is behind it, Volkswagen still has a long way to go to repair the damage to its reputation. “We’re making progress but it certainly has to be stated that this unfortunate diesel issue should have never happened in the name of Volkswagen; we are very regretful”, he said. “We are making progress but we are far from fully overcoming the crisis”. +++
+++ Ever fancied being CEO of a car company? Me neither. The pressure is surely unbearable, the responsibility enough to make fret-free sleep a thing of the past. But VOLVO boss Håkan Samuelsson makes the job look pretty straightforward, fun even. The burden of ensuring the survival and success of the much-loved Swedish car maker is almost invisible in the man’s easy chuckles and languid posture. Everything’s easy when things are going well though, right? And at Volvo things are going well. August 2016 was the best sales month in the company’s 88-year history. It built half a million cars last year, another Volvo record. The XC90, its talismanic SUV, is one of the more decorated cars on sale. There are, in Samuelsson’s words, “a lot of positive indicators right now on the dashboard”. The man and role appear a perfect fit, and yet when Samuelsson took the position (in late 2012) it wasn’t the realisation of some long-held ambition. “It was very stimulating being part of the board here since the re-start in 2011”, says Samuelsson. “Becoming chief executive was not something I had planned but I don’t regret the move. You should continue learning all your life and I’ve learned that real activity is more stimulating than sitting and talking on boards! And of course as a Swede, contributing at Volvo is especially good”. Lesser men might have seen this post-Ford, Geely-funded reboot as a quite terrifying challenge but Samuelsson insists he had no doubts, and that mapping Volvo’s renaissance was pretty straightforward. For him it was obvious: the company’s traditional values would point the way ahead. “The brand had certainly not been strengthened by the Ford years”, says Samuelsson. “Volvo had been in a resting mode. But it had huge potential. There was a risk of doing things the wrong way, like disregarding safety because now everyone has that, but that would have been absolutely wrong. We’re proud of our heritage and we’re building on it. Of course it’s not just tradition; you have to develop. Safety is more than seatbelts and airbags now. It’s collision avoidance, it’s hightech. It’s a very exciting area, all the way to autonomous driving. And we should do that. You build on your strengths. Another for us is design. We should be the one building modern Scandinavian design. That’s our home turf. Why should we let the Germans do that? We didn’t just come in, look at the figures and start talking about return on investment. We went back to fundamentals. What are we trying to achieve, to deliver? The really good premiums are clear on that. Audi has progress through technology. BMW is about dynamic driving pleasure. You need a clear brand promise. If you haven’t decided that, you are guaranteed not to deliver it, and guaranteed not to succeed. Even when you have decided, it is still challenging”. “We are the premium alternative”, explains Samuelsson. “Our brand is about design to be proud of and about responsibility, both in terms of safety and the environment. Not everybody wants a big engine with a lot of horsepower. For some that is not premium, and those are our customers. If you deliver a copy you will never be able to ask a high price. How high can we go? The first ambition is to catch up. Beyond that we have no limit. With the S90/V90 we have closed the gap to the Mercedes E-class but it will take some years to convince people. I think the first car is maybe easier to sell; the really difficult one is when they come back. Will they buy another one? That answer is critical in knowing that you have convinced your customer that you are premium. This will take some years. Realistically it’s 2020, with all the new cars rolled out”. Samuelsson is quick to point out that he hasn’t plotted this course or forged Volvo’s modern identity alone. “There is a board, appointed by the owner, but they’re not just representatives of the owners. There are experienced professionals also. There is Tom Johnstone, former CEO of SKF. Mikael Olsson, ex-CEO from IKEA is now our vice-chairman: a lot of knowledge about retailing and branding. Carl-Peter Forster, ex head of GM Europe: a car guy. “These are internationally experienced professionals. And that’s really how the company is steered. There is no micro-management from Geely about the details. Of course we have very stimulating discussions with our owners but they understand Volvo as a premium European car maker and they don’t want to change it into anything else”. In recent years Volvo’s weathered a few storms, suffered a couple of less than successful partnerships, but under Samuelsson its resilience and potential are becoming clear; its heritage a steadying hand in an age of unprecedented change. Autonomous driving is absolutely right for us, with our commitment to safety. Again the brand will help. It’s a big advantage having the Volvo Iron Mark on the front of the car. In the future it will give credibility when you’re reading your emails at 130 km/h”. +++