+++ Carmakers in CHINA are fretting over whether a tax break that has propped up sales this year will be extended, with an end to the policy possibly leading to the first annual decline in sales on record for the world’s largest auto market. The topic has dominated talk at the Guangzhou auto show, even as industry executives work hard to promote new SUVs and electric cars, currently the highest growth segments in China. “The tax cut has been very successful, it’s been a fabulous success”, said James Chao, Asia-Pacific chief for research firm IHS Markit Automotive. “But there’s going to be some payback next year – a lot of payback”. Spooked by a slowing economy, the central government last October halved the sales tax for cars with engines of 1.6 litres or smaller to 5 percent. That turned around a market on the verge of sales declines in 2015 to one that has notched up 13.8 percent growth for the year to date. Without an extension, analysts forecast annual sales would at best be flat or could decline 2 to 3 percent, which would be the first drop since China’s car industry association began collating data in 1997. Concern that the tax cut will expire at the end of December as scheduled has prompted Volkswagen and others to warn of a potential drop-off in sales, adding that they have been in talks with the government on the matter. “There is a question of what will happen with this purchase tax policy. If it really comes totally to an end, then maybe the first quarter will be a little bit more difficult”, said Jochem Heizmann, China CEO at Volkswagen, which counts China as its biggest market. The government has said it is considering an extension, but pundits are reluctant to make a bet on whether one will be forthcoming, noting that pushing back the expiry date would only delay a drop-off in sales. A rapid climb in real estate prices has also lessened the need for government to stimulate the auto sector and prop up the economy, analysts say. Some industry executives said there were expectations that the tax cut would be extended, albeit not in full. Heizmann said robust growth for the market was possible even if it was replaced by a smaller cut. A flat or mildly declining market could be a rude shock for automakers used to double-digit growth in China and may push them to consider heavy discounts, squeezing profit margins, said Jochem Siebert, managing director of JSC Automotive. It could also bring in to question the wisdom of aggressive production plans that both foreign and Chinese automakers have adopted. Volkswagen, for examples has said it wants annual production capacity of 5 million vehicles by 2019, a 40 percent increase over last year’s sales. One potential beneficiary of an expiry in the tax cut could be the luxury segment, some executives said. “There are fewer 1.6 liter and less engines in premium, so if that tax cut does go away, that could be an opportunity”, said Lincoln President Amy Marentic, adding the brand has no vehicles that benefit from the tax cut. Marentic expects the premium segment to grow 5-10 percent in 2017. +++

+++ FIAT Chrysler Automobiles is reportedly planning to permanently discount Fiat models as the brand continues to struggle in the US market. The revisions will lower sticker prices by up to $5,205 depending on the model, according to leaked documents. The entry-level Fiat 500 is expected to drop from $16,995 to less than $14,995 (excluding $995 freight). The biggest discounts are said to affect the 500C, reducing the premium for all convertible trim levels to just $1,495 compared to equivalent hardtops. The documents point to a $21,490 price tag for the 500 Abarth Cabrio, down from $26,695. The 2016 lineup currently places the Mazda MX-5 Miata-based Fiat 124 Spider in a slightly lower price bracket than the Fiat 500C Abarth, however the 124 will soon carry the brand’s highest base price in the US. Prices for the 500X are also set to remain mostly unchanged. Brand sales were down by 24 percent in October, pushing overall deliveries down by 20 percent through the first 10 months of the year. The 500X is up by 63 percent so far. The all-wheel-drive model has apparently cannibalized sales from the 500 and 500L, which are down by 39 percent and 59 percent, respectively. Aside from the price cuts, Fiat dealers will also receive a simpler lineup with fewer trim levels. The changes are expected to be implemented sometime next year. +++

+++ MAZDA executives are talking up the one-year-old relationship between it and the world’s largest company, Toyota, but it does not necessarily mean a rush towards hybrid for Mazda. The deal, struck in May 2015, is a long-term strategy play by both companies that is aimed as much at product improvement as it is about sharing technology and cutting costs. Toyota, in particular, wants to use the tie-up to help it in its mission to produce cars that add personality to the brand’s reliable and dependable tags. Mazda senior managing executive officer for research and development Kiyoshi Fujiwara told journalists at the Los Angeles motor show that the pair are actively working along three specific lines, as well as specific areas of product manufacture. “Our relationship, we can say, has migrated from friendship to fiance,” smiled Mr Fujiwara. “I cannot talk about specifics; however, we are continuously exchanging culture of the company and also some relationships between Toyota and our company in special areas”. He offered an example of a specific line of production where Mazda has often been regarded as lagging behind its competition. “NVH (noise, vibration and harshness), for example. Both sets of engineers have visited each company to look at programs and facilities around how to improve NVH technology”, he said. “These parts of the relationship are being done frequently”. Mr Fujiwara explained that the car-makers are actively co-operating along 2 key lines of future technology, as well as examining ways to share product lines. Mazda provided a Mazda2 sedan for Toyota’s now defunct Scion brand in 2015, which is set to fold into the US catalogue as a Toyota Yaris for next year. The company also offers a Mazda3 hybrid in its domestic market that uses Toyota’ s electric engine and battery array mated to a Mazda petrol engine. “As for Toyota, we continue to talk about 3 topics”, he said. “One is electrification; one is connectivity; and one is sharing non-core product portfolio. “We already provide the Mazda2 for the US with a Toyota badge, and we also got some hybrid technology in Japan, so we can share technology”. However, Mr Fujiwara was cautious about the notion of Mazda pushing out versions of Toyota’s hybrid system across more of his company’s cars. “Hybrid systems is an difficult one, because the Toyota system is very complicated,” he said. “If we can continue to develop our SkyActiv technology, we don’t need this kind of complicated hybrid system. We need a milder system that is suited to our SkyActiv technology”. Mr Fujiwara would not be drawn on whether Mazda’s 2019 electric vehicle would be done in partnership with Toyota, but indicated that it was likely. “We are developing a Mazda system by ourselves, but in terms of commercialisation of the technology, and whether it can be shared or not, that is a discussion point”, he said. “Volume is not so big, therefore in terms of the business, it better for both companies. We have not decided yet, but we will be discussing it”. +++

+++ MCLAREN has revealed that it did indeed have discussions with technology giant Apple about a partnership but that no bid was made. Back in September, the motoring world went into overdrive when it was suggested that Apple was pondering a takeover of McLaren Applied Technologies in the midst of drastic changes to Apple’s car project. However, while speaking with Reuters, McLaren chief executive Mike Flewitt said no bid was put on the table although talks were indeed held. “There wasn’t a bid from Apple. They visited. We talked. We talked about what they did. We talked about what we did. They toured. It never matured to a definitive proposition”, he confirmed. Flewitt did say that numerous bids were made to take over the British brand but that they were all turned down. Although McLaren Automotive only started producing cars in 2011, the company now has some of the finest sports cars and supercars in its repertoire, cementing itself as a true rival to Ferrari and Lamborghini. According to reports, it has a value of between $1.3-1.95 billion so it’s not at all surprising larger companies have been eager to snap up the brand for a bargain price. +++

+++ Even though the Formula 1-powered MERCEDES-AMG hypercar is 2 years from launching, the company has confirmed it has almost sold out. According to Mercedes-AMG chairman Tobias Moers, between 200 and 300 examples will be produced and that the list of buyers is encroaching its limit. “It’s close to our production capacity. It’s an amazing car. There’s nothing else on the market”, Moers said. It was recently confirmed that the hypercar will have the same powertrain as the brand’s championship F1 car, including its high-revving 1.6-liter turbocharged V6 engine. Moers has confirmed that the internal combustion engine will be modified to idle at lower revs but that its pistons will still be capable of spinning at over 10,000 rpm. Describing the car, Moers said “If you combine both worlds, the most efficient powertrain on the planet, which is the F1 powertrain, with the competencies and capabilities from AMG, to make a very performing hypercar, this is the pinnacle of engineering in automotive now”. When it hits the market in 2018, the AMG hypercar will face stiff competition from the Aston Martin AM-RB 001. Developed between Aston Martin and Red Bull, it promises the same 1 to 1 power-to-weight ratio of the AMG but will make use of a naturally-aspirated V12, potentially joined by an electric motor. Some predicted the death of performance cars years ago but these two upcoming hypercars prove that such vehicles still have some life left. +++

+++ MINI has announced plans to introduce its first regular-production electric car in 2019. The yet-unnamed battery-powered model will be the fifth — and likely the last — member of the company’s lineup. It won’t be entirely new because it will be based on an existing model, though the company didn’t reveal which one. Regardless, the car will inaugurate an important breakthrough in battery technology. “It’s completely new technology. It’s the next step in battery tech. We chose to launch in 2019 as this is when we will see the technology”, explained company boss Peter Schwarzenbauer in a recent interview. Schwarzenbauer openly wants to trim the Mini lineup down to 5 core models. In 2019, the family will be made up of the 3- and 5-door versions of the Hatch, the Convertible, the Clubman, the Countryman, and the EV. Executives aren’t interested in chasing volume or branching out into niche segments, so the upcoming arrival of an electric model most likely means earlier concepts like the tiny Rocketman and the well-received Superleggera Vision most likely won’t reach production. Mini has already started to electrify its lineup. The brand new second-generation Countryman that made its public debut a few days ago at the Los Angeles Auto Show will be available with a gasoline-electric plug-in hybrid drivetrain when it goes on sale in March. +++

+++ The European Union’s competition chief said she did not see any concerns over a British assurance to Japanese carmaker NISSAN related to Brexit, but that she was still waiting for details to have more clarity about the case. Nissan agreed last month to new UK investments after Prime Minister Theresa May assured it the government would provide support to counter any loss of competitiveness caused by Britain leaving the EU. The European Commission subsequently asked for more details. European Competition Commissioner Margrethe Vestager, who makes sure companies do not unfairly benefit from subsidies granted by governments in the 28-country European Union, said British authorities had yet to provide the required information. “Before we know more, we have no concerns”, Vestager told reporters at the sidelines of the Chillin’ Competition Conference in Brussels. Vestager can ask national authorities to recover subsidies that breach the bloc’s strict state aid rules. She has ordered Ireland to claw back up to 13 billion euros in back taxes from iPhone maker Apple. The Netherlands, Belgium and Luxembourg have also been told to recover millions of euros from various companies for illegal sweetheart deals. +++

+++ VOLKSWAGEN unveiled 2 SUVs for the Chinese market on Friday, the first in a planned wave of new models for a booming segment where it has lagged rivals. Volkswagen’s venture with SAIC Motor, China’s largest automaker, took the wraps off the Teramont large SUV at the Guangzhou auto show, which opened Friday. Its venture with China FAW Group displayed a smaller C-Trek crossover SUV. SUV sales have soared in China in recent years with consumers choosing larger cars as they grow wealthier. Sales in the segment are up 46 percent in January-October from the same period a year earlier. “We have not forgotten promises we made… We will introduce more SUVs to the market. Here today you can see how we deliver on our promises”, said Stephan Wollenstein, head of VW brand passenger cars for China. Volkswagen, which has until now had only one locally made SUV, the Tiguan, plans to launch another 4 SUVs before 2019. The 2 new SUVs must, however, share a stage with a long list of similar launches as Honda, Nissan, Ford’s Lincoln and several other brands will also show new models at the Guangzhou auto show. Chinese demand for SUVs can be an important driver for profits with Honda last month lifting its annual earnings estimate, helped in part by strong sales of its XR-V and Vezel SUVs. The SUV share of China’s auto market is still far lower than that of the U.S., suggesting plenty of room for the segment to grow but increased competition is putting pressure on sales prices and margins. +++

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