+++ A dusty village on the outskirts of Ningde, a third-tier city in CHINA ’s southeast, seems an unlikely place for the headquarters of a potential global leader in future automotive technology. Yet China’s top-down industrial policy diktats – move up the value chain, clean up polluted urban skies, and shift to plug-in cars – have Contemporary Amperex Technology Ltd (CATL) poised to go from hometown hero to national champion, and beyond. China’s answer to Japan’s Panasonic and South Korea’s LG Chem has tripled its production capacity for lithium/ion car batteries in the past year to keep up with a surge in China’s sales of electric cars. After a second major funding round completed in October, the company’s value quadrupled to 80 billion yuan ($11.5 billion), CEO Huang Shilin said. CATL, which hopes to list on Beijing’s over-the-counter exchange as part of plans to raise at least another 30 billion yuan by 2020, could be a dominant force globally. It has already overtaken LG Chem in lithium/ion car battery output, and is chasing down Panasonic and Warren Buffett-backed BYD Co. CATL plans to grow its battery capacity sixfold by 2020 to 50 gigawatt hours, which could put it ahead of Tesla’s gigafactory in Nevada. “We continue to walk where the country guides us”, Huang said. “We hope by 2020 we can achieve performance and price that lead the world”. The company, founded just 5 years ago, is already pushing beyond China’s borders, with offices in Sweden, Germany and France and plans to build a factory in Europe. Company representatives say that because of non-disclosure agreements they can only list BMW as a customer for now. Despite the ambitious expansion, the emerging segment’s dependence on government policy and rapidly evolving technology is not without risk. A123, a U.S. automotive battery maker, went from IPO to bust in just 3 years as battery costs remained stubbornly high and orders dried up. “People think we’re a big successful company, but we think we’re in jeopardy every day”, marketing director Neill Yang said. “The market environment and technology changes so fast that if we don’t follow the trend we could die in three months”. To become a Chinese champion, a battery maker must first shed any foreign investment to be eligible for subsidies and other policy support, people in the industry say. Before he set up CATL, Robin Zeng had started Amperex Technology, a company now majority-owned by Japan’s TDK. ATL initially had a 15 percent stake in CATL, but liquidated that holding last year, Yang said, when electric vehicle sales first started to take off. He declined to elaborate on the circumstances of that divestment. TDK separated from CATL to focus on batteries for mobile consumer electronics, but still collects royalties on some intellectual property used by CATL, a spokesman for the Japanese company said. “The reason is strategic and confidential. ATL still keeps a close relationship with CATL”, said a person familiar with the situation, who was not authorized to speak to the media. ATL and CATL still share a Ningde campus, although the front gate and main office bear only the ATL name. Zeng, a Ningde local with a doctorate in chemistry, appears to be the remaining link between the 2 companies he founded. He declined an interview request. While government support for electric cars has driven demand for components such as batteries, Beijing is also rolling out other policies that could benefit leading producers like CATL, by forcing smaller firms to consolidate or go out of business. The Ministry of Industry and Information Technology (MITI) said last month it is considering a rule that would increase minimum production requirements for battery makers by around 40 times to 8 gigawatt hours. Only BYD and CATL are roughly in line with that minimum, though Chinese media reports suggest Hefei Guoxuan High-Tech Power Energy and Tianjin Lishen Battery Joint-Stock may be close to or above that level by next year. Yang said subsidy support for batteries is fairly modest compared to those for producing electric vehicles, which totalled $4.5 billion last year alone. CATL has been nominated as one of three battery makers – with Guoxuan and Lishen – for incentives under China’s 13th Five-Year Plan, promising around $15 million if it can meet targets, Yang said. He noted, though, that a single production line costs $40 million. Among national 2020 targets: to halve battery costs to below 1 yuan ($0.144) per kilowatt hour, and improve energy density by two-thirds. To get there, CATL is ramping up spending on research and development, where it employs more than 1,000 people with advanced science degrees. “The strength of their R&D investment is quite large”, said Fu Yuwu, chief of the Society of Automotive Engineers of China, adding he hopes the company can become a global leader. “They have such large scale and the support of China’s huge market, all the more reason they should do a good job of internationalizing,” he said. +++

+++ Details of the next generation CHEVROLET Corvette with a naturally-aspirated 6.2-liter V8 featuring a DOHC design has appeared in a document posted recently on a General Motors service website. It has been removed, but not before it was possible to take a screen shot of the page the engine was listed on. According to the document, the engine features the code name “LT5,” a name that we learned in September GM has trademarked. The engine is also said to feature GM’s SIDI direct fuel injection technology, variable valve timing and aluminum construction. The document also reveals that the engine will be offered for the 2018 model year and in a Corvette model (The “Y” in the document is a book code that highlights which model line the engine is bound for, and book code Y corresponds to the Corvette). The LT5 name will be familiar to Corvette fans as it is the name of a 5.7-liter V8, also with a DOHC design, that featured in the C4 Corvette ZR-1. More recently, the LT5 name has appeared on the website of GM’s performance engine builder Katech, where it was linked with a C8 Corvette model called the Zora. The LT5 name also suggests the next member of the current LT family of small-block V8s from GM. The LT4, found in the C7 Corvette Z06 as well as the Camaro ZL1 and Cadillac CTS-V, is a supercharged 6.2-liter V-8 delivering as much as 650 horsepower and 870 Nm of torque. There are 2 leading possibilities for the initial application of the new LT5 engine. One is a C7 Corvette range-topper thought to be a new ZR1. This would make sense as GM’s last LT5 engine was also used in a ZR1 model—and this C7 Corvette range-topper is due for the 2018 model year, when the engine is due. The other possibility is the mid-engine C8 Corvette, although this model isn’t expected to be launched until the 2019 model year. Stay tuned for an update. +++

+++ Headed for a fourth straight annual profit decline, HYUNDAI is trimming its cost fat; scaling back on business class flights and annual family home trips for overseas employees, executives told. The South Korean automaker has been hit by its exposure to weak emerging markets, and a product line-up that features more sedans than SUVs, just as SUVs have become more popular across many global markets. The belt-tightening – which also includes cutting back on printing and fluorescent light bulbs – aims to buy Hyundai time to prepare new models and a design revamp. “We’re trying to address a mismatch between the market trend and our product line-up”, said one Hyundai insider, referring to a need for more SUV models. “That’s a longer term plan. For now we’re trying to save every penny,” he said, declining to be identified because the plans are not public. Since October, Hyundai executives have taken a 10 percent pay cut, the first such move in 7 years. The number of executives at Hyundai alone has risen by 44 percent in 5 years, to 293 last year. The group has also downgraded hotel rooms for executive travel, and is encouraging video conferencing as a cheaper alternative to travel, insiders said. “We’re in emergency management mode,” said another insider, who didn’t want to be named as he is not authorized to speak to the media. In a response, Hyundai said it is “making various cost-saving efforts”, with shrinking global demand and growing business uncertainty, but did not elaborate. Other costs, such as low-margin supplier parts and labor at the heavily-unionized automaker, are tougher to pare back, said Ko Tae-bong, analyst at Hi Investment & Securities, noting Hyundai needs also to spend more on research and development in self-driving and other new technologies. While Hyundai remains cash-rich, its costs as a proportion of revenue have risen for 5 straight years, to 81 percent so far this year, regulatory filings show. “Cutting expenses are stopgap measures, and won’t do much to improve its bottom line”, Ko said, calling them more “symbolic”. Hyundai grew quickly after the global financial crisis, with brisk sales of its Sonata and Elantra. It was the only major automaker to increase sales in the United States in 2009. But it has struggled to maintain that momentum as rivals’ sales of SUVs have boomed and emerging market economies have weakened. Hyundai shares have fallen 40 percent in the past 3 years, the worst performer among global automakers. The automaker’s top U.S. executive has resigned, and the South Korea sales chief and China head have been replaced. Sales of Hyundai cars, and those of its affiliate Kia, could drop to 8 million this year, a first decline since Hyundai bought its smaller domestic rival in 1998, said Ko, the analyst. For next year, Hyundai-Kia Executive Vice President and research head Park Hong-jae, expects sales to pick up again. “It was a difficult year this year. Things will get better”, he told reporters, citing recovery in markets such as Brazil and Russia. Another Hyundai source said the group has trimmed its preliminary 2017 sales target to 8.2 million vehicles, from 8.35 million forecast in mid-year. While it looks to manage its staff budget, Hyundai is beefing up its SUV offerings, freshening up its Sonata, and redirecting exports from slow-demand markets such as the Middle East to the United States. In the United States, SUVs accounted for 28 percent of Hyundai’s sales in January-November, up from 23 percent a year earlier, according to Autodata, but less than half the industry average. At its plant in Montgomery, Alabama, Hyundai has replaced some Sonata production with its popular Santa Fe. Next year, Hyundai will look to plug a gap in its SUV offerings for developed markets by making a subcompact model – under the project name “OS” – in South Korea for sale at home, in the United States and Europe, people inside the company said. Hyundai makes sub-compact SUVs locally in China, India and Russia. “We need that small SUV in the U.S, much sooner than later”, Scott Fink, one of Hyundai’s biggest U.S. dealers, told. In sedans, Hyundai is pushing sales of bigger, higher-margin models like the Azera, or Grandeur, and its Genesis luxury line. Its smaller sedans, including the Elantra and Sonata, have lost ground to rivals like Honda’s Civic, which one Hyundai executive said has “wowing design”. Hyundai is working on a next generation of cars with “a different flair” to hit the market from 2019, Luc Donckerwolke, senior vice president for design, told on the sidelines of a recent event. The biggest holder of Hyundai preferred shares, the Norway-based Skagen Kon-Tiki fund, expects the automaker to get back on track over the next couple of years, with new SUVs, recovering emerging market currencies and better plant utilization. Knut Harald Nilsson, the fund’s lead portfolio manager, reckons Hyundai’s margins should recover to above 7 percent over that period, from 6 percent earlier this year, but are unlikely to return to the 10 percent levels of a few years ago “anytime soon”. +++

+++ MAZDA Australia is expecting only a slight increase in sales in 2017 as it looks set to end 2016 well ahead of its earlier forecast. Following the Japanese car-maker’s record 2015 with a haul of 114,024 units in Australia, it is expected to hit a new high of 118-119,000 units once all of the registrations for December are factored in. To the end of November this year, Mazda has recorded 108,446 sales, a 4.0 per cent lift over the first 11 months of 2015 when it had sold 104,316 passenger cars and SUVs. Speaking with journalists at a media event last week, Mazda Australia marketing director Alastair Doak said that the company had “over-achieved” in 2016 after initially predicting only minor growth for the calendar year. “2016 was a year of consolidation,” he said. “We had a huge jump the year before to 114,000 units. No-one quite expected that level of growth. That included the new CX-3. It’s fair to say that maybe we were a little too conservative for this year’s forecast given we were up 4.0 per cent this year, that has increased just a couple of per cent”. Predicting sales just shy of 120,000 for this year “depending how strong December is”, Mr Doak said the company was not expecting a huge leap in 2017, despite the arrival of key new models, variants and updates. “Given the market is almost flat we are very happy with the improved sales performance. Despite this, we don’t think the overall market will shift greatly from its current position in 2017 so we are forecasting a sales increase of just a few per cent next year with the overall market. For us we will probably move inline with that increase next year”. Mazda biggest launch next year will be the second-generation CX-5 mid-size SUV, which rolls into showrooms in the first half and is expected to continue the sales success of the outgoing model. This year will mark the third straight year that the CX-5 has not only topped the mid-size SUV class, but also taken the crown as the best selling SUV in the country. Aside from the CX-5, there are likely to be some mid- or late-cycle updates to key models, but Mazda is keeping quiet on which models. This year will mark the 5th consecutive year that Mazda has exceeded 100,000 sales in Australia, with June the best sales month to date for the brand, while 9 of the 11 months of 2016 were record monthly results. When asked if he could see an end to Mazda’s sales “honeymoon period”, Mr Doak said the company was working hard in a number of key areas to remain strong, adding that quality products were also critical. “We stick to our game plan and we try to be as consistent in the short, medium and long term as we possibly can. We are investing a lot in the brand, in that customer care area, and (customer) service and sometimes it maybe doesn’t get a sexy headline, but there is a lot of work going on in the background and all those things will stay strong”, he said. “And product is crucial to that … We know it will continue that way. We know what is coming down the pipeline. We will be ok”. Despite a 6.3 per cent drop in year-to-date sales, the Mazda3 is still the company’s top seller with 32,966, followed by the CX-5 that has dipped just 2.4 per cent in its final year to 22,658. The Mazda6 (-17 per cent) and Mazda2 (-6.3 per cent) have both slipped in 2016 but the arrival of the all-new CX-9 earlier in the year has provided significant volume, capturing 4.324 sales; a 39 per cent increase – after less than 4 months on sale. Another model doing well for Mazda is the BT-50 pick-up, with sales of the 4×2 version up 3.8 per cent to 4.692, while the 4×4 has increased by 8.4 per cent to 8.726 units to the end of November. Mr Doak said 2016 would be the Mazda ute’s best sales year yet. While its combined 4×2 and 4×4 sales are off the pace of the big hitters in the segment including the Toyota HiLux, mechanically related Ford Ranger, Mitsubishi Triton, Nissan Navara and Holden Colorado, the 4×2 is the third best seller in the segment behind the two-wheel-drive HiLux and Ranger. Mr Doak said that while a renewed focus on small fleet business has helped the BT-50, the company would continue to pursue private buyers. “It’s still driven by private sales essentially. Yes we have had some small fleet business success there. We have always had the program, it is just we have put more focus on it. What happens when you do that, you get more success. “It has been good, but we are very much on a mission, and have a narrow window. We are still not chasing big stuff, it is very much those people buying on to 4 (vehicles). We have had some good success with it. It is never going to be huge numbers. Private buyers are the focus for BT, and will continue to be”. +++

+++ MERCEDES is working on the next generation of its compact car range, with the first model to arrive to be a redesigned A-Class hatchback. We’re expecting the new hatch to make its debut in late 2017 or early the following year. Mercedes sees room for a second sedan in its compact car range. The automaker already sells the CLA but an A-Class sedan is brewing. The new sedan will be positioned above the CLA but below the C-Class. (Think of it as a roomier but less sporty alternative to the CLA). Mercedes is yet to make mention of plans for another compact sedan the car could be in showrooms before the end of 2018. Production is tipped to take place at the new plant in Mexico where Mercedes will produce compact cars alongside models from Infiniti. If accurate, it means the A-Class sedan should be sold in the United States. Other production locations are said to be plants in China and Hungary. Underpinning Mercedes’ next-generation compacts will be an updated version of the current MFA (Modular Front-drive Architecture) platform. Referred to as MFA2, the updated platform will bring weight savings plus greater capacity for alternative drivetrains. A stretched version of this platform will underpin the next B-Class, a new SUV rumored to be called the GLB, and, most likely, the A-Class sedan. Rivals will include the Audi A3 and Mercedes’ own CLA. BMW has also just launched a 1-Series sedan, though this is exclusive to the Chinese market. There are rumors Cadillac is also planning a compact sedan, one with rear-wheel drive. +++

+++ OPEL continues to plan the production of the rear-wheel-drive GT concept, unveiled at the Geneva motor show in March, and believes it has 2 more years to make a decision before the design loses its appeal. Opel chairman Karl-Thomas Neumann said: “It’s a car we all love and the public love, so we really want to build it. The question is what the right approach is, so we are studying different directions we could follow”. The 2 main possibilities are to create a ‘parts bins’ rear-wheel drive platform or to borrow an off-the-shelf platform. A rear drive platform is essential if the GT is to retain the concept’s proportions in production. Neumann said: “The platform is a complication”. However, Neumann appeared to rule out the chances of parent company General Motors (GM) creating a parts-bin platform. “You can take parts and pieces, but it’s a matter of cost. If you do a lot of engineering on the platform, then you can’t do it,” he said. The most likely solution is to team up with a partner to create a new rear drive platform.“Then you need something off the shelf”, Neumann said. GM’s Chinese partner, SAIC, which owns MG, has been cited as a possibility, but Neumann refused to comment. Neumann is prepared to wait to find a solution rather than push it with GM’s top brass and risk getting the project canned. +++

+++ As India’s biggest corporate showdown heads from the boardroom to the courtroom and brings in a Who’s Who of the country’s legal profession, ousted TATA Sons chairman Cyrus Mistry vows a multi-layered battle for governance reforms at the $100 billion conglomerate, people close to him say. Mistry, who was dismissed from his post in October and has since left boards at other Tata group companies, will step up his legal fight with patriarch Ratan Tata and others and make his case in any regulatory investigations into the Tata group, three people familiar with Mistry’s strategy said. Mistry has so far broadly laid out three sets of allegations: breaches of governance within the Tata group; misconduct at Tata ventures; and the illegality of his ouster. “If all of those are put together, it paints a picture – of mis-governance and misappropriation”, said one of those people. “I think there will be different elements, which will all be looked at in different forums”. Tata Sons, the holding company with stakes in listed firms operating in a range of industries, denies Mistry’s allegations and says it has followed the highest standards of corporate governance. Two lawyers representing Tata said the group is ready to defend itself and will challenge the merits of any legal action Mistry takes. In his first salvo, Mistry last week filed a petition at the National Company Law Tribunal (NCLT), a quasi-judicial body that deals with corporate grievances in India, alleging mismanagement and shareholder oppression by Tata Sons, and seeking the replacement of the group’s board of directors. Tata hit back, filing a legal notice against Mistry, accusing him of breaching confidentiality rules, and alleging he shared “confidential data, business strategies, financial information” related to Tata Sons. Tata legal advisers say the burden of proof is on Mistry, who will need to prove his assertions that decisions taken by Tata Sons were not in the interest of all shareholders, and it mismanaged group companies’ affairs. “He will first have to substantiate that something wrong happened and that there were actions intended to oppress him”, Tata group counsel Mohan Parasaran said before the Tata filing. Parasaran said Mistry would need to prove that certain decisions taken by Tata Sons – such as the $12 billion purchase of steelmaker Corus’ assets in Europe or the decision to continue making the loss-making Nano car – were oppressive to the interest of minority shareholders in Tata Steel and Tata Motors. “Only proving that these were bad decisions does not amount to anything”, Parasaran said. “Broadly, we have a strong legal case”. Responding to Mistry’s petition, the NCLT stopped short of granting his request to prevent the Tata Group from issuing new securities that would dilute his stakeholding. It will hear the petition again on Jan. 31. Lawyers not involved in the proceedings say the legal battle could stretch from the Bombay High Court to the Securities Appellate Tribunal, and even to the Indian Supreme Court. Corporate grievance cases in India can drag on. A dispute between the companies of billionaire brothers Mukesh and Anil Ambani over natural gas supplies lasted for 2 years and went all the way up to the Supreme Court. Both the Tata and Mistry camps have hired some of India’s top legal brains. “The stage seems set for the next round where courts and regulators will be involved”, said Vaneesa Agrawal, a securities lawyer at Suvan Law Advisors. Mistry alleges misconduct in the way some Tata companies awarded contracts, and fraud at one of its aviation ventures. He also alleges some trustees of Tata Trusts (charitable trusts that own two-thirds of Tata Sons) undermined the boards of Tata Sons and group companies by demanding a say in key internal matters – in breach of securities rules. “The make or break will be whether Mistry can prove that the Trusts used their powers in the interest of their personal whims,” said a Mumbai-based lawyer, who asked not to be named. +++

+++ The 2017 VOLKSWAGEN Golf R produces 310 hp from its turbocharged 2.0-litre four-cylinder engine, which is 10 hp more than the pre-facelift car and matches the peak output of the Golf GTI Clubsport S, as well as the Honda Civic Type R. That power hike makes this the quickest variant of Volkswagen’s best-selling hatchback ever sold, and it’s joined by a jump in torque of 30 Nm, bringing the maximum figure to 400 Nm. The added potency helps to trim the all-wheel drive R’s 0-100 km/h time down to 4.6 seconds, three-tenths faster than before, when the 7-speed DSG auto is fitted. No time has been released for the 6-speed manual version at this stage, but expect a similar reduction to the old car’s 5.3 seconds time. The Golf R Variant also benefits from the same engine improvements, and its 0-100 km/h time improves by two-tenths to 4.9 seconds with the DSG auto. Along with its uprated engine, the 2017 Golf R gets a very lightly tweaked exterior with new LED lighting and restyled bumpers. Inside, there’s a new optional Active Info Display with 12,3 inch high-definition monitor. Additionally, the latest generation of Volkswagen’s on-line services, including an updated App Connect feature that allows it to integrate with the latest versions of Apple CarPlay and Android Auto and MirrorLink, are included. There are also new and updated driver assistant systems, such as Traffic Jam Assist, Emergency Assist, which detects the driver is incapacitated, Lane Assist plus ACC for active lane keeping, an updated City Emergency Braking system, Front Assist function that employees autonomous braking for collision avoidance, and Park Assist 3.0. The 2017 Golf R is on sale in Germany now, but elsewhere order books won’t open until February. Prices are expected to grow slightly on the outgoing car. +++

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