+++ CHINA is gunning for 35 million new car sales a year by the middle of the next decade, according to government targets. The week after the 2017 Shanghai motor show, the Ministry of Industry and Information Technology (MIIT) released a road map which points to the goal by 2025. If realised, the goal would cement China’s position as the world’s biggest car market by some margin. A total of 28 million new cars were sold in China in 2016; by way of comparison, American buyers bought just shy of 18 million vehicles. The government plan predicts that ‘new energy vehicles’ will make up a fifth of that total. It forecasts that sales of clean-fuel vehicles should top 2 million sales by 2020. “The quality of Chinese brand vehicles has clearly risen, while brand recognition, reputation and global influence are much stronger”, the MIIT said. “By 2025, we should have some Chinese vehicle brands that are in the global top 10 by sales”. +++

+++ The FERRARI 488 GTO will be the most hardcore V8 supercar to leave the gates of Maranello when it’s launched next year. As a track-focused version of the 488 GTB, the 488 GTO, as it is expected to be called, will essentially be a replacement to the discontinued 458 Speciale, a car widely regarded as the best track-focused Ferrari to date. The 488 GTO will build on the proven platform of the 488 with extra power, more focused chassis settings and a lightened structure to offer scintillating performance to rival the upcoming Porsche 911 GT2. The 488’s twin-turbocharged 3.9-litre V8 engine will be boosted with increased pressure and internal modifications to produce an anticipated 700 hp, with torque also increasing substantially on the standard car’s 650 Nm. Ferrari will remove non-essential parts from the interior and sound deadening from its engine bay, as well as fitting lightweight parts such as thinner glass for the windscreen and side windows, lighter ceramic brakes and forged wheels, as with the 458 Speciale. This should bring the 488 GTO’s kerbweight down below 1.400 kg, enabling exhilarating on-track performance that’ll include a 0-100 km/h sprint time of little more than 2.7 seconds. With those stats, not even the McLaren 720S would be able to keep up. The 488 GTO will also get new software for its Side Slip Angle Control and bodywork that works the air more aggressively, generating more downforce. Ferrari has refrained from commenting on the model, but a recent sighting of a 488 test car suggests development has moved onto public roads. This ties in with a schedule for a car that’s due to be released in 2018, which is when my sources expect the 488 GTO to go on sale. Due to the car’s hardcore nature and reduced production numbers, prices will increase significantly over the 488 GTB. The 488 GTO’s name follows a trend first set by the 288 GTO, which arrived in 1984 as a harder version of the 308 GTB. +++

+++ South Korean carmaker KIA will announce a plan for its first factory in India “soon”, vice chairman Lee Hyong-keun told reporters. The comment, made on the sidelines of the Shanghai auto show, came after Kia and affiliate Hyundai suffered a March sales slump in China, their biggest market, attributed to a political standoff and rising competition from local brands. Kia said in a regulatory filing that the investment size for its India plant has not been decided. India’s Economic Times newspaper reported that the envisioned factory involves 2 phases with combined investment of $1.6 billion, in one of the biggest foreign direct investment projects in India. Reuters reported in February that Kia was close to finalizing Andhra Pradesh as the site for its first Indian factory, with production scheduled to start in 2019. +++

+++ MINI ’s upcoming fifth ‘superhero’ model will take the form of an Electric Vehicle (EV) when it launches in late 2019. It has been no secret in recent months that the British company has been developing and testing an all-electric model but it was unclear if it intended on launching it as a volume model or instead just a niche player in select markets. It will be the former. According to the global head of Mini, Sebastian Mackensen, “The electric car is not meant to just have an offering so you can say you have an electric car, but really nobody buys it. No, it’s a real car, and people will hopefully buy it”. In the face of falling sales, particularly in the United States, Mini believes that increasing demand for EVs should allow it to return to record sales in the coming years. A couple of months ago, reports surfaced indicating that due to Brexit, the Mini EV wouldn’t be built in the UK as originally intended. Now, VDL Nedcar is looking likely to be contracted to build the model. +++

+++ NISSAN has traditionally enjoyed a strong following among performance enthusiasts; a following that only grows with the addition of each new Nismo model variant. Now the Japanese automaker is planning on expanding its performance line with new models in more markets. To that end, Nissan has announced a new Nismo Cars Business Unit, which will focus on expanding Nismo’s volume beyond the 15,000 vehicles it currently produces each year. “As a Nissan sub-brand, Nismo further builds upon the core values of Nissan cars”, said Nismo chief Takao Katagiri. “With the combined expertise of Nissan group companies, Nismo road cars will make customers enjoy Nissan cars more than ever”. The Nismo treatment is currently applied to the GT-R, 370Z, Juke, and Sentra – plus the (Versa) Note and Patrol sport-ute in other markets. There’s no word as of yet as to which models could get a performance makeover next, but we wouldn’t be surprised to see sedans like the Altima and Maxima, and crossovers like the Rogue and Murano get treated next. The Euro-market Pulsar could be on the docket as well, and pickup trucks wouldn’t be out of the realm of possibility, either. A more potent Sentra Nismo RS could be in store as well in similar fashion to the Juke RS. But we’re just speculating at this point. Whichever way you look at it, though, the prospect of more performance models sounds good to us, in whatever form they take. +++

+++ PSA (Peugeot, Citroën, DS) Group’s boss Carlos Tavares says the brand’s presence in China will be key for it to become a successful global automaker. Following the debut of the Citroen C5 Aircross at the ongoing Shanghai Auto Show, Tavares told that the company hasn’t been going in the right direction in China and needs to refocus. “China is the biggest market in the world. We want to become a global car maker, so it is important for us to be successful in China. Being successful in China shows we are capable of being a global car maker. That’s why it’s strategic for us to be here”, he said. Tavares believes that as its 3 key brands (Peugeot, Citroen and DS) all have new SUVs coming to China (the 3008, C5 Aircross and DS 7 Crossback), PSA is in the position to fight back in the Chinese market after its sales fell by around 16 per cent in the nation and broader south-east Asian region in 2016. According to the company’s boss, the main problem in China is a lack of awareness about the French brand and that it’ll take time to cement roots in the country. +++

+++ TESLA Chief Executive Elon Musk took many risks with the technology in his company’s cars on the way to surpassing Ford’s market value. Now Musk is pushing boundaries in the factory that makes them. Most automakers test a new model’s production line by building vehicles with relatively cheap, prototype tools designed to be scrapped once they deliver doors that fit, body panels with the right shape and dashboards that don’t have gaps or seams. Tesla, however, is skipping that preliminary step and ordering permanent, more expensive equipment as it races to launch its Model 3 sedan by a self-imposed volume production deadline of September, Musk told investors last month. Musk’s decision underscores his high-risk tolerance and willingness to forego long-held industry norms that has helped Tesla upend the traditional auto industry. While Tesla is not the first automaker to try to accelerate production on the factory floor, no other rival is putting this much faith in the production strategy succeeding. Musk expects the Model 3 rollout to help Tesla deliver five times its current annual sales volume, a key target in the automaker’s efforts to stop burning cash. “He’s pushing the envelope to see how much time and cost he can take out of the process”, said Ron Harbour, a manufacturing consultant at Oliver Wyman. Investors are already counting on Tesla’s factory floor success, with shares soaring 39 percent since January as it makes the leap from niche producer to mass producer in far less time than rivals. There are caution signs, however. The production equipment designed to produce millions of cars is expensive to fix or replace if it doesn’t work, industry experts say. Tesla has encountered quality problems on its existing low-volume cars, and the Model 3 is designed to sell in numbers as high as 500,000 vehicles a year, raising the potential cost of recalls or warranty repairs. “It’s an experiment, certainly”, said Consumer Reports’ Jake Fisher, who has done extensive testing of Tesla’s previous Models S and X. Tesla could possibly fix errors quicker, speeding up the process, “or it could be they have unsuspected problems they’ll have a hard time dealing with”. Musk discussed the decision to skip what he referred to as “beta” production testing during a call last month with an invited group of investors. Details were published on Reddit by an investor on the call. He also said that “advanced analytical techniques” (code word for computer simulations) would help Tesla in advancing straight to production tooling. Tesla declined to confirm details of the call or comment on its production strategy. The auto industry’s incumbents have not been standing still. Volkswagen AG’s Audi division launched production of a new plant in Mexico using computer simulations of production tools – and indeed the entire assembly line and factory – that Audi said it believed to be an industry first. That process allowed the plant to launch production 30 percent faster than usual, Audi said. An Audi executive involved in the Mexican plant launch, Peter Hochholdinger, is now Tesla’s vice president of production. Typically, automakers test their design with limited production using lower grade equipment that can be modified slightly to address problems. When most of the kinks are worked out, they order the final equipment. Tesla’s decision to move directly to the final tools is in part because lower grade, disposable equipment known as “soft tooling” ended up complicating the debut of the problem-plagued Model X SUV in 2015, according to a person familiar with the decision and Tesla’s assembly line planning. Working on a tight deadline, Tesla had no time to incorporate lessons learned from soft tooling before having to order the permanent production tooling, making the former’s value negligible, the source said. “Soft tooling did very little for the program and arguably hurt things”, said the person. In addition, Tesla has learned to better modify final production tools, and its 2015 purchase of a Michigan tooling company means it can make major equipment 30 percent faster than before, and more cheaply as well, the source said. Financial pressure is partly driving Tesla’s haste. The quicker Tesla can deliver the Model 3 with its estimated $35,000 base price to the 373,000 customers who have put down a $1000 deposit, the closer it can log $13 billion. Tesla has labored under financial pressure since it was founded in 2003. The company has yet to turn an annual profit, and earlier this year Musk said the company was “close to the edge” as it look toward capital spending of $2-2.5 billion in the first half of 2017. Tesla has since gotten more breathing room by raising $1.2 billion in fresh capital in March and selling a 5 per cent stake to Chinese internet company Tencent Holdings. Musk has spoken to investors about his vision of an “alien dreadnought” factory that uses artificial intelligence and robots to build cars at speeds faster than human assembly workers could manage. But there are limits to what technology can do in the heavily regulated car business. For example, Tesla will still have to use real cars in crash tests required by the U.S. government, because federal rules do not allow simulated crash results to substitute for data from a real car. +++

+++ The automotive industry’s seemingly inexorable drive towards electric cars, and especially Chinese polices pushing new energy vehicles, has forced TOYOTA , the world’s No.2 automaker by sales, into what one executive calls an “agonizing” strategy U-turn. Until recently, Toyota was one of the industry’s major hold-outs against full electrification, and planned to more or less skip all-electric battery cars and turn instead to hydrogen as a mainstream alternative to gasoline-fueled cars. In 2013, Toyota Chairman Takeshi Uchiyamada, father of the gasoline-electric hybrid Prius, told Reuters the hydrogen car was a “practical alternative” to the traditional combustion engine, and if there was any use for the electric vehicle (EV), it was “only as a neighborhood errands car”. Fast-forward to late last year, and Toyota said it had begun developing a long-range all-electric battery car, which industry experts say should hit the market around 2020. The Japanese firm has put its president, Akio Toyoda, in charge of a new unit called the EV Business Planning Department. One Toyota executive, who did not want to be named as he is not authorized to speak to the media, said the strategy about-turn was “agonizing” and “heart-wrenching”. Toyota had for some time predicted conventional hybrids and plug-in hybrids would be a medium-term bridge to hydrogen-powered cars of the future. In late 2014, Toyota launched the Mirai, a hydrogen fuel-cell car, selling in Japan for 7.24 million yen ($66,636) before subsidies and rebates. The model retails in the United States at $57,700 before subsidies. The game-changer for Toyota is China: the world’s biggest market and one where tough policies to push cleaner energy cars have challenged global automakers. Latest draft proposals from Chinese policymakers, released in September, require 8 percent of automakers’ sales to be battery electric or plug-in hybrid vehicles by next year, rising to 10 percent in 2019 and 12 percent in 2020. After some industry push back, the scale and pace of those plans may shift, but Toyota and other automakers don’t see much changing fundamentally in China’s drive to electrification by around 2020. “Those mandates are tough to the point it could wreck our fundamental business case”, said another Toyota executive. Toyota is particularly exercised by China’s proposed policy move to categorize conventional hybrids, like the Prius, as gasoline-fueled cars. That would mean conventional hybrids would not generate what China calls new-energy vehicle (NEV)credits, which automakers could use to meet strict fuel economy rules. Under the proposals, each hybrid an automaker would sell in China would set them back by one NEV credit point. “The Prius and other hybrid cars are central to our green car strategy”, said one of the Toyota executives. “But in China’s view, the Prius is no more than a gasoline car. We have no choice but to get over our EV allergy and come up with an electric car”. Hiroji Onishi, the head of Toyota’s China business, said ahead of this week’s Shanghai auto show that the Japanese firm would start selling plug-in electric hybrid cars in China next year, and aimed to sell an all-electric battery car in China, but gave no time frame. At a briefing, Onishi said this wouldn’t mean Toyota will de-emphasize sales of conventional gas-electric hybrid cars in China. Because automakers in China are expected to have to meet stringent fuel-economy requirements in addition to new energy vehicle quotas in coming years, Toyota will try to sell more conventional hybrids in an effort to meet fuel economy requirements, he said. Toyota sold close to 300,000 vehicles in China in January-March, up 1.7 percent on the same period a year ago. +++

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