+++ Hyundai Motor Company Australia (HMCA) chief operating officer Scott Grant has revealed the company has been forced to change its GENESIS luxury brand strategy, following confirmation from its South Korean headquarters that 6 products will now arrive within 3 years. Grant confessed that with the rollout of Genesis as a sister brand of Hyundai, “60 or 90 days ago our plan was quite different. If you’d asked me 60 days ago I would have given you a very clear picture, but some things have changed in the last couple of months on Genesis”, he continued. “60, 80 or 90 days ago I would have said, look, we’ve got 25 dealers who represent Genesis right now, we’ve got one product, we’ve got another product coming at the end of the year, I would have said that’s our firm plan. 2 products, 25 dealers, away you go. Now it is bigger than that, it has the potential to be much bigger than that into the future”. In the middle of the year the current Hyundai Genesis upper-large luxury sedan will flick its ‘H’ badging and, timed with a light facelift, will be renamed the Genesis G80. Late this year it will be joined by the BMW 3 Series-rivalling Genesis G70 sedan, using the same rear-wheel-drive platform and a 3.3-litre twin-turbocharged V6 engine as used in the Kia Stinger GT. Now, however, with another 4 to 5 products set to follow including at least 2 large and upper-large SUV models, Genesis could potentially become too large to integrate within standard Hyundai dealerships. “There’s 6 or 7 products that are now committed and underway for Genesis, so they will move away from the Hyundai brand and that’s a big decision to make”, Grant continued. “With that came a rollout plan market by market to bring that to the world, and this has all happened in the last 6 months. For us it has been the last 60 days. It’s been difficult for us sitting over here exactly what that means for us. In terms of what products, when, what does the luxury branding mean in terms of sales distribution channels, marketing and so on … lots of those questions the Hyundai Motor Company (HMC) has been unable to answer. All of the headspace of HMC has been focused on the success and development of that global strategy”. Grant confessed that “everything is up in the air” for Genesis at the moment and it is “taking longer than we thought to finalise”. However, Hyundai dealerships had been informed of the change and, “By the end of June or early July we’ll probably have reached implementation consensus with HMC. We had a meeting with our dealers in August or September last year where we talked about the vision at that time for where Genesis was at and where it was heading”, Grant continued. “At that time, we said what that means exactly and precisely for Australia we don’t know, but we’re planning, we’re discussing, and as soon as we have some information we’ll come back and share it. For the time being, have some confidence about the future and where it’s heading, keep doing what you’re doing and representing the product to the best of your ability”. Grant said that a decision had not been made whether the brand would utilise stand-alone dealers or larger combined dealerships such as Toyota/Lexus. Being a former Toyota/Lexus executive, he said he would draw upon his experience with Lexus’ customer service reputation. “The biggest thing by far is customer service and support around the product”, Grant continued. “We’re looking at … all that goes with that, which are things like a luxury experience, the right level of customer engagement, the right kind of marketing strategy of Genesis now as a sub-brand as opposed to Hyundai, and what are the expectations of us and our dealers in that regard”. For the 2 products launching this year, Grant confirmed that the G80 would continue with a luxury focus, while the G70 would be a sportier offering – and that could mean similar pricing for the duo, although there was no final decision yet. “Obviously it G70 is smaller inside but it … will be quite different from the G80”, he explained. “It’s quite a large car, it’s beautifully finished, but it’s not necessarily a sporting drive where I think the G70 will have a more performance orientation. So to what extent will they sit side by side? How far is it this way or is it a Y-strategy and equal in pricing? I think there will be different buyers and a different experience completely”. Grant said the launch of the Hyundai Genesis had been a success, despite the fact only 373 units of the model were sold last year, down 30 per cent from 540 in 2015. He also argued that while sales numbers were not an indicator of success, the Genesis nearly doubled sales of the Lexus GS (198 units) last year. “To bring in a luxury car and sell it under a Hyundai badge and sell anything is a success”, he said. “I’m not looking at the salesnumbers although we’re running head to head with Lexus GS, for example, and they’ve been at it for 15 or 20 years”. A key consideration to the marketing and positioning of the G70, G80 and future Genesis products would therefore also look at how other luxury brands have fared in the highly competitive Australian new-car market. “There is a lot of study going on our side that we’re providing as part of the discussions with HMC”, Grant added. “What are the other luxury brands doing in Australia? How are they structured, how are they organised? How do they do what they do and ultimately is that working or not working and is there an opportunity to either follow that plan or path or do something different? We’ve put some ideas to HMC and they’ve come to us with some plans and we’re in the process now of understanding exactly what it means in terms of a launch plan for our market”. +++
+++ HOLDEN remains adamant that manufacturing cars in Australia is economically unsustainable, 6 months before it closes local assembly plants for good. But the brand says there is “no sugar coating” significant challenges on the road ahead. The manufacturer recorded an after-tax profit of $27.3 million for its national sales company operations, the division’s second consecutive year in the black. Combined with its manufacturing results, the brand recorded a $125.5m profit. But that doesn’t tell the whole story. Holden’s General Motors parent company chipped in $128.1m to help the brand wind down its manufacturing operations, a cause helped by a further $51.4m from the Federal Government’s automotive transformation scheme. A statement released by the company says Holden’s car-making arm “continued to operate at a significant loss”: had the company kept building cars throughout 2017 and into 2018, it would have been $180m in the red. Australian Holden employees built 38,677 vehicles in 2016, exporting 4,191 to New Zealand, the Middle East and North America. The company sold a total of 94,308 cars in Australia in 2016, a difficult year that saw the brand sell fewer cars than 2015 despite record overall new car sales. Hyundai also leapfrogged Holden to become the third-largest vehicle brand in Australia. Holden’s story has not improved dramatically in 2017, as it continues to lose market share following an 11.3 per cent reduction in sales. Next year could be even worse, as Holden is still bolstered by reasonably strong Commodore demand: without it, the lion would drop from 4th to 9th on the sales charts, just ahead of Kia. Then again, Holden showrooms will soon be bolstered by new Acadia and Equinox SUVs as well as a European-built Commodore replacement and expansions to the Astra range. Holden managing director Mark Bernhard says 2016 results reinforce the brand’s decision to stop building cars in Australia and become a leaner, more prosperous organisation. “This result highlights the strong profitability of our long-term business plans”, he says. “We’re facing challenges as a business and undergoing fundamental changes, there is no sugar coating that. But our consistent financial results highlight the underlying health of the business”. +++
+++ INDIA wants to tackle its pollution and environmental problems, and hopes to end the sale of cars with internal combustion engines by 2030. Piyush Goyal, India’s minister for power, coal, new and renewable energy, and mines, told the Confederation of Indian Industry’s 2017 Annual Session, “We are going to introduce electric vehicles in a very big way”. Citing the country’s push to reduce energy use through the widespread adoption of LED lights, the minister claimed that the government would “make electric vehicles self-sufficient” and “by 2030, not a single petrol or diesel car should be sold in the country”. In a report from the International Business Times, Goyal expressed the government’s desire for the electric vehicle market to be ultimately “driven by demand and not subsidy”. That said, automakers would need 2 to 3 years of handholding, after which “the cost of electric vehicles will start to pay for itself for consumers”. The government is currently mulling assistance in the form of low-cost financing or GST relief. In addition to making the vehicles more financially desirable, the Indian government will need to flesh out the country’s infrastructure. The minister says the administration is investing in charging infrastructure in large population centres, like Delhi, which has some of the world’s worst pollution. In addition to this, the government is considering investing in or incentivising battery swapping stations, which can remove a depleted battery and replace it with a fully charged one in “less time than what it takes to put petrol in your car”. +++
+++ KIA is looking forward to getting its version of the forthcoming Hyundai Kona, the South Korean brand’s smallest SUV. “When it comes, we’ll probably be giving it a hug and kissing it on the bonnet”, joked a spokesman. But the new, yet-to-be-named model, which will share its underpinnings with the Kona, is still 18 months away from hitting showrooms. That’s a long wait for Kia as the city-sized SUV category continues to grow, but the spokesman said the brand won’t relax while it waits. He confirmed the Soul would remain a part of the line-up for the foreseeable future to give it some character. The spokesman also revealed the brand would consider dropping the price of the Optima when the new Stinger arrives in September. “It depends how we position 2.0-litre Stinger but, as I’ve said before, if we have to re-price Optima to keep it viable and keep it selling then we’ll do that”, he said. +++
+++ NISSAN ‘s British arm has adapted a 19th century invention to 21st century times, creating an armrest-mounted phone holder that blocks the device’s signal to reduce driver distraction. Called the ‘Nissan Signal Shield’ concept, the holder is lined with a Faraday cage: an invention dating back to the 1830s. The contraption has been installed into the armrest of a Juke, which is built in the UK, and once a mobile device is placed in the compartment all of the phone’s incoming and outgoing cellular, bluetooth and WiFi connections are blocked – any incoming electromagnetic signals, such as cellular or Bluetooth data, are distributed across the cage’s external conducting material and therefore prevented from reaching the device. Nissan’s Signal Shield concept is in response to the growing amount of road users being distracted by their phones while driving, with a new report by the UK’s RAC finding that an alarming 31 percent of drivers admit to using their mobile devices when they should be focusing on the road ahead. Additionally, Nissan’s own research found that 1 in 5 drivers admitted to texting behind the wheel. The Japanese company says its device is designed to give drivers the choice to eliminate the distractions caused by the countless text messages, social media alerts and app notifications that are pushed to smartphones every day. Drivers are still able to connect to the vehicle’s entertainment system via USB or AUX ports if they want to listen to music or podcasts stored on their smartphone, though wireless connections will continue to be blocked. +++
+++ Automakers in the 1960s participated in the horsepower wars, and afterwards different oil companies took up the challenge to produce fuel that could prevent high compression engines from blowing up pistons. However, it all halted when the Clean Air Act was imposed. Further, preposterous insurance premiums and an oil crises wiped out any further demand for 100-plus OCTANE fuel. Car enthusiasts then resorted to either searching for 100-plus octane race gas or just detuning their cars to run on 91 octane. Enthusiasts have done a wonderful job in converting power with lower octane fuels but these advantages might soon disappear without better fuel. The Detroit Free Press reported that the automakers and oil companies are now developing and advocating for a new generation of fuels and engines that will run more smoothly. In turn, this will generate more power from a lower amount of gasoline, resulting to less emissions and better fuel economy. However, this higher-octane gasoline will cost 10 cents more per gallon more than the current premium fuel. The auto industry and oil companies haven’t figured out yet how to appeal to drivers with this plan. They are concerned that the consumers might be puzzled about the increased costs and won’t choose the higher-octane gas even if it generates more power and uses less fuel. Octane is a measurement of a fuel’s resistance to igniting upon being compressed in an engine’s cylinder. Increasing octane will allow engineers to boost the engine’s compression ratio, then it can facilitate an engine to run with greater thermal efficiency. In the U.S., gasoline grades range from 87 to 93 but this largely depends on the state. A rise to 98 octane will grant a 10 percent rise in fuel economy compared to the modern premium fuel. An engineer even presented the significant benefits of gas that’s as high as 114 octane but he commented that the price would be considered too steep by the public consumers. The Detroit Free Press further pointed out that raising the octane could be the ideal solution to achieve the lowest cost to increase fuel economy. Another advantage is that it will cost less than developing a brand new transmission. But all of these can’t happen overnight. It actually isn’t likely to happen before the year 2021. The acting head of the Environmental Protection Agency’s Office of Transportation and Air Quality recommended in 2016 that the years following 2025 will be an appropriate time to introduce higher-octane gas. But all of these will not be a walk in the park, as the suggested plan would benefit only a few drivers at first due to the fact that there’s no fuel economy advantage when placing a higher-octane fuel into an engine that is not compatible with the raised octane fuel. The reality is that vehicle owners have been wasting billions of dollars per year in getting the wrong kind of gas for their automobiles. +++
+++ With just weeks left for TESLA to meet his tight production deadline for its first mass-market vehicle, Chief Executive Elon Musk sounded confident the goal will be met. Musk said that Tesla is on track to begin production of the Model 3 in July in what will be a critical test for the company to shift from a niche luxury brand to a mainstream auto maker. Buyer enthusiasm for the $35,000 electric car is mounting, and investors are pouring into Tesla as Wall Street sours on traditional auto makers, fearing their swelling inventories are a prelude to a cyclical downturn after 7 consecutive years of robust U.S. sales. General Motors joined Ford and other car companies in reporting disappointing U.S. sales results for April, the 4th consecutive month of year-over-year of declines. Tesla, which is coming off its best quarterly sales period, is helping fuel the belief that Silicon Valley can revive lagging interest in car buying, igniting imaginations about a future where vehicles drive themselves. At stake is a U.S. auto industry that generates some $2 trillion in annual revenue. “Model 3 vehicle development is nearly complete as we approach the start of production”, Musk said. “Preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018”. Shares of Tesla have risen this year by 50%, pushing its market value to greater heights than both GM and Ford, the two largest U.S. auto makers by sales. Tesla currently owns the market-value crown despite the fact the company sells a fraction of 10 million vehicles GM sold last year, is deeply in debt and has never turned an annual profit. “We don’t think earnings matters”, Brian Johnson, an analyst with Barclays, advised clients. “The stock seems so disconnected from any form of fundamentals, and right now is purely driven by momentum, making earnings less relevant”. Tesla continued its unprofitable ways during the first 3 months of the year despite more than doubling revenue to $2.7 billion. The company said its loss attributable to common shareholders widened to $330 million from $283 million a year earlier as it moves toward Model 3 production. On an adjusted basis, the company’s per-share loss of $1.33 missed the 81-cent-a-share loss predicted by a consensus estimate of analysts surveyed by Thomson Reuters. Tesla’s automotive business was helped by a 69% increase in the sale of Model S and Model X during the quarter compared with a year earlier. The company delivered about 25,000 vehicles in the January through March period, its best ever and a remarkable change of fortune from a year earlier when Musk was struggling to work out the kinks in the new Model X, which had been plagued with production and quality issues. The sales growth puts the company on pace to meet Musk’s goal of selling 50,000 vehicles in the first half of the year. He aims to begin initial production of the Model 3, its first mass-market electric sedan, in July with the goal of ramping up production to 5,000 a week during the fourth quarter. Musk is betting the Model 3, a 5-door liftback, will broaden the company’s appeal and help increase production to 500,000 vehicles next year toward a goal of 1 million in 2020. Tesla made about 84,000 vehicles last year. Hedge-fund manager David Einhorn, a longtime shareholder of GM who has shorted Tesla’s stock, expressed doubt that Tesla will be able to reach a mass market with its Model 3 at a level that would justify its market value. “For the time being, investors remain hypnotized by Tesla’s CEO”, said Einhorn, the founder of hedge fund Greenlight Capital, on a conference call with his firm’s investors. To support plans to spend more than $2 billion ahead of the Model 3 rollout, Musk worked in the first quarter to shore up a continuing issue for Tesla: its cash balance. During the quarter, Tesla raised $1.22 billion by issuing new debt and stock. Tesla spent $553 million during the period on expenses for the Model 3 and giant battery factory in Nevada, finishing the quarter with $4 billion in cash, which is the highest amount in its 13-year history. Musk received a vote of confidence this year when Tencent Holdings, China’s most valuable company, revealed it had t aken a 5% stake in Tesla. To prepare for more people driving Tesla cars, Musk said he plans to add almost 100 retail, delivery and service facilities, a 30% increase. Tesla will also add more mobile repair trucks during this quarter to address customers concerns in the field. Those efforts comes after announcing plans to at least double the number of fast chargers across its network for cars, following complaints about crowded stations. +++