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+++ Volkswagen boss Herbert Diess will outline a 10-year plan on Nov. 16 to slash research costs by working with rivals, a step which would sideline AUDI as the group’s leading development center. The chief executive will present his plan at a meeting of the German carmaker’s supervisory board, 2 sources told. It will explore potential alliances with Ford and others to develop autonomous and electric vehicles (EVs). If approved by the board, it would signal a major departure from VW’s standalone efforts to build them and diminish Audi’s importance as an engineering hub. Automakers globally are considering teaming up to save money on development, which cost Volkswagen $13.1 billion in 2017, in the race to get EVs and self-driving cars on the road. Savings are particularly important for VW as it tries to get its business back on track after an emissions scandal. It faces a big bill to make its combustion engines comply with new anti-pollution rules. “The strategy plan doesn’t only cover the next 5 years, but looks a decade ahead”, one of the sources said. A VW spokesman declined to comment on the agenda of the company’s next supervisory board meeting. Audi spokesman Peter Oberndorfer said no formal decisions have been taken about reassigning Audi’s responsibilities on autonomous driving within the group. Diess also aims to cut duplicate efforts on technology development among VW’s different brands, and to seek greater economies of scale by partnering with software companies, carmakers and battery cell manufacturers. The strategy could also deepen existing cooperation with Ford. This could include the U.S. carmaker supplying a pickup truck platform and some engines to VW, one of the sources said. VW could also buy a stake in Ford’s autonomous cars program and give Ford access to its MEB electric cars platform, they said. Ford has said it has an agreement with VW to discuss potential collaborations across a number of areas but it was premature to provide details. VW and Ford are under pressure to roll out more EVs in Europe, after the emissions scandal, which originated at Audi. Emissions rules in Europe are still being finalised but VW would need to raise its share of fully electric vehicles to 30 % of new car sales to cut average fleet emissions of carbon dioxide by 30 % by 2030. Audi, whose slogan is Vorsprung durch Technik or Advantage Through Technology, has been VW’s research and development hub for decades. But its engineers developed the engine management cheating software that masked excessive pollution levels. The departure of senior Audi executives after the scandal has left a leadership vacuum just as carmakers are trying to keep up with innovations by software and technology companies. Audi’s stumble also comes as Diess is tightening his grip on the sprawling multi-brand car and trucks group, which includes Skoda, Seat, Audi, Porsche, Bentley, Bugatti, Lamborghini, Ducati, Scania and MAN. To cut the costs of developing an electric car platform for premium vehicles, VW has already bundled development between Porsche and Audi. “The pendulum is swinging back in the direction of centralization”, a senior Volkswagen executive told. Audi has been developing autonomous technology for VW, Audi and Porsche. It built the A8, a car with advanced self-driving features, but its efforts for a fully autonomous car have fallen behind rival companies like Alphabet Waymo. “We want to have access to a self-driving system and we are speaking with relevant players. It is very expensive to develop and others are already well advanced”, Chief Financial Officer Frank Witter said. Diess fears German carmakers will lose their edge unless they make radical changes. He said last month there was a 50-50 chance they would still be among the global elite in 10 years’ time. Electric cars are still too expensive to produce for mainstream consumers to afford them and so carmakers must find savings or greater economies of scale to make them cheaper. +++ 

+++ FIAT CHRYSLER Automobiles ’ (FCA) new CEO is tired of being No. 3 in U.S. pickup truck sales. With a strategy of loading up its revamped Ram 1500 full-size trucks with new features (ranging from 12-inch touch screens on the dashboard to large battery packs and electric motors to help adjust speed and gears and conserve fuel), the automaker is banking on a sustained surge in demand. So Chief Executive Mike Manley is now reconsidering a decision announced in January to stop building Ram heavy-duty pickups at a plant in Saltillo, Mexico. That plant, and another in Warren, Michigan, between them would produce other Ram models and free up manufacturing capacity to make even more new trucks to eat into sales of Ford’s F-Series or General Motors’ Chevrolet Silverado and its higher-end GMC Sierra. “We need to get ourselves into second place”, Manley told in his first interview since taking over the No. 7 global automaker after Sergio Marchionne died suddenly. “Frankly, I don’t care which of the two I take share from”. When U.S. President Donald Trump was threatening action that would have imposed a 25 % tariff on Mexican-made pickup trucks earlier this year, Fiat Chrysler said Saltillo would be “repurposed to produce future commercial vehicles”. In 2017, Marchionne had raised the possibility his company could move heavy-duty pickup production out of Saltillo, saying U.S. tax and trade policy would influence the decision. Now, the United States, Mexico and Canada have a tentative trade agreement that imposes no ceiling on shipments of pickups to the United States from Mexico, provided they meet thresholds for the share of parts produced within the region. “With a combination of Warren and Mexico building what we call the classic truck, we have enough production to increase output next year if it’s required”, Manley said. “In my opinion it will be required. We are gaining share. Obviously I am looking for that to continue, but it’s an incredibly competitive segment”, he added. The Ram and Jeep brands underpin the automaker’s North American business (which accounted for nearly 85 % of Fiat Chrysler’s second-quarter pre-tax profit) and offset the struggles of its legacy Fiat business in Europe and operations in China. Ford’s F-Series trucks have led the segment for 4 decades. In 2017, Ford had a 35.6 % share of U.S. retail truck sales, followed closely by GM at 34.2 % and FCA with 22.3 %. Pickup trucks are the single biggest contributor to the Detroit Big Three automakers’ profits, so there is plenty at stake as they fight for market share. In the battle for pickup customers, GM launched a new version of its Silverado truck designed with a focus on slashing weight and trimming production costs to compete with market leader Ford. Fiat Chrysler took a different tack with the new Ram. The automaker stuffed more features into the vehicle (including an optional 12-inch touch screen and partial electrification that saves fuel and helps with acceleration and cruise control) on a bet that customers would pay more in return. So far, the gamble appears to be paying off. The new Ram 1500’s average sale price for the year to date through late October hit $46,856; higher than the $42,389 average for the Ford F-150, according to industry data. Though in FCA’s case the data only involves the higher-end versions of the 2019 Ram 1500 that are available so far, but all versions of the F-150. Hayden Elder, owner of Elder Chrysler Dodge Jeep Ram in Athens, Texas, said 3 times in under a month he has had families trade in nearly-new large SUVs made by FCA’s rivals for a new Ram 1500. “This new Ram is the biggest leap I’ve ever seen from one version to another”, Elder said. Phil Jansen, Fiat Chrysler’s head of product development, said when his team began redesigning the Ram 1500, they decided a lighter, all-aluminum body (which Ford uses for its trucks) was too expensive. GM executives reached the same conclusion. But Fiat Chrysler took a chance that GM did not, and added a large battery pack and electric motor that assist with acceleration and shifting, plus deliver a smooth start-stop function that idles the engine when stopped in traffic, boosting fuel economy. “It can save about this much fuel at an average stop”, said FCA electrification manager Brian Spohn, holding up a small tumbler of water. The decision to offer a larger dashboard screen than its rivals have came late in the design process. Initially, the big screen was offered in the top3 of the truck’s 6 versions. Fiat Chrysler has since decided to offer it on an additional version. Demand is so high, the company has pushed the screen’s supplier for as many screens as it can provide, according to a source familiar with production plans. “We haven’t found the ceiling yet” for what U.S. customers are willing to pay for additional features, said Jim Morrison, head of the Ram brand in North America. Fiat Chrysler had problems earlier this year accelerating production of the new Ram truck on a highly-automated production line installed at a Detroit-area plant that previously made slow-selling sedans. Among the problems: Dropped bolts and other debris would shut down automated vehicles that carried truck frames through part of the assembly process. The solution was to put debris-sweeping skirts on the carriers, FCA executives said on a recent tour of the plant. Now, the Sterling Heights Assembly Plant is cranking out around 65 trucks an hour, 20 hours a day, 6 days a week; a pace of about 400,000 vehicles per year. “It is capable, if we wanted to, to push it up more from there”, Manley told. “Clearly, having the capacity to fulfill our ambitions is important”. +++ 

+++ FORD could help build a rival to the iconic Land Rover Defender if plans from chemicals company Ineos come to fruition. Ineos has shortlisted Ford’s engine plant in Bridgend, south Wales, as a possible production location for the off-roader. Discussions are ongoing between the 2 companies. In 2017, Ineos chairman Jim Ratcliffe detailed his plans for a vehicle in the style of the Land Rover Defender dubbed Project Grenadier. Despite having no prior experience in building vehicles, Ineos has bold ambitions for its automotive endeavor and has said that its Defender-style SUV will ultimately be followed by a family of models offered with petrol, diesel, and hybrid powertrains. As of September 2017, Ineos had allegedly been considering building a new plant in the United Kingdom at a cost of up to $945 million to build its range of vehicles. However, the company is now in talks with the Blue Oval to use a section of Ford’s plant which currently builds engines for Jaguar Land Rover and will cease production in 2020. According to Ineos, a final decision has yet to be made. The company has previously confirmed that former Mercedes division MBTech will handle engineering of the SUV while Magna International will be responsible for chassis development. Speaking about the company’s upcoming Defender-esque vehicle, Ineos Automotive chief executive Dirk Heilmann expressed his confidence in the project. “Our job is to create the world’s best and most uncompromising 4×4, and we are steadily moving forward with the project. We have recruited a first-class management team, are making good progress in our search for a manufacturing site, and we are now launching the new Projekt Grenadier interactive website”. +++ 

+++ At a near-empty HYUNDAI showroom in the Chinese mega city of Chongqing, the store manager is grumbling about his shortage of customers and a lack of bigger, cheaper SUV models popular in the world’s largest auto market. Even with discounting of as much as 25 %, his dealership was selling barely 100 vehicles a month, said the manager surnamed Li. A nearby Nissan dealership was selling about 400 vehicles a month, a store manager there said. “The sales are simply poor”, Li told. “Look at the Nissan store next door, they have tens of customers while we just have 2”. An hour’s drive away is Hyundai’s massive $1 billion manufacturing plant, which opened last year with a target to produce 300,000 vehicles per year. But with sales weak and the Chinese auto market slowing sharply, the factory is running at roughly 30 % of capacity, 2 people with knowledge of the matter said. The sources asked not to be identified because the information was not public. Hyundai, the world’s 5th largest automaker, declined to comment on the Chongqing plant’s production or the showroom’s sales but said it is “closely cooperating” with local partner BAIC to turn around the China business. BAIC did not respond to requests for comment. Hyundai’s woes mark a major reversal for the automaker which was an early success story in China as it quickly and cheaply rolled out popular new models into a surging market. In 2009, Hyundai and partner Kia’s combined sales ranked third in China after General Motors and Volkswagen. The South Korean duo now ranks 9th and its market share in China has more than halved to 4 % last year, from more than 10 % at the beginning of this decade. Executives and industry experts say Hyundai conceded its once stronghold in the low-end segment to fast-growing Chinese rivals such as Geely and BYD. Foreign rivals not only defended their turf in premium segments but also kept pricing competitive for mass-market models, squeezing Hyundai’s positioning as an affordable foreign brand, they said. In the United States, the world’s second-biggest auto market, Hyundai’s market share fell to 4 % last year, near a decade low. Hyundai ran into problems in China and the United States for similar reasons: It missed shifts in consumer tastes, especially the surge in demand for SUVs, and it sought higher prices than its brand image could command, 4 Chinese dealers and 6 former and current U.S. dealers, executives and employees said. In a statement, Hyundai said it is addressing its problems in its key U.S. and Chinese markets, revamping designs, launching new SUVs and giving regional units more autonomy to quickly develop products tailored to local tastes. Japanese rivals such as Honda, long a role model for the Korean automaker, have also struggled to adapt to the industry’s emerging challenges including self-driving cars and electric vehicles. Last month, Hyundai posted a 68 % plunge in third-quarter net profit and reported its operating margin shrank to 2.7 % in the January-September period. In 2011, Hyundai’s operating margin of 10.3 % was the industry’s highest after Germany’s BMW.Hyundai’s lack of a strong SUV line-up in key markets has also hurt. Last year, SUVs accounted for just 36 % of Hyundai’s U.S. sales, compared to GM’s 76 % and the industry average of 63 %, according to U.S. market research firm Autodata Corp data. “One of our challenges back then, and I know it would continue to be a challenge, was that the management at the headquarter was really big on sedans”, said Ed Kim, a Hyundai U.S. product manager between 2004-2008 who is now vice president for California-based auto consultancy Auto Pacific. “U.S. product planning staff, marketing staff really wanted more truck products, more SUVs, but in so many cases, it was very difficult to convince management”. Hyundai America Chief Operating Officer Brian Smith acknowledged the automaker was “caught a little off guard” with a rapid market shift toward big vehicles. But a slew of new planned SUVs including a “crossover” pickup in 2020 will help drive a “slow, steady” recovery in sales, Smith told in an interview. Hyundai has also in recent years hired several new designers to revamp design for next-generation models, he said. Asked if Hyundai will be able to return to its record market share of 5.1 % in 2011, Smith said: “It’s going to take a few years”. Hyundai made a crucial mis-step with its flagship Sonata 4 years ago when it decided to dial back distinctive design features including its sporty, fluid curves. The redesign contributed to falling sales, U.S. dealers and former Hyundai executives said. Scott Fink, who owns the biggest U.S. Hyundai dealer by volume, vividly recalls the moment when Hyundai brought about 20 U.S. dealers to its headquarters in Seoul to show off the new Sonata before its 2014 U.S. launch. “I’ll never forget it. They pulled the sheet off of it and there were 20 people in the room and not one person clapped”, Florida-based Fink told. The design was too conservative and mainstream, falling flat with dealers and consumers, he said. “Then, more than anything else, it just became a price war”, Fink said. In 2007, the Sonata was 10 % cheaper than Toyota’s popular Camry but by 2014 it cost more, according to U.S. market research firm Edmund. Hyundai, which sold nearly 200,000 Sonatas in the U.S. market in 2010, sold just 131,803 units last year. Hyundai did not comment on the design changes or the cool response to the unveiling of the Sonata design described by Fink. Back in the Chinese city of Chongqing, dealers at 4 Hyundai showrooms visited say the new Encino SUV, based on the Kona and launched this year in China, missed the mark. Global automakers often tweak designs for the Chinese market, adding features such as bigger, more luxurious rear passenger zones to cater to buyers, many of whom have drivers. “We don’t sell Encino. It simply doesn’t fit the Chinese market”, said another store manager surnamed Liu at one of Hyundai’s first dealerships in Chongqing. “Most Chinese prefer bigger, cheaper and prettier cars”. Hyundai had a target of producing 60,000 Encinos a year, one source with direct knowledge of the matter said. But just over 6,000 Encinos have been sold in the 6 months since its April launch, regulatory filings show. During a recent earnings call, vice president Koo Zayong said Hyundai will also shorten its development period for new models in China, where market trends are changing fast, driven by the rise of young customers. Hyundai created a division dedicated to improving Chinese products in August, and replaced its China operation head in July. But the China recovery will likely be “gradual” given an economic slowdown and intensifying competition from rivals, Hyundai said in a statement. Company officials, dealers and analysts expect the task of leading a revival will fall heavily on Hyundai’s third generation leader, Euisun Chung. Chung, 48, was promoted to executive vice chairman in September, moving him a step closer to succeeding his octogenarian father and current chairman, Mong-koo Chung, who has been absent from public view and key internal meetings for the past 2 years. The elder Chung is credited with catapulting Hyundai to the big leagues by drastically improving product quality and rapidly building production capacity at home and abroad. Under his tight grip over the sprawling conglomerate and centralized decision making, Hyundai shunned partnerships and made everything in-house, from steel to key components such as engines and transmissions. But Hyundai also invested less than rivals in research and development. Last year, Hyundai Motor spent just 2.6 % of its revenue on R&D, compared with 6.7 % for Volkswagen, 3.8 % for Toyota and 3.6 % for BYD, according to their annual reports. In a break from tradition, the younger Chung has been investing in start-ups, hiring outsiders and forming partnerships with self-driving tech firms and others. Last year, Hyundai appointed a chief innovation officer from Samsung Electronics to oversee a division on ride-sharing, robotics and artificial intelligence. Euisun Chung has had some early setbacks. At the 2011 Detroit auto show, he unveiled Hyundai’s new brand vision (modern premium) to revamp its value for money image, and 4 years later announced the automaker’s first premium brand, Genesis. U.S. sales of Genesis fell 45 % year-on-year to 9,281 vehicles from January to October. Chung declined an interview request. Nick Reilly, a former chief executive of GM Korea, told that Hyundai’s brand image has certainly gone up but still is “not anywhere near a premium brand”. “So I think they have to go back to the mentality to be very price-competitive in order to maintain the volumes”, he said. +++ 

+++ SEAT ’s taste for high-riding vehicles started with the presentation of the Ateca in early 2016. The compact SUV was then followed by the smaller Arona and, more recently, the larger Tarraco. The Spanish car brand’s ambitions won’t stop here, however, as they’re also looking at introducing a coupe SUV. They have trademarked the Terramar moniker, which could be used in the production version. Autodromo de Sitges-Terramar is a former racing track located near Barcelona, built in the 1920s. It’s also where Seat hosted the launch event of the Cupra brand earlier this year. Thus, the Terramar is consistent with Seat’s naming policy, which takes inspiration from the Spanish geography. Also, it’s relatively easy to pronounce in different languages. Seat already confirmed a “SUV coupe”, which “will be Leon-sized”, according to R&D boss, Matthias Rabe. The official referred to it as “quite high, coupe-like and quite sporty”, which “works very well as a Cupra” and “fits perfectly”. So, if the Terramar is this model, it would slot in their lineup between the Ateca and the Tarraco. However, it will be a coupe version of the latter, inspired by the 20v20 Concept presented at the Geneva Motor Show in 2015. It is said to launch as a Cupra first, with more than 300 horsepower channeled to both axles through a dual-clutch automatic transmission. A small electric motor might also be used for a mild hybrid powertrain. Possibly following the Cupra Terramar, around 18 to 24 months later, will be the Seat versions. These will reportedly make use of petrol and diesel engines, but hybrid variants are also being considered. +++

+++ Shortly after TESLA confirmed that it had received a subpoena from the U.S. Securities and Exchange Commission (SEC) about Model 3 production forecasts, chief executive Elon Musk has slammed news about the matter as being false. The Wall Street Journal reported that the FBI is reviewing Model 3 production numbers as part of an ongoing criminal probe into whether the company misled investors. Citing unnamed sources, the publication asserted that federal agents were reviewing Tesla’s stated Model 3 production numbers dating back to early 2017. Despite Tesla admitting that it has provided information to the Department of Justice regarding Musk’s public statements about Model 3 production, he denied The Wall Street Journal’s assertions. “The amount of untruthful stuff that is written is unbelievable”, Musk told during an interview. “Take that Wall Street Journal front-page article about, like, ‘The FBI is closing in’. That is utterly false. That’s absurd. To print such a falsehood on the front page of a major newspaper is outrageous. Like, why are they even journalists? They’re terrible. Terrible people”, he said. Musk’s denial appears solely related to claims that the FBI is involved. While Tesla says the Department of Justice is conducting investigations, it has failed to comment on reports about the agency’s alleged involvement. According to Tesla, none of the government agencies conducting investigations have concluded that any wrongdoing occurred. When Tesla launched the Model 3 in 2017, it said it would be building 5,000 units per week by late Q1 2018. The company soon revised that target to the end of Q2, ultimately achieving its goal in the final week of June. +++

+++ Last month, a mysterious prototype of the VOLKSWAGEN Golf R was spotted testing at the Nurburgring, and more recently, the same car arrived at the German track again. Rumor has it that it has the same turbocharged 2.5-liter 5-cylinder engine as the Audi RS3 Sportback, which may be tuned to produce 420 hp, or an extra 20 hp over the Audi. If the info turns out to be correct, then the Golf R420 (name unconfirmed) will have 120 hp more than the updated Golf R, which lost 10 hp in order to comply with the new WLTP emission standards. More importantly, with all that power channeled to the 4Motion all-wheel drive system, the alleged Golf R420 will become the new mega hatch king in terms of power. This would allow it to fight against the likes of the upcoming Mercedes-AMG A45, expected next year with in excess of 400 horses, but it would also pose a threat to the Audi RS3 Sportback, which is why, if it’s indeed approved for production, it might be a limited run. With an all-new Golf coming next year, it would make sense for VW to send off Golf Mk7 with such a special, though we’re not sure if it would make it faster than the RS3. Moreover, while the latter’s 5 cylinder would, in theory, fit in the Golf’s engine bay, it’s doubtful the company would go to all that trouble instead of tuning the R’s 2.0-liter 4 cylinder. Anyway, this is all speculation and guesstimates right now, so we’ll have to wait and see. Since the clock is ticking for the Mk7’s demise, something tells us it won’t be long before we find out. +++

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