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+++ ASTON MARTIN sales rose by a quarter in 2018, despite challenging market conditions affecting the wider car market. As a luxury car brand, the Gaydon-based car maker is at least, in part, protected by its high-end position in the market with similar brands such as McLaren and Ferrari also seeing growth in 2018. Aston Martin also launched a plethora of new products last year, helping it to combat broader car sales trends. It sold 6.441 units in 2018, up from 5.098 the previous year, aided by the introduction of the new Vantage, DBS Superleggera and special editions of the Vanquish Zagato Shooting Brake, Vanquish Zagato Speedster and DB4 GT Continuation. Growth was led by China and the Americas, up by 31 % and 38 % respectively. UK sales grew by 17 %. Revenue rose by 25 % to £1.096 billion year on year and earnings before interest, tax, depreciation and amortisation increased by 20 % to £247.3 million. However, it also revealed pre-tax losses of £68 million, largely down to £136 million in costs for its stock market flotation in October. Investment in its new manufacturing facility in St Athan, Wales plus development costs for new models also thwarted profits. Aston Martin boss Andy Palmer said: “2018 was an outstanding year for us, delivering strong growth, with improving revenues, unit sales and adjusted profits. As the UK’s only listed luxury automotive group, we have demonstrated our legitimacy in the global luxury market. Our well-defined expansion plans, that combine outstanding high-performance cars with iconic brand status, are on track as we manage through the uncertainties and disruption impacting the wider auto industry”, Palmer added that it was confident of “another year of growth”. He said: “Whilst we are mindful of the uncertain and more challenging external environment, particularly in the UK and Europe, we remain disciplined in our execution, whilst also reconfirming our medium-term objectives”. Aston Martin is creating a £30 million Brexit fund to ensure its business is not interrupted by the UK’s imminent departure from the EU. A sum of “up to £30 million of advanced working capital and/or operating expenses” will be set aside in order to “protect production and customer deliveries”. +++ 

+++ BMW owners whose cars need essential recall work are having to go up to 2 months without their vehicles, because the company admits parts supply issues and workshop availability are leading to delays of up to 8 weeks. A recall in October last year identified 268,000 diesel BMWs in the UK requiring potential remedial work, with 1.6 million vehicles affected worldwide. The fault concerns a possible glycol leak in exhaust gas recirculation (EGR) valve coolers, which could lead to fire “in extreme cases”. Hundreds of thousands of EGR parts are needed worldwide to resolve the fault, placing unprecedented demand on BMW’s suppliers. Due to the potential fire risk, a significant number of cars have been impounded at dealerships. Their owners have been unable to drive them while they wait for parts to arrive from Germany. The firm has supplied “thousands” of courtesy cars to affected customers, but we have been contacted by a number of owners who feel BMW hasn’t done enough to resolve the situation. Complaints range from long waits with poor communication and unsuitable hire cars, while some readers told us they had not been sent recall letters, only finding out their cars required the work when they were in dealerships for routine servicing. Models affected are examples of the 3 Series, 4 Series, 5 Series and 6 Series, X3, X4 and X5 and X6 with 4-cylinder diesel engines produced from December 2014 to August 2016, and with six-cylinder diesel engines made from July 2012 to June 2015. Also, examples of the 1 Series, 2 Series, and 7 Series, and X1 with 4-cylinder diesel engines made from March 2011 to January 2017, and with 6-cylinder diesel engines made from August 2010 to June 2015. Exhaust gas recirculation (EGR) valves reduce harmful NOx emissions by recycling a portion of exhaust gases into the combustion chamber, reducing the high ignition temperatures associated with NOx production. EGR valves run hot and require cooling; in affected diesel BMWs, EGR coolers that can leak, posing a potential fire risk. +++ 

+++ The usual mix of sports cars, offroaders and family saloons will be on display at the Geneva motor show this week, but with one big difference from previous years: they may be about to become harder and costlier to make, and more expensive to buy. If Britain leaves the European Union on March 29 without a withdrawal deal, all bets are off on what will happen to the just-in-time production system on which the European auto industry relies, or to demand for vehicles across the continent. And the situation has just got more complicated. Last week, British Prime Minister Theresa May raised the prospect of a short delay to the BREXIT , potentially disrupting the plans that carmakers have put in place to cope with a no-deal divorce. “I’m sure I speak for most of the country when I say, we just want to get it done. We just want to know where we are and get on with it”, Andy Palmer, the chief executive of Aston Martin, told. The stakes are high. Britain is Europe’s second-biggest buyer of cars and 4th biggest manufacturer, meaning disruption to supplies (and possible tariffs of up to 10 % on vehicles moving between Britain and the European Union) will have repercussions across the industry. With less than a month to go, May is trying to renegotiate a withdrawal deal with the EU that British lawmakers have so far refused to approve. The timing could hardly be worse for a car industry already struggling with a slowdown in China, the world’s biggest autos market, a plunge in demand for diesel vehicles and costly investments in electric as well as self-driving cars. Britain’s once booming car industry is already recording drops in sales, investment and output, with Japan’s Honda delivering the biggest blow so far by announcing plans to close its British factory. But carmakers cannot suddenly stop plans which have been years in the making. McLaren will display its Speedtail in Geneva, while fellow British luxury brand Bentley will show off the Bentayga Speed and Aston Martin its Lagonda all-terrain concept vehicle. Meanwhile, Toyota has just begun churning out its new Corolla at its English factory. But others are staying away from Europe’s top car show. These include Jaguar Land Rover (JLR), which is belt-tightening, and U.S. manufacturer Ford, which is making cuts to its European operations. JLR has said it faces a more than £1.2 billion hit to its profits if there is a “bad Brexit deal”, which would involve tariffs on cars of up to 10 % and between roughly 2 and 4 % on components and engines. Ford, which does not make cars in Britain but builds nearly 1.3 million engines there, has said a no-deal Brexit could cost up to $1 billion. It fears delays and tariffs before the engines can be fitted into vehicles in Germany, Turkey, the United States and elsewhere. Ford also has the most exposed overseas plant, with nearly 1 in 3 cars rolling off the production line in its Cologne plant in Germany destined for Britain, the company’s third-largest market. 7 of the top 10 factories that export the highest volumes to Britain are in Germany, which itself is teetering on the edge of recession. Ford said last month it would take “whatever action is necessary to preserve the competitiveness of our European business”. But moving production can takes years, meaning firms would have to manage a no-deal Brexit, at least in the short term. Honda’s plant closure announced last month will not take place until 2021. A delay to Brexit could also ruin some contingency plans. JLR, Honda and BMW’s Mini and Rolls-Royce brands (together accounting for around 55 % of UK car output) all plan to shut down in April from between a week to up to a month in case of any disruption from a no-deal Brexit. Shutdowns are generally organized months in advance so employee holidays can be scheduled and suppliers can adjust volumes, making them hard to move. The uncertainty leaves automakers grappling to address a huge range of potential problems, from recertifying models to investing in more pallets to transport German-made engines. “We can listen to the rhetoric of British politicians saying ‘we’ll make the Dover port flow, we’ll let the stuff in’ but what they fail to realize is that for every time you bring in an engine, you’ve got to send a pallet back to Germany”, said Aston Martin’s Palmer. “If the French aren’t opening up their border, very soon you run out of pallets”. +++ 

+++ The Honda CR-V, Mercedes-Benz G-Class and Seat Tarraco have all been given the maximum 5 stars in the most recent round of EURO NCAP crash tests. The 3 SUVs all scored highly for both their crash protection systems and for safety technology designed to prevent accidents. All 3 cars feature autonomous emergency braking (AEB) as standard, along with several other systems. The Tarraco scored 97 % for adult occupant protection, one of the highest scores for a large SUV. The CR-V scored 93 % in this category, with the G-Class scoring 90 %. Matthew Avery, the director of research at UK safety insititute Thatcham Research, said the Tarraco’s adult occupant protection score would become “the target for 2019”. The 3 machines all offered different forms of speed assistance systems, which the European Parliament is set to make a standard-fit requirement for new vehicles in the future. +++ 

+++ FORD ’s joint venture with China Changan Automobile Group has decided not to renew its contract with some agencies supplying it with workers, as carmakers struggle to cope with slumping sales in China. The Ford-Changan joint venture has quietly begun dismissing thousands of its 20,000 workers in the world’s second-largest economy. China’s car sales fell 2.8 % in 2018, marking the first contraction since the 1990s. Slowing economic growth as well as the fallout of trade frictions with the United States have hurt demand. Ford suffered an even deeper sales slump of 36.9 % last year in China, due to lack of new and significantly redesigned models, especially SUVs for the market. Company executive told last year it was unlikely that Ford’s sales will regain momentum in China until later in 2019 when the first new vehicle models arrive in showrooms in large enough numbers. Beijing has in recent months pledged various measures to boost private consumption to prop up growth, including subsidies to boost rural sales of some vehicles and purchases of new energy vehicles. January’s car sales fell 15.8 % from a year earlier, however, and analists do not expect annual sales growth in 2019. +++ 

+++ HYUNDAI , which is reeling from tumbling sales in China, is considering cutting capacity at its factories in its biggest market, chief executive Lee Won-hee said. Lee made the comments at a meeting with analysts and investors. He told that the automaker is considering addressing overcapacity at its old factories in China, while slashing headcount in the country. A Hyundai spokeswoman said that the automaker is “reviewing various optimization plans to enhance facility efficiency” and has begun voluntary retirement for employees in China. China’s auto industry, the world’s biggest, is slowing after strong recent growth, with demand hit a weakening economy and the fallout of trade frictions with the United States. China’s car sales fell 2.8 % in 2018, marking the first contraction since the 1990s. Hyundai’s China sales sank 23 % in the 4th quarter amid a lack of attractive models and strong branding in the face of competition from both Chinese and global car makers. Lee said Hyundai is also considering shipping vehicle kits from China to Philippines, South America and other countries for local assembly. He said that General Motors, Ford and Honda are also slashing global excess capacity, the note added. Lee said globally automakers have the capacity to produce 135 million vehicles a year; 31 % higher than the industry demand of 95 million vehicles. Hyundai plans to boost the core automotive businesses’ operating profit margin to 7 % by 2022, compared with 2.1 % in 2018, as part of its mid- to long-term plan. The automaker said it also plans to invest $40.48 billion over the next 5 years in research and development, capital expenditure and future growth areas such as autonomous driving technologies, vehicle electrification and mobility services. +++

+++ INDIA ’s cabinet has approved a scheme to spend $1.4 billion to subsidize sales of electric and hybrid vehicles as part of efforts to curb pollution and reduce dependency on fossil fuels. Under the scheme, known as Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), subsidies would be offered based on the battery capacity of the vehicle, ranging from buses and cars to three-wheelers and motorbikes, a government statement said. The incentives would be applicable only on vehicles costing less than $21,177. The benefits of the incentives will be extended to only those vehicles fitted with advanced batteries using lithium/ion or other new technologies, the government said. India, one of the world’s fastest-growing car markets, still has negligible sales of electric vehicles (EVs). The government had set a target in 2017 for all new vehicles to be electric by 2030, but critics said the high cost of batteries and a lack of charging points were major obstacles. Carmakers also said the target was too ambitious. The transport ministry later scaled back that target to EVs making up 15 % of vehicle sales in 5 years. India will spend $1.4 billion over 3 years on incentives, the government said. A source had earlier told that subsidies would amount to about 50 % of the battery cost. Automakers Mahindra and Tata Motors both produce electric cars in India. Maruti and Toyota build hybrid cars. Maruti, controlled by Japan’s Suzuki, last year said it would start testing 50 electric vehicle prototypes. It plans to launch EVs in India around 2020, in cooperation with Toyota. +++ 

+++ From a business standpoint, the JAGUAR F-Type doesn’t have a lot going for it. It competes in a segment of the market that’s shrinking all over the world, and it’s made by a brand whose recent financial problems are well documented. And yet, its future looks bright. One of Jaguar’s top executives has revealed the firm will always sell a 2-door model. “There will always be a coupe in the line-up because that’s the story of what we’re about, and you can’t build a brand without a story”, Ian Callum, Jaguar’s design boss, told. “So yes, a 2-door is essential to the brand. The volumes may not be high but we will build sports cars and the rest will grow from that”. Jaguar revealed the F-Type in 2014, so Callum’s statement suggests the company is already looking at how to replace the model. It might be an evolution of the current car with a sexy design, and a wide palette of gasoline-powered engines. Or, it might arrive as something else entirely; unverified rumors claim Jaguar may have a battery-powered sports car up its sleeve as part of a broader shift towards an electric-only line-up. “You’ll have to wait and see”, Callum said. He noted Jaguar needs 1 coupe, not more. While its German competitors sell 2-door variants of their compact sedans, Callum ruled out turning the XE into a coupe to take on the Audi A5, the BMW 4 Series, and the Mercedes-Benz C-Class Coupe.
“The coupe market is more difficult, it’s more niche. I think for a specialist like us the coupe becomes more of a challenge because the volume of sales isn’t big enough, otherwise I’d love to have done a 2-door version of this car”, he explained. +++

+++ Fiat Chrysler Automobiles (FCA) has announced a $4.5 billion factory expansion plan to increase JEEP and Ram output in Michigan. The total includes $1.6 billion to modernize the Mack Avenue Engine Complex for the next-generation Grand Cherokee and an unnamed all-new 3-row full-size Jeep SUV, creating 3,850 new jobs. The planned investment in Warren Truck has been increased by $1.5 billion, supporting the Jeep Wagoneer and Grand Wagoneer and creating 1,400 new jobs. Jefferson North will be retooled at a cost of $900 million for the continued production of the Dodge Durango and next-generation Grand Cherokee, with 1,100 new jobs expected. The company’s growth is currently driven by Jeep and Ram as American customers continue to gravitate toward trucks and SUVs. The investment will also help pay for plug-in hybrid versions and pure battery-powered EVs in the future. FCA said it will cut nearly 1,400 jobs at an Illinois assembly plant where it builds the Jeep Cherokee. The Italian-American automaker will cut 1 of 3 shifts at the Belvidere Assembly plant starting May 6, impacting 1,371 jobs, in order to “better align production with global demand”, a spokeswoman said. +++

+++ This week saw the reveal of the POLESTAR 2; the company’s second model, but a chance to properly launch the innovative new brand from Chinese giant Geely (which has proven such a fantastic custodian of Volvo and will hopefully do the same with Lotus). Polestar was only born just over a year ago in October 2017 with the imaginatively-named Polestar 1; a hybrid sports car with more than a passing resemblance to a previous Volvo concept. Probably because that’s really what it was. It’s no surprise, really; the company’s CEO is Thomas Ingenlath, previously Volvo’s design boss. All models from the Polestar 2 onwards will be all-electric and the company is promising to shake up the industry. “Dear car industry, we need to talk”, the firm starts by saying in its bold launch material. “Polestar challenges the car industry’s traditional conventions by thinking differently when it comes to everything from electrification, design and user experience”. Great! About time someone did. That means you’ll be able to visit Polestar Spaces in city centres rather than traditional dealers (we’ve heard that before), while they’ll be manned by staff who aren’t on commission (ditto). More importantly, you can do the whole thing online and never go anywhere near anyone like a car dealer, from booking a test drive from your front door, to buying the car and getting it delivered directly to you, too. You can also transact with Polestar via a subscription that can be modelled around how you’ll use your car. Of course, the proof of the pudding will be in the eating. But this could be the start of something good that car buyers have been telling us they’ve wanted for years. +++

+++ PORSCHE ’s second-generation Macan will switch to electric-only power when it’s launched in 2021, but the company will continue to sell the existing petrol-powered first-generation model alongside it indefinitely. In a move that will provide Porsche with both petrol combustion engine and pure electric versions of the Macan until well into the next decade; a decision has been made to extend the life of the first-generation Macan beyond the end of its planned model cycle. “The petrol-engine Macan will continue to be produced alongside the new electric PPE-based Macan in Leipzig”, a spokesperson told. Porsche won’t confirm how long the 2 models will be produced in parallel, adding: “There will be a transition time, but just how long that will be has not yet been determined”. Porsche says the decision to extend the life of the existing Macan is due to concerns that some markets are not prepared for a sudden switch to pure electric drivetrains. “The move to a fully electric model line-up is suitable for certain markets but, due to a lack of infrastructure and other hurdles, it is yet not possible in other markets”, said Porsche. “We are constantly monitoring the situation and can react accordingly”. The decision means petrol-engine versions of the Macan will remain on the Audi-developed MLB platform, while the new pure electric version will use the PPE (Premium Platform Electric) architecture being developed in an engineering partnership between Porsche and Audi. To provide both models with a harmonious look, both the petrol-engine and electric models will adopt similar exterior and interior styling. Set for introduction in 2021, the second iteration of the firm’s mid-size SUV is set to become the third electric Porsche, following the Taycan due out later this year and the Taycan Sport Turismo, which is planned to go on sale in 2020. The firm had previously revealed that it was working on a battery-electric SUV. No details have been made about the electric drivelines that will power the new Macan, but it’s expected to receive a twin motor set-up and standard four-wheel drive, as planned for higher-end versions of the Taycan. As with the existing facelifted version of the first-generation Macan on sale today, the electric SUV is set to be sold with a number of different power outputs in a multi-model range. A development of the J1 platform used by the Taycan and Taycan Sport Turismo; the more flexible PPE platform has been conceived to support models with both low and high ground clearance, and with varying wheelbase and track widths. A concept of the new Macan is expected to be shown this year, with rumours suggesting it may appear as soon as next week’s Geneva motor show. +++

+++ The PSA Group will launch 116 new cars across its 5 brands (Peugeot, Citroën, DS, Vauxhall and Opel) by 2021, accelerate the electrification of its model range and launch Peugeot in the North American market as part of the second phase of its ‘Push to Pass’ growth plan. The strategic plan, the first version of which was unveiled in 2016, is designed to turn the company into a “global vehicle manufacturer”, and the company completed the first phase by recording its fifth consecutive year of growth. Since the first plan was launched, PSA has acquired Vauxhall and Opel, which posted a profit in 2018 for the first time in 20 years. The second phase of the plan runs from 2019 until 2021, and aims to grow the company’s global presence with entry into several new markets, along with expanding its product range and a focus on electrification and digital technology. “We will be continuing our Darwinian transformation and approaching each challenges as an opportunity to stand out against our competitors”, said PSA Group chairman Carlos Tavares. “Darwinian means that either we adapt and change, or we die. We will adapt, and we are now ready for change”. The PSA Group has set a target to increase sales outside of Europe by 50 % by the end of 2021. To achieve that, it plans to launch Peugeot in the North American market, Citroën in India and Opel in Russia. Peugeot’s return to North America (giving PSA access to the crucial US market) has been planned since 2016, with the company recruiting staff recently and having worked to make its vehicles compliant with key US regulations. Tavares said the firm’s North American market entry into “the US and/or Canada” would be done in an “unconventional, frugal and creative” way. Initially, models will be imported from China and Europe, and Tavares hinted it had developed a “creative” sales and distribution strategy. He noted that the firm would wait to see what happened with the ongoing threat of a trade war before finalising plans. Tavares added: “We made the decision Peugeot will be the brand to take us back to North America. We believe bringing the brand that 3 times won the Indianapolis 500 is the right thing to do”. The brand launched in the US in 1958, but withdrew from the market in 1991 due to dwindling sales. It has maintained a North American presence by selling cars in Mexico, although models sold there do not meet requirements to be sold in the US or Canada. In terms of Citroën’s entry into India, Tavares said that would also take a “creative” approach, and that the firm had already developed a model line-up plan, which will be unveiled in the near-future. Opel only withdrew from the Russian market 2 years ago, and Tavares said the company still has around half-a-million vehicles on the road there, a market awareness that presents a “significant opportunity” for a return. The 116 “regional” models PSA Group will launch by 2021 include concepts, and are likely to include a large number of commercial vehicles, cited as a key growth target. The goal is to reduce the average age of the group’s model range to 3.5 years. PSA’s goal is to focus its portfolio around 43 key model lines by 2021, compared with 62 currently. Tavares said reducing the number of models would “focus the talents of our people”. The PSA Group has recently started to electrify its fleet, developing a range of hybrid and full electric systems. The firm now aims to speed up that process, with the goal of offering electrified version of half of its range by 2021; and across its entire range by 2025. PSA Group also plans to offer hydrogen-powered vehicles, used in business-to-business fleets. The firm also says it will further push the development of its advanced driver-assistance systems, and its Free2Move mobility brand. Tavares notes that the high cost of developing fully autonomous systems meant they would not be affordable for private car buyers for some time “unless they could afford to sit in the back of the car anyway”, so would focus on advanced driver assistance systems in the near future. The firm will focus its fully autonomous research on shared shuttles and other mobility systems. Tavares also announced a number of goals designed to boost profits and make the company more agile. This included a further reduction in its real-estate assets, with the aim to cut them by a further 14% by 2021. The group has already been assessing the future of a number of its factories, including Vauxhall’s Ellesmere Port facility. The group is also aiming to massively expand its online sales programme. It sold 6.000 cars last year, but wants to sell 100,000 cars online by 2021. The PSA Group has also announced its 2018 results. Combined, the firm’s brands sold 3.88 million vehicles, an increase of 6.8%, with group revenue up 18.9%. Notably, Vauxhall and Opel recorded its first annual profit in 20 years. Tavares said the result was “historic”, coming after “20 years of red ink”. Tavares also noted that he expected the European car market to remain stable this year, “providing there is no hard Brexit”. Growing the firm in China is also a key goal for the future. Tavares admitted the PSA Group’s struggles in the market had been a “big frustration” and was “not acceptable as is”, although he also said it had left the firm less susceptible to the market slump that had hit other car makers. He added that PSA, along with its joint venture partners, was “working on a different business model” for China that reflected the market’s recent decline. Tavares added that once the Push to Pass plan ends in 2021, the PSA Group will launch a new 9-year long-term plan that will run from 2021 until 2030. +++ 

+++ TESLA ’s move to dismantle its network of high-end showrooms as part of a plan to launch the long-awaited cheaper version of its Model 3 has pushed the electric carmaker into uncharted territory for an industry that has long relied on physical stores to move the metal. Retailers from Amazon to Apple to traditional automakers have trumpeted the benefits of physical stores, and Apple and automakers also rely heavily on advertising, which Tesla has eschewed, making the electric carmaker an outlier in its dependence on the web. As Tesla pushes to broaden its appeal and drive up sales with the arrival of the $35,000 Model 3, the impact of the store closings will play out over time, answering questions about whether a national physical footprint is necessary in an increasingly digital world, analysts and investors said. “Customers are becoming increasingly comfortable making purchases online, and that is especially true for Tesla”, chief executive Elon Musk said. However, some analysts and investors question whether Tesla closing most of its 250 stores was the panicked decision of a company seeking to build the lower-cost model profitably. It was only last month that Musk said a $35,000 version that could be sold profitably was perhaps 6 months away. And in the company’s annual report released last month, Tesla talked about growing its network of stores. “There’s a bit of a leap of faith that’s required to have confidence that the moving from a physical distribution model to an online distribution model will succeed”, Tom Vandeventer, portfolio manager with Tocqueville Opportunity Fund, said. He has owned Tesla stock in the past and still follows the company closely. “People like to go to car showrooms and kick the wheels and sit in the car”, he added. However, Musk pointed out that 78 % of all Model 3 orders were placed online and 82 % of customers bought such models without ever taking a test drive. He said shifting to an online sales model, cutting jobs and reducing spending on marketing will allow Tesla to offer the lower vehicle price. Tesla also said it now expects to record a loss in the first quarter. To overcome any remaining hesitation, Musk said Tesla would make it easier for customers to return a car within 7 days or 1,000 miles for a full refund. “Given its seeming abruptness, it does not appear that yesterday’s announcement was made from a position of strength”, Bernstein analyst Toni Sacconaghi said in a research note entitled ‘The $35k Model 3 – Genius or Desperation?’. Vandeventer still likes Tesla’s innovative, forward-thinking nature, but worries about the short term. “Cutting prices is more often a sign of weakness unless you are Amazon”, he said. “And only Amazon is Amazon”. Adding to the pressure Tesla faces is the growing level of competition from Chinese electric carmakers as well as established players like Audi, Porsche and Jaguar. Meanwhile, U.S. dealers remain sanguine about their position in the sales chain. “We still believe that the franchised dealer model is by far the best way to sell, distribute and service new vehicles”, National Automotive Dealers Association spokesman Jared Allen said. “The vast majority of consumers want to do some combination of both online and traditional shopping for new vehicles”. Since unveiling the Model 3 in 2016, Musk has been promising a $35,000 version. A lower-priced Model 3 is seen as critical to Tesla’s long-term viability as it needs to reach more customers who can afford the vehicles to offset slowing sales of costlier sedans. The lower price could expand the Model 3 market by about 600,000 cars in the United States alone, based on historical sales figures for similarly priced sedans, Baird analyst Ben Kalo said in a research note. However, the lower-cost model also could squeeze profit margins at a time when Tesla has said it is targeting 25 % margins for the vehicle some time this year. +++ 

+++ The number of cars built in the UNITED KINGDOM fell significantly in January, with an 18.2 % decline in production. Cars built for the export market bore the brunt of that drop, with 21.4 % fewer cars going to foreign homes. January’s sharp drop in productivity represents the 8th consecutive month in which manufacturing contracted, with the industry branding the continued falls a “serious concern”. Some 120,649 cars rolled off the production line last month, compared with 147,507 in January last year. In terms of specific markets, demand from China and EU27 countries fell 72.3 % and 20 % respectively. The number of UK-made cars going to UK homes saw a drop of 4.8 %, from 28,234 to 26,868, with political uncertainty over Brexit being blamed for further damage to consumer confidence. Analists say the figures are of “serious concern”. They cited “falling demand in key markets”, “escalating global trade tensions” and “the need to stay at the forefront of future technology” as 3 key challenges faced by the industry. They added the threat of a no deal Brexit is “monopolising time and resources”, thus “undermining competitiveness”. UK car manufacturing and investment hit by “deeply depressing” decline January’s figures follow a “deeply depressing” decline of 9.1 % in 2018, the same year investment in the UK automotive industry fell by a “disturbing” 46.5 %. Some 1.52 million cars were built in the UK in 2018, a 9.1 % decline on the previous year, when 1.67 million left factories. While production at Mini plants rose by 7 %, Vauxhall saw a 15.9 % fall in the number of cars it produced in the UK, with Nissan down 10.7 %, Toyota down 10.4 % and Jaguar Land Rover witnessing a 15.6 % production reduction. Brexit-related uncertainty, diesel downturn, regulatory changes, model cycles, market stagnation in Europe, and slowdown in China have been cited amongst the reasons for the manufacturing slump. The biggest concern, however, which employs around 856,000 people across the wider industry, is the fall in investment witnessed last year. Analists place blame for the stalled investment firmly at the feet of Brexit: “We know uncertainty is the big enemy of business. We need a deal. Brexit uncertainty has already done enormous damage to output, investment and jobs”. Turning to another common refrain among those who see Brexit as opening up new trade deals, analists say: “When we leave, we still have to operate with our biggest market by far under the rules Europe sets. At the moment, we have a seat at the table, we can influence those rules. The other major regulatory hub is obviously Washington. Should we do a free trade deal with America? I can’t ever see us having a seat at the table. They set their rules”. +++ 

+++ The transition for VOLKSWAGEN cars becoming fully connected will be more challenging than the advent of electric powertrains, according to CEO Herbert Diess. “We have the transition of drivetrains becoming electric”, he said. “We want to be emissions-free and CO2-neutral by 2050. We have a plan and EVs are coming and they’re connected. That’s all nice. But the next transition to software will be harder for us. It’s really skills we don’t own today. We have to create an entirely new set of skills and capabilities because the change into software is really radical for us. The car becomes an internet device that’s probably more complicated than a smartphone. We are only at the beginning”. Volkswagen Group has recently appointed Christian Senger to a new position of board member for software, demonstrating how important this area is for the firm. “We’re making a big effort in this area”, said Diess. “This is also the preparation for autonomous driving. It only works if you have cloud capabilities, data connections”. Talking at a press conference with Microsoft, with which it has recently announced a partnership, Diess said that there is currently 10 million lines of code in cars, but such a number is small compared to what’s to come. “Software capability is very limited today. In 2025, we will have three times more software in a car, and with autonomous driving, it will be 10 times more”. He added that the differentiation between cars will be through software. “We have to become a software company, but it’s a long way away”. Car firms are increasingly pairing up with third parties for their technology capabilities as the automotive industry evolves from a traditional car business model to one where technology is at the forefront of the services that are offered. However, Diess said its choice to work with Microsoft was in part because it is a business-to-business company. “They don’t compete with us for the attention of the customer”, he said. “They are trying to make us work and they will have a benefit from marking this happen”. VW Group-owned Seat announced earlier this week that it would open an in-house software branch in the next 12 months. Digital officer Fabian Simmer told: “We should keep this knowhow in-house and this is a means of differentiating us from other brands. When we’re looking at vehicle software or mobility services, why would we give that to a third party?” Talking about the arrival of autonomous vehicles, Diess said he remained conservative. “I would say people are more conservative than they were 2 years ago on this. It will take a while. It really requires a lot of safety because you can’t risk lives with a machine. We have to be cautious. There’s a lot going on, a lot of development. I’m trying these cars worldwide. They are evolving and getting better but there’s still a lot to do”. +++

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