+++ President Donald Trump’s vow to impose a 5 % tariff on Mexican goods comes just in time to hit exports from a $1 billion BMW factory that opens in the country next week. Many of the 3-series sedans to be made at the plant in San Luis Potosi are destined for U.S. dealers. Higher duties mean a hard choice for the Bavarian automaker: raise sticker prices or take the hit to profits on its best-selling model. It’s not the kind of calculation executives were expecting to make when they chose to build BMW’s first factory in Mexico, with its low labor costs and zero duties on exports to the world’s second-biggest car market. The tariffs will take effect on June 10, the U.S. president said. It’s another blow for a company whose sales are falling as German rivals challenge its dominance of the premium car segment, pushing profits to decade-lows. BMW spent years surfing on demand for prestige vehicles among China’s emerging middle class, leaving it brutally exposed as Washington and Beijing erect new tariff barriers in an escalating trade dispute. The Mexican factory is expected to account for 20 % of BMW’s North American production. BMW currently produces most of its cars for North America in South Carolina but leans heavily on components imported from Mexico. It bought $2.5 billion worth of parts from Mexican suppliers in 2015. BMW is now expected to ramp up Mexico output slower than originally planned, said Jürgen Pieper, head of automotive research at Bankhaus Metzler. In a research note, Evercore ISI analyst Arndt Ellinghorst said the tariffs could be a “major blow” for BMW and other carmakers. +++
+++ FERRARI has stated that the hybrid technology found within the SF90 Stradale will trickle its way down the company’s range. While the SF90 Stradale isn’t the Italian car manufacturer’s first production hybrid, it is its first production plug-in hybrid and this is technology which other Ferrari models will benefit from. “There will be other hybrid models, but with specific powertrain characteristics”, Ferrari chief technology officer Michael Leiters told, adding that it would be “very easy” to adapt the hybrid tech from the SF90 into other models. The new plug-in hybrid supercar utilizes a 4.0-liter twin-turbo V8 engine alongside a trio of electric motors to deliver a combined 100 hp, 780 hp of which comes from the V8 engine alone. The electric motors are fed by a small 7.6 kWh battery pack which means it can travel up to 25 km on electricity alone. Ferrari has made no secret of the fact that hybridization will play an important role in the company’s future, particularly since it is becoming increasingly difficult to build high-performance supercars which comply with emissions regulations. This year has already proven to be a very significant one for the company. In March, Ferrari unveiled its successor to the 488 GTB in the form of the spectacular F8 Tributo. It has followed up that car with the unveiling of the SF90 Stradale and intends on launching 3 other new models. Details about these new models remain murky but Ferrari senior vice president of commercial and marketing, Enrico Galliera, has confirmed that there will be a new entry-level mid-engine Ferrari sports car unveiled this year with a turbocharged V6 engine. +++
+++ FIAT CHRYSLER AUTOMOBILES (FCA) is discussing a Renault special dividend and stronger job guarantees in a bid to persuade the French government to back its proposed merger between the carmakers, sources close to the discussions said. The improved offer, if formalized and accepted, would also see the combined company’s operations headquartered in France and the French state granted a seat on its board, 2 people with knowledge of the matter told. Italian-American FCA is engaged in intensive discussions with Renault and the French government over the $35 billion merger proposal it pitched to create the world’s third-biggest carmaker. The concessions being discussed are not definitive and depend on other aspects of an emerging compromise deal, both sources cautioned. They nonetheless increase the chances that the merger plan will be approved by Renault’s board, on which the French state has 2 seats. The board meets again on Tuesday. Some analysts and French industry leaders had voiced doubts about the €5 billion in claimed cost and investment savings, and whether the proposal represents a fair deal for Renault shareholders. A Renault dividend would improve the valuation in their favor, balancing a €2.5 billion proposed dividend to FCA shareholders. The sources did not elaborate on the potential size of a Renault payout. The merger plan presented would see the 2 carmakers acquired by a listed Dutch holding company whose ownership would be split equally between current FCA and Renault shareholders, after special dividend payments. FCA had proposed locating the combined group’s operational head office in a neutral city, most likely London, but has now indicated readiness to base it in the greater Paris area, meeting a key French government demand, both sources said. The French government is also likely to be granted a seat on the board to reflect its 7.5 % stake in the merged company, the people said. Nissan, whose matching 15 % stake in its French alliance partner will also be diluted to 7.5 % of the new group, also receives a board seat. Guarantees to maintain Renault’s French blue-collar jobs and industrial sites would also be extended to 4 years from the 2 initially proposed under the compromise being discussed, the sources added. Both France’s pro-business government and Italy’s populist administration back the merger in principle but fraught relations between the 2 could yet derail the deal if one side feels disadvantaged. +++
+++ FORD teased the Puma earlier this year and it appears the crossover will make its debut at the Frankfurt Motor Show. It will use the show to highlight their new range of crossovers which include the redesigned Explorer and Kuga. Those models were introduced earlier this year at a special event where the Puma was teased, so it would make sense that the crossover would also been shown in Frankfurt. The Puma will be launched late this year and be offered with a hybrid powertrain that consists of a 1.0-liter 3-cylinder EcoBoost engine, a belt-driven integrated starter/generator and a 48‑volt lithium-ion battery pack. The starter/generator will generate electricity during coasting and braking, and this power can then be used to deliver a performance boost during acceleration. Ford hasn’t released detailed specifications for the powertrain, but has previously said it produces up to 155 hp. Besides the eco-friendly powertrain, the Puma will have a class-leading luggage capacity of 456 liters. Ford also said the model will have enough room in back to transport 2 golf bags in an upright position. On the styling front, the Puma will have a prominent grille and uniquely shaped headlights with integrated daytime running lights. The crossover will also have flowing bodywork, a sloping roofline and a “raised ride-height for a confidence-enhancing driving experience”. This will be Ford’s first time attending a major European auto show after an extended hiatus, but they’ll have plenty of company. Other debuts will include the BMW 1-Series, Honda E, Kia XCeed, Land Rover Defender, Porsche Taycan, Seat Leon and Volkswagen ID3. +++
+++ The government of FRANCE has reversed its decision to reduce the default speed limit on roads without separation barriers, despite there having been less road deaths as a result. Last year, the default speed limit was cut from 90 km/h to 80 km/h in a bid to reduce the number of fatalities, which had risen over the previous 3 years. The move was successful in achieving this goal, with the number of road deaths on the country’s rural roads decreasing by 127 in the second half of 2018, compared with the 2013-17 average on the same roads. The French research institute Cerema and the French Road Safety Observatory attributed this to the new, lower speed limit, while also noting that the average increase in travel time was just one second per kilometre driven. The government has now been forced to make a U-turn on the policy, though, with protests across France by the yellow vest movement and widespread vandalism of speed cameras pressurising ministers. It was French prime minister Edouard Philippe who eventually announced the reversal, despite having been strongly in favour of the 80 km/h speed limit, both before and after its implementation. The European Transport Safety Council (ETSC) was critical of the U-turn, pointing out that many of the countries with the best road safety records in Europe have either 70 or 80 km/h speed limits on their equivalent roads, adding that inappropriate speed is responsible for between 20 and 30 % of all fatal road crashes in the continent. Antonio Avenoso, executive director of the ETSC, said: “With more than 3,000 deaths on French roads each year, the French government was right to take bold action to address speed, one of the main killers on the road. This decision represents a major public health and safety reversal based not on science and data, but on emotions and short-term political considerations”. +++
+++ Jeep Wrangler sales hit a record 240,032 units last year and have been increasingly almost regularly ever since 2009. Thus, it’s not surprising to learn that rivals want a piece of the action. Ford’s answer is pretty well known at this point, as they announced plans to resurrect the Bronco back in 2017. While we still have to wait a little longer to see the production model, previous reports have suggested it will borrow heavily from the Wrangler playbook. In particular, dealers have said the model will have a retro-inspired design with removable doors and a hard top. The Blue Oval, though, might not be the only company eyeing a Jeep competitor. A couple of 4 door Wranglers were spotted undergoing testing at GENERAL MOTORS ’ Milford Proving Grounds. While it’s not unusual for automakers to test products from their competitors, rumors about a hardcore SUV have grown increasingly louder. A mysterious Chevrolet Trailblazer was spied undergoing testing in Europe earlier this month and the model was said to be a mule for an all-new SUV. That remains unconfirmed, but the current Trailblazer is based on the international version of the Chevrolet Colorado. To make matters more interesting, General Motors is said to be considering a $1 billion investment in its Wentzville plant, where the current Colorado and GMC Canyon are being built. It’s been rumored (but unconfirmed, to this point) that some of those funds could be used for a new body-on-frame SUV, presumably based on the next-generation of the General’s mid-size pickups. If this were to happen, it would echo what Ford is doing with the Bronco, which is closely related to the Ranger and will built alongside it in Michigan. While it’s not entirely certain that GM is building a Wrangler competitor, the company has toyed around with the idea in the past. In 2008, the then HM-owned Hummer unveiled the HX concept, which featured a removable roof and doors. The Hummer brand was axed shortly afterwards and the project never came into fruition, but a report from 2015 suggested GM asked dealers about a Hummer-like model to battle Jeep. +++
+++ JAGUAR LAND ROVER (JLR) recently revealed a £3.6 billion annual loss, much of which was due to it reducing the value of company assets and a recognition of a reduction in future earnings. The results came after 2 weeks of speculation that the PSA Group (owner of Peugeot, Citroën, DS and Opel / Vauxhall) had made a bid to buy JLR from Indian owner Tata Motors. What Tata’s statement didn’t say was that it might divest some of its stake in JLR, entering a co-operation with PSA that could make sense for both companies. This currently looks to be the most likely outcome. One investor said he believed that some kind of PSA-JLR tie-up was “inevitable”, a sentiment backed up by former Land Rover chief engineer Charles Tennant, who told that JLR was in a “death spiral”. So is JLR really in trouble, or is this major bump in the road simply due to the collapse of JLR’s sales in China? The hard figures suggest that there is trouble ahead. According to JLR’s accounts for 2018-19, sales in North America were up by 8.1 % to 139,800 and up in the UK by 8.7 % to 117,900 units. But sales across the EU were down by 4.5 % and they crashed in China by 34 %. North America is now JLR’s biggest market. Behind those headline figures, there were big drops in the 2018-19 sales of the Evoque and Discovery Sport (both down by around 30 %) as buyers waited for the new models, but this should spring back over the next 12 months. A 20 % fall in F-Pace sales is not helpful for a comparatively young model, though. However, sales of the E-Pace grew strongly, as did sales of the Range Rover Velar. The Range Rover Sport was up to a profit-enhancing 80,000 sales globally. Investment in the new MLA multi-fuel platform is weighing on the company, though. JLR spent a significant £3.8bn in 2018-19 on investment, of which 62 % was on new products and 14 % on electrification. Sources also told that the JLR operation in China is in particular difficulty. Rocky relationships with dealer networks need to be repaired after significant sales and marketing mistakes were made. Sources also claim that JLR’s relationship with Chery, its joint-venture partner in China, is also not as settled as it might be. Rocky releationships with dealer networks need to be repaired after significant sales and marketing mistakes were made, with insider concern JLR won’t be able to turn that operation around. Stories of quality problems with Chinese production are also common in the local media. The JLR-Chery combine builds the Evoque, Discovery Sport, E-Pace and long-wheelbase XE and XF for the Chinese market. If we boil all that down, JLR’s predicament looks something like this: sales of less than 600,000 units across 13 model lines is a recipe for trouble down the line. And although the company is merging most of its cars onto the MLA platform, it is an expensive architecture and the investment needed to redesign its current bestsellers and launch three new model lines will be vast. Even selling more than 700,000 cars by 2021 may not generate the cash needed for the future of the business. Rival firm BMW, for example, sold more than 3 times that in 2018. Moreover, JLR’s financial projections predict profit margins in the 3-4 % range for the next 3 years and 4-6 % by 2023. Tricky, when a recession is entirely possible in the medium term. Take, for example, the current Evoque / Discovery Sport platform, which is due to be phased out in 2025, leaving no replacement architecture for these big-selling cars and, one investor claimed, no money in the bank for a project that needs to start in 18 months or so. Outline plans for a range of smaller, more affordable and low-CO2 ‘city Land Rovers’ are also dead. Jaguar’s future in saloon cars has to be in question, too, despite official protestations. Tata Motores, Jaguar Land Rover’s owner, is looking for a partner for a new medium-sized platform for its own future models. Chery was in the frame, but PSA could present itself as a better match. PSA’s well-regarded EMP architecture could be upgradable for the next Evoque and Discovery Sport, perhaps fitted with an electrically driven rear axle. It could also underpin a family of Land Rovers priced below €50.000, helping JLR build much-needed scale and appease dealers. An alliance with PSA would also provide significant cover for JLR’s fleet CO2 rating, especially if JLR loses its derogation from meeting the 95 g/km target in 2021. PSA’s alliance with Dongfeng in China is said to be rocky, so a bespoke PSA-JLR venture in the country could help both partners start with a clean sheet, and JLR would have access to PSA dealers, allowing a neat brand ‘ladder’ from Citroën, Peugeot or DS and then Land Rover as a flagship. PSA is also looking to get a foothold in the US, where JLR already has an established dealer network that it describes as “solidly profitable”. As a first step in a PSA-JLR alliance, this all looks like a sound move. Any deal would probably lead to some major changes in JLR’s future plans, rather than ensuring business as usual. But major upheaval for JLR looks unavoidable. A ‘post-integration’ document was reported to have been in circulation at the British car maker. JLR boss Ralf Speth did not rule out discussions between PSA and Tata but suggested he was not party to them. For its part, Tata said there was no truth in the rumours that it was about to “divest its stake in JLR”. +++
+++ KIA has issued a voluntary global recall notice to drivers of its Niro hybrid and plug-in hybrid models. This is because an electrical relay fitted to vehicles built between November 2016 and September 2017 is prone to overheating. The Korean manufacturer says it isn’t aware of any fire or injury resulting from the issue but nevertheless advises owners to contact its customer services department. A company spokesperson confirmed that the relay in question was modified for vehicles built after September 2017, as part of an ongoing development programme that continues even after a model enters production. The fix will be carried out at no cost to the owner and is expected to take only around 1 hour. At present, only hybrid and plug-in hybrid examples of the Niro are affected; not the all-electric e-Niro. The fault was identified as part of Kia’s ongoing research and development programme. +++
+++ Redesigning an automotive icon like the LAND ROVER Defender is no easy feat. The original was characterized by its legendary rugged off-road abilities, simple construction, and tough appearance. For 2020 (codenamed L851), the changes are huge; forget what you know about its predecessor(s), as the all-new Defender now treads into premium territory. The Defender’s tough new underpinnings are a strengthened adaptation of the MLA platform that sits underneath the Range Rover Sport and Land Rover Discovery. Moving to this architecture means the new Defender is able to compete on a global stage, where safety standards ruled out previous iterations being sold in markets like USA and Canada. As for the cabin, “premium durability” is the new catchphrase. It has chunky, horizontally-themed styling, melded together with quality materials and technical detailing. It also blasts into the 21st century with hoards of tech and driver assistance; expect goodies like heads-up display, wireless charging, dual-view SatNav with wifi, lane keeping aid, adaptive cruise and ClearSight ground View, which uses cameras to project a see-through hood onto the touchscreen to assist with parking and off-road wheel placement. Whilst yet to be confirmed, I anticipate 2.0-litre 4-cylinder petrol and diesel units from Jaguar Land Rover’s Ingenium powertrain family. A petrol-electric hybrid is also tipped to be in the works; this unit in the Ranger Rover Sport pumps out 404 combined hp and offers up to 50 kilometres of all-electric driving range. Power will be fed to all 4 wheels via automatic and manual transmission options. Independent rear suspension will be standard, as will a terrain management system with selectable drive modes. Some might perceive the new look as a softening of its capabilities, but don’t be fooled: Land Rover promises it will be the most capable and robust Land Rover ever developed. In developing the 2020 Defender, Land Rover has already completed 1.2 million kilometers of testing to date, with more still to be done. The development team has been to various corners of the globe to test the Defender, from the scorching heat of Death Valley USA, the freezing cold in Sweden, the hot sands of Dubai and even the Nürburgring. Perhaps a hot SVR version is on its way? Another break in tradition with the all-new Defender is that it’ll be made at a new, state-of-the-art Nitra manufacturing facility in Slovakia. The new plant which was opened last year utilizes an advanced Kuka Pulse carrier system which is 30 % faster than traditional conveyance setups. Jaguar-Land Rover anticipates up to 100,000 vehicles will be built there, including some Land Rover Discovery models too. Since the 2020 Defender is going premium, it’ll have stronger credentials when compared against the likes of Mercedes-Benz’s iconic G-Wagen. Expect a range of different variants in 90 and 110 formats, plus a plethora of accessories. Other potential rival could include Jeep’s Wrangler, the upcoming Ford Bronco and the Toyota Land Cruiser. While Land Rover has yet to give us a specific date, the all-new Defender will be officially revealed later this year (possibly in September), with sales starting early 2020. +++
+++ President Trump has announced plans to impose a 5 % tariff on all goods imported from MEXICO starting on June 10th. In a statement, the President said the “United States of America has been invaded by hundreds of thousands of people coming through Mexico and entering our country illegally. This sustained influx of illegal aliens has profound consequences on every aspect of our national life, overwhelming our schools, overcrowding our hospitals, draining our welfare system, and causing untold amounts of crime”. He went on to say “thousands of innocent lives are taken every year” due to gangs, smugglers, human traffickers and illegal drugs pouring across the border. President Trump says this has to stop and claimed Mexico “could easily halt the illegal flow of migrants, including by returning them to their home countries”. Since Mexico hasn’t done this, the president is evoking the International Emergency Economic Powers Act to impose new tariffs on the country. The tariffs will start at 5 %, but the President said they will be raised to 10 % on July 1st, if illegal migration isn’t stemmed through “effective actions taken by Mexico”. The tariffs will continue to rise until that happens and they’ll hit 15 % on August 1st, 20 % on September 1st and 25 % on October 1st. While the president said the tariffs are designed to get Mexico to stop the flow of illegal immigrants and drugs, he also said the tariffs could pressure companies to move production back to the United States. As he claimed, “The sustained imposition of tariffs will produce a massive return of jobs back to American cities and towns”. Trump later tweeted Mexico has “taken 30 % of our auto industry” and suggested these jobs could return to America if tariffs remain high. The tariffs could have a significant impact on consumers and automakers as a number of vehicles are built in Mexico. BMW could be especially hard hit as the company is set to begin production of the 3-Series at their brand-new San Luis Potosi plant later this year. Of course, they’re not the only company with a plant in Mexico as GM, FCA, Mazda, Nissan, Honda, Toyota and Volkswagen build vehicles there as well. +++
+++ Chinese electric vehicle (EV) maker NIO is keen to build a production base in Beijing and will likely seek a manufacturing partner, chief executive officer and founder William Li said this week. His comments come after Nio said that it would form a joint venture with Beijing E-Town International Investment and Development, which will invest 10 billion yuan ($1.45 billion) in the new entity. Nio’s current manufacturing base in the eastern province of Anhui has an annual production capacity of 100,000 units, but this is insufficient, Li told a conference. The company, headquartered in Shanghai, operates the factory at Hefei with Anhui Jianghuai Automobile Group. Nio delivered 3,989 units in the first quarter, almost half of what it rolled out in the previous quarter. “We will evaluate all possibilities and will not completely rule out the plan to build the Beijing factory independently. The first choice is still manufacturing with a partner, which is our consistent strategic thinking”, Li said. China’s new energy vehicle market, the world’s largest, is booming, and many in the industry still believe that there is a big room for new EV makers. However, fierce competition, subsidy reduction and a slowing economy having raised concerns over their performance. Nio’s U.S.-listed shares hit a record low after BofA-ML downgraded the stock to “underperform”, citing weak orders for ES8 and ES6 models due to purchase subsidy cuts for EVs, reduced free cash flow, higher refinancing risks, increased competition from Tesla and rich valuation. +++
+++ For NISSAN , Fiat Chrysler Automobiles’ (FCA) proposal for a bright new future with Renault comes at an awkward moment of disarray. Nissan has been coping with a talent drain for the last few months, with executives in Asia and North America heading for the exits in the wake of former chairman Carlos Ghosn’s scandalous departure late last year. The management churn continued last week as Randy Parker, Nissan division general manager, responsible for worldwide marketing and sales for the automaker’s light commercial vehicle business unit in Yokohama, Japan, left to lead U.S. sales at Hyundai. Parker will join Jose Munoz, Nissan’s former head of global performance who left in January. Munoz was named as Hyundai’s global COO and CEO over North America in April. Last week also saw the departure of Nissan’s top North American communications executive, Kristina Adamski, who left for an undisclosed job outside the auto industry. Nissan managers have been bolting since Ghosn’s arrest in Japan on charges of financial improprieties during his 2 decade leadership and his ejection from the Renault-Nissan-Mitsubishi alliance. Like Munoz and Parker, some have landed top posts elsewhere in the industry. Their successful transitions are a testament to the currency they command as seasoned officers under Ghosn, one of the industry’s most lauded leaders before his surprise arrest. Daniele Schillaci, a top Nissan executive with a portfolio covering everything from global sales and marketing to zero-emission vehicles, left Nissan on May 15. The Italian native becomes CEO of brake-maker Brembo on July 1. Roland Krüger, former president of Nissan’s premium Infiniti brand, left the company in January to take the top job at Dyson’s automotive unit. Just 4 months later, his replacement, Christian Meunier, also abandoned Infiniti. Meunier was recruited to be the global president of FCA’s Jeep business, one of the industry’s hottest brands. In North America, chairman Denis le Vot was redeployed back to Renault in March, after just 14 months in the U.S., to become head of global commercial vehicles at the alliance. He was replaced as North American chairman by Jose Luis Valls, previously head of Nissan’s Latin America region. Others recent departures have yet to land anywhere. Arun Bajaj, Nissan’s global head of human resources, left in March. Also out the door is former Mitsubishi COO Trevor Mann, a globe-trotting Nissan problem solver whom Ghosn dispatched to reboot Mitsubishi after Nissan took a controlling 34 % stake in the company in 2016. Mann also left in March. Analysts expect the talent flight to continue as Nissan’s performance hits “rock bottom” in the words of its CEO, Hiroto Saikawa, and slowly recovers over the next couple years. Cost cutting amid lackluster profits puts pressure on salaries and bonuses, making it harder to attract and retain talent. “Many head hunters are probably approaching Nissan’s top and midlevel management these days”, said Tatsuo Yoshida, senior auto analyst at Sawakami Asset Management. “The liquidity of people at Nissan is much higher now than it was before”. The drain occurs just as global leaders at Renault and FCA are in the early stages of envisioning a new world organization, and Nissan’s potential role in that proposed empire remains unclear. Saikawa himself is under pressure on multiple fronts, and the revolving door of top management doesn’t make his own tasks any easier. For starters, Saikawa is rolling out sweeping corporate governance reforms at Nissan to fix the lax oversight that critics say enabled Ghosn’s alleged misdeeds. Ghosn has denied any wrongdoing. But those corporate changes have to be hammered out and put to a vote when shareholders gather for their annual meeting in June. Saikawa also is trying to reverse an implosion of sales at the company’s critical U.S. business, a downturn triggered partly by his pullback on incentives and fleet sales. At the same time, Nissan is reeling from a 45 % plunge in global operating profit to its lowest level in 11 years. Amid the disorder, Saikawa has been jousting publicly with Renault, Nissan’s 20-year partner and top shareholder, over the partnership’s future structure. Saikawa has been trying to fend off pressure from Renault for closer integration; possibly through a holding company or merger. The Nissan chief was blindsided last week by the revelation that Renault and FCA are considering a 50-50 merger. Nissan management is only just beginning to weigh the ramifications of such a blockbuster deal, which could sideline Nissan in the alliance and possibly diminish its influence. All the while, Saikawa faces mounting pressure to take responsibility for the mess by stepping down. The only problem: Because of the talent drain, Nissan’s top executive has no clear successor. “There is not someone clearly more qualified to deal with the current situation”, said Kurt Sanger, lead auto analyst at Deutsche Securities Japan in Tokyo. “One of the clear failures of the Ghosn era is not cultivating a bench of managers for the next generation”. Indeed, Ghosn’s grip on power was so ironclad, his more ambitious underlings often concluded the only way up was out. One result was a diaspora of talent that continues to this day. +++
+++ PORSCHE has been spied testing the 992-gen 911 GT3 Touring at the Nurburgring. The German car manufacturer famously introduced the GT3 Touring in response to customers flipping the limited-run 911 R for absurd profits. The sports car is largely identical to the regular GT3, but lacks a large rear wing and, unlike the PDK GT3, was sold exclusively with a 6-speed manual transmission. Prototypes of the 992-generation GT3 have been spied testing on a multitude of occasions in recent months. Reports claim that the ‘regular’ 911 GT3 will premiere at the 2019 Frankfurt Auto Show in September. If that’s the case, then we will probably see the new GT3 Touring some time next year, perhaps as early as the Geneva Motor Show in March. +++
+++ The board of RENAULT will meet on Tuesday to discuss Fiat Chrysler Automobiles’ (FCA) merger offer, the French carmaker said, as Finance Minister Bruno Le Maire reiterated the government’s conditional support for the tie-up. Renault directors will decide whether to open formal talks with FCA when they reconvene after informal work sessions being held this week. The meeting has been scheduled for Tuesday, a company spokesman said. Italian-American FCA pitched a $35 billion merger with Renault to create the world’s third-biggest carmaker, joining forces to tackle mounting industry challenges including investment-heavy emissions regulation, vehicle electrification, connectivity and driving autonomy. Doubts about the bid’s valuation and 5 billion euros in claimed cost and investment savings have been voiced by former Renault executives including Carlos Tavares, who now leads domestic rival PSA Group, and Patrick Pelata, who served as chief operating officer until 2011. Questions have also arisen over the deal’s impact on Renault’s partnership with 43.4 % owned Nissan, already strained in the wake of the arrest and ouster of their former alliance chairman Carlos Ghosn, now awaiting trial in Japan on financial misconduct charges he denies. But the French government, Renault’s biggest shareholder with a 15 % stake, reiterated its support for the combination on condition that it preserve French industrial jobs and sites, safeguard the alliance with Nissan and sign up to a nascent European battery manufacturing project. FCA’s bid presents a “real opportunity for Renault and the French automotive industry”, Finance minister Le Maire told. +++
+++ When Renault Group’s board of directors and the French government sought a steady hand to right the ship after the shocking arrest of CEO Carlos Ghosn in November, one name rose to the top of the list: Jean-Dominique SENARD , the soon-to-be-retiring CEO of Michelin. Quickly nicknamed the “anti-Ghosn”, the low-key Senard, now 66, was named chairman in January. He moved swiftly to repair relations with alliance partner Nissan, shuttling back and forth to Japan to meet with CEO Hiroto Saikawa, and repeatedly asserting that the Renault-Nissan alliance would not only survive, but thrive. At the same time, however, Senard was also holding back-room talks with John Elkann, the scion of the Agnelli family that controls Fiat Chrysler Automobiles, about a possible tie-up with Renault, but not Nissan. If the merger goes through, he could become the CEO holding the purse strings over Jeep and Ram and other icons of Auburn Hills. The secrecy of the negotiations and the boldness of the proposal (a 50-50 merger rather than a technology-sharing agreement, as some had speculated) are a testimony to Senard’s discretion, as well as his willingness to consider creative new business combinations, supporters say. “When he went to Renault, the benefit was that he was a respected figure”, said Philippe Houchois, automotive analyst at Jefferies in London. “He was brought in to be a cool head”. Another plus was his familiarity with Japan, home to Michelin’s biggest competitor, Bridgestone, Houchois said. Senard’s savoir-faire was on display last week in Tokyo, where he flew to persuade Nissan of the merits of the FCA-Renault merger. At first, the Japanese executives had many questions he told, but by the end of their meeting the mood was positive, he said. Even Saikawa, whom some Renault partisans accuse of orchestrating Ghosn’s arrest to oust him from Nissan, seemed to be willing to give Senard the benefit of the doubt. After the meeting, he said he saw potential opportunities for the existing alliance in Fiat Chrysler’s merger proposal, adding, “we don’t consider this as a minus”. Senard is also close with French president Emmanuel Macron, of whom he was an early supporter. It’s a crucial connection, because the French government is the largest shareholder in Renault and must give its blessing to the FCA offering. Macron in 2017 reportedly offered Senard the post of employment minister in his administration. In contrast to the globe-trotting Ghosn, Senard is little known outside France. Though he had never worked directly for an automaker, he has a long record of success at complex, global industrial enterprises that supply the auto industry, capped by his being named the first non-family member to run Michelin, the world’s second-largest tire maker. At Michelin, Senard led a program of steady expansion through acquisitions, last year buying Fenner, a maker of polymer products for the industrial market, for $1.7 billion and Camso, the Canadian off-road tire maker, for $1.45 billion. That has put Michelin, with about $24.5 billion in sales last year, in a position to challenge Bridgestone’s decadelong run as the industry’s leader. “The Michelin he’s leaving today is much more competitive, more profitable and has a stronger balance sheet”, Houchois said. “There has been friction with some investors who wanted the company to move faster, but Michelin is a socially conscious company that won’t ‘slash and burn’ to chase profits”. As CEO, Senard oversaw an ambitious plan for overseas growth, and avoided major scandals or corporate oversight issues. “Overall we haven’t seen any governance issues at Michelin”, Houchois said. “It’s a well-run company that is fairly transparent”. Senard’s genteel upbringing and business experience have led to a rapport, according to news reports, with Elkann, more than 20 years his junior. “Despite their age differences, they share a common culture”, Houchois said. “Both recognize that they were born privileged, but there’s always a sense of responsibility toward employees and jobs”. Preserving good jobs is “part of the spirit that they’re trying to” achieve with the proposed merger, he said. FCA has promised not to close factories if the deal is approved. Senard and Ghosn share similarities, too, in addition to both having worked at Michelin, long seen as a proving ground for France’s best and brightest managers. Senard, born in the upscale Paris suburb of Neuilly, grew up as the son of a diplomat in embassies around the world, much as Ghosn navigated Brazilian, Lebanese and French cultures. Senard graduated from HEC, the prestigious French business university, in 1976 and went on to earn a law degree there. He started his business career at Total, the French state oil company, working in finance and operations. In 1987 he moved to Saint-Gobain, which counts automotive glass among a broad portfolio of industrial products. From there, Senard joined Pechiney, an aluminum and packaging conglomerate, as CFO in 1996. The Pechiney post proved to be critical for Senard. In 1999 the Canadian aluminum producer Alcan spearheaded a 3-way merger proposal with Algroup of Switzerland that was rejected by antitrust authorities. Alcan then launched a successful hostile takeover bid in 2003 for Pechiney, and in the aftermath Senard was named CEO of Pechiney, having won the confidence of Alcan chief Travis Engen. Michelin came calling in 2005, with CEO Edouard Michelin personally recruiting Senard to be CFO. By all accounts Senard and the industrial heir bonded quickly, and after Michelin drowned off the coast of Brittany at age 42 in 2006, Senard became one of three managing directors. In 2011, he was named to succeed Michel Rollier, a Michelin cousin, as CEO. Noting the transition from family stewardship, Rollier said of Senard: “He has all the necessary qualities, a true strategic vision and a concern for operational excellence. What’s more, he embodies the values of the group”. +++
+++ The U.S. buys big but relatively unsophisticated cars, while Europe prefers sophisticated small cars. That truism is about to be rewritten in Europe, however, as automakers start to question their SMALL CARstrategy in response to costly new European Union legislation covering safety and tailpipe emissions, in particular the output of CO2. “New CO2 rules will require automakers to fit thousands of euros of tech to each car”, Max Warburton, an analyst at research and brokerage firm Sanford C. Bernstein wrote in an April report. “Big cars have the price points and margins to cover these costs. Small cars simply do not. These segments may soon be abandoned by many manufacturers”. Automakers across Europe are axing their smallest cars or preparing to do so. Opel will drop its Karl and Adam, while fellow PSA Group brands Peugeot and Citroen said their 108 and C1 are unlikely to survive. A source at Ford confirmed that it will stop exporting the Indian-built Ka+ to Europe. Volkswagen executives have said privately that the automaker is preparing to drop combustion-engine versions of the Up, which would almost certainly mean the fuel-powered Seat Mii and Skoda Citigo would also disappear. Daimler, meanwhile, has begun the process of shifting production and development of its Smart brand to China, where the small cars will be built exclusively starting in 2022 as part of a joint venture with Zhejiang Geely Holding. That decision raises a question mark over Renault’s Twingo, which was developed alongside the current Smart Forfour. It won’t just be minicars affected, Warburton said. VW Group could be forced to axe the Polo as well as the related Audi A1, Skoda Fabia and Seat Ibiza, he said. “This is a very big volume platform, but it will face an increasingly tough economic challenge”, Warburton said. He also flagged up the size of BMW’s task with Mini. “BMW will need to rethink or reduce the size of the Mini business. We are not convinced it’s ever made proper money”, he said. These cars are at risk because tougher EU rules for CO2 start to take effect next year. The industry has to reduce its fleet average to 95 grams per kilometer, down from an average of 120.5 g/km last year. The problem is that most current minicars cannot get to below the 95 g/km average without including some form of electrification. Beyond 2021, the EU is finalizing plans that, once agreed later this year, would cut automaker CO2 targets by 15 percent from the 2021 averages by 2025 onwards and to 37.5 % after 2030, meaning average CO2 emissions of less than 60g /km on an NEDC basis or 66 g/km under WLTP. Automakers would need popular EVs in cheaper, more accessible categories to be able to carry on selling conventional SUVs or face fines. That means an automaker’s smallest, lightest car (the car that traditionally helped lower the company’s average CO2) no longer offsets the higher emissions of bigger cars. This car exists purely as a business case in its own right, and the business case for minicars is poor. “Ironically the smaller vehicles are toughest to reduce CO2 in”, Ford of Europe chairman Steve Armstrong told. “The smaller the vehicle, the tighter the margin, the harder it is to meet emissions targets”. PSA’s head of Europe, Maxime Picat, agreed: “The ability of any carmaker to make a profit from minicars is under pressure because of all of the technology we have to add in our vehicles for safety and for emissions”. Another reason why small cars are going to get more expensive to produce (even if they keep their combustion engines) is because of tougher standards for oxides of nitrogen (NOx) that take effect in September 2020. Ford’s Armstrong estimated that bringing tailpipe emissions to the Euro6d Temp standard will cost about €2,000 whether the car has a diesel or gasoline engine. Also affecting all cars, small to large, are EU requirements to add a raft of mainly camera-based safety equipment starting in 2021. Cutting CO2 emissions by means of partial electrification such as adding mild-hybrid, full-hybrid or plug-in hybrid technology is one option, but this solution won’t be economically viable for many brands. A 48 volt mild-hybrid option adds €600 to €1,000 per car, a full hybrid costs almost €2,000 while a plug-in hybrid adds up to €5,000. Looking at the average cost of minicars and small cars, it’s clear they are not well placed to absorb the extra cost. The average retail price of cars registered in Germany, Spain, France and Italy in the first quarter of 2018 was €14,152 for minicars and €17,459 for small cars. Bernstein estimates that automakers make “only a few hundred euros” gross profit per car on small cars. Any cost increase, however, will not be tolerated by the customer. “The smaller the car the harder it is to justify this price increase because the tech costs more or less the same for a small car as a big car”, Alain Favey, head of global sales and marketing for Skoda, told. “People are not ready to pay it”. Automakers will only be able to pass on 25 % of the total cost of CO2 compliance technology, leaving automakers to shoulder the remaining 75 %, according to a recent report by UBS that examined the earnings impact. Right now electrification in small cars and minicars accounts for a tiny portion of the market. Toyota alone has shown that car companies can make a full-hybrid system work in a small car with the successful Yaris Hybrid, which emits 84 g/km of CO2. Toyota, however, is unique in achieving economies of scale for its hybrid powertrain partly because of strong demand for the system in Japan. That popularity should also help Honda when it adds a hybrid version of its new Jazz next year, while Nissan has said it will add its E-power system, which is currently only offered in Asia, in Europe. The 2 brands most reliant on small cars in Europe are Fiat and Renault, with each brand counting on the models for more than 60 % of their total 2018 European sales. Nearly all of Fiat’s share was in minicars due to the popularity of the 500 and Panda, which are the 2 best-selling cars in the segment, leaving parent company Fiat Chrysler Automobiles particularly vulnerable to fines once the new emissions regulations start to take effect next year. FCA plans to spend €1.8 billion in the next 3 years to buy regulatory credits to minimize the number of emissions-related fines it will pay in Europe and the U.S. This plan includes paying Tesla to join it in a pool to offset FCA’s high emissions in Europe and also benefit from the so-called “supercredits” that ultra-low emissions vehicles bring until 2022. Fiat has already killed the 2-cylinder engine that performed poorly in its Panda and 500 in real-world CO2 tests, but the automaker said it remained committed to the sector. “FCA is constantly working on making cars less polluting and safer, but that does not mean having to renounce market segments that, by their nature, meet specific customer needs”, a spokesman told. Fiat next year will launch a full-electric version of the 500, on a new platform, to prepare itself for what some automakers believe is the only viable propulsion for the smaller car sectors. Citroen brand CEO Linda Jackson told that the C1’s future was likely to be electric. Meanwhile, Skoda recently unveiled an electric version of the Citigo, which will be sold under the automaker’s new e-mobility subbrand called iV. Full-electric variants look to be the best option for the entry segment when the VW Group replaces its current trio of minicars, Skoda’s Favey said: “Everything else will be tricky to justify”. The continued popularity of the Renault Zoe, which last year was Europe’s No. 2-selling full-electric car after the Nissan Leaf, gives automakers hope that an electric future is viable for small cars. In Geneva, Peugeot unveiled a rival to the Zoe in the form of the e-208, while Opel and Citroen are also gearing up to launch related full-electric small cars. PSA’s electrification strategy is to restrict full-electric to smaller cars, where range is less important, and add plug-in hybrid technology to larger cars that traditionally cover more ground. Honda will launch a small electric car, the Honda E, next year following an introduction at the Frankfurt auto show this year. Meanwhile Dacia, Nissan and Mazda are also expected to debut small EVs in the midterm. The Volkswagen Group is so far concentrating on compact cars for its first large-scale push into EVs via its MEB platform, but more recently the automaker announced the development of a family of smaller, urban-focused EVs starting at less than €20,000. These cars are due around 2023 and will be led by its Seat brand in Spain. The problem is still one of cost. “The €10,000 car is going to be very difficult”, Ford of Europe sales boss Roelant de Waard said. “Even if you reach $100 per kilowatt hour you still need 40 kWh as a minimum so that’s still $4,000”, he said. Said Thomas Ulbrich, VW brand’s board member for e-mobility: “Minicar customers are paying €12,000 to €14,000 but in the future, when they are electrified, it will be €18,000 to €20,000. This will be a problem”. He added that VW and the German government were discussing how to provide extra subsidies to this sector. These customers also “have the right” to have access to electrified models, he said. Analysts at ING bank predict price parity between conventional and electric drivetrains won’t arrive until 2025. Fiat’s proposal for keeping the cost of small electric cars down was unveiled at the Geneva auto show in March in the form of the Centoventi concept, a look at what might replace the aging Panda. The price would be kept low on the base car by offering a small battery with a 100 km range, but that battery would be expandable to 500 km after purchase via upgrades. “It is driven by a desire to capture the essence of one end of the Fiat spectrum, while at the same time (if we are being honest) to build our electrified portfolio and avoid any CO2-compliance fines”, Fiat brand head Olivier Francois told. Automakers only have themselves to blame for the high cost of electric cars, believes European environment pressure group Transport & Environment. “BEVs [battery-electric vehicles] are still more expensive than small gasoline cars due to lack of early investment in supply chains and betting on diesel instead. But their price will drop fast”, said Julia Poliscanova, T&E’s manager for clean vehicles and e-mobility. She pointed out that all technology, batteries included, trickles down from more expensive categories. Despite the fears, smalls car will remain a staple of European motoring into the midterm, analyst firm LMC Automotive believes. Sales of small cars will sink from 3.16 million last year to less than 3 million next year and 2020, but stabilize at about 3 million until 2023, LMC predicts. Similarly, minicars are forecast to drop from 1.1 million last year to a little less than a million this year and to 900,000 in 2021, before returning to more than 1 million in 2023 (when the new generation Fiat 500 arrives). “There will always be a demand in the market for a cheap form of mobility”, LMC analyst Sammy Chan said. De Waard at Ford believes small cars will keep their place in Europe. “I think you will still get the same segmentation, but the vehicles will be €1,000 to €3,000 more expensive”. +++
+++ The TOYOTA fans who are unhappy with the high number of BMW parts found in the new ‘A95′ GR Supra might be in for a rude surprise. The Japanese company has already started thinking about the 6th generation Supra, and one of its insiders hinted it might completely break with tradition. “The A100 will come, one day, but the taste will probably be very different. It might be an EV, or autonomous, or like a Formula E car. Who knows. The A100 might take the Supra name in a drastically different direction. Definitely different from lineage of A70 and A80”, said Tetsuya Tada, the Supra’s chief engineer, in an interview. Tada explained the Supra’s fate will ultimately be in the hands of the engineer that succeeds him when he retires. However, the person that replaces him will need to navigate through or around ever-stricter emissions regulations, and a slow but steady shift towards increasingly autonomous vehicles. Buyer demand is another factor in this equation; will motorists still want a coupe in 10 or 15 years? These question marks already shaped the current Supra, which, as everyone knows by now, was developed with input from BMW. Developing the car in-house was possible, but it would have delayed its launch to 2021, which would have made the process of homologating it much more difficult. “If we had gone that route, the car would not be done, even today. It wouldn’t be out for at least a few more years. The problem is, you can’t sell a car like I showed you today in 2021. Safety and emissions regulations are getting tighter and tighter every year”, Tada told. +++
+++ Up-to-the-minute auto industry stats about the UNITED KINGDOM which I’ve just nicked show colossal changes in 2018 over 2017. True, Jaguar Land Rover retained its position as our largest vehicle manufacturer. Equally good news was that, across the UK automotive scene, job numbers stayed the same (at 856,000), with at least 10 % of employees hailing from Europe (the same as in 2017). The icing on the cake was that our vehicle industry continued to turn over precisely £82billion. But that’s where the positive consistencies end and the mostly negative changes kick in. It hurts me to say this, but 2018 was the year we went backwards in far too many crucially important departments. In 2018 vs 2017, UK car and engine production, car registrations and car exports slumped. Also on the decline: the creation of new jobs, and the number of youngsters starting apprenticeships. The money invested in our automotive manufacturing industry plummeted by £1.4billion to £2.6billion. Not good. Commercial vehicle makers fell from 5 to 5, bus/coach builders from 9 to 8. Honda and Infiniti served notice that they’re deserting the UK. The UK has exported fewer cars and slumped from 11th to 12th in global car production, with Russia passing us and the buoyant Czech Republic poised to tread the country into ‘unlucky for some’ 13th place soon. At the same time the number of big auto supply firms with UK bases decreased. Sales of diesels that politicians have declared war on plummeted. Fleet registrations dipped, as did used car purchases. CO2 emissions got worse, as politicians urged people to buy petrol not diesel. But it wasn’t all bad news in 2018. Sales of petrol-electric and, to a lesser extent, pure-electric cars were up last year. And according to the Society of Motor Manufacturers and Traders, the number of workers in the UK who were reliant on diesel engine production jobs was actually higher in 2018 than it was in 2017. An upturn in commercial vehicle production, in addition to a welcome growth in the percentage of car exports to the US and Japan, were other positives. The SUV sector was rare in that it grew, with the Nissan Qashqai being particularly popular among buyers. In 2017 there were 34.7 million cars on the road, compared with 34.9 million last year. The total number of vehicles registered was also up: to a cool 40 million for the first time. Not sure if that’s a good thing since the road and parking ‘networks’ aren’t expanding accordingly. Much of the above doesn’t make for easy reading. But what follows does. In percentage terms at least, the number of private motorists buying their own cars actually increased in 2018 vs 2017. Conversely, the number of fleet buyers decreased. Put another way, the most loyal, important and confident customers buying from UK manufacturers and dealers last year were people like you, dear readers: real-world consumers spending their own money acquiring cars for themselves. Buyers like you do more than most to support 856,000 motor trade and industry jobs in Britain. +++
+++ VOLKSWAGEN boss Herbert Diess told that he did not fail in his duty to inform markets about the gravity of VW’s diesel cheating scandal in 2015, when he was still VW’s brand chief. Prosecutors in Braunschweig, Germany, are investigating whether VW executives including Diess and chairman Hans Dieter Pötsch should have made a regulatory disclosure to inform investors about an emissions cheating scandal in summer 2015. “I believe that the allegations made against me are unfounded. This is also the result after the viewing of files”, Diess told. VW confirmed Diess had made the remarks. VW has consistently denied wrongdoing by its executives and Diess, who has since been promoted to group chief executive, made the remarks after prosecutors granted defendants access to files which will be used in court. Shareholders sued the carmaker citing a violation of disclosure rules, arguing that VW failed in its duty to inform investors about the financial impact of the scandal, which became public only after the U.S. Environmental Protection Agency issued a “notice of violation” on Sept. 18, 2015. A failure to make a regulatory disclosure under German law could also amount to an offense of market manipulation. VW shares lost up to 37 % of their value in the days after authorities exposed VW’s illegal pollution levels but the carmaker said its managers could not have foreseen the financial scope of the scandal that has cost the carmaker more than 30 billion euros so far. VW insists that the U.S. EPA’s issuance of the notice of violation was not in keeping with how U.S. authorities had handled similar cases involving other carmakers. Because other carmakers had reached a settlement for emissions cheating without an EPA notice of violation, and because VW was at the time engaged in settlement talks, VW’s board did not see the need to inform investors, the carmaker said in a filing with the Braunschweig court. VW had already made substantial provisions in late 2015 to cover other vehicle recalls, and because previous fines by U.S. authorities for similar violations were below $200 million, there was no need to issue an ad-hoc disclosure notice under German law, the carmaker said in the filing. Volkswagen says board members at the time, including Diess and Poetsch therefore did not violate disclosure rules, according to the VW defence document filed with the court. +++
