Newsflash III


+++ The market regulator of CHINA fined Ford ’s main local joint venture 162.8 million yuan ($23.55 million) for violating anti-monopoly laws. It is the latest automaker with foreign partners to face such penalties. The move comes amid an intensifying trade war between the United States and China, and as Washington put Chinese tech giant Huawei on a trade blacklist, raising concerns among U.S. firms that they might be targeted for retaliation. The State Administration for Market Regulation (SAMR) said on its website that Ford’s joint venture with Chongqing Changan Automobile (Changan Ford) had breached the law by setting a minimum resale price for its cars in the Chinese municipality of Chongqing since 2013. The joint venture, which is owned 50:50 by Ford and Changan Auto, did not provide evidence that this complied with the country’s anti-monopoly law during the investigation, it said. “Changan Ford’s actions deprived downstream dealers of their pricing autonomy, excluded and restricted competition within the brand, as well as damaged fair competition in the market and consumer’s legal interests”, it said. The fine is equivalent to 4 % of the joint venture’s sales in Chongqing last year, it said. Changan Ford told Reuters that it respected the regulator’s decision and had taken corrective action in its regional sales management together with its dealers. “Changan Ford will continue to ensure its business activities contribute to a free and fair competitive environment”, it said. Other automakers which have been punished by China for violating its anti-monopoly laws in the past include General Motors’ joint venture, which was fined $29 million in 2016, as well as Audi and Fiat Chrysler. Some analysts said setting of such minimum resale prices was not unusual in China. “Every automaker makes efforts to protect its brand’s resale value. Sometimes their actions might be seen as crossing a line such as with price basements”, said Michael Dunne, chief executive officer of California-based consultancy ZoZo Go and a former General Motors executive. Amid the escalating trade war, Beijing announced last week that it was launching an investigation into FedEx Corp and would draft a hit-list of “unreliable” foreign firms and individuals that harm the interests of Chinese companies without giving any names. Dunne said the fine could be seen as a “warning shot”. “China could at any time and for any number of reasons launch a wholesale investigation of any global automaker’s operations in China. That is the reality”, he said. Ford and Lincoln cars faced unusual delays at customs in May 2018, when trade tensions between the 2 countries began escalating. SAMR did not mention the trade war in its announcement of the Ford venture’s fine. Ford has been struggling to revive sales in China (the second biggest market globally for the Dearborn, Michigan-based automaker) where its business began slumping in late 2017. Its sales slumped 37 % year on year to 752,000 units in 2018, after a 6 % decline in 2017. Changan’s president told in April that it expects sales at its Ford joint venture to rebound at the end of this year. +++ 

+++ A team of scientists has written to the Committee of Climate Change warning that if the UK’s 31.5 million cars are replaced by ELECTRIC vehicles by 2050, as is currently planned by the Government, this will require almost 2 the current annual global supply of cobalt. The researchers have also calculated that based on the latest ‘811’ battery technology (80 % nickel, 10 % cobalt, 10 % manganese), UK demand for EV batteries will require almost the total amount of neodymium produced globally each year, 75 % of the world’s lithium, and “at least 50 %” of the world’s copper. The letter, authored by a team of 8 scientists headed by the Natural History Museum’s head of earth sciences, professor Richard Herrington, explains that to replace the UK’s cars with EVs will require 207.900 tonnes of cobalt, 264.600 tonnes of lithium carbonate and “at least” 7.200 tonnes of neodymium and dysprosium, as well as 2.362.500 tonnes of copper. Furthermore, the Committee on Climate Change, an independent statutory body established under the Climate Change Act 2008, has previously called for all new cars and vans to be zero-emission by 2035. Professor Herrington and his colleagues estimate that to make the (roughly) 2.5 million new cars sold each year in the UK electric “will require the UK to annually import the equivalent of the entire annual cobalt needs of European industry”. While the UK’s 2050 target for all cars and vans to be EVs gives us around 3 decades to procure those materials, the push towards electric vehicles is a global one and other countries, particularly China, are competing in the global mineral marketplace. The letter deepens concerns into cobalt resourcing. The scientists also estimate that the energy required to mine materials for EV batteries will take 22.5 TWh (TeraWatt-hours) of energy, equivalent to 6 % of the UK’s current annual electrical usage. Just mining the battery materials necessary to replace the 2 billion cars in the world would require 4 times the UK’s total annual electrical output. Once all those EVs have been built, the letter highlights further concerns. Current estimates put the extra power required for all UK cars to be electric at 63 TWh a year, a 20 % increase over current generation levels. To produce this extra electricity with environmentally friendly wind farms would require and extra 6,000 turbines, the production of which would require a “years’ worth of total global copper supply and 10 years’ worth of global neodymium”. While the letter highights making all cars electric and environmentally friendly is a “laudable” aim, it warns that the “global supply of raw materials must drastically change to accommodate not just the UK’s transformation to a low carbon economy, but the whole world’s”. Commenting on the letter, Professor Herrington said: “The urgent need to cut CO2 emissions to secure the future of our planet is clear, but there are huge implications for our natural resources”. Herrington added: “Our role as scientists is to provide the evidence for how best to move towards a zero-carbon economy: society needs to understand that there is a raw material cost of going green”. +++ 

+++ FIAT CHRYSLER AUTOMOBILES (FCA) has resolved key differences with France over its proposed merger with Renault, 3 sources told, as talks on the $35 billion tie-up plan progressed. An emerging compromise over French influence on a combined FCA-Renault could clear the way for Renault’s board to approve a framework deal and begin the long process of a full merger. FCA, Renault and its 15% shareholder, the French state, have been locked in talks over the Italian-American manufacturer’s bid to create the world’s third-biggest carmaker. France has broadly welcomed the deal, on condition it guarantees Renault’s domestic blue-collar jobs and plants. Renault’s board adjourned after a 3-hour meeting and agreed to meet again in 24 hours after more negotiations. Its directors will “continue to study with interest the opportunity of such a combination”, Renault said in statement. FCA’s proposal would see both companies acquired by a listed Dutch holding company owned 50-50 by current FCA and Renault shareholders, after payment of a €2.5 billion special dividend to FCA shareholders. Following analysts’ and French industry leaders’ criticism that the bid undervalued Renault and its 43.4 % stake in partner Nissan, Paris pushed for better terms. The deal on the table now includes a special dividend for Renault shareholders, likely in the range of €250 to €500 million, 2 sources told. According to agreed “general organizational principles”, the new group’s CEO office and headquarters for its Europe, Middle East and Africa region would be sited in Paris. Concerned about the enforceability of job guarantees, France has also been demanding its own seat on the new board and a veto on future CEO appointments. Jean-Dominique Senard, the Renault chairman set to become FCA-Renault’s first CEO under Elkann’s chairmanship, turned 66 in March, and France is keen to have a say on his succession. “It’s not enough to talk about non-closure and job conditions”, one official said. “We need to be equipped to uphold them”. French Finance Minister Bruno Le Maire has stressed that the deal must preserve Renault’s alliance with Nissan, already strained by the arrest and ouster of former chairman Carlos Ghosn, now awaiting trial in Japan on financial misconduct charges he denies. Nissan’s 2 Renault board representatives may abstain in a vote on the deal, after the Japanese carmaker’s CEO Hiroto Saikawa said it would prompt a “fundamental review” of the relationship with Renault. Achieving €5 billion in FCA-Renault synergies would depend partly on access to technology jointly owned by Nissan, executives acknowledge. A Renault board decision to approve the merger proposal, subject to regulatory approvals and other conditions, would begin a process expected to last well into 2020. FCA and Renault would aim to put the tie-up to shareholder votes in the first quarter, one source close to the talks said. +++ 

+++ A number of companies are working on vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) technology, but FORD has announced some interesting new developments in regards to cellular vehicle-to-everything (C-V2X) technology. While acknowledging that immediate and universal adoption of C-V2X is a “daunting challenge”, the company has used a meeting of the Intelligent Transportation Society of America to unveil a new device that allows vehicles to communicate with other road users such as pedestrians, cyclists and e-scooter riders. Essentially a box that can be mounted at intersections, the device allows different wireless technologies to talk to one another. According to Ford, the roadside unit acts as an “interpreter” that can translate signals from different wireless technologies such as Bluetooth and C-V2X. This doesn’t sound too exciting, but it means Bluetooth signals from smartphones and wearable device could tell cars where people are located. As an example, a pedestrian could cross a street while their smartphone alerts nearby drivers to stop until the path is clear. The second technology introduced at the meeting is aimed at allowing autonomous vehicles to talk to their human-driven counterparts. As Ford explained, it’s easy for humans to communicate right of way, at a four-way stop, with a simple wave of the hand. However, autonomous vehicles can’t do this.
As a result, engineers are developing an “unalterable blockchain-based system” which determines which vehicle should go first. +++

+++ The Trump administration has denied a GENERAL MOTORS (GM) request for an exemption to a 25 % U.S. tariff on its Chinese-made Buick Envision. The denial of the nearly year-old petition came in a May 29 letter from the U.S. Trade Representative’s office saying the request concerns “a product strategically important or related to ‘Made in China 2025’ or other Chinese industrial programs”. The midsize SUV, priced starting at about $35,000, has become a target for critics of Chinese-made goods, including leaders of the United Auto Workers union and members in key political swing states such as Michigan and Ohio. GM said it was aware of the denial and has been paying the tariff since July. GM has not raised the sticker price to account for the tariff. Buick Envision sales fell in the United States by nearly 27 % to 30,000 last year and fell another 21 % in the first 3 months of 2019. Only a small number of vehicles are built in China and sold in the United States. Last month, the U.S. Trade Representative’s Office also denied a request by Chinese-owned Volvo for tariff exemptions for mid-size SUVs assembled in China after the automaker sought an exemption for the XC60, its top selling U.S. vehicle. GM, the largest U.S. automaker, argued in its request that Envision sales in China and the United States would generate funds “to invest in our U.S. manufacturing facilities and to develop the next generation of automotive technology in the United States”. GM said last year the “vast majority” of Envisions, about 200,000 a year, are sold in China. Because of the lower U.S. sales volume, “assembly in our home market is not an option” for the Envision, which competes with such mid-size crossover vehicles as the Jeep Grand Cherokee and the Cadillac XT5. Ahead of the July 2018 start for higher import tariffs, GM shipped in a 6-month supply of Envisions at the much lower 2.5 % tariff rate. +++ 

+++ New-car sales in GERMANY rose 9.1 % in May, boosted by a resurgence in demand for diesel vehicles. Overall registrations were 332,962 for the month. Sales of diesel cars increased 16 % to give the powertrain a 33.3 % market share. Gasoline car sales rose 0.7 % for a 59 % share.  Sales of alternatively powered vehicles, including full-electric, plug-in-hybrid and hybrid cars increased 100 % to give them a 1.4 % market share. Sales to business fleets rose 12 % for a 62.9 % market share in May, while sales to private customers rose 4.5 % for a 37.1 % share. Major brands had mixed results last month. Tesla, Volvo and BMW were the big winners, while Alfa Romeo, Mini and Honda were the biggest losers. Alfa Romeo’s registrations plunged 54 %, Honda’s volume fell 33 % and Mini sales were down 17 %. VW brand dropped 4.6 %, while Audi was down 4.3 %. Seat sales jumped 35 %. Among the winners, Tesla rose 117 %, Volvo gained 77 % and BMW registrations were up 42 %. Smart rose 36 %, Ford 18 % and Opel by 15 %. Mercedes-Benz registrations increased 9.5 %, while Porsche was up 3.9 %. Through May, sales in Germany are up 1.7 % to 1.52 million. +++ 

+++ Volkswagen is celebrating another milestone for ID.3 pre-orders, receiving 20,000 deposits in the first month. The company received approximately 15,000 deposits in the first week and added another 5,000 in the following 3 weeks. “We originally wanted to reach 30,000 by the IAA in September”, Jürgen Stackmann, the brand’s marketing and sales head, said. The German automaker initially reported strong demand in its home country along with Norway, the Netherlands, the UK, and Sweden. The first reservation holders are expected to receive their all-electric ID.3 hatchback by mid-2020. +++ 

+++ Registrations in ITALY fell 1.2 % in May to 197,307. The decline comes despite one more selling day in May than the same month of 2018. According to market researcher Dataforce, demand from private customers declined 7.4 % after growing 2.5 % in April. Deliveries to short-term rental fleets jumped 24 % and those to long-term rentals increased 20 %, while sales to companies were down 3 %. Self-registrations by dealers were up 1.3 %, while self-registrations by automakers dropped 76 %. The 2019 Italian budget law introduced an additional purchase tax on vehicles emitting more than 160 g/km of carbon dioxide while granting incentives to cars emitting less than 70 g/km of CO2. The incentives kicked in April 8, triggering an increase in sales of battery electric and plug-in hybrid vehicles. Demand, though, was slower in May. Electric-car sales rose 92 % to 1,167 units in May. Their share of the market rose to 0.6 % from 0.3 % in May 2018 but declined from 0.7 % in April. Sales of plug-in hybrids rose 35 % to 420 units for a 0.2 % share, compared with 0.3 % in April. Sales of diesel-powered cars fell 20 % to 82,810 and a 41.8 % market share, down from 51.7 % in May 2018 but up from a low of 40.5 % in April. Gasoline car sales rose 23 % to 86,487 with a 43.7 % share; up from 35.2 % the year before. The market share for cars powered by liquefied petroleum gas rose to 6.6 % from 6.2 %, while the share for vehicles powered by compressed natural gas slipped to 1.9 % from 2.8 %. Registrations for market leader Fiat Chrysler Automobiles slipped 6.1 % in May. Sales of  the flagship Fiat brand declined 1.4 %, while Jeep was down 15 %. Alfa Romeo sales were halved and Maserati declined 12 %. Lancia bucked the FCA trend with a 20 % increase. The Peugeot brand suffered a 1.6 % decline, while both Citroën and Opel posted a 5.6 % sales increase. Sales of DS rose 63 %. Volkswagen registrations rose 5.1 %, Seat 33 % and Skoda 17 %. The T-Roc, T-Cross and Tiguan accounted for nearly half of VW sales in May (47.5 %). T-Roc was the most popular VW nameplate for the third consecutive month. Audi registrations were up 3.7 %, while Porsche rose 33 %. Registrations for Renault declined 14 %, while sales of sister brand Dacia increased 42 %,  thanks to the success of the Duster. At Ford, deliveries were down 7 % in May. Hyundai declined by 12 % and sister brand Kia by 16 %. Nissan’s registrations declined 24 %, while rival Toyota gained 5.1 %. German premium brands: Sales of BMW rose 5.4 %; rival Mercedes-Benz suffered a 4.1 % decline. Sales through the first 5 months of the year are down 3.8 % to 910,093 vehicles. Dataforce forecasts sales will decline 3.8 % in 2019 to 1.84 million. +++ 

+++ The United States is set to impose a 5 % tariff on all goods imported from MEXICO on June 10th and a number of automakers are scrambling to prepare for potentially devastating impacts. Some automakers are planning to delay shipments of vehicles made in Mexico. This could prove disastrous if tariffs remain in place and continue to rise, but the publication says the delays are only aimed at models which have high levels of existing inventory in the United States. While some companies are planning to delay shipments, others are rushing to beat the clock. In particular, the publication says a handful of companies are trying to get critical parts out of Mexico before the tariffs go into effect. While the tariff is already wrecking havoc on the supply chain, the biggest blow could be yet to come. According to LMC Automotive, prices of vehicles imported from Mexico could climb by an average of $8,500. That’s a huge jump and it means Mexican-made vehicles would no longer be an option for a number of American consumers. Of course, we live in a global market and a number of automotive components are built in Mexico. This means vehicles made in the United States would also be impacted by the tariff as many use parts sourced from south of the border. The rate and duration of the tariff will have a big impact on how devastating it is. As we have previously reported, the tariff starts at five percent but could eventually hit 25 % (on October 1st) if Mexico doesn’t take “effective actions” to limit the flow of migrants and drugs coming into the United States. LMC Automotive believes the industry can absorb the impact of a 5 % tariff for about a month, but anything more could be disastrous. Their analysts believe a prolonged 25 % tariff could cut new car sales in the United States by up to 1.5 million units annually and possibly push both countries into a recession. The tariff would have a huge impact on Mexican-made vehicles: 39 models built in the country and imported into the United States. GM would be particularly hard hit as the company imports popular vehicles such as the Chevrolet Blazer, Equinox, Silverado and Trax as well as the GMC Terrain and Sierra. Nissan would also be hard hit as imports include the Frontier, Kicks, Sentra, Versa and NV200. Other models facing the tariff include the Audi Q5, BMW 3-Series, Honda HR-V, Infiniti QX50 and Jeep Compass. That’s not even mentioning the Toyota Tacoma and Volkswagen Tiguan. +++ 

+++ Former French Justice Minister Rachida Dati is being probed over consulting fees she has received from the RENAULT – Nissan strategic partnership, France’s financial prosecutor office said. The preliminary investigation follows a complaint by an individual Renault shareholder against Dati, Ghosn and Bauer for corruption and misuse of company funds, the shareholder’s lawyer Jean-Paul Baduel said in an interview. Payments to consultants made by the Netherlands-based joint venture have come under scrutiny after its ousted chairman, Carlos Ghosn, was arrested and charged in Japan in December for alleged financial misconduct; charges which he denies. A full independent audit of the Dutch-registered joint venture listed suspect payments made by Renault-Nissan under Ghosn of about €11 million. Renault’s board is seeking to recover the funds jointly with Nissan, as both companies fund the alliance. Renault-Nissan hired Dati, 53, after she stepped down as justice minister in 2009 to stand for the European Parliament. She recently said she wanted to run for the Paris municipal election in 2020. Security consultant Alain Bauer, who was paid by the holding company for his services in the wake of an earlier scandal over a 2011 espionage hoax at Renault, is also being probed. Bauer and Dati’s lawyer, Olivier Pardo, both said the contracts they signed with Renault-Nissan were legal. “Everything was reported, there was a professional agreement totally compliant with the rules and it dates back a long time ago”, Pardo said. +++ 

+++ New-vehicle sales in SPAIN declined 7.3 % in May to 125,625. Demand from private customers and sales to rental companies both slipped 11 %; to 54.485 and 34.054 units respectively. Registrations by companies increased 3.6 % to 37,086. Last month had the same number of selling days as May 2018. Diesel vehicles continued their slide, with sales down 26 % to 35,607 last month. The diesel market share was down to 28.3 % in May from 35.3 % in May 2018 but up from 27.3 % in April. Sales of gasoline cars were down 3.7 % to 75,068 for a 59.8 % share, the lowest in 2019, although still slightly up from 59 % a year ago. Sales of all electrified cars (full-electric and hybrid) plus vehicles powered by liquefied petroleum gas and compressed natural gas jumped 54 % to 14,950 units and claimed a 11.9 % market share, up from 7.1 % in May 2018. Sales of full-electric cars jumped 167 % to 900 and took a 0.7 % share. Noemi Navas, director of communication for ANFAC, said May registrations have resumed a downward slope after the April recovery, which was attributable to purchases by rental companies around Easter week. Navas said she hopes the end of the election will bring more political stability, which in turn should help consumer confidence. Spain held Parliament elections at the end of April, followed by European Parliament elections May 26. It is expected that sales in Spain will drop 5 % to 1.2 million units in 2019 and remain there in 2020. Volkswagen suffered a 15 % decline in May, while Seat grew 1.4 %. Skoda registrations fell 16 % Volkswagen’s bestseller, the Golf, posted a 21 % drop in the run-out of the current model, with the new version to be unveiled in September. Sales of the Polo fell 46 %. Audi deliveries were down 5.3 %, while Porsche registrations rose 6.8 %. Peugeot sales were down 2.8 %, while Citroen deliveries declined 3.7 % and Opel sales fell 20 %. Renault sales declined 19 %, while sister brand Dacia grew 7.1 %. Fiat registrations were down 17 % and Alfa Romeo declined 3.8 %. Jeep deliveries rose 11 %, including a 51 % jump in sales of the Renegade. Registrations of the Compass declined 14 %. At Ford, sales were down 26 %. Toyota deliveries rose 15 %, led by the recently launched Corolla with 1,981 units. Sales of the C-HR were up 22 %. Nissan deliveries were up 4 %, with its top seller, the Qashqai, posting a 16 % increase. Hyundai declined 15 %, while sister brand Kia slipped 28 %. Mercedes-Benz deliveries rose 25 %, while sales of rival BMW increased 16 %. +++ 

+++ In a U.S. market with a seemingly insatiable appetite for spacious crossovers and SUVs, there’s plenty of room for their bite-size counterparts. The Hyundai Venue will be the latest to join the growing roster of SUBCOMPACT CROSS-OVERS when it arrives in dealerships this fall. While Hyundai is pitching the funky little ride as a value play that stands out from the crowd and could even convert used-car shoppers into new-vehicle buyers, it will face tough competition in a segment that didn’t exist a few years ago. Offering more practicality than a small sedan and an economical alternative to larger trucks, the segment has captured a small but growing share of the U.S. market in its brief history. The Mitsubishi ASX and Nissan Juke had combined U.S. volume of 10,329 in 2010, which quintupled to 52,329 the next year. In 2013, the Subaru XV and Buick Encore (Opel Mokka) made a splash. The XV retailed more than 53,000 vehicles in what was its second year, and it has mostly dominated the segment since. The Encore, a rookie that year, sold nearly 32,000. It is No. 2 in the segment today. In 2015, there were 10 subcompact crossover nameplates in the U.S., good for 411,774 sales, or 2.4 % of the market. The following year, the Jeep Renegade was the first in the segment to cross the 100,000-sales threshold. Last year, the subcompact crossover segment (comprising 16 nameplates and 784,073 sales) captured 12 % of the U.S. crossover market and 4.5 % of overall U.S. light-vehicle deliveries. In comparison, the share of subcompact cars fell to 2.4 % of the U.S. market in 2018 from 5.4 % in 2010, while compact cars declined to 9.9 % from 12.4 % in the same period. Although the smallest crossovers were last to market, it was inevitable that consumer demand would lead to sizable growth, said Stephanie Brinley, IHS Markit’s principal automotive analyst. Entry-level buyers and people who are downsizing, in particular, find the subcompacts appealing, and automakers were smart to see the opportunity. “The ability to sit a little higher than a comparably sized passenger car and have an easier way to configure the cargo area appeals to drivers”, she said. “And automakers have continued to push the boundaries for where SUVs can go”. +++ 

+++ In the UNITED KINGDOM , the new car market continued its negative trend in May in the face of continued political instability, a fall in consumer confidence and uncertainty over diesel. A total of 183,724 new cars were registered last month, down 4.6% year on year. Private consumers bought 5 % fewer cars, with fleet and business custom falling by 3 % and 29 % respectively. One main factor is the sustained decline in demand for diesel cars, which were down 18.3 % year on year in their 26th consecutive month of falling popularity. This wasn’t offset by a modest 1 % growth for petrol cars and an 11.7 % rise for alternatively fuelled vehicles (AFVs). Of the rise in AFVs, demand for petrol-electric hybrids increased by nearly 35 %, with battery electric cars up 81 %. However, plug-in hybrids declined 40.6 % in May and 25.1 % so far this year; figures that are directly related to the British government’s removal of the purchase grant for the vehicle type. Individual winners and losers in May’s market include Volvo (up 25.8 %) and Mitsubishi (up 23.0 %), while Renault registrations were down 24.9 %, Honda fell by 26.1 % and Mini registrations dropped by 22.4 %. +++

+++ In the UNITED STATES , the biggest winners were: Genesis (up 115 %), Lamborghini (up 85.6 %), Ram (up 29 %), Tesla (up 100 %) and Volkswagen (up 14 %). The biggest losers were: Alfa Romeo (down 34 %), Chrysler (down 26 %), Fiat (down 29 %), Infiniti (down 10.4 %), Jaguar (down 14.6 %), Mazda (down 16 %), Mini (down 33.2 %) and Mitsubishi (down 21.5 %). +++  

+++ VOLKSWAGEN will invest up to €4 billion over the years to 2023 to digitalize its administration and production, the German carmaker said, adding that up to 4,000 jobs in non-production units could be cut. “At least 2,000 new jobs related to digitalization are to be created”, the Wolfsburg-based company said. Works council head Bernd Osterloh added there would be no forced layoffs until 2029. Volkswagen will place a stake of less than 25 % in truck unit Traton in a listing planned before the end of June, a person familiar with the matter said. Volkswagen is being more cautious about the volume of shares it intends to place after halting earlier listing plans in March, when it had planned to place a stake of up to 25 % on the stock market. “We are not thinking about the upper end of the corridor given the market environment”, said the person, speaking on condition of anonymity due to the sensitivity of the matter. Volkswagen will list between 10 and 20 % of the truckmacker’s shares in Frankfurt and Stockholm. It will use the next 2 weeks to gauge investor appetite, the person said, adding that a larger offering was still possible. The Wolfsburg-based company will invest the proceeds from the initial public offering (IPO) into its passenger car business, the person added. Because truckmakers trade at higher multiples than passenger car companies, separately listed Traton shares will serve as a more valuable currency in merger and acquisition deals than using existing VW shares, the person said. VW has made no decision on whether to pursue an acquisition of United States based rival Navistar, the person said. “The Traton IPO is a standalone deal which is not directly linked to subsequent deals. Any additional steps need to be evaluated subsequently”, the person said. “We need the liquidity from Traton to fund the transformation of the automotive business”, the person said, adding that mass-producing electric cars is a challenge no carmaker has yet mastered. More shares could be placed on the market in subsequent transactions if the IPO is successful, the person said, adding that VW will remain Traton’s majority shareholder for the foreseeable future. Asked whether Volkswagen could play an active role in auto sector mergers and acquisitions, the source said that VW had the ability to review opportunities should they arise. “We are not lacking scale, we are not lacking in the area of technologies, and we are not lacking complexity. We need to work on delivering our strategy which aims to cut fixed costs”. +++


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