+++ ASTON MARTIN chief executive Andy Palmer says consolidation across the automotive industry is inevitable as car manufacturers work on developing electric, connected and autonomous cars. During an interview, Palmer said that there is no way all car manufacturers can simply develop their own electric and self-driving vehicles and expect to make a return on their investments. “The slightly extreme hypothesis, it builds on Sergio Marchionne’s “Confessions of a Capital Junkie”, is that it’s crazy that we’ve got 20 or 30 major car companies spending billions of dollars effectively creating the same thing. At a time when the emerging technology, it’s just amazing, around electric cars, connected cars, or autonomous cars”, Palmer said. “Each of those companies individually can’t afford to spend that money. They’ll not get the return on it. The margins are becoming extremely tight, often negative, especially on electric cars. A new car, a billion dollars for no return. That story doesn’t go on very long before you start to get companies in distress”. Palmer believes that, in 10 years’ time, self-driving vehicles will be used for all manner of purposes other than driving. For example, they’ll be used for “sleeping, talking, meetings, video conferencing” and that this will inevitably result in the creation of pod-shaped vehicles. Before long, he claims, cars of this sort will become a commodity. Nevertheless, Aston Martin doesn’t want to fall into this trap. Rather than catering to the masses and competing with the few companies who will build these pods successfully, the British car manufacturer will look to appeal to the lifestyle needs of the wealthy. “My hypothesis, actually, the reason for not producing more than 15,000 cars is very much to stay in that luxury arena. I see that as the way for the company to exist for another 100 years”, Palmer said. “We become much more focused on the lifestyle of the individuals, the playtime of the individuals”. +++ 

+++ Slovak group InoBat and U.S. energy tech firm Wildcat Discovery Technologies will build a €100 million AUTOMOTIVE BATTERY production line in Slovakia, with the aim of meeting future demand from central Europe’s carmakers. The companies said construction on the 100 MWh line, able to produce 1,500 batteries annually initially, should start in the first half of 2020 and distribution will begin by the end of 2021. Eventually, they said, they wanted to upgrade the line to 10 GWh in the long term, boosting capacity to 150,000 batteries. “Wildcat’s proprietary technology has the potential to revolutionize the entire European electric vehicle batteries industry”, InoBat co-founder Marian Bocek said in a statement. The companies are in talks with the European Investment Bank, they said. Wildcat develops technology combining high throughput experimentation and artificial intelligence, and has worked with both automakers and consumer electronics groups, including Toyota and Samsung Electronics. The car sector is increasingly shifting to electric and the European Union is seeking to support battery production. The electric car battery production line would be the first in Slovakia, which is the world’s biggest per-capita car producer. Central Europe is home to several car plants, making the sector important to the region’s economies. South Korean battery maker LG Chem has already set up a production base in Poland while SK Innovation is due to launch in Hungary, where Samsung SDI is already. +++ 

+++ Rumors, reports, and rumblings pointed to a growing SUV range immediately after BENTLEY introduced the Bentayga in 2015. The British company did little to quell the noise, and it admitted launching more SUVs wasn’t off the table, but it ultimately decided to stick with one high-riding model for the time being. At least 2 different rumors refused to go away in the wake of the Bentayga’s launch. First, that Bentley would release a coupe-badged, fastback-roofed version of the Bentayga styled like the BMW X6 and the Porsche Cayenne Coupe, among others. Second, that Bentley would expand its line-up with a smaller high-riding model positioned at the bottom of its range. Both were credible, it’s not like they alluded to a Bentley-badged Wrangler fighter, but neither are happening. “Direct answer? We are not looking into that”, said Adrian Hallmark, the company’s CEO, in an interview. “Is there an imminent, or very near, coupe? No”. He added his team isn’t looking at launching a smaller SUV, either. However, he also stressed none of this is set in stone. Bentley might change its mind in the medium-term future. “Could we imagine doing different twists on SUVs in the future? Yes”, he hinted. The Bentayga represents 50 % of the company’s annual sales and it’s the best-selling Bentley in its history, so it’s not going away any time soon. Hallmark told that the model will evolve over the course of its life cycle, it hasn’t reached its full potential yet, but he didn’t go into additional details. +++

+++ BMW is in the final stages of a plan to add a new baby SUV to its model range, in an attempt to capitalise on the growth of affordable, compact crossovers. The firm has one of the largest SUV line-ups in the industry, stretching from the X1 to the X7. During the first half of 2019, almost 45 % of the company’s sales were made up of SUVs; the highest figures the firm has ever recorded and up almost 10 % on the same period last year. The rapid rise in the popularity of SUVs has encouraged bosses to look at other areas of opportunity. The first will be a crossover measuring between 4.1 and 4.2 metres to take on the likes of the Audi Q2 and new DS 3 Crossback. For context, BMW’s smallest current SUV, the X2, measures in at 4,36 metres long. The new crossover will retain many of BMW’s trademark styling cues, such as the bold kidney grille and thin LED headlamps. But, the biggest differentiator will come in the car’s name; it’s understood that this new model will be the first SUV to break away from BMW’s X1 to X7 naming structure; Urban X (pronounced Urban Cross) is understood to be the frontrunner. Thanks to BMW’s expansive product portfolio, a lot of the Urban X’s running gear can be cherry-picked from the firm’s existing vehicles. The firm’s smallest and latest architecture, called UKL2, has been developed from the well known front-wheel-drive platform that first appeared in 2014, and UKL2 will form a base for the new Urban X. Crucially the platform is already equipped for electrification. From the 48 volt mild-hybrid system to powerful plug-in hybrid powertrains and even a fully electric set-up with a range of 400 kilometres, BMW already has a full suite of powertrain options to give the Urban X a fighting chance of success from the moment it launches. As a plug-in hybrid, and even in pure-electric guise, an electrified rear axle would allow 4-wheeldrive to be introduced; the same principle can be seen on the existing 2 Series Active Tourer MPV; the 225xe’s 1.5-litre 3-cylinder petrol engine sends power to the front wheels and an electric motor drives the rears. It’s becoming increasingly difficult for premium manufacturers to ignore the growing trend of small SUVs. Between 2011 and 2016, global sales increased from 950,000 to 4.45 million vehicles. By next year, analysts are expecting this to rise to about 7.5 million. Audi has also flirted with the idea of developing an even smaller crossover, called the Q1. Audi CEO Bram Schot told: “Don’t be surprised if you see the car in 2 or 3 years as we react fast to markets”. +++ 

+++ The new CHEVROLET CORVETTE Stingray may be the talk of the town right now but those wanting to purchase a new ‘Vette before the C8 arrives in dealers next year have thousands of C7 models to choose from. There are approximately 6025 new C7 Corvettes sitting in dealerships across the United States just waiting to be purchased. This represents an 84 day supply of the front-engined, V8 powered sports car. As Chevrolet was readying to launch the C8 Corvette throughout the first half of this year, it began offering generous discounts for the C7 model. At the start of the year, there were more than 9000 examples on dealership lots and by June, that had fallen to 7045 units. Chevrolet intends on commencing C8 Corvette production later this year and when it does, predicts there will be fewer than 2,500 C7 models looking for homes, enough for a 35 day supply. Chevrolet stopped taking orders for the C7 on June 23 but the current car is expected to remain in production until September. Now, you may be wondering how C7 production is still ongoing when the final example sold for $2.7 million in late June. Well, the car which was presented on stage at the Barrett-Jackson auction was actually just a lookalike of what the final C7 will be. In a bid to help shift its inventory of C7s, Chevrolet is currently offering $3,000 in loyalty cash to current Corvette owners looking to purchase a new one. +++ 

+++ China’s Evergrande Group has formed a joint venture with German automotive powertrain specialist Hofer to develop ELECTRIC VEHICLE POWERTRAINS as the leading Chinese real-estate developer seeks to expand its presence in the domestic EV sector. The joint venture, in Stuttgart, was unveiled as a 67-33 partnership between Evergrande Group’s health care subsidiary, Evergrande Health Industry Group, and Hofer with Hofer’s founder, Johann Hofer, as its chairman. The joint venture will develop integrated electric drive units in Germany and carry out r&d and production in China, Evergrande Group said, without giving additional details about the partnership. Hofer, headquartered in Nürtingen, Germany, also has offices in the UK, Austria, Italy, China and the U.S. The Evergrande Group, since failing to acquire domestic EV startup Faraday Future, has made several EV-related acquisitions this year via Evergrande Health Industry Group, including National Electric Vehicle Sweden, a Swedish company that bought the assets of bankrupt Saab Automobile in 2012 to build EVs on the Saab 9-3 platform; Shanghai EV battery supplier Cenat New Energy; U.K. electric motor maker Protean Holdings; and Dutch electric motor manufacturer e-Traction. In June, Evergrande Group signed framework agreements with local governments to build major EV plants in the south China city of Guangzhou and northeast China city of Shenyang. The Evergrande Group is headquartered in the south China city of Shenzhen and is listed in Hong Kong. It reported net profit of 72 billion yuan ($10.5 billion) on revenue of 466 billion yuan for 2018. +++ 

+++ FORD will end European sales of the Ka+ as part of the automaker’s drive to improve profitability in the region. Minicars have become problematic for automakers in Europe because their low retail price means it is not profitable to equip the cars with expensive emissions-reduction technology needed as the European Union introduces tougher CO2 reduction targets to help combat climate change. A Ford spokesman said the Ka+ would be subject to CO2 penalties in 2020, “making it less attractive to customers in a competitive segment”. PSA Group’s Opel-Vauxhall unit has said it will drop its Karl and Adam. PSA has also hinted that the Peugeot 108 and Citroen C1 might be dropped after the current generation. Volkswagen Group is not expected to directly replace its VW Up, Skoda Citigo and Seat Mii and is instead working on how to sell affordable battery-powered city cars with zero emissions. Ford began importing  the Ka+ into Europe from India in 2016 as a replacement for the smaller Ka that was built in Fiat’s factory in Poland alongside the 500, whose platform it shared. Ford sold 22,406 Ka+ models in Europe through May, down 13 % on the year before. Last year, Ford sold just over 50,000 Ka+ units in Europe. Dealers were told as early as April that Ford would drop the Ka+. Shipments will officially stop in September, the spokesman said. Ford has previously said it will also ax the C-Max and Grand C-Max. In January, Ford unveiled a plan to fix its poor profitability in Europe that includes cutting 12,000 jobs by the end of 2020. The cost-cutting also includes the closure of an engine plant in Bridgend, Wales and exiting the passenger car market in Russia. Ford posted a $53 million profit in Europe in the second quarter for Europe, reversing a $73 million loss in the same quarter of 2018. Restructuring actions in Europe and South America cost the automaker $1.2 billion in special charges during the quarter. Ford is overhauling its product lineup in Europe  to focus on more profitable vehicle lines such as SUVs and commercial vehicles, including launching the Puma later this year. “We are introducing exciting vehicles soon that will better match customer demand in Europe”, the spokesman said. Ford said in July it would launch an electric car in Europe in 2023 based on VW Group’s MEB platform, following an electric SUV in 2020. The company also said it would introduce 2 more SUV nameplates in Europe in the next 5 years. Ford is mulling an ST version of its new Puma as the range’s flagship sporting model. Ford global development boss Hau Thai-Tang said the Puma “would be a good place for us to look” in expanding the ST range beyond the Fiesta and Focus in Europe. Thai-Tang stopped short of confirming the model for production, but it is understood that the project is set to be given the green light, with the Puma ST sharing its key running gear, including a 200 hp 1.5-litre 3-cylinder turbo engine, with the Fiesta ST. Early development mules have already been seen testing at the Nürburgring. An ST version of the Puma would be unlikely to vary drastically from the ST Line version of the car, which was revealed back in April. But we can expect a bespoke chassis setup, possibly including an optional limited-slip differential, selectable drive modes and a launch control function. Thai-Tang said Ford is keen to continue leveraging its Ford Performance arm for road car development, but the company would not simply look to create an ST version of each car. In addition to its 2 European hot hatches, Ford also makes ST versions of its Edge and Explorer large SUVs. “We look at creating STs by very objective measures to make sure it is credible as an ST”, said Thai-Tang. “Do we have the right building blocks on which to base it?” A new Focus RS is also understood to be in development, but it’s unlikely to appear before 2022, after the Focus’s mid-life update. “We have nothing to announce but we recognise the importance of that car”, said Thai-Tang. It is understood that hybrid power is one consideration for the Focus RS. “We’ll see where we go”, Ford’s automotive president Joe Hinrichs said. Ford of Europe is in the midst of a restructuring that will see the company eliminate of a number of MPVs and focus on crossovers. While the automaker has promised to give Europeans a “niche portfolio of iconic models” imported from aboard, there will apparently be one notable absence: the highly-anticipated Bronco. During today’s second quarter earnings presentation, the automaker revealed the upcoming Jeep Wrangler competitor will be offered in North America, Africa and The Middle East. If that wasn’t bad enough, the Baby Bronco (officially referred to as the “Small, rugged off-road utility”) doesn’t appear destined for Europe either. Instead, the presentation shows the crossover will only be offered in North and South America. Interestingly, the presentation doesn’t show either model will be offered with a hybrid powertrain. This is a tad surprising as the company had previously confirmed a Bronco Hybrid in 2018. At the time, Ford said they were embarking on an “all-in push on hybrid-electrics to bring new capability and features to customers on high-volume, profitable vehicles like F-150, Mustang, Explorer, Escape and Bronco”. I’ve reached out to Ford for clarification, but it could be just a matter of timing. The Bronco Hybrid won’t arrive until 2021 or later. If that’s the case, it could also open the door to Bronco / Baby Bronco availability in Europe at a later date. Regardless, pictures of the Baby Bronco slipped out of Ford’s dealer meeting last year. They showed the crossover will be significantly more rugged than the Kuga as the model features slab-sided styling and meaty off-road tires. The crossover also has a relatively flat roof and a squared off grille with prominent ‘Ford’ badging. The standard Bronco will be launched in 2020 and will reportedly be powered by a 2.3-liter EcoBoost 4-cylinder engine. It will likely have a retro-inspired design as well as removable doors and a roof. +++ 

+++ Automakers are accelerating the rollout of technology designed to avoid crashes, but INSURANCE companies are waving a caution flag at consumers eyeing discounts for buying collision-avoiding brakes or automated cruise control. The global market for advanced driver assistance systems, known in the industry as ADAS, is expected to reach more than $67 billion by 2025, growing more than 10 % each year. A group of 20 carmakers has pledged to outfit almost every new vehicle with forward collision warning and city-speed automatic emergency braking by 2020. Government mandates to install technology such as collision avoiding automatic brake systems are driving the market, as is the promise of profits for these higher-margin vehicles. “Anybody that has been in a car with advanced safety solutions is not going to go back”, Kevin Clark, chief executive of auto technology supplier Aptiv told. The cost for advanced safety systems (automatic braking, lane keeping and automated cruise control) can be relatively low to the automaker, between $500 to $1,000 per vehicle, Clark said. “The manufacturer can price for it and consumers will pay for it”, he said. Aptiv expects to book more than $4 billion in new ADAS business this year. “We have gone from 5 customers just a few years ago to I think we’ll have north of 20 in a couple of years from now”, Clark said. The insurance industry’s perspective is different. Personal auto insurance, while traditionally a low-margin business, provides the largest amount of liquidity to insurers, generating more than $244 billion in 2018 direct premiums in the United States alone, data by the National Association of Insurance Commissioners showed. Motor insurance is also seen as a way for insurance companies to cross-sell other, more lucrative products to customers. According to Swiss Re, the world’s largest auto reinsurer, and mapping company Here, ADAS has the potential to reduce motor accident frequencies by up to 25 %, cutting global insurance premiums for fully ADAS-equipped cars by $20 billion by 2020. But U.S. insurers said they currently do not have sufficient data to validate auto industry promises of safety benefits from automated driving systems. They cite car manufacturers’ reluctance to provide detailed information on models sold with those features, a lack of consistent standards, drivers’ unpredictable use of the systems and higher repair costs. “We’re not going to go against the data and create any type of false discounts for the purposes of marketing at this point. We just want to make sure the rate is reflective of the risk that it brings”, said Steve Armstrong, a vice president of Allstate’s pricing department, one of America’s largest insurers. Shantelle Thomas, also a vice president at Allstate’s pricing department, said insurance rates will reflect benefits and costs of modern auto technology in the next 5 years, but will not necessarily be presented as discounts. The sentiment was echoed by other insurance providers. “We’re stuck in a murky in-between”, said Jennifer St. John, national auto claims leader at Westfield Insurance. “ADAS have shown to provide real world benefits, but there really isn’t a great deal of commonality in terms of what’s out there”. Insurers pointed to higher repair costs as a risk. Sensors and cameras central to automatic driving systems are mostly installed in a car’s bumper or windshield. Research by AAA has shown repair costs for even minor collisions can double if such sensors are damaged. “There’s no such thing as a $300 bumper anymore. It’s closer to $1,500 in repair costs nowadays”, said Richard Lavey, executive vice president at The Hanover Insurance Group. State Farm in a statement said it did not offer discounts specific to advanced driver assistance systems and that future rates would be shaped by a variety of factors, including safety, regulation, underwriting, liability and repair costs. With new automated driving features being released on a rolling basis, insurers said it is difficult to keep up. Forward collision warning with automatic braking has been found to have one of the greatest safety benefits among various driver assistance systems. The Insurance Institute for Highway Safety concluded in a recent study that automatic braking could reduce front-to-rear crashes with injuries by 56 %. But most ADAS features are still sold as optional equipment, making it impossible for insurance companies to validate which features ultimately end up on a specific car. Insurers are reluctant to trust car buyers to correctly identify what technology their vehicle has on board. Advanced safety features not only differ in performance and description among different manufacturers, but even among models by the same automaker, according to research by IIHS and its UK equivalent Thatcham Research, which conduct road tests to evaluate safety tech performance. “The only way you can adequately price is by getting more data to understand what a vehicle has and whether it makes a difference”, said Matthew Avery, Thatcham’s research director. That data is not sufficiently provided by manufactures who often cite proprietary and competitive reasons, said Tom Karol, general counsel of the National Association of Mutual Insurance Companies, whose members insure more than 170 million U.S. auto policyholders. Automakers and insurers said they are dealing with the data issues. General Motors has a team working on ADAS and insurance, according to Barry Engle, head of GM’s North American operations. Engle said he expects with better information, the insurance industry would respond positively. “To the extent that they are not, collectively we need to do a better job of communicating with one another”, he said. Swiss Re is leading efforts to develop a global ADAS risk score and a mechanism allowing carmakers to supply data to Swiss Re, which in turn will recommend discounts to auto insurers. “If we say these cars are safer, insurers are more prone to believe us as we take part of the risk” as a reinsurer for consumer-facing auto policy writers, said Sebastiaan Bongers, Swiss Re’s head of products and technology. Bongers believes reductions in accident frequency and severity will eventually offset higher repair costs. But he said lower premiums could result in temporary liquidity problems in the insurance sector in about ten years. Swiss Re so far has partnered with Germany’s BMW and is in talks with more auto manufacturers to develop a comprehensive system. +++ 

+++ As much as I’d love to see MAZDA build a new rotary sports car, it’s very unlikely that such a car will come to fruition anytime soon. Nonetheless, the automaker was recently spotted testing a pair of RX-8 prototypes at the Nurburgring, sparking my curiosity. The duo produced very different exhaust notes, while the blue one also features a piece of black and white camouflage across its front fascia which is odd to say the least. Just what is Mazda working on? In late 2017, a mysterious RX-8 mule appeared on the streets near the Nurburgring. That vehicle was apparently being benchmarked against a Porsche Cayman and, at the time, I speculated that the prototype may have been outfitted with a new rotary engine with upwards of 450 hp. Fast forward to mid-2019, and these 2 RX-8s have appeared out of nowhere. At last year’s Paris Auto Show, Mazda said it would launch an electric vehicle with a rotary engine acting as a range-extender. Last month, I came across some patents showing a new, turbocharged rotary engine design. While there’s no word if it is indeed intended to power a modern-day RX-7 (or is it RX-9?), Mazda research and development chief Kiyoshi Fujiwara did indicate a couple of years ago that such a model could indeed become a reality sometime in the future. “We have still been developing rotary engines as a sports car. Technology is going well but if we launch this kind of model later, we will have to add more technology to it, like autonomous driving, electrification”. +++ 

+++ RENAULT warned revenue may decline this year, scrapping a previous goal, after first-half profit was hit by weakening car demand and an earnings collapse at alliance partner Nissan. Net income slumped by more than half to €970 million in January-June as revenue fell 6.4 % to €28.05 billion, the French carmaker said. Operating profit also dropped 13.6 % to €1.65 billion. “Given the degradation in demand, the group now expects 2019 revenues to be close to last year’s”, Renault said; abandoning an earlier pledge to increase revenue before currency effects. A broad-based auto sales downturn has rattled the sector, prompting profit warnings and compounding challenges for Renault and Nissan as they struggle to turn the page on the Ghosn era. Renault’s bottom line was hit by an €826 million drop in earnings from its 43.4 % owned partner. Nissan is cutting 12,500 jobs globally after an earnings collapse that it is keen to blame on Ghosn’s leadership. But Renault’s own performance (reflected in an operating margin that declined to 5.9 % from 6.4 % the year before) compares less favorably with domestic rival PSA Group. The Peugeot maker bucked the downturn with a record 8.7 % profit margin. Alliance tensions flared after Ghosn’s November arrest, worsened when Renault tried in vain to merge with Nissan, then Fiat Chrysler Automobiles, and may be affecting operational performance, investors fear. Citi analyst Raghav Gupta-Chaudhary flagged a lower-than-usual €258 million in joint purchasing savings for Renault. “We thought this would be weak in light of the well-documented difficulties with the alliance”, he said. Renault blamed falling sales in France, as well as Turkey and Argentina, for a 7.7 % revenue drop at its core automotive business, whose profit margin slid to 4 % from 4.5 %. Operating free cash flow also suffered, coming in at a negative €716 million as investment jumped by €742 million to €2.91 billion. Renault, which is counting on model launches including a new Clio to boost performance in the second half of 2019, nonetheless reiterated pledges to deliver positive full-year cash flow and a margin close to 6 %. +++ 

+++ TESLA boss Elon Musk, after reporting a surprisingly large loss in the second quarter, pointed toward an eventual, if delayed, return to profitability and spectacular growth into a truly global company. “We expect growth to continue for several years to come at the 50 to 100 % level”, Musk said on a conference call. Such rapid growth stretches the bounds of human comprehension, he said. “We can only understand an exponential rate of growth at a cognitive level”, he said. “If that trend continues, the results will be pretty amazing”. After a pause, he added: “And I think that will continue”. For now, record sales have not been enough to generate consistent profits. The company lost $389 million in the second quarter (far more than analysts had projected) even as sales jumped more than 50 % to $6.35 billion. Automotive gross margins, a closely watched metric, slipped to 18.9 % from 20.2 % in the first quarter and 20.6 % in 2018’s second quarter. Itay Michaeli, an analyst at Citigroup, had written that anything much below 21 % “would support the bear case on Tesla’s profitability”. Musk and chief financial officer Zachary Kirkhorn said in a letter to shareholders that the company would aim for a net profit in the third quarter, though “continuous volume growth, capacity expansion and cash generation” would be the focus. In the call that followed, Musk said the company would about break even this quarter and be profitable in the fourth. Next year, he said the first half will be “tough”, with the second quarter not as bad as the first. Then the second half of the year “will be incredible”. Tesla said in the letter that the Fremont, California, plant has started preparing to assemble the Model Y crossover, with production to begin by fall 2020. A new factory in China is forecast to begin making the Model 3 before the end of this year. And Musk said on the conference call that he wants to select a location for a European factory this year. “We remain focused on international expansion, because local production is essential to being cost-competitive”, he said on the call. In a surprise announcement, Musk said veteran Tesla executive J.B. Straubel would hand off his chief technology officer role to a protégé and become a senior adviser. Straubel is the engineer behind Tesla’s battery and has been at Tesla since its founding. In 2003, he had lunch with Musk and the two discussed advances in consumer electronics and lithium ion batteries. A fire was lit.  “That was the premise Elon and I discussed over that first lunch: that batteries have come much further than anyone expects, certainly than the auto industry expects”, Straubel told 10 years later. “If we hadn’t had lunch in 2003, Tesla wouldn’t exist, basically”, Musk said on the call. Straubel insisted he’s “not going anywhere” and expressed full confidence in Drew Baglino, with whom he also had a fateful lunch in 2003 when Baglino was finishing college and seeking direction. Tesla, which doesn’t report sales by country, said its Model 3 outsold “all of its gas-powered equivalents combined” in the U.S. and is approaching volumes of established premium competitors in Europe. Global sales of the most affordable Tesla model totaled 77,634 in the quarter. Tesla said it delivered 17,722 of its larger Model S and Model X. Kirkhorn said the average selling price of the Model 3 was down to about $50,000, but margins on the vehicle improved as manufacturing became more efficient. The company said it has 18 days worth of vehicle sales in inventory, down from 55 a year earlier and 30 at the end of the first quarter. Tesla reported $117 million in restructuring and other charges in the quarter. It has laid off workers and pledged to close some stores to lower costs. It has also tinkered with its pricing and dropped some model variants in recent months. The company reaffirmed its sales guidance for 2019 at 360,000 to 400,000. “We believe our business has grown to the point of being self-funding”, Musk and Kirkhorn wrote in the letter, though there may be some challenges around product launches. “We are most focused on expanding our manufacturing footprint in new regions, launching new products and continuing to improve the customer experience, while generating and using cash sustainably”. To that end, Tesla is trimming its capital expenditure budget to $1.5 billion to $2 billion, down from $2 billion to $2.5 billion, citing improved capital efficiencies and delaying some spending. Tesla has confirmed that production of the Model Y should commence in the fall of 2020. The electric car manufacturer took the covers off its entry-level electric crossover back in March, but we already knew the car wouldn’t reach the production line for quite some time. In fact, Tesla had yet to even decide exactly where it could build the Model Y until the second quarter of this year, as confirmed by the company’s latest quarterly results. Eventually, it started production preparations for the Model Y at its Fremont, California factory and firmly believes that it will prove to be more profitable than the Model 3. “Due to a significant overlap of components between Model 3 and Model Y, we are able to leverage existing manufacturing designs in the development of the Model Y production facilities”, Tesla said. “Additionally, we are making progress managing Model Y cost with only a minimal cost premium expected over Model 3. Due to the large market size for crossovers, as well as higher prices, we believe Model Y will be a more profitable product than the Model 3”. For a time, the automaker was considering building the Model Y at its Gigafactory in Nevada, but has evidently decided against that. It will also build some Model Ys at its upcoming manufacturing facility in Shanghai, China, but those are, in all likelihood, meant solely for the local market. Tesla will sell the Model Y in the Standard Range, Long Range, Dual Motor AWD, and Performance guise. The entry-level model will be priced from $39,000, while the Performance will start at $61,000. +++ 

+++ The VOLKSWAGEN Group posted a 30 % rise in second-quarter operating profit despite a drop in vehicle sales as rising demand for SUVs and premium brands boosted margins. Volkswagen bucked a trend of falling demand for passenger cars by launching a range of higher-margin sports utility vehicles at a time when demand for sedans is falling. Daimler and Aston Martin warned on profits this week. “Very solid and clean set of numbers, marginally ahead of consensus”, Jefferies analyst Philippe Houchois said about Volkswagen’s earnings in a note. The Wolfsburg, Germany-based company’s operating profit rose to €5.13 billion, up from €3.94 billion in the second quarter last year. It was boosted by the absence of a diesel charge VW booked in the year-earlier period. Volkswagen reiterated it expects vehicle deliveries in 2019 to exceed a prior-year figure and for revenue in the passenger cars and commercial vehicles divisions to grow at least 5 %. VW said it continues to expect an operating return on sales in the passenger cars area and the group of between 6.5 % and 7.5 %. It reiterated that after special items, it expects the operating return on sales to be at the lower end of the expected range for the group and the passenger cars business area. Peugeot said it had delivered an operating margin of 8.7 % in the first half of 2019, without releasing a more detailed breakdown of quarterly results. By contrast, Volkswagen Group’s operating return on sales rose to 7.2 % in the first half, up from 6.8 % in the year-earlier period. +++

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