Newsflash IV

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+++ Even after a relationship is dead, couples often go through the motions of remaining in a marriage. That’s the best way to characterize what’s left of the ALLIANCE between Renault and Nissan Motor. Renault must sell down its 43.4 % stake in its Japanese partner to 5 to 10 % and both sides should “invest in new ventures”, Nissan’s senior vice president Hari Nada wrote in an email to colleagues, saying this was the view of independent director Masakazu Toyoda. In Toyoda’s view, the 2 sides should come up with some sort of joint venture in order to show that the alliance isn’t dead, giving Renault chairman Jean-Dominique Senard the room to unwind the cross-shareholdings that underpin the relationship. To judge by the picture this paints of internal discussions within Nissan, the Japanese company is only interested in maintaining the appearance of an alliance with Renault and its 15 % shareholder, the French government. Making a joint commitment to reaffirm a bond isn’t uncommon for people in a failing relationship, but it’s no way to run a business. If Nissan is sincerely committed to a joint venture, the first thing it should do is identify a strategic opportunity, work out what synergies it would bring, and find a way to operate it. Forming a JV just to get your partner to agree to the terms of a divorce puts your employees’ careers at the mercy of these corporate maneuverings. For those at Renault, most committed to the logic of the merger with Fiat Chrysler Automobiles (FCA) that was declared dead in June, this might count as good news. Senard has publicly talked down the prospect of the tie-up being renewed, but this suggests that Renault has been looking for ways to revive the alliance behind the scenes. A tie-up between European giants, in the manner of the mergers that created Airbus, Air France-KLM, and IAG, seems a far more congenial outcome than the bitter remains of the Renault-Nissan marriage. FCA’s strong business in pickups and North America would also complement one of the most obvious shortcomings that Renault would suffer if it lost its alliance with Nissan. At the same time, the writing is on the wall for any further integration between France and Japan. Nissan seems committed to preventing any further convergence. Whether a Potemkin village JV is agreed to, the sort of ambitious activities pushed in the Carlos Ghosn era (development of modular designs shared between Renault and Nissan vehicles, or moving the manufacturing of the Nissan Micra from the Japanese company’s Chennai plant to a Renault factory north of Paris) are unlikely to see the light of day again. The more likely outcome would be something eventually resembling the far more limited cooperation between Daimler and the alliance. Does it matter whether Renault and Nissan are married, or merely cohabiting? In many ways, the alliance has been dead since Ghosn and his deputy Greg Kelly were arrested by Japanese authorities last November. Nissan in particular may be better off resolving its substantial problems on its own rather than getting involved in the complexity of another multi-billion dollar cross-border merger. Still, the risk for Nissan is that by turning away from its European partnership it will leave itself too small to manage the vast capital expenditures and research and development costs necessary as the global car industry seeks to reverse slumping sales and manage the transition to electric vehicles and greater automation. Ghosn’s pursuit of volume growth at any cost is one reason why Nissan is now plagued with overcapacity and facing drastic job cuts. But the vision he was pursuing before his arrest (of a company as transnational as he is, headquartered in the Netherlands and with operations all over the world, and not especially beholden to either the Japanese or French governments) is now unlikely ever to materialize. That’s a tragedy. A Renault – Nissan alliance free to pursue profitable growth in the interests of the business as a whole, rather than being turned into the plaything of nationalist interests, is the likeliest way for the 2 companies and their workforces to prosper. If management in Paris and Yokohama are quietly giving up on that future, both companies may live to regret it. A marriage where neither partner is committed is the worst of all worlds. If separation is out of the question, Nissan and Renault need to find a way to make this relationship work. +++

+++ China’s Great Wall Motor said that its joint venture in China with BMW faced regulatory uncertainties as both companies pledged to proceed with their plans in the world’s No. 1 market. In February 2018, BMW said it had signed a letter of intent with Great Wall to produce electric Minis in China. Great Wall now says: “At present, the project is proceeding as planned, and the 2 parties are communicating on the details of the cooperation and preparing for the project to seek approval from the relevant authorities”. There are uncertainties regarding whether the joint venture will be able to obtain the required regulation approvals, it said. BMW said the joint venture was going very well and significant progress was being made in all business areas. The venture aims to build a plant in Zhangjiagang with the capacity to build 160,000 gasoline vehicles for export and another 160,000 so-called New Energy Vehicles (NEVs). The joint venture will also include a research center and car parts manufacturing facilities. A separate local government document shows the total investment of the project is forecast at 20.2 billion yuan ($2.87 billion). Automakers and suppliers are scrambling to meet tough new Chinese quotas for less polluting cars, know as NEVs in China. Those rules call for electric and rechargeable hybrid vehicles to account for a fifth of total sales by 2025. Great Wall, which is China’s top SUV and pickup maker, currently builds cars for Ora, an affordable battery-electric vehicle brand in Baoding, the city where it is headquartered. BMW and Great Wall have not yet received permission to build a new plant in Changsu, China and Chinese State Planning authorities last year tightened regulations on adding manufacturing capacity unless factory utilization rates improve. Hit by the U.S.-China trade war, China’s vehicle sales have fallen for 12 months in a row, including in June. Industry officials and analysts now expect car demand to slide some 5 % this year, its first decline since the 1990s. Great Wall is China’s top SUV and pick-up maker. BMW has a separate manufacturing alliance with BMW Brilliance Automotive in Shenyang. +++ 

+++ CHEVROLET has revealed that it considered designing the C8 Corvette with a split rear window similar to the 1963 ‘Vette. In an interview, Chevrolet Performance exterior design director Tom Peters stated that the design team tried but couldn’t make such a split rear window suit the mid-engined Corvette. “We looked at a split window. It was too literal. And however way we did it, it came across as forced”, he said. “Because the ’63 is so powerful, is there a way to represent that split window theme in a modern way? We tried to emulate the theme in the rear, and if you look, you can see a theme come through the roof. The glass aims and breaks subtly, and that lines up with the top of the motor. And that lines up with the Stingray emblem. So your eye connects the dots and it’s kind of a thematic element to the split window”. Chevrolet premiered the 1963 Corvette coupe with a split rear window thanks to design chief Bill Mitchell who wanted to continue the vehicle’s eye-catching centerline from the nose through to the car’s rear end. The split rear window Corvette is absolutely iconic and despite its striking good looks, was kicked to the curb the following year in favor of a more traditional single-piece rear window. Would the new Chevrolet Corvette Stingray look any good with a split rear window? We’ll never know. +++ 

+++ FIAT CHRYSLER AUTOMOBILES (FCA) boss said the automaker will not have to pay fines for failing to comply with tougher European CO2 regulations in 2019 and 2020. FCA will be compliant because of a regulatory credit deal with Tesla, the forthcoming debuts of plug-in hybrid versions of the Jeep Compass, Renegade and Wrangler, as well as the addition of an all-new full-electric Fiat 500 and the arrival of more efficient combustion engines, the executive said. “This year we’ll continue to roll out improved traditional engine technologies including our new GSE 3-cylinder and 4-cylinder gasoline engines”, Manley told analysts during a conference call to discuss FCA’s second-quarter financial results. The GSE 1.0 and 1.3 liter GSE gasoline engines are produced in Bielsko Biala, Poland, and are currently offered on the Fiat 500X and the Jeep Renegade. Additional production of the engines is scheduled to start at FCA’s plant in Termoli, Italy, next year. In 2020, FCA will launch a battery-powered Fiat 500 and the plug-in hybrid Jeeps. Manley said that with those launches electrified vehicles would account for about 5 % of FCA’s European sales mix. These vehicles, combined with the rollout of mild hybrid versions of models such as the Fiat 500 and the Jeep Renegade, and the benefits that FCA will get from pooling its result with those of Tesla have left Manley very confident. While FCA expects it will avoid fines, it will still have a substantial bill to achieve compliance. Chief financial officer Richard Palmer said during FCA’s first-quarter conference call that the cost to achieve compliance in Europe this year is €120 million. The global total cost for compliance in 2019 is set to be “moderately higher” than the €600 million FCA spent  in 2018. The CFO said compliance cost s are a 50 basis point (0.5 %) drag on FCA’s profit margin in the European region, which includes Africa and the Middle East. Electrification will also increase industrial costs, he added. Manley said FCA aims to recover 60 % of the additional vehicle electrification costs via pricing. He did not say whether FCA will also be able to avoid fines in 2021, when the new EU rules take full effect (next year automakers will have to comply with 95 % of their sales). Manley said FCA’s target is to be compliant without the help of credits from Tesla by 2022. To achieve full compliance by 2021, FCA plans to add another full-electric car to the lineup, another plug-in hybrid and four more mild hybrids, Manley said. By 2022, Manley believe that the “the need for pooling deals would be very, very small”. +++ 

+++ FISKER ’s upcoming all-electric SUV will feature some kind of innovative roof system which allows occupants to enjoy the open air. Henrik Fisker dubbed it the ‘California package’. If the Fisker SUV with the available California package does feature a roof design unlike any other, that would seem to eliminate the possibility of a large panoramic sunroof as heaps of other cars on the market offer such roof designs. Most panoramic sunroofs on the market allow drivers to either crack open the front half or slide back the front half to enjoy an open-air experience. Could the Fisker SUV allow owners to slide back the entire glass roof panel? It’s possible but we will have to wait until the SUV is unveiled before knowing exactly what it has designed. The electric car manufacturer dropped a new teaser for its SUV in mid-June and the example pictured appeared to feature a traditional sunroof. What we do know for sure about the vehicle is that it will be powered by a pair of electric motors, one of each axle, and feature an 80 kWh battery pack which should provide an estimated range of 483 km on a single charge. Key exterior design elements of the car teased in the past include turn signals mounted on the D-pillar and LED headlights. +++ 

+++ GENERAL MOTORS persuaded the U.S. federal judge who oversees nationwide litigation over defective ignition switches to narrow claims by owners who said their vehicles lost value because of the defect, which has been linked to 124 deaths. In a decision, U.S. district judge Jesse Furman said owners in 3 “bellwether” states (California, Missouri and Texas) could not seek damages based on the difference in value between what they paid for their defective vehicles and what the vehicles were really worth. He said the owners’ failure to show the fair market value of their vehicles, despite testimony from an expert witness, created an “absence of evidence on an essential element” of their claims, making it impossible for a jury to assess damages. The Manhattan-based judge also said that while damages could be measured by costs to repair defective vehicles, they could end up being zero if GM footed the bill. GM spokesman David Caldwell said the Detroit-based automaker was pleased with the decision, saying it dismissed the owners’ largest remaining claim. Furman’s 44-page decision is a defeat for owners who said they suffered economic losses from buying vehicles they thought were defect-free, only to see the ignition switch problem hurt GM’s brand, reputation and ultimately resale values. Because the decision “changes the landscape in dramatic ways”, Furman delayed indefinitely a proposed Jan. 13, 2020 trial on claims from bellwether states, and said “it may well make sense for the parties to revisit the issue of settlement”. Steve Berman, a lawyer for the owners, said he may ask Furman to reconsider the decision, and was confident he could address the judge’s concerns in cases from other states. “There has to be a damage remedy for consumers who unwittingly drove cars with serious safety issues”, Berman said in an email. “The car maker doesn’t get a free pass when it’s caught lying years later and then fixes the cars”. GM has recalled more than 2.6 million vehicles since 2014 over ignition switches that could cause engines to stall and prevent airbags from deploying. The automaker has paid more than $2.6 billion in penalties and settlements, including $900 million to settle a U.S. Department of Justice criminal case. That case was dismissed last September after GM honored its obligations under a 3-year deferred prosecution agreement. The nationwide litigation before Furman also covered well over 3,000 personal injury and wrongful death claims. A large majority have been resolved or dismissed. +++

+++ INDONESIA ’s capital announced new curbs on private cars as it moves to rein in Jakarta’s choking air pollution, but experts warned the measures were unlikely to stamp out the problem. The traffic-clogged city has more than 10 million residents, but about three times that number live in surrounding towns, swelling emissions from vehicles, factories and power stations. In the current dry season, Jakarta has consistently ranked among the world’s most polluted cities, based on data from Air Visual, a Swiss-based group that monitors air quality. In 2016, the municipal government ordered curbs on private cars governed by whether their license-plate numbers were odd or even, to reduce traffic jams on main thoroughfares. That effort was widened last year, ahead of the Asian Games. Today, it said this policy would be extended again to cover smaller roads. This move comes after an instruction last week by Jakarta Governor Anies Baswedan to levy congestion charges for cars from 2020, set an age limit of 10 years on vehicles on the road by 2025, tighten emission tests and rein in industrial discharges. However, experts said the governor needed to do more. “All the steps taken will in themselves improve the air quality, but the overall impact will not be big because they are not addressing the main problem”, said Almo Pradana, senior manager for energy and climate at the World Resources Institute Indonesia. Pradana added that Jakarta did not have enough monitoring devices to pinpoint the cause of the pollution spikes. “If we look at air quality issues, what you have to do is you have to find what makes the air quality worsen, how much in percentages comes from transportation, and when, and how much comes from coal power plants and factories”, he said. A strategic plan to cut pollution based on an inventory of emissions would be a better solution, he said, adding that this week’s massive power outage had made the city’s air cleaner. But ending the city’s love affair with cars appears likely to be difficult. Jakarta residents took to social media on Wednesday to figure out how to get around the restrictions, including strategies such as changing car plates and buying more cars. “It’s a burden for people, not effective!” one of them, Tito Pangesti, said. “Make better regulations, like banning old minibus with black exhaust smoke on the street if you want to reduce pollution, odd-even is not a solution”. Environmental groups have sued President Joko Widodo and several government officials over Jakarta’s worsening air quality, trying to force the government to investigate the source of emissions. +++ 

+++ The MCLAREN 720S is only of couple of years old, but it appears the company is already working on an extreme ‘longtail’ (LT) variant. The new supercar will be launched next year and follow in the footsteps of previous modern Maccas with the same moniker such as the 600LT and 675LT. Little is known about the car, but previous longtails have dropped up to 100 kg thanks to the extensive use of lightweight materials such as carbon fiber and aluminum and also sported aerodynamic tweaks, a sportier suspension and a revised interior. Besides being lighter and sportier, the new latest LT should be more powerful than the 720S. There’s no word on specifics, but speculation suggests Woking’s venerable twin-turbo 4.0-liter V8 has been upgraded to produce 750. That would be a healthy increase over the standard model, which is rated at 720, and in line with the brand’s practice when it comes to such variants. The engine will likely be paired to the same 7-speed SSG transmission that sends power to the rear wheels, whose software could be tweaked for even faster shifts. Given the extra power and reduced weight, the 750LT will be even faster than the already mighty quick 720S, which can accelerate from 0-96 km/h in 2.8 seconds and max out at 341 km/h. The 750LT could debut at the Geneva Motor Show next year and will presumably be followed by a Spider variant later on. +++ 

+++ Electric vehicle startup NIO ranks highest in J.D. Power’s inaugural China New Energy Vehicle Experience Index Study, which measures new-vehicle quality by monitoring problems reported by EV owners in the first 2 to 6 months of ownership. In the study, an electrified vehicle is scored based on problems cited per 100 vehicles, with a lower number of problems indicating higher quality. Nio, with a score of 67, was followed by BMW at 82. Two marques from Chinese automakers (Chery and Trumpchi) tied for third at 84. Separate rankings were also produced for 2 segments of electrified vehicles: BYD’s Tang led the ranking of mass market plug-in hybrids while the Nio ES8 ranked highest in the midsize/large battery EV segment. The study shows that electrified vehicles have the same problems as traditional vehicles, with the top three cited complaints covering interiors, exteriors and driving experience. When it comes to problems specific to electrified vehicles, the top 4 complaints were insufficient power, slow charging speed, excessive energy use that affects range and abnormal powertrain noise. The study also reveals that luxury electrified vehicle brands, as a whole, excel in new-vehicle quality, with an average score of 69 vs. the industry average of 89. By contrast, electrified vehicle brands marketed by Chinese automakers, with an average score of 90, have the most reported problems. The study surveyed 2,770 owners who bought new electrified vehicles from September 2018 through March. It covered 41 models from 21 brands and was carried out from March to May in 30 provinces in China. +++ 

+++ If you’ve got a guilty conscious and money to burn, PORSCHE is willing to help as they’ve announced a new carbon offset program for customers in the United States. Designed to effectively cancel out the CO2 emissions created from driving your car, the program allows people to calculate their emissions and select their preferred offset project. After visiting the site, users will be asked to enter their annual mileage and their average fuel consumption. While those numbers will vary, a person who drives a new Cayenne, 16,000 km annually will need to offset 4.62 tons of CO2. In order to do this, owners are presented with 4 different options. For €80, they can help save forests in Zimbabwe. Those looking for something closer to home can spend €70 to support the Aura Solar I project in Mexico. Customers can also support the Za Hung Hydropower project in Vietnam (€50) or protect the forests on the Afognak Island in Alaska. The latter option is the most expensive of the group as it has a recommend offset price of €120 which is more than twice as much as the Vietnam project. Porsche says each project is “internationally certified” and they’ve partnered with South Pole which is described as a “Swiss-based provider of carbon offsetting projects and sustainability financing that has been active internationally for more than a decade”. It remains to be seen if Porsche owners care enough about their pollution to do anything, but Porsche Cars North America President and CEO Klaus Zellmer said “offering an option for greater sustainability is part of creating a superb Porsche experience”. +++ 

+++ Dongfeng Motor is exploring options for its €2.2 billion stake in the PSA Group including a potential divestment, people with knowledge of the matter said, as the companies grapple with a global slowdown in the auto market. The Chinese state-owned automaker held talks in recent weeks with potential advisers about ways to monetize part or all of its 12.2 % stake in the French automaker, according to the people. As part of the strategic review, Dongfeng has discussed possible transactions including a straight sale of PSA shares or issuing exchangeable bonds backed by PSA stock, the people said. The funds would allow Dongfeng to invest in other areas at a time when its rivals are spending billions on electric vehicles and autonomous driving systems. The global car market is deteriorating as shifts in technology and weakening economic growth give consumers fewer reasons to go to the showroom. The slump has prompted traditional automakers to fight back by slashing jobs and pursuing mergers. Dongfeng, which has a Chinese joint venture with PSA, plans to coordinate with the French company if it decides to sell down so that it can preserve a good working relationship, they said. Deliberations are at an early stage, and there is no certainty they will lead to a deal, according to the people. The Chinese automaker may hold onto part of its stake in PSA to potentially benefit from future industry consolidation, the people said. PSA said in May that it is open to “any opportunities” to create long-term value amid reports of tie-ups with other automakers. PSA and Fiat Chrysler Automobiles had explored sharing car manufacturing investments in Europe, people familiar with the matter said earlier this year. Any selldown could upset the delicate balance between Dongfeng, the French state and the Peugeot family, which each own 14 % of the company. PSA boss Carlos Tavares said in October the parties’ shareholding pact is stable and that a change is not in the works. A representative for Dongfeng said the company does not have any information regarding the plan at the moment. Dongfeng got the stake in 2014 as part of a bailout after the more-than century old PSA fell behind rivals in investing in new technology and development. The company used the funds to overhaul its lineup. As part of the revamp, PSA and Dongfeng also agreed to team up in China, giving the European automaker access to the world’s largest auto market. The company’s faith in PSA’s turnaround plans has paid off. Dongfeng bought shares at €7.50 a piece in 2014 when it made the €800 million investment. 5 years on and the stock’s trading at more than double the price. Still, the global auto market has been slowing and proceeds from the sale would give the Chinese automaker much-needed funds to weather the worst slump in a generation. In a sign that PSA is struggling to keep its Chinese plants busy, Tavares has said he would consider making cars for the U.S. market in China. Renting out the facilities is also among ways to tackle the capacity issue, PSA chief financial officer Philippe de Rovira has said. Underscoring the depressed state of the market, Dongfeng Motor’s Hong Kong-listed unit saw second-half profit fall 30 %; the most on record. The company is slated to disclose first-half results later this month. China’s largest automaker, SAIC Motor, expects its annual sales to fall for the first time in at least 14 years, people familiar with the matter said last month. +++

+++ TESLA is considering lifting its prices in China from September amid yuan-related uncertainty, 2 people familiar with the matter said. The people declined to be named as the plan has not been made public. They did not offer detail on the price change. China allowed the yuan to weaken past the 7-per-dollar level for the first time in more than a decade, after which the U.S. government labeled China a currency manipulator, raising the stakes in the trade dispute between the 2 countries. China firmly opposes the currency manipulator label saying it has not used and will not use the yuan to cope with the U.S. trade frictions. The sharp drop in the yuan comes days after U.S. president Donald Trump stunned financial markets by vowing to impose 10 % tariffs on the remaining $300 billion of Chinese imports from Sept. 1, abruptly breaking a brief ceasefire in a trade war that has disrupted global supply chains and slowed growth. Tesla currently imports all the cars it sells in China, but it is in the process of building a factory in Shanghai that will manufacture the Model 3 in the initial phase and help it minimize the impact of the trade war and tariffs. If enacted, this would be the first case of a planned price adjustment by an importer since the yuan fell this week and points to the growing pressure that importers are facing. Tesla broke ground on the Shanghai factory in January and its chief executive officer Elon Musk has said the firm aims to finish initial construction this summer and start production of the Model 3 toward the end of the year. Deliveries of all models in the second quarter this year rose 51 % from the first quarter to 95,200 vehicles, including 77,550 Model 3s, 17,650 Model S and X. Last month, Tesla globally dropped the standard-range variants of its Model X and Model S from its product lineup and adjusted prices across its range. In China, the world’s largest electric vehicle market, the trade frictions between China and the U.S. has caused Tesla to adjust its multiple times over the past year because of the tariff changes. +++ 

+++ Battery-electric price parity with internal combustion engines will be the TIPPING POINT that brings broad market acceptance for the emerging technology, and that tipping point is closer than it may appear, said Reinhard Fischer, senior vice president for the Volkswagen Group who heads strategy for the VW brand in North America. Fischer told that Volkswagen’s $50 billion global electric push will bring new scale to EV production, pushing down costs to a point where they reach parity with internal combustion powered vehicles. “We strongly believe that the tipping point is near, and that tipping point will be price equity” that will drive new consumers to BEVs, not just early adopters. “Once you overcome the fear of something new, the EV is the better choice for you”, he said. VW’s 12-brand group, which includes Audi, Porsche and Bentley, said in March it plans to introduce almost 70 full-electric models globally by 2028, accounting for 22 million battery-powered vehicles. “I don’t think it’s going to take a lot of convincing”, Fischer said. “There is a fundamental curiosity. Everybody sees the end state. “When you put pencil to paper, owning a full-electric vehicle costs about half of what a gas car costs me to operate”. But in recent VW brand focus groups, held in anticipation of the launch of planned battery EVs, the company found more problems that it must overcome with consumers. “There is still a fear about driving electric cars through water”, Fischer said. “For 50 years, we’ve educated people that electricity and water don’t mix”. Another problem: “Range anxiety has now been replaced by charging anxiety”, Fischer said. But he said history shows that this problem will pass. “100 years ago, gasoline was sold at pharmacies. Today, we have 122,000 gas stations in the United States. It’s transformed from a bottleneck to a commodity”, Fischer said. “Electric charging is going to be exactly the same”. +++

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