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+++ +++ It only took a decade for traditional automakers to take ELECTRIC cars seriously and offer more than a smattering of test-the-water models. Now comes the hard part: Getting consumers to buy them. At Frankfurt’s 2019 auto show, Volkswagen Group CEO Herbert Diess laid it on thick, calling on governments to give up coal-fired power as he unveiled the electric ID3 car-for-the-masses. At the Mercedes-Benz stand, where the Daimler was showing the prototype of an electric S class, real beech trees framed massive screens displaying schools of digital fish. The message to environmentally conscious consumers: we are with you. But a marketing blitz alone will not wash away the deep uncertainties facing electric cars: obstacles little changed since automakers’ initial forays with models like the Nissan Leaf and BMW i3. Customers do not like paying up for new technology they are unsure about, and they are worried they will not reliably get to where they want to go. “The next big thing is not going to be about the cars, because they will come”, Carlos Tavares, president of the European Automobile Manufacturers Association and CEO of PSA Group, said. “The next big thing is about affordable mobility. The next big thing is about how we make this work for the biggest number of people”. So far, electric vehicles have only proliferated in countries with significant subsidies. Once they go, sales of battery models crater. Demand in China, the world’s biggest electric car market, fell 16 % in August (its second straight decline) after the government scaled back subsidies. Automakers can reduce prices, but then only cut into profitability that in most cases has been nonexistent. Consumers are similarly sensitive elsewhere. Demand in Denmark collapsed when the government phased out tax breaks in 2016. “We’ve been talking about EVs for years, but this year the real production cars showed up”, Max Warburton, an analyst at Sanford C. Bernstein, wrote in a note. “Should we be celebrating these cars, given the poor margins that most will have?” Across Europe, sales of new plug-in hybrids and fully-electric cars last year made up 2 % of total registrations. That’s a tiny market to tussle over for the likes of Volkswagen’s ID3, with a price below €30,000 , Tesla’s Model 3 and Mercedes’s gleaming lineup of plug-ins. Yet automakers have little choice but to boost their offering to keep pace with regulation, or face fines. Consumer demand “can’t be mandated”, Daimler CEO Ola Kallenius said at the show. Mercedes is adding at least 10 purely battery-powered cars through 2022 at a cost of more than €10 billion , starting with last year’s EQ C, so the automaker’s lineup can meet stricter emission limits. A lot of factors are moving in the right direction. The ID3’s price and basic range of 330 kilometers sets the car apart from previous efforts that needed meticulous pre-planning for longer trips. At the top end, there is now the €191,000 Porsche Taycan Turbo S, and a mid-range that’s rapidly filling out from SUVs such as the Jaguar I-Pace and Audi e-Tron. Patchy charging infrastructure is improving, too. Ionity, a consortium of Daimler, Volkswagen, Ford, BMW and now Hyundai, is on track to finish building a network of 400 European fast-charging stations by next year to make long-distance travel easier. For automakers, this will mean some lean years (at least to 2025 when battery prices are expected to come down) during which lucrative conventional SUVs must subsidize poor returns from their electric cousins. VW will need “patience” until the ID3 brings significant profit “joy”, chairman Hans Dieter Pötsch said. To bridge the gap, the industry is lobbying hard for governments to step up incentives to get to the oft-cited tipping point where driving without a combustion engine becomes normal. In Germany, home to VW, Mercedes and BMW as well as world-leading suppliers like Continental, the government sits down next week to discuss broad climate measures. Automakers are hoping for a bigger slice of subsidies than they got so far. The ACEA called on national governments to boost charging points in Europe to 2.8 million by 2030, a 20-fold increase from 2018. “We need strong support, because if we don’t do it”, simply offering electric cars won’t be enough for sales to take off, PSA’s Tavares said. +++

+++ Fiat Chrysler Automobiles’ merger offer for RENAULT was “in the past” and the two parties have not resumed discussions, the French carmaker’s CEO, Thierry Bollore, said. “We are not talking to each other, this is in the past, the offer was on the table, it’s no longer on the table”, Bollore said at the Frankfurt auto show, adding that it was a matter of regret. Bollore said he was sure FCA also regretted not gaining access to Renault-Nissan’s so-called Common Module Family of architectures that is expected to underpin 70 percent of the alliance’s vehicles by 2020. In June, FCA withdrew a $35 billion merger offer for Renault after the French company’s board failed to reach a decision on the offer. Bollore did not directly answer when asked if Nissan CEO Hiroto Saikawa stepping down would offer a chance for Renault and Nissan to rebuild a relationship that soured after the arrest of Carlos Ghosn last November. “The top priority for Renault is the recovery at Nissan, because an alliance can only be healthy when all partners are healthy”, he said. Bollore said the search for a new Nissan CEO was a “board matter” that was “ongoing”. Nissan said on Monday that its chief operating officer, Yasuhiro Yamauchi, will serve as acting CEO while the company seeks a full-time boss and that the company hopes to pick a new CEO by the end of October. +++

+++ TOYOTA has been experimenting with a sun-powered Prius that it hopes will one day require no plugging in. In a Japanese government-funded demonstration project started in July, Toyota engineers fitted solar panels designed by Sharp to the hood, roof, rear window and spoiler to see how much power the sun can generate. The electricity from the panels goes directly to the drive battery, so the Prius can charge while moving or when parked. On a good day, the engineers found that the charge can be sufficient for up to 56 km of travel, more than the 47 km driven a day by the average American, according to a study by the AAA Foundation for Traffic Safety. But the performance drops off quickly if it is cloudy or even when it is too hot. If used in real-world driving in those conditions, the Prius would have to be plugged in to recharge. The solar cells are inspired by new ultra-thin solar panels developed for satellites. They are just 0.03 mm (0.11 inches), making them malleable enough to form-fit to the body of a car. The engineers needed to create a buffer between the car and the cells to protect them, so the actual solar panel modules are closer to 1 cm. The trunk of the car is filled with batteries for the solar panels, adding an extra weight of around 80 kg. Making the entire package lighter and bringing down the extremely high costs are among the biggest challenges for the technology, said Satoshi Shizuka, Toyota’s lead engineer on the project, adding that commercialization likely remained “years away”. +++

+++ The VOLKSWAGEN Group and other automakers warned that trade tensions risk dragging the global economy into a recession as the fallout starts to hit consumers. The gloom of the U.S. and China’s tit-for-tat tariffs cast a shadow over the Frankfurt auto show this week, where automakers were seeking to whip up interest in critical new electric models. The geopolitical volatility adds another layer of uncertainty to an industry in the midst of a radical overhaul as the end of combustion-engine era looms. “We come now into a situation where this trade war is really influencing the mood of the customers, and it has the chance to really disrupt the world economy”, Volkswagen CEO Herbert Diess said in an interview. “China is basically a healthy market, but because of the trade war, the car market is basically in a recession. So that’s a new situation. That’s scary for us”. Concerns about global trade have reached nearly 10 times the peaks seen in previous decades and could shave about 0.75 percentage points off world economic growth this year, according to data compiled by the International Monetary Fund. The auto industry is particularly exposed because of its global network of assembly plants and parts suppliers. Daimler, for instance, makes many of its Mercedes-Benz’s SUVs in Alabama and exports them to China and other markets. “What will happen in 2020 will very much depend on what happens with the U.S. and China in the coming weeks”, BMW Group CFO Nicolas Peter said in an interview at the Frankfurt show. The automaker makes most of its SUVs in South Carolina. After months of talks, the tensions between the U.S. and China remain high. Ted McKinney, the top trade official in President Donald Trump’s Agriculture Department, called Chinese President Xi Jinping a “communist zealot” in the mold of Mao Zedong. After a summer of bombast and tariff escalation, the two sides have agreed to hold face-to-face, working-level staff talks in the coming weeks and a ministerial meeting in Washington in early October. On top of the U.S.-China spat and Trump’s recurring threat to impose levies on European car imports, the industry is bracing for the potential of the UK crashing out of the European Union without a deal in a few weeks. BMW, which owns the British-based Mini and Rolls-Royce car brands, has set up a €300 million fund to deal with a possible hard Brexit and will look to slow and temporarily halt production at its Mini factory in Oxford, England, CFO Peter said. In an interview, PSA Group CEO Carlos Tavares called the prospect “not acceptable” on ethical grounds and appealed to European and British leaders to show “good sense” and avoid a no-deal Brexit. For the auto industry, the trade squeeze clouds efforts to show off slick new models like the Porsche Taycan and Volkswagen ID3 as German brands ramp up electric offerings to meet increasingly stringent environmental regulations. Demand disruptions threaten to squeeze profits needed to fund the high-risk rollout. “We hope there won’t be any recession in the midterm or long term, because it would be a self-made recession”, Diess said. +++

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