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+++ The National Highway Traffic Safety Administration proposed allowing automakers to offer a variety of sound choices for ELECTRIC VEHICLES and other “quiet cars” to choose from to alert pedestrians. The agency in February 2018 finalized rules requiring EVs and hybrids to emit alert sounds to warn pedestrians of their approach, extending to 2020 the deadline for full compliance. The long-delayed rules, which were first demanded by Congress in 2010, require automakers like Tesla, Nissan and General Motors to add sounds to vehicles when they are moving at speeds of up to 30 kph to help prevent injuries among pedestrians, cyclists and the blind. The agency said in response to a petition from automakers it was proposing to amend its rules “to remove the current limitation of one sound per vehicle model”. The agency wants public comment “on whether there should be a limit to the number of compliant sounds that a manufacturer can install in a vehicle and what that limit should be”. NHTSA required the alerts be in all “quiet” vehicles by September 2020. Automakers were required to have the sounds in 50 % of vehicles by Sept 1. To meet emissions requirements from California, automakers need to sell more electrically powered vehicles, and those vehicles are often harder to hear at lower speeds than gasoline-powered engines. At higher speeds, tire noise, wind resistance, and other factors eliminate the need for a separate alert sound, regulators say. The Trump administration froze the Obama-era rule as it conducted a review of petitions from automakers. Nissan had argued that the alert was only needed up to 20 kph. NHTSA said last year it expects the rules finalized to prevent 2,400 injuries annually by 2020 and to require the addition of alert sounds to about 530,000 model 2020 vehicles. NHTSA has said the rules will cost the auto industry about $40 million annually because automakers will need to add an external waterproof speaker to comply. But the benefits of the reduced injuries are estimated at $250 million to $320 million annually. The agency estimates the odds of a hybrid vehicle being involved in a pedestrian crash are 19 % higher than with a traditional gasoline-powered vehicle. About 125,000 pedestrians and cyclists are injured annually on roads in the United States. +++

+++ In EUROPE , new-car sales fell 8.6 % in August as Nissan, Renault, Fiat and Volkswagen posted double-digit sales declines. Registrations fell to 1.07 million across the European Union and EFTA countries. Nissan sales plunged 48 % while Renault saw sales of its core brand drop by 38 %. Fiat brand’s registrations fell 26 %. Volkswagen brand’s volume dropped 14 %. Among the premium brands, Jaguar’s registrations were down 21 % while sister brand Land Rover saw sales dip 3.3 %. Mercedes-Benz sales rose 13 %, outpacing rivals Audi and BMW, which saw their registrations drop 9.1 % and 8.4 % respectively. Asian brands had a bad month as Toyota sales fell 1 %, Hyundai registrations declined by nearly 2 % and Kia sales dropped by 3.2 %. Among PSA brands, Citroen was down 8.1 %, Opel / Vauxhall 6.9 % and Peugeot 3.4 %. DS registrations rose 26 %. Volkswagen Group’s Skoda brand had a good month with sales up 5.4 % while Seat registrations fell nearly 1 %. Porsche sales plunged 18 %. Ford sales gained 1.7 %. The August decline, the steepest of 2019, was made worse by exceptionally high growth in the same month a year earlier as automakers rushed out models ahead of the European Union’s new WLTP emissions-testing rules. Some markets saw exceptional sales increases last August as dealerships stockpiled cars ahead of the September 2018 introduction of WLTP, distorting year-on-year comparisons. August is also a slow sales month, particularly in Mediterranean countries, accentuating the decline. Sales dropped 31 % in Spain, 14 % in France and 3.1 % in Italy. The German market was down 1 % while registrations in the United Kingdom dipped 1.6 %. Automakers are facing a litany of setbacks, including a risk of a recession in Germany and a slowdown in the Chinese car market. European sales over the year to date are down 3.2 %. +++

+++ The collapsed €36 billion marriage of carmakers Renault and FIAT CHRYSLER AUTOMOBILES still makes a lot of sense. Yet that becomes less true with every day that passes. Fiat chairman John Elkann withdrew his merger offer in June after the French state signalled it wanted Renault, in which it owns a 15 % stake, to sort out its alliance with Japan’s Nissan first. That puts on hold €5 billion in potential cost savings; worth €33 billion to investors today, or almost as much as their combined market value. Those goodies are still on offer, but the clock is ticking. Many of the touted savings involved Fiat adopting technologies and basic car designs, known as “platforms”, that Renault had already developed. Take, for example, lower-emission vehicles. Elkann’s company, with a strong reliance on Jeeps and Dodge trucks, has been skimping on capital expenditures in this area. Over 2018 and 2019, Fiat’s total capex will be €13.7 billion, or 6 % of revenue, using Refinitiv data. If Elkann had instead invested at Renault’s 8 % ratio, Fiat’s spending would be almost one-third higher at €18 billion. Why is that a problem? Imagine Renault spends another 6 months courting tepid partner and 15 % shareholder Nissan, whose 2 directors planned to abstain last time on Renault’s board vote on the merger. That takes Elkann to March 2020. A lengthy antitrust review would probably postpone the deal’s completion until well into 2021; the year in which new European carbon emissions rules bite. That timeline isn’t good for Fiat, whose relatively dirty fleet of vehicles is further away than other major European carmakers from meeting its 2021 target, Goldman Sachs estimates. Elkann has other options, including making investments using Fiat’s giant net cash pile, which should reach €4.5 billion at the end of 2019. He could also partner with German behemoth Volkswagen, which is building the world’s largest dedicated electric-vehicle platform; or even tie up with PSA. Turin-based Fiat will probably embark on one of these backup plans if Renault hasn’t come back to the table by 2020; 3 people familiar with the original merger proposal told. That gives the deal a fast-approaching expiration date. +++

+++ FRANCE will host a pilot plant to make electric car batteries, a French Finance Ministry source said, part of a pan-European project to rival Asia’s dominance of the battery market. France had committed €700 million and Germany would offer €1 billion toward a project that envisaged setting up plants in both nations in future, the source said of the plans. The electric car battery project aims to repeat the success of Airbus, which began producing aircraft 50 years ago as a pan-European project with public support. However, efforts to mirror Airbus in other industries have proved more difficult. French economy minister Bruno Le Maire told lawmakers in parliament that the plans for battery industry would be announced when he meets his German counterpart Peter Altmaier in Paris, although he gave no details. “First there will be a pilot factory and then there will be factories in both countries”, the Finance Ministry source said, adding that the pilot site would be in France. France and Germany have asked the European Commission to approve state subsidies for a consortium including carmaker PSA, its German subsidiary Opel, and French battery maker Saft, as well as Siemens and Manz. The European Union allows state aid in certain conditions under its rules for Important Projects of Common European Interest (IPCEI). EU energy commissioner Maros Sefcovic and competition commissioner Margrethe Vestager have signaled support for the battery cell initiative. Germany is considering supporting a second European production consortium with preliminary agreements expected in the coming months. France and Germany also plan joint investment of public funds in data storage facilities to wean Europe away from foreign centers and spur artificial intelligence investment. +++

+++ An all-electric pickup and an advanced battery system will be part of the $7 billion that GENERAL MOTORS (GM) has pledged to invest in the United States as parts of contract talks with the United Auto Workers. The automaker and the union were continuing talks to resolve a strike by 48,000 hourly workers that shut down GM’s highly profitable U.S. operations. GM said it would make investments in 8 facilities in 4 states, but did not specify timing, location or products other than the electric pickup and a battery cell plant. GM plans to invest both in advanced propulsion systems for electric vehicles and in core products such as pickups and SUVs that generate much of its profit, the company said. Some of that investment is earmarked for the production of electric vehicles in Michigan and battery cells in Ohio, sources said. GM also is expected to update plants in Michigan, Tennessee and Missouri to build redesigned versions of its midsize pickups and crossovers, according to a GM source. The company said it will invest in “additional new vehicle and propulsion programs”, but said nothing about opening new plants. “With as much excess capacity as GM still has, the company won’t be opening any new plants for the foreseeable future”, said AutoForecast Solutions Vice President Sam Fiorani. GM has said it plans to introduce a stable of electric vehicles by 2023, but has not provided details. Sources have said those vehicles will feature an advanced battery system and a new vehicle structure that is flexible and modular, to accommodate different vehicle types and sizes. Over the past 3 years, GM has spent an average $8.45 billion a year on capital expenditures. Most of that investment was made in North America, another GM source said. The $7 billion investment pledged to the UAW works out to less than $2 billion a year over the four-year life of the proposed contract. GM plans to introduce a full-size electric pickup in 2022. A person familiar with GM’s offer to the UAW said the company could produce the electric truck at the Detroit-Hamtramck plant that now has no future assignment. GM could also build an electric vehicle battery plant near its shuttered assembly plant in Lordstown, Ohio. +++

+++ China, Japan and South Korea have set ambitious targets to put millions of HYDROGEN powered vehicles on their roads by the end of the next decade at a cost of billions of dollars. But to date, hydrogen fuel cell vehicles (FCVs) have been upstaged by electric vehicles, which are increasingly becoming a mainstream option due to the success of Tesla’s luxury cars as well as sales and production quotas set by China. Critics argue FCVs may never amount to more than a niche technology. But proponents counter hydrogen is the cleanest energy source for autos available and that with time and more refueling infrastructure, it will gain acceptance. China, far and away the world’s biggest auto market with some 28 million vehicles sold annually, is aiming for more than 1 million FCVs in service by 2030. That compares with just 1,500 or so now, most of which are buses. Japan, a market of more than 5 million vehicles annually, wants to have 800,000 FCVs sold by that time from around 3,400 currently. South Korea, which has a car market just one third the size of Japan, has set a target of 850,000 vehicles on the road by 2030. But as of end-2018, fewer than 900 have been sold. Hydrogen’s proponents point to how clean it is as an energy source as water and heat are the only byproducts and how it can be made from a number of sources, including methane, coal, water, even garbage. Resource-poor Japan sees hydrogen as a way to greater energy security. They also argue that driving ranges and refueling times for FCVs are comparable to gasoline cars, whereas EVs require hours to recharge and provide only a few hundred kilometers of range. Many backers in China and Japan see FCVs as complementing EVs rather than replacing them. In general, hydrogen is seen as the more efficient choice for heavier vehicles that drive longer distances, hence the current emphasis on city buses. Only a handful of automakers have made fuel cell passenger cars commercially available. Toyota launched the Mirai at the end of 2014 but has sold fewer than 10,000 globally. Hyundai has offered the Nexo since March last year and has sold just under 2,900 worldwide. It had sales of around 900 for its previous FCV model, the Tucson. Honda’s Clarity Fuel Cell is available for lease, while Mercedes’ GLC F-Cell has been delivered to a handful of corporate and public sector clients. Buses are seeing more demand. Both Toyota and Hyundai have offerings and have begun selling fuel cell components to bus makers, particularly in China. Several Chinese manufacturers have developed their own buses, notably state-owned SAIC Motor, the nation’s biggest automaker, and Geely Auto Group, which also owns the Volvo Cars and Lotus brands. A lack of refueling stations, which are costly to build, is usually cited as the biggest obstacle to widespread adoption of FCVs. At the same time, the main reason cited for the lack of refueling infrastructure is that there are not enough FCVs to make them profitable. Consumer worries about the risk of explosions are also a big hurdle and residents in Japan and South Korea have protested against the construction of hydrogen stations. This year, a hydrogen tank explosion in South Korea killed two people, which was followed by a blast at a Norway hydrogen station. Then there’s the cost. Heavy subsidies are needed to bring prices down to levels of gasoline-powered cars. Toyota’s Mirai costs consumers just over 5 million yen ($46,200) after subsidies of 2.25 million yen. That’s still about 50% more than a Camry. Automakers contend that once sales volumes increase, economies of scale will make subsidies unnecessary. +++ 

+++ NISSAN is looking to sell its vehicle parts and materials distribution business in a deal that may be valued at about $1 billion, as the struggling Japanese automaker seeks to slim down. The automaker sought bids from private equity and trading firms for the whole of Nissan Trading Co and a buyer will be selected by October. The sale process for the unit is ongoing and no agreements have been reached yet. +++

+++ OPEL aims to deliver a small, punchy and affordable electric car when it launches a full-electric version of its popular small hatchback in November. The Corsa-e is the brand’s first battery-powered vehicle developed since becoming part of the PSA Group 2 years ago. Under previous owner General Motors, Opel was an early proponent of electromobility with the Ampera plug-in hybrid, which debuted in 2011, and the full-electric Ampera-e, with its 423 km WLTP-certified range, that arrived 6 years later. Both Ampera models flopped, however, partly because of their high starting prices. Opel wants to be more competitive this time with a lower cost of entry along with offering numerous related services including charging. The starting price is still more than twice that of the entry gasoline version of the Corsa. “The knowhow we have collected from launching the Amperas is a tremendous help now that the whole automotive industry is entering the era of mass electrification due to the CO2 targets set by the European Union”, CEO Michael Lohscheller said at the debut of the Corsa-e this summer. The car starts an electrification offensive at Opel that will include 3 more battery-driven vehicles by the end of next year, including the Mokka X. By 2024 all Opel models will offer an electrified version. The Corsa-e’s 136 hp powertrain can take the car from 0 to 100 kph in 8.1 seconds, which beats every Volkswagen Polo except the GTi performance version. Corsa-e owners get access to an app-based digital pass that grants them access to more than 105,000 charging points in Europe. The app offers a trip planner based on the car’s residual range plus a listing of the charging prices along the route. “It is not by accident that that our first model to enter the electrification era is a car from the B segment, the most popular segment in the European market”, Lohscheller said. The Corsa was Opel’s best-seller last year, accounting for more than 235,600 unit; nearly a quarter of the brand’s global volume. Altogether, more than 13.6 million have been built since the Corsa arrived in 1982. +++ 

+++ 6 months ago, the VOLKSWAGEN Group plunked down a few dozen building containers next to its sprawling assembly halls in Zwickau, eastern Germany. The graceless space stands apart from the rest of the sleek plant, but it’s inside that the carmaker is really breaking new ground. One module houses a walk-in time capsule curated with meticulous attention to detail. There’s a vintage bicycle and antique furniture; old books and black-and-white photos adorn the walls under the glow of light bulbs mounted on old-fashioned fixtures; hidden loudspeakers play the clip-clop of horses pulling carriages. The not-so-hidden message Volkswagen wants to instill in the minds of its 8,000 factory workers being funneled through the installation: change is normal and necessary, and it’s coming here to Zwickau. The factory represents the starting point for one of the most audacious bets in corporate history. It’s here that VW, the world’s biggest carmaker with annual production of more than 10 million vehicles and revenue approaching the gross domestic product of Finland, wants to prove it can morph into an electric-vehicle champion and survive the end of the combustion engine. Managing the switch is nothing short of open-heart surgery. In Zwickau, most of the factory space is being revamped while production continues. Some 9,000 tons of steel structures are moved, and only about a third of existing machinery can be re-used. With the revamp in full swing, extensive training sessions and seminars kicked off  for everyone from assembly workers to engineers to managers. Electric cars may have 4 wheels, but they’re fundamentally different from current vehicles in almost every other respect, from the technical architecture to the way they’re assembled to the materials used. “It’s like getting changed inside a wardrobe”, said Dirk Coers, the personnel chief of VW’s operations in the region, who is overseeing the transition and its effect on workers. “No one has done something like this before”. The site is the world’s first car factory switching seamlessly from combustion engines to electric drivetrains, and VW has a lot riding on the experiment, investing $33 billion to develop the world’s biggest battery-vehicle fleet and move toward a lofty goal to become carbon neutral by 2050. Zwickau is the laboratory for Volkswagen’s grand reinvention. The site will become Europe’s largest car plant of its kind with annual capacity of 330,000 cars, just shy of Tesla’s targeted global deliveries this year. The ID.3 electric hatchback will start rolling off assembly lines in November, and in 2021 the site will have ceased output of conventional cars altogether. All told, VW will sink €1.2 billion into producing 3 electric vehicles, 2 for sister brand Audi and 1 for Seat in Zwickau. “At the moment it’s not just about learning how things work, but also about learning why some things do not work”, Roesch said. “If you like dealing with a different issue every day, then this is your place”. One major challenge is the weight of electric cars, which are heavier mainly because of the battery. The entire assembly line has to be revamped because the ID.3’s chunky SUV sibling weighs 2.25 tons, more than the existing steel gantry can support. “For years we’ve been fighting for every ounce to lower vehicle weight, and now this”, said Holger Hollmann, who oversees the assembly operations. To no small degree, Volkswagen was shocked into this massive retooling exercise by the diesel-cheating scandal that erupted 4 years ago this month, throwing the carmaker into an existential crisis and forcing it to radically rethink its future. Like most incumbent carmakers, VW had never really embraced electric cars. In Zwickau it assembled a small number of electric Golfs before culling the project in 1996. It would take the shock waves of the diesel scandal to prod the company into action. With its balance sheet intact despite unprecedented fines, VW is now putting its vast engineering and financial muscle to work. “Volkswagen’s recent earnings and cash flow performance has been impressive”, Evercore ISI analyst Arndt Ellinghorst said. “However, being the largest player in Europe and taking the greatest bet on battery-electric vehicles also bears significant risks that shouldn’t be ignored”. There’s reason for skepticism. While earning money with upscale electric cars that can command higher prices is already proving difficult (just ask Elon Musk), no one has even come close to making affordable ones without burning vast amounts of cash. Undeterred by patchy charging infrastructure, VW plans for no fewer than 22 million units over the next 10 years and anticipates that by 2030 the electric-car share will surge to at least 40 % of global deliveries. That lofty projection stands in stark contrast to the realities on German roads today. Volkswagen shipped only a handful rekindled battery-powered Golfs last year, and in all of Germany a meager 36,000 electric cars were sold. “We know the stakes are high, no doubt about that,” said Thomas Ulbrich, a VW lifer and trained metal worker who climbed the corporate ladder to become a board member at the company’s main car brand. “But there is no valid alternative to our strategy”. Volkswagen picked Zwickau because it wanted to kick things off with a German site and because a refit is easier at a modern site. It’s the opening salvo in a global race in which Volkswagen will convert or add 7 other factories in Europe, Asia and the U.S. by the end of 2022, including 2 in China with a combined annual output of 600,000 vehicles. The town of 90,000 is no stranger to upheaval. Zwickau is rich in automotive heritage. It’s here that car pioneer August Horch established Audi more than a century ago, and it later became home to the diminutive Trabant car, that boxy emblem of Eastern German mobility whose asthmatic 2-stroke engines sputtered down communist roads. Volkswagen picked up the site at the end of 1990, months after Germany was officially reunited, and began building its Polo there. Volkswagen is placing a big bet on a battery-powered future, and so is Zwickau. The carmaker is the only major employer in the area, where the population has been shrinking since reunification. In regional elections this month, the far-right AfD party garnered more than a quarter of the votes in Zwickau. Unlike nearby Leipzig, which has attracted substantial investments from companies like BMW and Porsche, most of the money whizzed past Zwickau. The gloom of the post-communist era’s economic struggle still hangs over the city. Derelict houses with smashed windows and potholes in cobbled streets dot the area around the town center. An air of nostalgia and skepticism fills the wood-paneled pub that dates back 270 years, where the card-playing locals have noticed the growing number of out of towners heading to the VW factory that squats in Saxony’s rolling hills. “Pretty much everything is changing here at the moment”, said Martin Lehmann, 31, who works in the VW factory’s planning department. “Our jobs, the way we do things, how decisions are made, just about everything”. Heiko Roesch oversees the manufacturing of car bodies inside the sprawling hall, home to an armada of 1,625 robots spread across an area equivalent of 11 soccer fields. Every morning at 7:30 a.m., Roesch, 52, gathers engineers, co-workers and suppliers next to the assembly lines to track progress and identify problems. There’s much to discuss. From an advanced welding technique to a more complex way of fitting the battery into the car to a greater degree of automation aimed at reducing assembly time, employees face challenges everywhere. At this stage, much of the work that will be taken over by machines is still performed manually as employees come to grips with the new tasks and cars. On a recent visit, 3 men were untangling cables for the dashboard, a step that will become fully automated to speed things up. The goal is to get to 800 cars a day in 3 shifts over time from currently about 760. +++

+++ VOLVO boss Håkan Samuelsson is more convinced than ever that the Geely-owned automaker needs to capitalize on the disruptive movements taking place in the industry. Volvo aims to use its small size, compared with BMW or Mercedes-Benz, to generate half its global sales from full-electric cars by 2025 and have one-third of the cars it sells to be fully autonomous by then. A more immediate goal in Samuelsson’s sights is to break the automaker’s worldwide vehicle sales record for a sixth straight year. Samuelsson says Volvo is on track to sell 700,000 cars this year. Its ambition is to reach 800,000 next year. When Volvo reaches that, it should also be as profitable as our premium colleagues, which means a margin of about 8 %. “We are on the way because we have never had such a strong product offering”, Samuelsson says. To save money, Volvo is reducing the amount of consultants. Samuelsson says Volvo is more convinced than ever that being at the forefront of these so-called disruptive movements is crucial: “As a small company making this shift will help us achieve our goal of becoming more premium and being more relevant in the global arena. If we don’t do this then we would be following what others are doing, or have already done. Disruption or change is a huge opportunity for a small company. If you are a big company, you might see all of these changes as threats, but we see them as an opportunity. With that as the base, I will probably never be satisfied with how fast we are moving. I would like to see us move faster but it is also important to bring the entire organization with you. That is often the challenge. There are internal forces that want to operate as you always have, so it is a challenge to get them to go along with the change. But that is what we have to do”. Samuelsson says the when it comes to offering self-driving cars, it is a bit more challenging technically than Volvo originally thought. “But we are still convinced our next-generation cars should have what we call a Highway Pilot (which takes control of the car on a highway). We will be very careful to avoid bringing out something that is perceived to be automated and it’s not, but the driver is impressed with what he can do with the system and then overestimates the capabilities. We really want to deliver something that is as safe or even safer than the impression you get. That will come, first for usage on the highway”. About the shift to electrification, Samuelsson says Volvo is well underway with models such as the full-electric Polestar 2 and the XC40 coming next year. “We firmly believe there will be a battery-electric car market that is big enough for us. Until then what we have is a very good solution, the TwinEngine plug-in hybrid. These cars can be driven roughly 50 % of the time in full-electric mode. They account for about 10 percent of the sales in the model lines where the technology is available, which is a very high percentage. We have an ambitious ramp up as we will not release any future models that are combustion only. At a minimum they will be mild hybrids. Another area where I would like us to progress more is with the way we bring mobility to consumers. We have traditionally sold cars to customers but we believe they would like to have mobility in other ways. And it shouldn’t be overly complicated. They want the freedom to move. To get this in the past I had to go to the dealership with a lot of money because I bought a car in cash. Then I could get a loan. Then I could lease it. What will be very attractive in the future is paying a flat subscription rate for the product. You still get the freedom to move because this car is at your disposal. After three years if you like it you keep it for three or four more years. If you want a bigger one you change to a bigger one. If you don’t want it anymore you cancel the contract. That’s what you get with Care by Volvo”. Samuelsson says there is absolutely no reason why this should not be as profitable as leasing: “A capital investment of €50,000 is a lot more than committing €500 a month. This makes Care by Volvo especially attractive to younger people. Our Care by Volvo customers are 10 years younger than our typical customers. They normally have good jobs and a decent cash flow but they don’t have €50,000 to invest in a car”. +++

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