Newsflash: Bugatti broedt op ‘betaalbare’ elektrische cross-over

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+++ A year on from the shock fall of boss Carlos Ghosn, the Renault-Nissan automobile ALLIANCE is bent on a reboot to leave behind the upheaval and dust kicked up by the affair. The giant task falls to new board chairman Jean-Dominique Senard in the context of the car industry as a whole racing to meet huge new challenges. Ghosn revelled in taking the 2 partners to the forefront of the carmaking game. A total of 10.76 million vehicles sold last year along with ally Mitsubishi put the trio ahead of Toyota and Volkswagen. But this year saw volumes slide back again below those of both rivals. The demise of the authoritarian Ghosn following his arrest on financial misconduct charges lifted the lid on an empire riven with internal conflict as he straddled the chairmanship of three companies, concentrating all power in himself. “The unity of command masked the incredible diversity of forces at work. When that exploded it liberated them”, says one highly-placed official within the alliance. In one corner, feeling they were the standout part of the partnership yet long seeing themselves as under-valued, were the Japanese behind Nissan director Hiroto Saikawa. In the other, foursquare behind Renault’s then chief executive Thierry Bollore, the French contingent nursed a sense of betrayal at a secret Nissan investigation which had delivered Ghosn into the hands of the Japanese judiciary. Unlike Volkswagen or Toyota, the alliance is not an integrated group but a partnership based on cross shareholdings without a joint structure. Renault holds 43 % of Nissan, which has a 15 % stake in Renault and a 34 % controlling stake in Mitsubishi. Since the Ghosn affair burst into the open last November, there has been no means of achieving constructive dialogue or decision making, meaning a year has been lost as a result. Last month saw the quickfire departures of both Saikawa and Bollore which did allow one page to be turned. “There were excesses on both sides and sparks flew. But there has been a clean-up at Nissan as well as Renault. The people now in place are all convinced of the need to reinforce the alliance”, said one source close to Nissan. Ongoing problems include profitability and cash generation amid the burning need for technological innovations including electric and autonomous cars in a shrinking market. Renault and Nissan have reduced operational margin targets for this year to 5 % and 1.4 % of sales respectively. That compares with Volkswagen’s 6.5 % to 7.5 % despite it having to bounce back from an emissions scandal which cost it tens of billions in fines. Toyota tops that with more than 8 %. “For a longstanding partnership” of 20 years “it is a little surprising that the synergies which should have existed for a long time don’t show up in the figures”, commented Vittoria Ferraris, an analyst with S&P Global Ratings, which recently lowered its rating for Renault and put Nissan’s on negative watch. But Senard recently insisted that “you will be surprised at the strength of the alliance in the months ahead”. He added that the last meeting of the partner boards “was one of the most positive since I arrived”. After failing to deliver a hoped-for merger with Fiat Chrysler (now set to seal the deal with French rival PSA) the alliance is looking for new initiatives. Debate on governance reform remains on the table, with the Japanese wanting a tilt in their favor. Given Renault’s strength in Europe and Nissan’s in the U.S. and China, the pair are geographically complementary and could pool expertise on the move to electric power. But Ferraris warns that while “the tough market will provide strong motivation, the problem is the time that will take”. +++ 

+++ Ford’s Mustang Mach-E will feature a new, hands-free driver ASSIST SYSTEM that will compete with Cadillac’s Super Cruise and Tesla’s Autopilot. The automaker will equip Premium and GT trims of the battery-electric crossover with the hardware necessary to launch the optional system, meant for highway driving, once it starts building them in Mexico next year, according to Dave Pericak, global director of Ford’s icon vehicles. But Ford does not yet know when it will activate the system, which will use lasers and cameras in the wheel to monitor a driver’s alertness. “As long as you’re staying alert and in the right zone on the highway, you’re going to be able to go hands-free and let the car do the work”, Pericak said. He declined to reveal the name for the system, which will build upon Ford’s adaptive cruise control and lane-centering technologies found on vehicles today. It’s unclear how much the system will cost or whether customers will be asked to pay an additional fee to activate it when available. Cadillac has been widely praised for its Super Cruise system, which launched in 2017 on the CT6. The luxury brand plans to expand it to the CT5 starting in 2020 before ultimately spreading throughout its lineup. +++ 

+++ Winter is almost here in the northern hemisphere and AUDI has already started cold weather testing of the facelifted Q5. It is likely to debute in the first quarter of next year. The facelifted Q5 will sport a new front end with revised grille, headlights and bumper. Changes will be performed at the other end as well, where the taillights will sport new graphics and the bumper will probably be a tad different. In spite of the mid-cycle refresh, Ingolstadt’s premium SUV will not get in line with other newer Audis when it comes to the cabin layout. Thus, don’t expect to see the addition of a third screen used to control the HVAC and a redesigned dashboard panel, as the updates are very minimal and consist of a new infotainment system and A/C buttons, among others. Details about the engine lineup are scarce, yet it’s expected to retain most of the outgoing version’s units. Gasoline and diesel burners should still make up most of the offering, including the 2.0 and 3.0 liter, offered in different outputs. The plug-in hybrid will live on as the Q5 TFSI-e Quattro. At the higher end of the range, the SQ5 and SQ5 TDI will get a few revisions as well. +++ 

+++ As recently as March, Daimler promised to put 10,000 AUTOMOMOUS TAXIS on the streets by 2021. This week, however, Daimler chairman Ola Källenius announced that the company was making a “reality check” on the project and focusing on self-driving long-haul trucks instead. It’s fine that self-driving cabs aren’t coming as fast as some expected, and it’s even better that Silicon Valley-style big talk appears to be going out of fashion. Källenius’s “reality check” has some solid business reasons: Daimler is cutting costs and can’t commit to a large, capital-intensive project without a clear idea of what kind of first-mover advantage it might confer. But mostly, it comes because of a long-obvious technical problem. Making sure self-driving cars aren’t a menace in city traffic is a job that will take more than a couple of years. Investigators are still trying to get to the bottom of the March 2018 accident in which a driverless Uber killed a pedestrian in Tempe, Arizona, and it appears Uber’s cars had been involved in dozens of previous nonfatal incidents in the course of the same testing program. No one wants to be in the same situation as Uber so General Motors subsidiary Cruise won’t be launching self-driving taxis in San Francisco this year, as previously promised, and maybe not next year, either. There have been lots of news stories about Waymo, an Alphabet subsidiary, launching a self-driving taxi service in Arizona, and in April, it even put an app for it on the Google Play store. But in September, Morgan Stanley lowered Waymo’s valuation because of delays in the commercial use of its technology, and last month Waymo CEO John Krafcik said driverless delivery trucks could come before a taxi service. For European carmakers, which have to deal with older cities not laid out on a grid, launching autonomous taxi services appears even more daunting than for Americans. They know it’s a long way from Tempe to Amsterdam or Rome. That’s one reason Volkswagen, a latecomer to self-driving development, isn’t worried about being overtaken. Alexander Hitzinger, chief executive of Volkswagen’s autonomous-vehicle subsidiary, said in a recent interview that even an industry pioneer such as Waymo was “a long way away from commercializing the technology” and that Volkswagen’s autonomous vehicles would be developed by the mid-2020s. That time frame may be no more realistic than the previous hype about big 2019 and 2020 launches. Autonomous car developers can complain all they want about unpredictable human drivers and pedestrians who are causing all the accidents with their flawlessly superhuman creations, but nobody is going to clear the cities of people to give self-driving cars a spotless safety record. And making sure that, after millions of hours of training, artificial intelligence is finally able to drive like a human after a few hundred hours on the road, is not all that’s required for robotaxis to be viable. There’s still the whole matter of figuring out how to reduce rather than increase urban congestion by using cars that don’t “think” like humans. It’s also dangerous to adopt any kind of specific framework for the launch of automated truck services, even though that’s an easier project than taxis because the routes are fixed. The presence of humans in what is still a predominantly human world has rather unpredictable consequences for robot behavior. And the first movers have an obvious disadvantage: Like Uber with a taxi, they can get burned in ways that could set the whole business back years, and the earnings potential is unclear. None of this means, of course, that self-driving development has failed or even hit a dead end. Given enough time and a few technological breakthroughs, autonomous vehicles will be safe around actual people in actual winding, narrow, crowded streets. Engineering challenges exist to be overcome. The problem isn’t with the tech, which is moving along at a reasonably rapid pace, but with how that progress is communicated. Nobody forced experienced managers at venerable companies such as Daimler or General Motors to make overly optimistic statements about self-driving taxi launches. Waymo is a cash-burning startup, and it’s difficult to hold it responsible for getting ahead of itself. But the adults in the room look silly for having tried to play catch-up. There is no reason for the big car companies to make any promises on self-driving at all. Unlike with vehicle electrification, which is part of many countries’ climate policies, there’s no regulatory pressure to eliminate human drivers. And autonomous mobility-related business models are purely theoretical at this point. It would be enough for companies involved in autonomous car development to say they’re working on it. Pretty much all the big players are, to some extent. The time for any other kind of announcement will come when someone is really ready to launch a commercial service, whenever that may be. No rush. +++ 

+++ Rumors about a possible zero-emission variant of the BMW 7-Series go back a few years, but it’s finally happening. The i7 (name unconfirmed) will get headlamps and taillights that are different from the ones on the ICE-powered 7er. In a few years, we’ll have 3 different versions of it: ICE-powered, PHEV and EV. It is understood that the latter will be offered in 2 flavors: the i7 and i7 S. The first one might get an 80 kWh battery pack and probably the powertrain of the i4, whereas the second one is thought to come with a 120 kWh battery, more than 650 hp and have a range of around 700 km. +++ 

+++ BUGATTI is looking to broaden its appeal by flanking the €2.5 million Chiron supercar with a slightly more accessible alternative. The potential second model line would be an electric-powered grand tourer or crossover that could seat up to 4 people and would cost between €500,000 and €1 million.The French boutique automaker is in discussions with parent Volkswagen Group about the investment, Bugatti CEO Stephan Winkelmann said in an interview. “The industry is changing fundamentally, and we have to address what opportunities there are to develop Bugatti as a brand going forward”, he said. Securing funding for such a niche project is a “hard fight”, Winkelmann said. The plan shows how even automakers decoupled from the day-to-day realities of transport are grappling with the gradual end of the combustion-engine era. For Bugatti, it’s less about emissions and more about the changing definition of progress and innovation. Winkelmann, who previously ran VW Group’s Lamborghini brand, is trying to make Bugatti viable enough to potentially survive outside the German auto group and head off the risk of being phased out once again. Since the 2015 diesel-cheating scandal, VW Group has been taking a closer look at its portfolio amid the growing burden of investing in electric cars and self-driving technology. Bugatti has long been viewed as prime example of VW Group’s engineering extravagance. It was revived under former chairman Ferdinand Piëch in 1998 after the brand had largely faded from existence in the 1950s. Volkswagen rebuilt the Molsheim-based marque around a hulking 16-cylinder engine, rolling out the Chiron’s predecessor in 2005 after a series of development issues. The elite nameplate offers limited opportunities for sharing parts and technology. Because of high development costs and low volumes, the Veyron (Bugatti’s first model under VW control) was considered one of the biggest money losers in the auto industry. Winkelmann said that Bugatti is “earning decent money” these days and that the brand now needs to justify itself with a business case, rather than just engineering feats. After setting a speed record earlier this year when a Chiron derivative drove faster than 483 kph, Winkelmann said Bugatti is done pursuing such performance milestones and is looking to increase its cache as a luxury brand. Bugatti limited the production run of the Chiron to just 500 vehicles, and fewer than 100 are still up for grabs. It currently crafts some 100 highly customized cars per year including the  $8.8 million the Centodieci, which is based on the Chiron. The addition of a cheaper model would be a massive expansion, with output surging by more than 600 vehicles annually, said Winkelmann, who was a key driver behind Lamborghini’s decision to add the Urus SUV. Ferrari, which has more than tripled in value since its public listing, has become a poster child for the potential of an independent elite car brand and raised interest in potential spinoffs by VW Group. But the recent struggles of Aston Martin highlight the challenges in replicating the strategy. VW Group CEO Herbert Diess is pushing the group’s high-end brands to generate better returns and mapped out a plan last year to pool Bugatti in a so-called super-premium group that includes Bentley and Lamborghini. Porsche would lead the division. Winkelmann said that combination of brands “would be unique in the auto industry”. +++ 

+++ The Mustang Mach-E electric sport utility vehicle FORD unveiled in Los Angeles is more than another car for the storied automaker. The Mach E has become within Ford a high-profile test for a restructuring that has been marred by profit warnings, costly quality problems and the troubled launch this year of another important vehicle, the Explorer. For chief executive Jim Hackett, the Mach E’s aggressive design and futuristic interior represent a long-awaited, visible sign of the overhaul of the company’s product creation process he has tried to explain to skeptical Wall Street analysts for the past 2 years. By accelerating the “clock speed” of vehicle development, cutting overlapping product architectures to just 5 from 13 and extending the company’s most successful brands to new products, Ford could slash $20 billion out of a 5 year 2018-2023 product plan, Hackett told. “This is the first thing we generated out of this new thinking”, Hackett said in an interview ahead of the Mach E unveiling. “We have a lot more coming”. For Ford chairman Bill Ford Jr., the Mustang Mach E puts together 2 previously conflicting goals: his desire for Ford to be a leader in clean cars and make the automaker carbon-neutral by 2030, and his personal love of the Mustang and its growling V8 engine. “We are really pushing our chips in on the table with this vehicle”, Ford said in an interview ahead of the Mach E’s unveiling. The automaker has said it will spend $11.5 billion developing electric and hybrid models by 2022. Automakers have struggled to make money on electric vehicles. Bill Ford told the Mach E “will be profitable right from the start”. Ford’s confidence in the car, and its determination to challenge Tesla, was reflected in the location the company chose to reveal it: An airplane hangar just a short walk from the main offices of Tesla CEO Elon Musk’s SpaceX operations in California. Musk often uses SpaceX facilities to unveil Tesla’s new models, and has scheduled the debut of his electric pickup for somewhere in Los Angeles later this week. Musk replied to Ford’s event with a tweet: “Congratulations on the Mach E! Sustainable/electric cars are the future!! Excited to see this announcement from Ford, as it will encourage other carmakers to go electric too”. The Mach E started with humble ambitions. The SUV originally was to be what Ted Cannis, Ford’s global director for electrification, called a “compliance” play: an electric variant of a frontwheel drive internal combustion vehicle, aimed at generating emissions credits to comply with clean air regulations at low cost. There was no link to Mustang’s muscle car image. Boring electric cars were the norm for Ford and other legacy automakers. Then Tesla in 2013 launched its Model S: an electric car that looked like a sporty European luxury sedan with a giant screen for a dashboard and entertainment and functional features that could be upgraded with over-the-air software updates. Tesla’s market value is now higher than Ford’s. Ford’s own customer research showed dull electric cars were a mistake, Cannis and other executives said. Those doubts came to a head in mid-2017 when Hackett, then newly appointed, reviewed the design for the electric SUV with executive vice president Jim Farley, who has owned 7 of the cars starting with a 1965 model he restored when he was 14 years old. “It’s not good enough”, Hackett recalled saying. Farley agreed, and Hackett said: “We tear it up”. The team designing the vehicle started over, using a new architecture engineered from the start to be a battery electric vehicle, instead of the original plan to use a modified version of an internal combustion engine vehicle, Ford executives said. The Mustang muscle car’s distinctive “shark face” front end and body proportions were adapted to a new skin, and under the floor Ford designed a new battery pack that can deliver up to 483 km of range in an “extended range” version. The re-do had to be accomplished much faster than normal to stay on target for a fall 2020 launch. “We were super behind time”, said exterior designer Chris Walter during a briefing on the vehicle ahead of the Los Angeles debut. A concept for new dashboard software and a display using a 15.5-inch (39 cm) diagonal screen was pulled together in just 90 days by a 15-person group that called itself Team Menlo (a reference to Thomas Edison’s Menlo Park, New Jersey, laboratory). A paper prototype of the new screen used an empty Keurig coffee pod to represent a large control knob. The overhaul cost money, but Ford product development chief Hau Thai-tang told the dedicated electric vehicle architecture should allow for 25 % to 30 % improvements in manufacturing efficiency to help offset the cost. The final call on using the Mustang name came from the top, and was not given easily. “I was dead set against it, initially”, Bill Ford said. Ford said he started to warm to the idea as he saw the styling and the performance data for the vehicle. Ford said he did not grant his approval until earlier this year after driving a prototype. “It felt like a Mustang experience to me”, he said. This is not the first time a challenge to reinvent the Mustang has emboldened Ford employees to break with convention during a rough patch in the company’s history. The original Mustang launched in 1964 was derived from a mainstream Falcon compact car and quickly became a hit, far outselling the company’s projections. In the early 1990s, with the economy in a slump, a small group of Ford employees rebelled against a plan to transform the rearwheel drive Mustang into a frontwheel drive car developed by Ford’s then-partner, Mazda. That project became a laboratory for cutting the costs of product engineering by putting representatives of different functions on the same team. The Mach E is another turning point, Hackett said. “The science project platform for EVs is now gone”. +++ 

+++ Ford is considering launching further new MUSTANG badged models in the future, raising the possibility of the muscle car nameplate effectively becoming a performance sub-brand. The long-running name and pony badge logo is being used on the new Mustang Mach-E electric crossover, Ford’s first bespoke EV. It will be the first time in the 55-year history of the Mustang that the name has been applied to an entirely new model type. The development team originally started work on a different EV project, but the project underwent substantial changes when it was decided to apply the Mustang name. Murat Gueler, Ford’s European design chief, said that decision could lead to more new Mustang models. “The Mach-E is our step into the future, without ignoring history”, Gueler told. “There’s a lot of emotion with the Mustang, and it’s time to progress that and make it spread wider”. Notably, to match the style of the Mustang, the Mach-E uses a reworked version of the model’s pony badge, rather than the Ford Blue Oval logo. Gueler said that decision was both to strength then Mustang links and “communicate the new-ness of this”, adding that: “We’ve talked about building a family”. He added: “The latest Mustang in Europe has gained another level of popularity, so we have a bigger base for the Mustang brand. The Mustang and the Porsche 911 are the most famous sports cars on the planet. Mustang is a big nameplate and it’s about time we applied electrification to it. “People now understand we can do different things to different nameplates quite successfully”. Ford is also working on new EV projects to follow the Mach-E, but Gueler added that they wouldn’t simply produce new Mustang-inspired EV models of different sizes. “We don’t want to take a Russian doll approach, where you can’t tell them apart other than the size of the car, but we want a family feel where a Ford EV starts to build off this concept”, he said. “But we’d never do a smaller version of this. If we did a smaller vehicle it would have different proportions”. +++ 

+++ Naming its first all-electric crossover the MUSTANG MACH E is certainly a controversial decision for Ford, as the new model does not have much in common with the iconic pony car, besides some styling references. It’s the first time the Mustang name has been used on anything but a 2-door car and Ford is hoping the nameplate will help its first all-electric SUV stand out from the competition. It’s a 2-way street, however, since the move could also dilute the appeal of the nameplate if it proves unsuccessful. Mind you, chances are fans will eventually get over this if the Mustang Mach-E is good enough. U.S. buyers in general, and the Trump administration in particular, will not be thrilled to learn the new model will be made in Mexico, though. In March, Ford confirmed the electric crossover would be built at its plant in Cuautitlan, Mexico but that was before revealing it was going to be named the Mustang Mach-E. Importing such an established American name to the U.S. could be risky given President Donald Trump’s tough stance on the new North American trade deal and on U.S. automakers importing vehicles from Mexico, China, and other places. Furthermore, the Mustang Mach-E will debut in the midst of a highly contentious election cycle, where automotive manufacturing jobs and plant locations will be high on the candidates’ agendas, particularly Donald Trump’s. U.S. automakers have traditionally chosen to manufacturing iconic American vehicles such as Mustang, Corvette and Jeep Wrangler in the United States because it’s part of their appeal. However, one could argue that Ford has made the decision of building the Mustang Mach-E south of the border to keep the costs down. In the end, that should benefit U.S. buyers, unless Ford decides to pocket the savings instead of pursuing an aggressive pricing strategy. Either way, rival Tesla might jump at the chance to tell buyers that its EVs are made in the United States, while Ford’s electric crossover is not. +++ 

+++ RENAULT will have soon drawn up a shortlist of candidates for chief executive officer but there is no rush, the French carmaker’s chairman told. Renault ousted chief executive Thierry Bollore in October as the carmaker and its Japanese partner Nissan have tried to rekindle their relationship after the arrest of the alliance’s former head Carlos Ghosn. “If we select a person by the end of the year, all the better. If not, it’s not a bad thing”, Jean-Dominique Senard told. He praised Renault’s finance director, Clotilde Delbos, who took over as interim CEO. Bollore had been close to Ghosn and had strained relations with Nissan’s previous boss. Appointing new faces at the helm of Renault could help draw a line under almost a year of turmoil and revive cooperation between 2 carmakers once seen as destined to a full merger. Senard did not rule out reducing Renault’s stake in Nissan, which he said the Japanese firm had long demanded. The French company holds 43 % of Nissan’s shares. “Things are not written for all eternity”, Senard said. “However, a reduction in shares must make sense”. French Finance Minister Bruno Le Maire said on Sunday that the search was ongoing for a new CEO and that he favoured selecting a professional from the automobile sector. “I can confirm the next CEO has not yet been chosen. The only indication I can give you is that I wish it is a professional of the car industry because amid the radical transformation of the sector, one needs professionals”, Le Maire told. The French carmaker, chaired by Jean-Dominique Senard, a former executive at tire maker Michelin who was parachuted in following the Carlos Ghosn scandal, is expected to choose a new CEO by the end of the year so that the group can try and fully refocus on its operations. The French state has a 15% stake in Renault. Renault’s interim chief executive Clotilde Delbos has applied to take the job on a permanent basis, 2 sources familiar with the matter have said, as the carmaker edges toward a shortlist likely to also feature several external candidates. One of the sources had said that Patrick Koller, the Franco-German CEO of car parts maker Faurecia, and Luca de Meo, the Italian boss of Volkswagen-owned Seat, also ticked many of the boxes for recruiters, including that they both spoke French. +++ 

+++ SKODA will unveil an crossover concept in February that will preview the first model underpinned by a new low-cost platform developed in India by the automaker. The concept will be shown at the Delhi auto show from February 7-12. The production version will go on sale by the end of next year and will be joined by a notchback on the same platform at the beginning of 2021, Skoda CEO Bernhard Maier said. Both cars will be built in India. Skoda is leading the development of the low-cost platform, called MQB A0, for its parent, Volkswagen Group. The program includes 2 cars for the VW brand, including a small crossover. The platform is part of VW Group’s bid to accelerate sales in a market that is price sensitive. Cars using the platform are not expected to be adapted for sale in Europe. “We said if we want to be competitive, we have to meet exactly the demands of our customers in India. They are different from what we see in the rest of the world”, Maier told. Skoda is spending €1 billion on the project to localize VW Group’s A0 platform. The investment includes setting up a R&D center near Delhi. Maier said Skoda had achieved its target to source 90 % of parts locally. India’s car sales are dominated by Maruti Suzuki and Hyundai, which have taken advantage of local economies of scale to deliver cars at a price attractive to local buyers. European automakers have struggled to gain a serious foothold in India. Renault has been most successful European brand in India in recent years after developing the Kwid small crossover locally. However, Renault was only India’s 9th best-selling brand through September, according to figures from forecasters LMC Automotive. Skoda was the 13th best-selling brand, while VW was at No. 10. India’s passenger car market is currently suffering a “severe and prolonged” downturn with sales down 16 % in the first 9 months to just over 2 million, LMC said in a recent report. It blamed a lack of credit availability, higher vehicle prices, weak buyer sentiment and a slowing economy. Skoda will launch its new cars for India only after the country switches to the tougher Bharat Stage 6 emissions standard in April. The change is predicted to create a further sales lull following an expected rush earlier in the year to buy cheaper cars rated to pass the current BS-4 regulations. LMC expects the India’s light vehicle market to stabilize at 3.4 million units by 2021. +++ 

+++ VOLKSWAGEN cut its medium-term outlook for operating profit as the industry is being hit by a global downturn. VW now expects operating profit before special items to grow by at least 25 % in the 2016-2020 period, down from a previous forecast of more than 30 %, slides for a presentation showed. The Wolfsburg-based company also cut its forecast for medium-term sales growth to 20 % from more than 25 %. Volkswagen Group lowered its outlook for sales growth to reflect weakening demand in big car markets such as China. “We are facing a declining market environment”, CEO Herbert Diess said during a telephone conference with analysts and investors. Some areas are poised to decline further next year, he said. The VW Group is keeping its operating profit margin targets excluding special items for this year and next, chief financial officer Frank Witter said during the presentation. Its goal for return on sales for 2021 should be similar to 2020, he said. Witter said the group was still “very resilient” in an increasingly difficult economic environment. “Strict cost discipline is, however, necessary to achieve our goals in the long term”, VW said in a statement. VW last month trimmed its global vehicle delivery forecast as cooling economic growth in some regions weighs on demand. At the same time, VW plans to lift spending to record levels on new technology. The carmaker will ramp up spending on electric vehicles, automated driving and other new technology by 36 % as the world’s largest automaker challenges rivals to keep pace with an aggressive shift into the post-combustion era. The new 5 year budget for investment in hybridization, electric mobility and digitalization totals €60 billion, compared with €44 billion previously, the Wolfsburg-based manufacturer said. The spending amounts to €12 billion a year. Diess said this includes a doubling of spending plans for software and digital operations to €14.4 billion for the 5 year period. “We are resolutely pressing ahead with the transformation of the Volkswagen Group and focusing our investments on the future of mobility”, chairman Hans Dieter Pötsch said in a statement after the supervisory board approved the plan. The sharp increase in spending after just 1 year reflects the increasing pressure on automakers amid the disruptive technology shift and the strains to meet increasingly stringent pollution regulations. Slowing markets make financing the investment tougher. “The idea of growing out of problems only grows the problem”, Arndt Ellinghorst, a London-based analyst with Evercore ISI, said in a note. VW’s approach is a contrast to “peers who are tightening their belts in light of tougher end markets and increasing variable costs”. Volkswagen lowered its global vehicle delivery forecast last month as demand waned in key markets including China, its biggest sales region. The manufacturer had reduced output plans by 900,000 cars and is prepared to cut further to avoid bloated inventories. “In light of the worsening economic situation, we are also working on increasing our productivity, our efficiency and our cost base”, Diess said in the statement. “We intend to take advantage of economies of scale and achieve maximum synergies”. Looking ahead, 2020 is shaping up to be “an extremely challenging year”, Diess said at a later press conference, adding that VW’s financial targets can still be reached. These include reaching an operating profit margin of between 6.5 % and 7.5 % excluding special items and net cash flow of at least €10 billion. The German auto giant has been under pressure since the 2015 emissions-cheating scandal. The aftershocks continued last week, with the company naming Markus Düsmann as head of the Audi brand. He will replace Bram Schot, who took over following the arrest of Rupert Stadler amid an ongoing German investigation into Audi’s past rigging of diesel-engine software. Since the diesel crisis, Volkswagen has accelerated its development of electric cars. The spending budget includes a 10 % increase in investment for battery-powered vehicles to €33 billion. Tesla added urgency last week by announcing plans to build a factory on VW’s home turf. Diess welcomed the investment and said Tesla’s speed and agility in developing technology provides a role model for VW. Through 2029, Volkswagen plans to introduce as many as 75 all-electric models, up from a previous forecast of about 70. The company now expects to produce about 26 million e-vehicles over the next 10 years, compared with an earlier target of 22 million. German rival Daimler warned last week that there’s no quick fix to reviving profit margins while making the costly switch to electric and self-driving cars. The company’s new CEO laid out a plan to cut jobs and cap development spending. “We will step up the pace again in the coming years with our investments”, said Diess. “Hybridization, electrification and digitalization of our fleet are becoming an increasingly important area of focus”. Volkswagen presented positive news by saying it’s new ID.3 electric vehicle will be 40 % cheaper to build than the electric version of its Golf model. The battery in the new ID.3 can be used to add structural rigidity to the body and the modular layout of the battery allows for advantages in packaging and economies of scale. “If you focus on an electric platform, all in all it accounts for a 40 % reduction against the predecessor electric Golf”, Diess said. “Most of it from cells and the battery system. Around 5-10 % comes from dedicating an entire plant to electric vehicles”. This cost reduction is one of the reasons that Volkswagen is confident it can shift from making combustion-engined to electric cars without eroding the company’s profit margin, VW said. +++

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