+++ The DIESEL exhaust fluid (DEF) shortage is accelerating a decline in the popularity of passenger cars and SUVs running on diesel. The headlines about the DEF shortage, caused by China’s restrictions on exports of urea, have focused on commercial vehicles like cargo trucks because they need more frequent refills of the fluid due to their longer drives and heavy loads. Ordinary cars don’t need as much, but the headlines have still scared potential customers away from diesel models. “One of my customers asked for a car that was suitable for camping, so I suggested a diesel SUV, particularly for its fuel efficiency”, said Mr. Kim, an owner of a car dealership in Seoul. “But over the weekend, the customers called me to change the order from a diesel model to another type that doesn’t need DEF. Unlike commercial vehicles, SUVs can run more than 10.000 kilometers on just 10 liters of the fluid, but I don’t think that fact will make him change his mind”. Diesel cars in South Korea have already seen a decline in popularity, mirroring the rise in interest in eco-friendly cars such as hybrids or pure electric vehicles (EVs). Newly registered diesel models in Korea in October numbered 20.261, a 63.1 percent decline from a year earlier, according to data from CarIsYou, a Seoul-based market tracker of auto sales. In September, the figure saw a more modest 23.4 percent decline. For the first 10 months of this year, the market share for diesel models among new car sales was 25.4 percent. But in October alone, the market share was only 16.5 percent. “With the rising price of fuel and a trend towards eco-friendly vehicles, the DEF shortage is leading consumers to purchase hybrid vehicles instead of diesels”, said a spokesperson for CarIsYou. Sales of hybrid vehicles jumped 20.3 percent in October, from 15,875 units last October to 19.182 units. Carmakers are stopping production of many diesel models. Genesis, Hyundai Motor Group’s luxury brand, announced recently that it will stop launches of new internal combustion engine vehicles from 2025. From 2030, it said it will stop selling them completely. Genesis stopped taking orders for its 2 diesel sedan models (the G70 and G80) on October 22. Production of diesel versions of compact SUVs such as Hyundai’s Kona, SsangYong’s Tivoli and Chevrolet’s Trax were suspended last year. The diesel version of Renault’s Captur was suspended in March. Kia’s diesel Seltos will also stop production next year. Diesel cars were popular for their fuel efficiency. In 2015, diesel models accounted for 52.5 percent of Korea’s auto market. Gasoline model had a market share of 37.2 percent at the time. “In 2015, when Volkswagen’s so-called ‘dieselgate’ scandal broke out, consumers started to think differently about diesel cars”, said Moon Hak-hoon, an automotive engineering professor at Osan University. “A lot of countries starting to come up with regulations on diesel cars”. Problems with diesel cars continue to this day. Early this month, the Ministry of Environment levied a fine on Mercedes-Benz Korea and Stellantis Korea for fabricating emissions from six of their diesel models. “With the breakout of the DEF shortage, consumers will continue to avoid diesel-running cars and their sales will continue to decline”, said Yoo Ji-woong, an analyst at eBest Investment & Securities. Sales of diesel cars will be replaced by hybrids and EVs. In 2015, the market share for hybrid cars was 2.1 percent, which grew to 10.4 percent as of October. The market share for pure EVs went from 0.2 percent in 2015 to 5.5 percent this October. +++
+++ +++ GENERAL MOTORS KOREA will launch 10 new Electric Vehicle (EV) models in the country by 2025 but none will be manufactured locally, GM International President Steve Kiefer told the Korean press. “10 EVs will all be imported vehicles”, Kiefer said. “We are not announcing any plan to produce EV models in the country”. Specifics about the 10 new models weren’t disclosed but Kiefer said they will follow General Motors’ strategy in offering EV models at every price point from entry level to trucks and luxury products. GM Korea will focus on the launch of a new crossover model expected in 2023 that will be made at the automaker’s Changwon factory, according to Kiefer. The crossover model is a key product for GM Korea as it will be sold domestically as well as exported to overseas markets. GM Korea hopes it will follow in the tire treads of its Trailblazer, a SUV which is manufactured at the company’s Bupyeong factory and has seen exports of more than 100.000 units since its launch in 2020. GM Korea in 2019 promised to invest 900 billion won in its Changwon factory to revamp the facilities for the next four years and make it ready to manufacture new models including the new crossover. “I had the opportunity to visit the Changwon plant where our all-new crossover will be manufactured for domestic and export markets”, Kiefer said. “It was great to see the significant investment in plant and equipment to support the new program”. For domestic customers, GM Korea will also bring in a full-sized Chevrolet Tahoe (a SUV) in the first quarter of next year followed by the GMC Sierra pick-up. GM Korea said it will take a 2-track strategy to make select models domestically and import other to offer Korean customers many options. When asked about the relationship with battery supplier LG Energy Solution, Kiefer said the partnership remains solid. “I couldn’t be more proud of the support we get from LG”, he said. “At the end of a decade, we expect to make 1 million EVs and more battery capacity is going to be required. Stay tuned for additional announcements”, he added, hinting at maintaining the partnership with LG Energy Solution. Recalls of LG Energy Solution batteries have suspended sales of the Bolt Es and delayed the launch of this Chevrolet model (recently sold as Opel Ampera-e in Europe) in Korea. When sales will resume and the launch be made weren’t confirmed. GM Korea CEO Kaher Kazem said new batteries are on their way from the United States to Korea. “We will see a steady supply [of batteries]towards the end of this year”, Kazem said, adding the new batteries will be offered to existing Bolt EV customers. +++
+++ A former HYUNDAI employee who informed the U.S. government of serious flaws in the automaker’s engines has been given the first-ever whistleblower award of US$24.3 million. The National Highway Traffic Safety Administration said Tuesday that the award, which was created in 2015, has gone to Kim Kwang-ho (59), a former engineer at Hyundai. Kim used to work at a quality control team at the automaker and informed the Korean and U.S. governments of defects in the Theta II engine used by Hyundai and affiliate Kia. Kim was fired for divulging corporate secrets and was even accused of dereliction of duty. But the NHTSA launched a probe into the Theta II engine based on Kim’s tipoff which resulted in the recall of 1.6 million Hyundai and Kia cars sold in the U.S. The NHTSA also found that the Korean automakers lied to investigators and slapped them with an $81-million fine last November. The NHTSA decided to award Kim 30 percent of the fine, the maximum amount that can be given to whistleblowers. “Whistleblowers play a crucial role in bringing information to NHTSA about serious safety problems that are hidden from the agency”, it said. “This information is critical to public safety and we are committed to rewarding those who bring information to us”. Kim was also given a medal by the Korean government as well as a W200 million reward from the Anti-Corruption and Civil Rights Commission in 2019. +++
+++ Hyundai and affiliate Kia have an iron grip on the SUV market of INDIA . The Society of Indian Automobile Manufacturers said on Wednesday that 34.5 percent of SUVs sold in India last month were made by the 2 automakers. Hyundai led the market by selling 18.538 cars and Kia followed it with 15.931 cars. Hyundai’s Venue was the bestselling model in the country last month with 10.554 cars sold, and Kia’s Seltos was in second place with 10.488 cars. India’s domestic automaker Tata sold 10.096 Nexons in the same period. The 2 Korean automakers account for 38.5 percent of the SUV market with cumulative sales of 369.000 cars in the first 10 months of this year. Last year, they claimed a combined 44.6-percent share. Korean cars are proving popular in India because of their competitive prices and convenient features. +++
+++ Chinese electric carmaker NIO said that it had delivered 24.439 vehicles in the third quarter (Q3) this year, an increase of 100.2 percent from the previous year, setting a quarterly record. The company posted a 116.6 percent year-on-year revenue growth in the period, raking in around 9.8 billion yuan ($1.5 billion), according to the company’s financial statement. The auto gross margin reached 18 percent, with the research and development expenses hitting approximately 1.19 billion yuan for the period, up 101.9 percent year-on-year, said the company. “The number of new orders have continued to grow, reaching a new high in October. The total delivery in the fourth quarter of 2021 is expected to reach 23.500 to 25.500 vehicles”, said Li Bin, founder of NIO. +++
+++ OPEL ’s status as the only German brand within the Stellantis group affords it “special prioritization”, said the brand’s CEO, Uwe Hochgeschurtz, following concerns from unions over the company’s future in the country. “We are the only German brand. We are building off this and with it I believe we will find success with the Opel brand”, Hochgeschurtz said. Opel has closed its Eisenach plant in Germany until at least the end of the year due to chip shortages. Workers there accuse Stellantis of exploiting Germany’s furlough scheme to move production out of the country. Hochgeschurtz will meet with the finance ministers of the 3 German states where Opel has plants (Rhineland-Palatinate, Hesse and Thuringia) on November 19, ahead of a planned meeting later this month between Stellantis CEO Carlos Tavares and the premiers of those states. Hochgeschurtz also said that Opel was prioritizing the use of the chips it already had on hand to put towards electric vehicles, and he did not want to speculate too much on when the chip shortage would be over. +++
+++ Daimler plans to dispose of its stake in RENAULT , the next step in dissolving equity ties forged over a decade ago to cement a three-way partnership between the German automaker, Renault and Nissan. The maker of Mercedes-Benz cars is launching an offer to institutional investors for 9.2 million shares following Wednesday’s market close, with the stake valued at about €316 million. The automakers’ industrial partnership remains unchanged and will not be impacted by the decision, according to a statement. Nissan sold its entire stake in Daimler for €1.15 billion in May this year, joining its alliance partner Renault that sold its holding in March to generate funds for turnaround efforts. The industrial partnership, including working together on Smart ForTwo and Renault Twingo minicars, yielded some cost saving through shared projects, the overall benefits remained modest. Daimler still retains a holding of about 3.1 percent in Nissan. Both Renault and Nissan are trying to restore profitability and overhaul their portfolio after the 2018 arrest and downfall of their long-time leader Carlos Ghosn threw their own alliance into disarray. While Renault has declined 4 percent since the start of the year, Daimler has jumped 52 percent. Several of Ghosn and former Daimler chief Dieter Zetsche’s projects to jointly develop and produce vehicles turned into bruising experiences. Mercedes dropped the X-Class pickup that was based on the Nissan Navara due to poor sales, and customers mocked the mediocre quality of the Mercedes Citan small van that shared components with Renault. The collaboration the companies planned for a factory in Aguascalientes, Mexico, also did not pan out as initially planned. Ghosn and Zetsche regularly hosted joint press conferences at car shows before Japanese police arrested Ghosn in late 2018 on suspicion of financial misconduct. In an unrelated development, Zetsche stepped down from his roles at Daimler the following year. +++
+++ RIVIAN , an electric-vehicle maker that has been around for over a decade, finally got around to delivering a product this year (156 pickups) and nearly all went to its employees. Despite that minuscule total, investors decided Rivian was in the same league as some of the most recognized names in the auto industry, like General Motors and Ford, which churn out millions of vehicles a year. In the first day of trading after its initial public offering, Rivian’s stock jumped 29 %, putting its market value at $86 billion, in line with GM’s and higher than Ford’s. The fevered buying did not come out of nowhere. The stock market is up 25 % this year, even with the pandemic’s disruptions. But investors also increasingly believe that the market for electric cars will be enormous and, for now, they are happy to bet big on companies in the sector that show promise and appear to have credible leadership. And of course they are hoping to find the next Tesla, a company that is on track to sell nearly a million cars this year and that has captivated the stock market for months with a rally that has lifted its value to $1 trillion. But Rivian is a long way from proving that it can vastly ramp up its production lines. And a failure to expand fast (as other automakers crowd into the market) could shake investors’ confidence, hurting its financial prospects. “Anybody who is going to pay a high price in the IPO expecting it to scale fast may be disappointed”, said John Paul MacDuffie, a professor of management at the Wharton School of the University of Pennsylvania. “A little bit of patience to combine with the excitement is appropriate”. Tesla’s struggles with production caused its cash to hemorrhage and its stock to plunge. And by giving Rivian such a high valuation at the outset, investors are betting on a much smoother expansion for the company and its chief executive, R.J. Scaringe, who has a doctorate in mechanical engineering from the Massachusetts Institute of Technology. “This is the first step of many, with us being a public company, and now having the opportunity to really accelerate our areas of focus”, Scaringe said. Rivian’s upscale pickup truck, the R1T, is aimed at drivers who like off-roading. (“Keep the world adventurous forever”, the IPO prospectus proclaims). The company plans to start delivering an SUV next month, followed by a delivery van developed with Amazon, which owns around a fifth of Rivian. Amazon has ordered 100.000 of the vans. But Rivian appears to be tamping down expectations. In a recent financial filing, the company said it did not expect to fulfill the 55,400 orders it has received for the truck and the SUV until the end of 2023. And even if Rivian avoids severe production difficulties (all the more unlikely when global supply chains are strained) the company will face competition on many fronts. “It’s safe to say that it’s going to be more challenging for this industry in the next 3 to 5 years than in the past 3 to 5 years”, said Mike O’Rourke, chief market strategist at the brokerage firm JonesTrading. The contract with Amazon could provide a steady revenue stream. But on the consumer side, Rivian faces competition not just from Tesla, which is developing a truck, but also from automakers that have more experience with mass production. Next year, Ford is supposed to start producing an electric version of its F-150 pickup truck, the top-selling vehicle in the United States. GM is expected to soon begin selling an electric GMC Hummer (in both truck and SUV versions) and is working on a Chevrolet Silverado electric pickup. Consumers may also question whether Rivian will provide service for the vehicles. The company has no dealers and intends to sell vehicles directly to consumers. Tesla uses the same approach, and many customers complain of waiting weeks for parts and repairs. For Tesla owners in Michigan, for example, the nearest service centers are in Chicago and Cleveland. Charging remains a challenge for all companies introducing electric vehicles. While stations are available in many urban centers, their numbers are fewer in suburbs and many less densely populated areas have no charging infrastructure. That could be a particular issue for Rivian since it expects owners to take its vehicles out into the wilderness where the nearest charging station could be many miles away. The big question hanging over young electric vehicle companies is whether they have enough cash on hand to finance their expansion when sales are still low. Rivian used up $3.5 billion of cash on operations and capital spending from the start of 2020 through the end of June this year. But Rivian appears to be able to finance its expansion into the near future. It had just over $5 billion of cash on hand at the end of September, and the IPO will bring in nearly $12 billion. Rivian’s IPO was one of the largest in recent years, exceeding Uber’s 2019 offering, which raised $8 billion. But it is smaller than Facebook’s 2012 offering, which raised $17 billion. So far this year, companies have raised $290 billion in 901 deals, compared with $169 billion raised in 457 deals in all of last year, according to the data service firm Dealogic. The stock market is playing a crucial role in funneling money into new sectors of the economy, including companies deploying green technology. But to some analysts, investors are just throwing money at what’s hot, and not doing enough to discern which companies are actually strong. “The market’s pricing mechanism is broken and you can’t see the real successes”, said O’Rourke of JonesTrading. But MacDuffie, the Wharton professor, said he believed there was enough potential growth in the electric vehicle market for many companies to succeed. “It’s not so much a winner-takes-all market”, he said. “We are probably more at a rising tide lifts most boats, if not every boat”. Investors that took an early stake in Rivian, Ford and Amazon included, are sitting on big gains. Ford’s Rivian shares were worth $10 billion at Wednesday’s closing price and Amazon’s at least $16 billion. And Scaringe, Rivian’s chief executive, is also sitting on a fortune. His shares in Rivian are worth more than $1.7 billion. And this year, Rivian’s board approved a new stock award for Scaringe that could be worth more than $7 billion if the stock trades as high as $295. +++
+++ In the UNITED KINGDOM , both DS and Vauxhall announced pricing and availability for their C-Segment hatchbacks which may share their Stellantis’ underpinnings but differ in terms of market placement. The more premium DS 4 starts from £25,350, while the Golf-rivaling Vauxhall Astra starts from £23,275 , although equivalent variants have weirdly similar pricing. The £2,075 price difference between the entry-level variants of the hatchbacks is not indicative since the cheapest DS 4 Bastille+ comes with the 1.2-liter producing 130 hp and the 8-speed automatic transmission, while the cheapest Vauxhall Astra gets the 1.2-liter producing 110 mated to a six-speed manual gearbox. Upgrading the Astra with the same engine/gearbox combination brings it to £25,375 which is actually £25 more expensive than the equivalent DS 4! +++
+++ Having announced that it will sign the Glasgow Declaration on Zero Emissions Cars and Vans at COP26, a study by VOLVO says that the manufacturing process of its C40 Recharge electric coupe-SUV generates 70 percent more emissions than that of the ICE-powered XC40 counterpart. However, when the car’s lifetime is factored in, a breakeven is reached, and the EV’s total carbon footprint is less compared to that of the ICE vehicle’s. The Volvo study painted a like-for-like picture, with the XC40 range comprising fully electric, PHEV, and ICE versions of the compact SUV. Their findings take into account the entire lifecycle carbon footprint of each and include mining of raw materials, production processes, fuelling it, and then driving the vehicle for 200.000 km before final disposal. Volvo says that the breakeven point will depend on how electricity is generated. The study mentions three different scenarios, based on the average global electricity supply, the projected EU28 balance of both renewable and regular, and full-on renewable energy. When using the average global energy supply, a Volvo C40 Recharge will need to cover 109.918 km before it breaks even with the ICE XC40; in this scenario, that’s over half of the car’s lifetime. However, over that lifespan, the EV will account for 15 percent fewer overall emissions than the ICE vehicle. Running the C40 on the EU28 electricity scenario doubles the overall reduction in emissions to 30 percent and reduces the breakeven point to 77.248 km. And if you’re able to charge your C40 on renewable energy alone, the carbon footprint of the EV is half that of the ICE, breaking even in just over 48.280 km. The takeaway? It would seem that, according to Volvo’s research, electric cars aren’t simply greener than ICE vehicles, but over time, they certainly can prove to be more environmentally friendly. However, despite being based on the same platform and sharing many parts, manufacturing an EV results in significantly more emissions, with the batteries alone accounting for nearly a third of them on the C40 and XC40 Recharge. This essentially burdens EVs with a ballooned carbon footprint before they even roll off the assembly line which means that, depending on charging, they need some time before they break even compared to ICE-powered models. +++