+++ AUTOMOTIVE PART SUPPLIERS had a terrible 2021 and 2022 doesn’t look much better. They have one big problem shared by the entire auto industry: chips. Due to a supply shortage in chips for cars, production plummeted, shrinking their orders. One businessman in Daegu makes navigation devices for cars. The price of car navigation chips has shot up 150-fold over the past year. “The chip price surged from 16 cents early last year to $24 these days”, he says. “So we are now operating at a loss of 300 ($250,731) to 400 million won every month”. The losses began last June, and aren’t ending anytime soon. “It’s getting more and more frustrating”, he says, “since we need to meet deadlines, but can’t raise the product price enough” to make up for the increased cost of chips. The global shortage of semiconductors for automobiles started in 2020, driven by production halts caused by Covid-19 lockdowns, the U.S.-China trade war. The global economy rebounded causing a sudden hike in automobile demand, catching chipmakers by surprise. Experts forecast that the auto chip supply will rebound within the first half of this year, but the auto parts industry wonder how much that will help. According to the Korea Automotive Technology Institute (Katech) and Bank of Korea, the average operating profit margin for some 556 local auto part manufacturers, which varied between 2 to 4 percent over the last 5 years, dropped to 1.1 percent in the third quarter of 2021. The Bank of Korea attributed the decline to the chip shortage and the resulting production suspensions. Katech estimates there are some 4.660 auto part manufacturers with more than 10 employees in Korea, with 260.000 people working in the industry as of last year. “Automakers posted record-high profits due to hikes in demand in 2021, while many small- and mid-sized subcontractors are in a predicament”, said Lee Hang-gu, a researcher at Katech. Automakers are feeling the heat as well. “Since last year, the executive in charge of semiconductor sourcing has been frequently going on business trips”, said a spokesperson for Hyundai Motor, “because we thought that visiting the semiconductor manufacturers directly might help to solve the situation”. Some auto manufacturers including the Geely Auto Group, General Motors (GM) and Ford, announced that they will develop and produce semiconductors on their own. “Hyundai will stabilize chip supplies through long-term plans of direct procurement of semiconductors and chip swap arrangements with other companies”, said Seo Gang-hyun, executive vice president of finance and accounting at Hyundai. Chip swaps are a strategy to share semiconductor inventory and exchange supplies with other companies. The chip shortage led to prolonged waiting periods for new cars. Buyers now have to wait for a year to get a new car in some cases. “I decided to rent a car instead of buying one, because I needed it right now”, said Mr. Shin, 50, who recently started a business. Shin wanted to purchase a Kia Carnival van last November, but decided against it after hearing that he would have to wait nearly a year. Waiting periods for popular models such as the Kia Sportage compact SUV and Sorento SUV are up to 14 months, according to the company. Buyers need to wait for about a year to get Hyundai Ioniq 5 and Genesis GV60 SUVs as well. Since the latter half of last year, some companies started to offer shorter waiting period but for cars without options that run on semiconductors. “If you give up features like the collision-avoidance system and remote parking assist, you can get the car a few months earlier at a cheaper price”, said a spokesperson for Hyundai. “The situation is the same in North America and Europe, so overseas branches are rolling out cars without some features, prioritizing chips needed for core functions such as driving and safety systems”, explained a GM Korea spokesperson. Secondhand cars are also gaining popularity. Online used car platform K Car found that the price of secondhand vehicles is rising, especially for electric vehicles and hybrids. The price of a used Tesla Model Y was 78 million won in February, a 30 percent increase from last month. A new Model Y is priced at 79.9 million won. “Some secondhand cars are even more expensive than the new ones due to the waiting period”, said Park Sang-il, head of the pricing management team at K Car. “Companies are expanding auto chip production capacity but it takes time for factories to start operation”, said Lee Ho-geun, an automotive engineering professor at Daeduk University, “and the transition to electric mobility has been accelerated as well, boosting the demand”. +++
+++ BMW has overtaken Mercedes-Benz again to lead the imported car market in South Korea. BMW sold 5.550 cars here last month to beat Mercedes-Benz’s 3.405. That gives it 32 percent of the import market. Mercedes was the bestselling foreign automaker for the last 6 years. But last October BMW beat Mercedes in monthly sales for the first time in 1 year and 2 months and repeated the feat the following month. The gap between them has now narrowed significantly, with Mercedes selling 76.152 cars there last year, while BMW sold 65.669. Industry watchers say the key to BMW’s success was how it dealt with the semiconductor chip shortage. The German automaker simply did away with certain electronic functions, while Mercedes opted to focus on profitable luxury models. BMW sold 2.21 million cars worldwide in 2021; up 9.1 percent on-year, but Mercedes’ global sales declined 5 percent to 2.05 million vehicles. +++
+++ In JAPAN , Tatsuya Arai, a 36-year-old entrepreneur in Tokyo, never saw the appeal of owning a car until he watched a YouTube video featuring a Tesla. The Model 3, with its sleek exterior and innovative dash, looked like a neat solution considering he was moving from the city’s bustling Shibuya district to a quieter waterfront area and needed a way to get around. “It was like buying a gadget”, he said. Arai joined a small but growing number of electric vehicle owners in Japan. While EVs account for only 1 % of overall car sales, well behind China and parts of Europe, they’re finally starting to catch on. In 2021, new registrations of imported EVs nearly tripled to 8.610, a small but remarkable shift in a country where overall automobile sales have stalled. With its high per-capita income and enthusiasm for high-end European cars such as Mercedes-Benz, Japan initially looked like a natural fit to Tesla CEO Elon Musk, who predicted back in 2010 the Asian nation would be Tesla’s second-biggest market after the U.S. Yet the country has remained wary of betting too heavily on full electric cars, even after Nissan blazed the trail for affordable EVs with its Leaf over a decade ago. Japan’s automakers and government have instead preferred to promote hybrids, a category Toyota pioneered with the Prius around 25 years ago, as a more economically sound model. There now seems to be a pivot amid international pressure. Toyota, Nissan and Honda have all rolled out new EV strategies as foreign giants from General Motors to Volkswagen pledge to abandon combustion engine cars altogether in the not too distant future. The Japanese government, pledging to be carbon neutral by 2050, also appears to have shifted from its earlier focus of defending its home-grown auto industry. It now aims to almost halve emissions by 2030 from 2013 levels, and is looking to ban sales of gas-fueled cars by the mid-2030s. At the same time, it’s making EVs more affordable for consumers, doubling the amount of subsidies to a maximum of ¥800.000 ($7.000) in November. That’s encouraging for foreign EV makers, who’ve long ceded the market to Toyota’s Prius hybrids and Nissan’s Leaf, the world’s first mass-market EV. “The shift to zero-emission EV cars hasn’t happened yet, but once it does, we’ll see it proceed rapidly”, said Matthias Shapers, president of Volkswagen Japan, noting that Tesla cars were already selling well in neighboring Taiwan, where its suppliers are booming. Tesla cars are particularly popular among Japan’s young and wealthy, who live in urban areas where EV chargers are available and buy into Musk’s maverick message, analysts say. Globally, Tesla delivered over 936.000 cars last year, an 87 % increase from the year before, despite a global chip crunch that’s forced automakers to cut production. “The fact that Tesla’s share price topped Toyota was huge” in boosting its brand recognition in Japan, said Seiji Sugiura, an analyst at Tokyo Tokai Research, adding that Teslas have become a status symbol. IHS Markit estimates Tesla sold more than 5.200 cars in Japan last year, up from about 1.900 in 2020, although it also forecasts a brief pause this year while potential buyers wait for the new Model Y, expected to become available in Japan around year-end. Discounts could also put Teslas within the reach of more people. In February last year, Tesla Japan cut the price of the long-range version of its Model 3 by 24 % to about ¥5 million, mirroring a discount in China. Tesla is soon expected to announce the start of production at its Gigafactory in Berlin, its first plant in Europe, and at another in Austin, Texas. “Now that Giga Berlin is coming online, there’s going to be a lot of Teslas made in China going into Japan in 2022” as well as to South Korea and India, said Tu Le, director at Sino Auto Insights, who also forecasts further price cuts in Japan. Yet some warn it will be difficult for Tesla to expand in any meaningful way, particularly as domestic automakers put more resources into EVs. Even with a growing fan base of young, tech-savvy drivers, Tesla still struggles with poor brand recognition and its direct-to-consumer business model also confounds most shoppers accustomed to white-glove treatment. “It’ll be a tight battle”, said Takeshi Miyao, an analyst at Carnorama, an automotive consultancy. “Japanese automakers are strong globally, but they’re even stronger at home. It’s a very difficult market for foreign carmakers”. Miyao predicts particularly strong competition from Toyota’s BZ series, a line of electric-only cross-overs unveiled last year. Toyota is planning to spend $35 billion (¥4 trillion) to speed up its shift to EVs. Nissan and alliance partners Renault and Mitsubishi are spending a combined €23 billion ($26 billion, ¥3 trillion) over 5 years to roll out 35 new battery-powered cars by the end of the decade. Domestic carmakers will also have the upper hand when it comes to providing charging stations, helped by their existing networks of dealerships throughout the country, including in rural areas. Nissan already has a network of charging stations and is planning to build more as part of a global, 20-billion-yen project. Toyota has said it will equip EV chargers at all its dealers throughout the nation by around 2025. Tesla’s charging stations meanwhile are concentrated in metropolitan areas. It won’t say how many chargers it will build in Japan this year, but is currently looking for a charging stations project deployment manager, according to its website. Volkswagen Japan has said it will build the country’s largest rapid charging network, equipping 90 to 150 kilowatt rapid chargers at some 200 points by the end of this year. Installing them can cost as much as ¥25 million each. Stellantis NV has also started talking to energy providers to expand its charging network. Pontus Haggstrom, chief executive officer of Stellantis Japan, said he wants to see the government take a more active role. “As far as infrastructure is concerned, it’s not for the manufacturers to work on. It’s what the government needs to work on”, he said. Tesla fan Arai says he’s satisfied with the Model 3’s driving range of about 540 km. While he wishes there were more charging stations along highways, the slight inconvenience is outweighed by the ease of the car’s technology, including over-the-air software updates and features including the ability to lock the door with his smartphone. “I’m seeing more Tesla owners day by day”, he said. +++
+++ Despite its lackluster performance, KIA has decided to give it another try in the world’s largest vehicle market. Kia and its Chinese partner Jiangsu Yueda Group announced on Monday that they would invest $900 million in their money-losing joint venture Dongfeng Yueda Kia. Based in Yancheng, Jiangsu province, the company lost 4.75 billion yuan ($747 million) in 2020 and 2.61 billion yuan in the first 10 months of 2021, according to Shanghai United Assets and Equity Exchange. Another partner, Dongfeng, dropped out of the partnership in January 2022 by selling its 25 percent stake to Yueda. The 2 parents would rename the joint venture and make public their respective stakes in April around the Beijing auto show. Kia, which is part of Hyundai Motor Group, said the new joint venture’s goal is to sell 4 million vehicles in 10 years from now. Its cumulative sales in China stand around 6 million since its arrival in China in 2002. Dongfeng Yueda Kia was one of the popular carmakers in China. Its models were more affordable than those from European and Japanese carmakers and have better quality than Chinese ones. Its sales peaked in 2016 at around 650.000 units but the deliveries have since dwindled, falling to 160.000 units in 2021. Analysts said that was because of local Chinese marques’ growing competitive edge, other international carmakers’ downward push and more importantly Kia’s sitting on the laureate and slowness to introduce new models. Kia said on Monday that it would step up efforts to introduce its global models, especially the electric vehicles, into China. According to its strategy released in 2020, the South Korean carmaker plans to offer 11 EVs by 2025 and achieve a 6.6 percent market share of the global EV market by the same year. The first of them will arrive in China in 2023 and 6 will be available by 2027, said the carmaker. That would be fast compared with Kia itself in the past, but still slow if compared with other international volume carmakers, said analysts. Volkswagen is selling in China 5 EVs built on its new platform. Honda is offering two from early 2022 and will have 10 in the Chinese market by 2026. Kia said it will also put efforts into localizing its brand by hiring professional Chinese employees. “We will transplant our global capabilities into China and rebound our Chinese business this year through efficient decision-making and substantial business promotion”, said the company in a statement. “In the future, we will seek the optimal governance structure for sustainable growth in the Chinese market”, it said. It is not the first time that Kia and its parent Hyundai have emphasized the importance of local Chinese professionals. 3 senior Chinese executives including Li Hongpeng, who had a pretty successful career at international carmakers, joined Kia and Hyundai in 2019 and 2020, but they left one after another because they did not have enough authority to help maneuver the companies’ business in China, said analysts. Kia sold 2.78 million vehicles across the world in 2021, a 6.5 percent increase year-on-year. It is targeting global sales of 3.5 million this year, but did not give goals by regions. +++
+++ MINI will further expand its range into new segments as it pushes on with electrification, but it will be anchored by a car that’s become a proven winner for the British brand, in the form of the third-generation Countryman, which will arrive in 2023. Following its introduction in 2010, the trailblazing model paved the way for the brand to expand beyond its hatchback roots. It’s comfortably the firm’s second bestselling vehicle globally, only edged out by Mini’s heartland product, the Hatch, in 3 and 5-door form. Mini will reinvent its biggest offering by making the Countryman even larger still. This is necessary because of the need to accommodate a smaller, all-electric SUV to sit beneath the Countryman in the brand’s range, plus the confirmation from Mini of another incoming vehicle in the ‘premium compact’ segment, which could be a space-maximising MPV with links to the Urbanaut concept. To do this, the next Countryman will become the largest Mini ever. The current car is around 4.3 metres long, but the newcomer will stretch this to almost 4.5 metres, leaving space for the new small electric SUV. As such, the new Countryman will rival the likes of the Audi Q3 and the Volvo XC40, almost moving up a segment. Mini’s design language is set to evolve with the new Countryman. We’ll get our first official look at this new design ethos with the next-generation 3-door Hatch, which will be the first among Mini’s many arrivals next year. However, leaked images from China already point to an evolution of the brand’s grille and a new rear facia featuring trapezoidal tail-lights. The new SUV will be underpinned by an evolution of the current model’s platform, known as FAAR, but it won’t be built at Mini’s factory in the United Kingdom. Countryman production will move from its current home in Holland to a BMW production line in Leipzig, Germany. When it comes to engines, the current Countryman PHEV will probably be dropped in favour of 48 volt mild hybrid units, with a full EV also offered for the first time. “I think once you get EVs to a certain range, for the Mini use case, I don’t see a big market for PHEV”, hinted former Mini boss Bernd Körber last year. The petrol engine range will kick off with Mini’s familiar 136 hp 1.5-litre 3-cylinder turbo petrol, enabling a starting price of around €39.000 when it arrives in the Netherlands. This engine will form the basis of the 48 volt mild-hybrid version, too, possibly badged Countryman Cooper. The unit’s output will stand at 170 hp and 280 Nm of torque, with the 48 volt system enabling engine-off coasting and improved efficiency. A Cooper S version will return, as evidenced by the quad-exhaust set-up of the spied prototype test car. This will retain Mini’s 2.0-litre turbocharged 4-cylinder engine, but will also make use of 48 volt electrification for more power and reduced emissions, offering 218 hp and 360 Nm. The fully electric Countryman will be the most radical addition to the line-up. We’ve yet to see an EV from Mini or parent firm BMW using the FAAR platform, but in a 2017 presentation BMW revealed that FAAR EVs will use a battery of at least 60 kWh for a range of 450 km, and have electric motors with 136 hp or 260 hp. It’s possible that the electric Countryman will use a dual-motor set-up for ALL4 four-wheel drive. +++
+++ RENAULT SAMSUNG MOTORS appointed Stéphane Deblaise, a former program director at Renault, as CEO Friday. The appointment is effective March 1. The 49-year-old Telecom Physique Strasbourg graduate has served as a directing vehicle engineer for Renault’s South America business and as a program director for the automaker’s large family and small family vehicles. Until recently, he served as a program director at Renault’s advanced project and cross-car line. “Renault Samsung Motors expects Debalise to contribute in developing new eco-friendly vehicles based on Volvo’s CMA platform, which was announced recently”, Renault Samsung Motors said in a release. Renault signed a contract with Hong Kong-headquartered Zhejiang Geely Holding Group, the parent company of Volvo, early this year to produce new vehicles, including hybrid models, utilizing Volvo’s CMA platform at Renault Samsung’s Busan factory from 2024. +++
+++ TESLA is to set up a design center in Beijing this year, which analysts say will allow the United States-based electric automaker to better tap into the world’s largest but increasingly competitive vehicle market. The facility is one of the capital city’s major automotive projects scheduled for 2022, according to a Beijing municipal government document. Tesla did not comment on the project. Cui Dongshu, secretary-general of the China Passenger Car Association, said it is getting important for international carmakers to move closer to Chinese customers as new energy vehicles are increasingly becoming serious options. Last year, electric cars and plug-in hybrids accounted for 14.8 percent of total passenger vehicles sold in China. The figure is expected to reach 25 percent in 2022, said Cui. The popularity of such vehicles has made the country one of Tesla’s largest markets. Last year, it sold over 320,000 vehicles to Chinese carbuyers, accounting for more than one-third of its global deliveries. “Setting up a design center is a reasonable move if you take the China market seriously”, said Yale Zhang, managing director of Shanghai-based consulting firm Automotive Foresight. “It is difficult to come up with designs that local customers like if designers are half a world away. Meanwhile, local Chinese carmakers are fast rising as competent rivals”, he said. Tesla’s design center will mark another step in its localization efforts in China, following a research and development center completed in Shanghai late last year. The facility, the company’s first outside of the US, will develop over time similar in size to the one in its home country, it said. The Shanghai facility employs engineers for software, electronics, materials and charging. “The goal of Tesla’s team in China is to design, develop and produce new vehicle models and products with Chinese elements and sell them globally”, Tesla said in a previous recruitment post. Tesla made China its major export hub since July 2021. The carmaker shipped over 160.000 vehicles from its Shanghai plant to more than 10 countries. Starting production in late 2019, the Shanghai plant is China’s first and only passenger car manufacturing facility wholly owned by an overseas carmaker. Some other international carmakers are stepping up localization in design as well as R&D as well. Last month, the US’ second-largest automaker Ford unveiled its China design center in Shanghai. Ford said the center houses a complete range of design capabilities and facilities and is capable of operating independently and designing vehicles for the local Chinese market. Anning Chen, president and CEO of Ford China, said: “The industry is rapidly pivoting to electrification, connectivity and intelligent technologies. We are excited to see Ford’s iconic heritage shine through designs that reflect Chinese innovation and craftsmanship”. The China Association of Automobile Manufacturers estimates that the Chinese vehicle market will grow 5 percent to 27.5 million units in 2022, with electric cars and plug-in hybrids the fastest-growing segment. +++
+++ Ana Holdings and U.S. mobility firm Joby Aviation announced Tuesday that they and TOYOTA will start considering a business tie-up in the field of flying cars. With the entry of Japan’s largest airline, the air transportation network can be expanded to cover trip distances that are inconveniently long by bus or taxi but too short or otherwise impractical for conventional aircraft. Joby plans to launch a flying car passenger service in the United States in 2024. It was looking for a business partner in Japan with a view to expanding overseas. Under the partnership, Ana will start a joint flying car venture to carry passengers using the U.S. firm’s electric vertical takeoff and landing vehicles. Aiming to launch the service in 2025, Ana will provide aviation business knowhow, such as flight management technology and pilot training. Toyota is expected to handle ground transportation for users of the new service. Ana is believed to have teamed up with Joby in the hope of expanding its customer base by offering more convenient middle-distance transportation in Japan. Joby has developed a 5-seat flying car with a maximum cruising distance of about 240 kilometers and a maximum speed of 320 kph. In 2020, Toyota invested $394 million (about ¥45 billion) in Joby and started joint development of such vehicles. Toyota will provide the U.S. firm with electrification technology it has cultivated in hybrid and electric vehicles as well as know-how on productivity improvement. Flying cars, which are similar to ultracompact helicopters, are expected to become a next-generation transportation method that requires neither runways nor fossil fuels. Morgan Stanley of the United States estimates that the global market for flying cars will grow to a size of about $1.5 trillion (about ¥172 trillion) in 2040 from about $7.4 billion (about ¥850 billion) in 2020. There is no strict definition of flying cars, but companies around the world are developing electrically powered passenger vehicles that can be operated automatically and can take off and land vertically. +++