+++ Major production adjustments are underway at Toyota’s assembly plant in Tianjin, CHINA , informed sources told the press. The move comes in response to sluggish sales of gasoline-powered vehicles, which are Toyota’s mainstay products, amid a rapid shift to electric vehicles in the Chinese market. The plant is operated by Tianjin FAW Toyota Engine, which is jointly owned by the Japanese automaker, China’s state-owned China FAW Group and others. At the plant, production of the Vios compact sedan ended by summer this year, and that of the popular Corolla sedan has been reduced, according to the sources. In China, electric vehicles are rapidly spreading on the back of government support, including subsidies. As a result, Chinese automakers with competitive edges in electric vehicles are expanding their market share, while Japanese rivals are struggling, not helped by their advantages in gasoline-powered vehicles. Overall new vehicle sales in China grew 9.1% from a year earlier to 23.967.000 units in January-October, mainly reflecting strong electric vehicle sales. But Toyota’s sales fell 3.6% to 1.557.600 units. The company cut about 1.000 temporary jobs this year at GAC Toyota Motor, another joint venture. Other Japanese automakers are also struggling in China, with sales dropping 16.7% and 25.1% at Honda and Nissan respectively. In October, Mitsubishi announced its withdrawal from auto production in China. “An official at a Japan-affiliated automaker in Beijing said: “Things are tough for non-Chinese automakers, including those from Europe and the United States”. +++
+++ The DACIA Duster is unlikely to be offered as a battery-electric car until the 2030s. Asked how and when the Duster will adopt pure-electric power, brand CEO Denis Le Vot simply replied: “I don’t know”. He explained that such decisions are still a long way off, given the new Duster is likely to remain on sale for the next 8 or so years. Moreover, he believes that until around 2032, there will be sufficient “room” in the market for the Duster to remain “mostly petrol-engined based” . Le Vot said: “Our parent company Renault is going quick and massively on the electrification of the cars. Dacia is also going, of course, because we know the endgame. But it’s not going as quick. Dacia is offering an alternative at every moment on the market for mobility”. He added that combustion engines are Dacia’s “bread and butter” and the brand is a “life jacket” for the Renault Group “in this uncertain environment. It is not a race to go electric as quick as possible. Maybe I could say the contrary. There are these 2 things that are moving at the same time. We just have to be consistent. Of course, we don’t do nothing, because this is not possible. We are decarbonising step by step, so the first one is the LPG (10% less carbon) and the second one is when the pressure is coming and the market is demanding. Then we go on HEV (hybrid)”. Le Vot added that “we will finish at some point of time fully electric” but that this would depend on individual model cycles (the Sandero is due for replacement around 2028) and demand from international markets. “No one can imagine that you would launch an ICE-only car in Europe that would live between 2028 and ’34, correct? At the same time, the percentages of electrification would be far from 100, and our cars have lives outside of Europe (Turkey, Morocco and North Africa, Latin America and India). We have here a dual offer to offer: we will be bi-energy, which is to say an electric version and an petrol version. We will see. We have time”. +++
+++ Toyota is selling a part of its stake in components maker DENSO to raise cash for its drive toward electric vehicles and other innovations, Japan’s top automaker said. The move is estimated to raise about 290 billion yen, given recent share prices. The number of shares Toyota plans to sell total more than 124 million shares, lowering its stake in Denso from 24.2% to 20%, while remaining the top stakeholder. “We don’t want to just hold on to our assets. We want to make them living assets that feed into the growth of our company”, said Masahiro Yamamoto, an executive in the accounting group at Toyota. Toyota said the money will also go into developing smart-driving technology and a wide range of other initiatives ongoing in the industry. Yamamoto did not give a specific date for the sale, but it’s expected to happen soon. All the world’s major automakers are working on strengthening their lineup of electric vehicle and other green cars, as concerns grow about climate change. That requires a great deal of investment. Toyota affiliates, Toyota Industries and Aisin, are also selling a portion of their Denso shares, officials said. Japanese companies hold stakes in other group companies in a practice traditionally known here as cross-shareholdings. Yamamato denied the move was aimed at reducing such cross-holdings. Some have criticized the practice as reducing transparency while proponents say it helps maintain stability. Toyota officials have acknowledged they have fallen behind in the industry shift toward electric vehicles, and they have been aggressively playing catch-up. Toyota leads the world in hybrids, which switch back and forth between a gas engine and electric motor to deliver a fuel-efficient drive. It also has a strong lineup in fuel cells, which run on hydrogen and are zero-emission. In July, Toyota sold a part of its stake in telecoms company KDDI, raising nearly 250 billion yen. Toyota officials hinted other such offers may be in the works but declined to give specifics. +++
+++ A 6-week United Auto Workers strike at FORD cut sales by about 100.000 vehicles and cost the company $1.7 billion in lost profits this year, the automaker said. Additional labor costs from the 4-year and 8-month agreement will total $8.8 billion by the end of the contract, translating to about $900 per vehicle by 2028, chief financial officer John Lawler said in a company release. Ford will work to offset that cost through higher productivity and reducing expenses, Lawler said. The Dearborn, Michigan, automaker re-issued full-year earnings guidance that was withdrawn during the strike, but it trimmed its expectations. The company now expects to earn $10 billion to $10.5 billion before taxes in 2023. That’s down from $11 billion to $12 billion that it projected last summer. Ford said the strike caused it to lose production of high-profit pick-up trucks and SUVs. UAW workers shut down the company’s largest and most profitable factory in Louisville, Kentucky, which makes big SUVs and heavy-duty pickup trucks. The UAW strike began on September 15, targeting assembly plants and other facilities at Ford, General Motors and Jeep maker Stellantis. The strike ended at Ford on October 25. Ford, as well as rivals General Motors and Jeep maker Stellantis, agreed to new contracts with the UAW that raise top assembly plant worker pay by about 33% by the time the deals expire in April of 2028. The new contracts also ended some lower tiers of wages, gave raises to temporary workers and shortened the time it takes for full-time workers to get to the top of the pay scale. At the end of the contract top-scale assembly workers will make about $42 per hour, plus they’ll get annual profit-sharing checks. UAW President Shawn Fain said during the strike that labor costs are only 4% to 5% of a vehicle’s costs, and that the companies were making billions and could afford to pay workers more. At the Barclays Global Automotive and Mobility Technology Conference Thursday in New York, Lawler was asked about whether Ford would consider something like GM’s $10 billion stock buyback program, which the company announced Wednesday. Lawler said Ford plans to return 40% to 50% of its free cash flow to shareholders, on top of the current 15-cent per-share dividend. He said the company has faith that executing its plans will increase the stock price. He also said Ford expects prices to fall next year by about $1.800 for internal combustion vehicles. About $800 of that would come from dealer profits, while Ford would offer $1.000 in discounts, he said. The company, he said, has to be aware of affordability issues for consumers, who now spend an average of $45.332 on vehicles, according to J.D. Power. Before the coronavirus pandemic in 2019, people spent about 13.5% of monthly disposable income on vehicles, Lawler said, but that increased to 15.7% in 2022. It’s since dropped to 14.5%, and Ford expects it to return to pre-pandemic levels next year, Lawler said. Electric vehicle prices, he said, already have fallen faster than Ford or other automakers expected, so he doesn’t see much of a decline next year. But as people who aren’t early adopters start buying EVs, the prices will come down, he said. “They are not willing to pay a premium” over gas powered vehicles, he said. He foresees EV prices being equal to gas vehicles and said the company is working to reduce EV costs so profit margins equal gas vehicles by 2026 or 2027. In October Ford announced it would delay $12 billion worth of EV capital spending as the growth rate for EVs started to slow. Lawler said Ford isn’t changing its EV strategy, but is changing tactics “so that we can better match (manufacturing) capacity with demand”. The company has cut in half the size of a Michigan battery factory, delayed a battery plant in Kentucky and cut manufacturing capacity for electric motors and other components. “It’s not about not moving forward on our electric plans. It’s about the level of capacity that we’re putting in place”. +++
+++ Toyota said its global output and sales hit record highs for October on robust demand in North America and Europe, despite a temporary production halt in JAPAN due to an explosion at a parts supplier’s factory. The automaker made 900.285 cars worldwide in the month, up 16.7 percent from a year earlier, and sold 890.241 vehicles globally, up 7.0 percent, the company said. The pace of production picked up amid an easing semiconductor shortage, and its production outside of Japan increased 8.7 percent to 617.590 cars, an all-time high for a single month, it said. Domestic production jumped 39.2 percent to 282.695 units, even as the company halted some production lines in Japan for 10 days during the month after an explosion at a factory belonging to Chuo Spring Co in the city of Toyota, Aichi Prefecture. Toyota said a production ramp-up on the back of the improvement in the chip crunch made up for the output loss, which was caused by a suspension spring shortage resulting from the explosion. Helping the rise in global sales was a 5.2 percent growth in sales outside of Japan to 756,245 units, also a record high for the month. Sales of hybrid cars were notably strong in North America and Europe, with models such as the RAV4 and Corolla particularly popular, the automaker said. Domestic sales rose 17.8 percent to 133.996 vehicles, according to Toyota. Global production at Japan’s 8 major carmakers, including Toyota, rose 12.2 percent in October from a year earlier to 2.371.355 units, as all of them except for Daihatsu reported year-on-year growth due to the improved supplies of semiconductors. Honda’s output increased 22.8 percent to 405,276 units as growth in the United States made up for a production drop in China, where it has been hit by stiff price competition. Nissan built 310.480 cars, up 4.3 percent, as it ramped up production in Britain. Daihatsu saw its output fall 1.5 percent, coming short of the results last year, when it launched new models. +++
+++ MITSUBISHI has announced that the new Minicab EV, a kei-car class electric commercial vehicle with a monobox design, will go on sale at sales affiliates nationwide in Japan on December 21. The Minicab EV 2-seater is priced at 2.431.000 yen and the 4-seater is priced at 2.486.000 yen (10 percent consumption tax included). The new EV is based on the Minicab-MiEV, which has sold approximately 13.000 units over the past 12 years. By leveraging the expertise gained through the development and maintenance of the Minicab-MiEV, the new Minicab EV offers an improved cruising range as well as enhanced safety and convenience features to answer the needs of commercial customers. In response to the accelerating efforts for decarbonization aimed at achieving carbon neutrality by 2050, and the growing demand for kei-car class electric commercial vehicles from the logistics industry and government agencies, Mitsubishi will contribute to the reduction of CO2 emissions in the last mile of commercial use with the new Minicab EV. The Minicab EV is a kei-car class electric commercial vehicle with a monobox design and is equipped with a new generation of electric components including the motor and drive battery. The cruising range has been extended to 180 km (in WLTC mode) per charge, which is an increase of approximately 35 percent compared to the previous model. A normal charging at AC 200 Volt (15A) takes approximately 7.5 hours to fully charge the battery, so if the battery is charged after work, it will be fully charged and ready to use when work begins the next day. In addition, up to 80 percent of the battery can be charged in approximately 42 minutes with quick charging. The new electric motor produces a maximum torque of 195 Nm instantly, so even when the vehicle is heavily loaded with cargo, it retains the smooth and powerful driving performance unique to an electric vehicle, delivering a crisp, stress-free driving. Moreover, the new motor and inverter have been integrated into a single unit for enhanced quietness, allowing users to drive early in the morning or late at night with no fear of disturbing others. The price has been kept at the same level as the previous model, while improving the cruising range and enhancing the safety features. +++
+++ TOYOTA said on Monday it would increase its line-up of battery electric vehicles in Europe to 6 models by 2026 and it expected such vehicles to make up more than 20% of new car sales in the region by then. The world’s largest automaker by sales said in a statement it expected to sell more than 250.000 battery-powered vehicles annually in Europe by 2026, as it seeks steep growth in a market where it has long been overtaken by rivals. On top of a battery EV the company is currently selling in Europe and a compact SUV concept it already showcased last year, Toyota unveiled 2 new concepts for models that it plans to sell in the region later this decade. One was a concept model for a battery-powered small SUV that it plans to launch in Europe in 2024 (as the BZ2X) and the other was a concept for a sports crossover model that is scheduled for introduction in 2025 (asthe BZ3), Toyota said in statements. Toyota is targeting sales of 1.5 million battery-powered vehicles a year globally by 2026. Sales of fully electric cars in the European Union (EU) were up more than half over the first 10 months of the year compared to the same period a year earlier, data from the European Automobile Manufacturers Association showed last month. Toyota had the fifth-biggest total auto market share in the EU for the 10 months through October, seeing its share decline slightly from the previous year to just under 7%, the data showed. +++
+++ The administration of president of the UNITED STATES , Joe Biden, has released long-awaited rules designed to block electric-vehicle manufacturers from sourcing battery materials from China and other foreign adversaries, while giving automakers some flexibility to comply with the new mandates. The guidelines, which were required as part of a deal to extend the $7.500 tax credit through Biden’s signature climate law, establish a 25% ownership threshold for a company or group to be classified as a foreign entity of concern (FEOC), government speak for businesses or groups owned or controlled by U.S. geopolitical foes. The restrictions will apply to battery components next year, then include suppliers of key battery raw materials, such as nickel and lithium, in 2025. The definition has wide-reaching implications because starting in 2024, vehicles containing any battery components manufactured or assembled by FEOCs will no longer qualify for the tax credit. In writing the highly-anticipated rules, the Biden administration has tried to balance 2 competing agendas: weaning U.S. industry off of low-cost Chinese materials that dominate today’s supply chains, while still incentivizing EV adoption to combat climate change. Delays in spelling out the requirements have left the mining, auto and battery industries in limbo, with just weeks until the new rules kick in. Outlining them now will give automakers and their suppliers some certainty in project planning. Most automakers are still sorting through the rules, though Ford said its analysis so far suggested its Mustang Mach-E EV will no longer be eligible for federal tax credits. Under the guidelines, any company that is subject to the jurisdiction of China’s government, or is controlled by the government (including if it is at least 25% owned by a Chinese government authority) would be considered an FEOC. The restrictions would also apply to all production inside of China. However, foreign subsidiaries of privately owned Chinese companies in non-FEOC countries, like Australia or Indonesia, would be allowed so long as they are not controlled by the Chinese government. The new rules seem to bless licensing deals like Ford’s battery plant in Marshall, Michigan, which is owned and operated by the automaker, but licenses technology from China’s battery champion, Contemporary Amperex Technology, also known as CATL. Tesla looked into a similar structure with CATL earlier this year, though the status of those talks is unclear. Contractors or tech licensing agreements are permissible so long as the non-FEOC partner has operational control of a facility, though this will be evaluated on a case-by-case basis. John Bozzella, president and CEO of the auto lobbying group Alliance for Automotive Innovation, praised the Treasury Department for finally providing clarity about the rules. He also lauded the agency for exempting requirements for trace materials until 2026, a reprieve he called “significant and well-advised”. “Otherwise the EV tax credit may have only existed on paper”, Bozzella wrote. Autos Drive America, which represents foreign automakers operating in the U.S. such as Hyundai and Toyota, also welcomed the clarity, but urged the U.S. to grandfather in more countries to provide critical minerals through free-trade agreements. Indonesia has been lobbying U.S. officials for a free-trade pact that would make its products Inflation Reduction Act-compliant. The U.S. has already struck such a deal with Japan. Passed into law last year, the Inflation Reduction Act has attracted more than $100 billion of investment in the North American battery and EV supply chains as part of efforts to reduce reliance on China. However, the Asian nation’s dominance of the global industry for now means that only a limited number of models would be currently eligible for the IRA tax credit. There will be a public comment period before the rules are finalized to take effect January 1st. The list of qualifying car models may shrink further as the FEOC rules come into force over the next 2 years. Models that were grandfathered in under the first phase of rulemaking may become ineligible once the component and raw material rules are implemented. “We are reviewing the new Treasury guidance now”, General Motors spokeswoman Jeannine Ginivan said in a statement. “Due to GM’s historic investments in the U.S. and efforts to build more secure and resilient supply chains we believe GM is well positioned to maintain the consumer purchase incentive for many of our EVs in 2024 and beyond”. Ford’s Mustang Mach-E, which the company said will no longer be eligible for federal tax credits, is built in Mexico and previously qualified for a $3,750 credit. Ford’s F-150 Lightning plug-in pickup truck, built in Michigan, will continue to qualify for the full $7,500 credit, the company said in an emailed statement. The 25% ownership limit is in line with language in the Chips and Science Act, which aims to reshore assembly of high-tech equipment like semiconductors. The law bars companies that receive Chips Act funds from engaging in joint projects with entities that have 25% or more Chinese ownership, among other restrictions. China accounts for 85% to 90% of global rare earth element mining and processing, and it refines 60% of the lithium, 65% of the nickel and 68% of the cobalt needed for EV batteries, according to a September research note by Goldman Sachs Group. The bank also estimates that 65% of battery components, 71% of battery cells and 57% of the world’s EVs are made in China. However, a large percentage of the raw materials needed to produce batteries are mined elsewhere; in many cases by Chinese-controlled companies, including ones that are not owned by the government. The world’s biggest nickel producer, Tsingshan Holding Group, and top cobalt miner CMOC Group are both Chinese-owned companies with international mining operations. The rule-making process sparked a yearlong lobbying frenzy. Carmakers pushed hard for looser rules, arguing that severe restrictions would ratchet up the cost of EVs and that China’s dominance of the supply chain makes it practically impossible to exclude. By contrast, U.S. mining and recycling companies sought a tougher line in order to defend and fast-track domestic production of critical battery-making materials. Even with strict limits on Chinese ownership and influence, there are still large loopholes in the Inflation Reduction Act that undermine that goal, something Sen. Joe Manchin, a clutch vote in passing the law, has criticized repeatedly. “I will take every avenue and opportunity to reverse this unlawful, shameful proposed rule and protect our energy security, that includes pushing the Treasury Department to make revisions, pursuing a Congressional Review Act resolution and supporting any lawsuit against the rule”, the West Virginia Democrat said in a statement Friday. EVs and hybrids that are leased instead of purchased aren’t subject to the content requirements because they are classified as commercial vehicles. The Treasury also made accommodations to give automakers more time to comply with some aspects of the rules, such as developing systems to physically track critical minerals and other low-value materials with more precision. +++
