Toyota’s Solid Performance in North America Fuels Profit

Toyota Motor Corp. powered through a car-market halt and put on record the solid profits in its fiscal third quarter, but it raised concerned in China by the virus outbreak. Toyota, the world’s biggest car maker by market capitalization, recorded operating profit of $5.96 billion in the October-December quarter, somewhat below last year’s numbers. The quarterly profile would have been as much as $900 million higher than a year ago, the company said.

Operating profit in North America quadrupled during the quarter even though unit sales slightly decreased.  Looking back on Toyota’s shift to higher-margin trucks and sport-utility vehicles, roughly two-thirds of Toyota vehicles sold in the U.S belong in that category. The popularity of models such as the Highlander SUV and the Tacoma pick up has increased. In North America, “we are selling more trucks than before because we shifted to more trucks including in our production volume,” said Didier Leroy, an executive vice president.

In comparison, Toyota’s somewhat healthy performance contrasts with the challenges of U.S. and Japanese competitors including Ford Motor Co. which said this week that its fourth-quarter operating income sank by two-thirds. Subaru Corp’s operating profit decreased 42% in the most recent quarter. Toyota somewhat raised its projected profit for the current fiscal year, which ends in March, but said it hasn’t yet taken into consideration the possible impact of the coronavirus outbreak emanating from China. Masayoshi Shirayanagi, head of public relations, said Toyota factories in China are going to remain closed, and they still remain uncertain when the restart date will be.

He expressed concerned about some workers returning from visiting families during the Lunar New Year holiday, especially those coming from the center of the virus outbreak which is the Hubei province. “Some provinces are ordering people to stay at home for 14 days after they come back from other provinces. We’ll have to take that kind of thing into account and look at parts procurement and the logistics situation before deciding when to restart,” Mr. Shirayanagi said. He said factories outside China, including those in the U.S. and Japan, were operating normally and any potential shortages of parts from China have not had an impact. However, he was not sure that would continue. “We’re examining every part one by one, looking at inventories and how the possibility or necessity of alternative production,” he said.

Subaru Pushing for 40% of Sales to be Electrified by 2030

Subaru plans to go greener with a target to get at least 40 percent of its global sales from full-electric or hybrid vehicles by 2030. The Japanese automaker plans to electrify every vehicle in it’s lineup globally. Subaru also released its first design study for a fully electric crossover its co-developing with Toyota as well. They would like the vehicle to be for sale before 2025.

The full-sized electric vehicle was presented during a technology briefing at Subaru’s global headquarters.  The car features rear windows, elongated body style and digital sideview mirrors with short front and rear overhangs. The front is creased, while the wheel wells have heavy black cladding for an oversized look. Subaru plans to achieve the electrification goals by introducing the EV along with a range of what it calls “strong hybrids” based off Toyota’s system, Chief Technology Officer Tetsuo Onuki said.

This is all part of a larger objective to reduce their carbon footprint, while improving the safety and drivability of Subaru vehicles. As Subaru looks to fix its all-wheel-drive lineup to escalate demand for expensive next-generation technology, covering everything from electrification and autonomous driving to connectivity. Subaru said that by 2050 it will cut the average well-to-wheel carbon dioxide emissions of new vehicles by 90 percent, compared with 2010 levels.

It will also remove direct carbon dioxide emissions from its factories, offices, and other facilities by 30%.
Additionally, Subaru wants to ensure there will be no fatalities among occupants of its vehicles by 2030. This can be done by improving responsiveness and stability of the vehicles and upgrading its Eyesight driver-assist system with new high-tech functions.

Subaru’s new global platform is intended to accommodate gasoline-only and hybrid layouts. “It will grasp that flexibility in electrifying more offerings,” Onuki said. Subaru will lean on partner Toyota for help with the hybrids. It will acclimatize Toyota’s two motor system to Subaru’s horizontally opposed engine and all-wheel-drive layout. The setup positions the two motors in a longitudinal array, behind the engine and along the axis of the propeller shaft. However, Subaru is not prioritizing a U.S. rollout for the new battery-powered offerings.

Mercedes to Discontinue the Production of its X-class Pick-Up Truck

Mercedes-Benz will no longer produce its X-Class pickup, which was created to expand Mercedes global reach of commercial vehicles. The vehicle was first launched in 2017 in competition with other brands carrying similar body styles such as the Volkswagen Amarok, Ford Ranger and Toyota Hilux. The goal was to compete in the midsize pickup market, which is projected to grow to 3.2 million units in the next 10 years. However, buyers were not prepared to pay the high price tag that came with the vehicle.

In its first year, global sales of the X-Class were just around 16.700 in Europe, Australia and South Africa. According to Mercedes, about 10,000 of those were sold in the first nine months. In the United States, the X-Class was never introduced, despite a stronger demand for full-size pickups. Mercedes’ light commercial vehicles unit said it will end production at its plant in Barcelona, Spain by June.

A representative from Mercedes noted, “It has been decided that from the end of May 2020, we will no longer produce this relatively young model.” However a spokesperson for Mercedes-Benz Vans said customers were able to still order an X class to their specific configuration until February 11.

The X Class was created to help grow the Mercedes-Benz brand of vans. Mercedes gave the X Class more complex and expensive features usually found in passenger cars compared with its rivals, the Navara and the Renault Alaskan. The future production of the X Class was put into question last year when Mercedes released the plans to build the vehicle in Argentina in addition to its current location in Barcelona.

Buyers in South America are unwilling to pay the high prices needed to maintain local production, meaning Australia and South Africa are the only two markets that have demand for the vehicle. Market researchers JATO Dynamics had said the X class would be challenging to sell in Europe where customers consider to be work vehicles and prefer smaller cars. Volkswagen’s Amarok has similar problems as well, and will model its future based on sales of the Ford Ranger.

Fossil Fuels Estimated to Only Have 15 Years Left in the United Kingdom

In 2035, Britain will begin to ban sales of new gasoline and diesel cars the ban will start five years earlier than planned. For the first time, hybrid vehicles will also be included in the ban. The UK government felt it was necessary to fight the climate crisis by helping the country to cut carbon emissions to “net zero” by the year of 2050.

The accelerated time frame drew pushback from automakers, who have concerns about the lack of clarification on whether the government would continue to subsidize sales of electric vehicles, as there is currently limited charging infrastructure. Automakers expect there to be several job losses. The new commitment puts the UK in a group of countries taking charge to phase out cars that are run by fossil fuels.

Norway is another country that wants all passenger cars and vans sold in the country to be zero-emission by the year 20205. India has also called for any new cars sold in the country to be electric by 2030.  If the UK wants to meet the 2035 goal, it would require an entire transformation of the UK car market.

The use of battery-powered electric vehicles has increase in Britain by over 144% since last year, but sales still only made up for a total of 2% of automakers revenue. Hybrids, which is also included to be in the ban under the new policy in 2035, made up for about 8% of total vehicle sales.

Automakers like Volkswagen are investing billions of dollars in developing electric cars. According to data from the Society of Motor Manufactures and Traders, UK car production decreased by 14% last year. The shift away from diesel in Europe plated a significant role in the decline. Many automakers feel the interrupt in production will ultimately erode their bottom line.

Hyundai is at a Standstill with Korea Production as Coronavirus Causes Parts Shortage

Hyundai Motor said it will cease production in South Korea, its biggest manufacturing base. They are the first major automaker to do so outside of China due to the lack of supply and parts resulting from the coronavirus outbreak. Hyundai has seven factories in South Korea, providing for the local market as well as the U.S, Europe, Middle East and other countries. Hyundai’s production in South Korea accounts for about 40 percent of its global business.

The cease of production follows a shortage in wiring harnesses that Hyundai uses mainly in its cars distributed in China.

Kyungshin and Yura Corporation are the two main suppliers who will be affected. They have both noted they are trying to increase production at their factories to reimburse Hyundai for any short supply in China.  They both also plan to resume production at their Chinese factories after Feb. 9.

“Hyundai and Kia may be more affected as they tend to import more parts from China than other global automakers,” a representative from the company said.  Hyundai has grown to be more and more reliant on China as there was built a huge production capacity in the country several years ago when its business was booming there.  According to trade data it shows South Korea imported $1.56 billion worth of auto parts from China in 2019 versus $1.47 billion in 2018. Japanese trading house Mitsui & Co has also warned that due to the virus outbreak may slow down manufacturing activities in automobiles and other sectors.

Other global automakers, including Tesla, Ford, PSA Group Nissan and Honda, have already halted their production efforts in China this week along with government guidelines. The flu-like virus has killed over 420 people and has spread to about 24 countries. Many fear for global economic growth and a downslide in markets, with Shanghai’s stock index losing about $400 billion in market value.

Hyundai’s decision to freeze assembly lines could delay its recovery form a sales slump. The automaker recently had  its best quarterly profit in over two years and said it projected for higher profit margins. They expect more sales of SUVs such as the Palisade and Kona. The production of the Palisade has been stopped by Hyundai due to a shortage of components from China. Hyundai’s South Korean factories are expected to restart Feb.11 or Feb 12, a union official said. “Hyundai Motor will closely monitor developments in China and take all necessary measures to ensure the prompt normalization of its operations,” the automaker said.