Tesla Close to Debut of Longer Range Model 3 in China

Tesla has announced it plans to extend it’s lineup in China by offering a Model 3 Sedan that’s locally built with a longer driving range. They will start as early as this week. The vehicle will have a range of more than 400 miles on one charge, compared to its current basic version that holds much less.

The price will start around $45,800 before rebates, although exact pricing is yet to be determined. A longer range could help Tesla fend of competition with other brands such as Volkswagen Group and BMW who are also bringing out new electrified models in the China region.  Automakers are counting on new vehicles to spur demand in the market, which has been hit hard by the coronavirus pandemic.

The longer range Model 3 will qualify for electric- vehicle subsidies, and is exempt from China’s sales tax on cars. Registrations of Tesla vehicles have fallen for the past two months in China, showing the carmaker is also suffering from the broader auto industry decline. The slowdown has come amid Tesla’s multibillion-dollar push to expand in the world’s largest electric vehicle market.

Tesla’s factory in China has recovered from a virus-related shutdown better than most in the industry, helped by aid from local authorities. After resuming operations at its Shanghai plant, Tesla’s outside the United States have surpassed the capacity it had before shut down. It has a weekly production reaching about 3,000 cars, the company said last month.

Auto Industry Learns from 2008 Recession Lessons to Survive Virus Hardship

In Spring of 2008, Renault executives received notice from colleagues at Nissan North America about the health of the U.S. auto market. Prices for used cars fell significantly, and orders were also slow. The U.S. subprime mortgage market also began to crumble with securities losing value and adjustable rate loans began to reset with higher interest rates.

Renault’s leaders decided to cut 5,000 European positions, which later was raised to 6,000 through attrition and severance. Inventory was decreased so that cash flow and production could be closely monitored. Subcontracting costs were also lowered, and development of a sports car similar to the Nissan 350Z was halted with a postponed launch.

“The crisis started sooner for carmakers in the U.S.,” said Patrick Pelata, who was named Renault’s chief operating officer in mid-October 2008. “We looked to the U.S., and we said it was going to come to Europe.”

Much of this happened after Lehman Brothers filed for bankruptcy, setting off a global financial crisis. At the same time, Fiat decided to extend summer vacation closings of its plants after noticing a global collapse in new orders, including Ferrari’s. “The second half of this year and the first half of the next could be a true bloodbath,” Fiat and Ferrari Chairman Luca Cordero di Montezemolo told Automotive News Europe in July 2008. “By summer of 2009, we should have a clearer idea of the winners and the losers,” he said.

Through incentives and government aid the European auto industry was able to bounce back. However, the COVID-19 outbreak has temporarily shuttered factories and showrooms once again. Many executives and analysts have said that automakers learned lessons in 2008 that can help them to better navigate the current pandemic. “Since that time all car manufacturers have gotten more rigorous about capital allocation and trying not to spend more than required, and also about having sufficient cash reserves in case they face a similar crisis,” one expert said.

“The big advantage between the crisis now and 10 years ago is that capital markets are very liquid and interest rates are very low, so I am pretty certain we won’t see a cash crunch,” Porsche Chief Financial Officer Lutz Meschke said. For now, many automakers are looking into temporary loans that will allow them to cover fixed costs such as salaries to avoid any layoffs. This year, after imposing restrictions on movement and commerce in an effort to slow the spread of the coronavirus, Europe’s national governments pledged they would step in to help automakers again, with loans, direct payments or in a worst-case situation.

These guarantees have helped prevent automakers from cutting costs. It’s expected a similar helping hand will be extended in the wake of COVID-19, today.

Volkswagen Presents New Software to Aid in Accident Prevention

Volkswagen has announced they will launch a new software in 2020 that will make accidents less likely by 2050.  Their newest cars will be equipped with software, sensors and processors that enable vehicles to anticipate and avoid accidents, as well as to keep learning new reflexes.

The company wants to abolish accidents by 2050.  The new software operating system will be launched with Volkswagen’s ID3 electric car. The software will continually be updated with algorithm improvements.

“How quickly can data and algorithms improve? Our customers should benefit from deep learning every week, and every day. We are moving from being a device company to being a software company,” said Michael Jost, strategy chief.

Volkswagen has had some software issues with the ID3 in the past, with reports surfacing that the brand was forced to abandon a planned sales launch in the summer. Volkswagen has said the timeline hasn’t changed.

The ID3 will cost approximately $27,000, once green car tax breaks and incentives are included. The brand further expects to build 1.5 million electric cars by 2025. Volkswagen Group, whose brands also include Porsche, Audi, Skoda, Bentley and Bugatti, will launch 75 electric cars by 2029 and be capable of building 26 million vehicles.

Fiat Chrysler and Ford plan to Restart Production in April

Ford and Fiat Chrysler plan to retard their production in North American plants in April. Plants have been closed due to the COVID-19 Virus.  Ford announced that their plans to restart production could happen as soon as April 6th. They were first urged to shut down due to union pressure to contain the virus outbreak from spreading through its workforce.

The majority of plants that are closed produce Ford Pickups, SUVs, vans and commercial trucks. Ford President of North America Kumar Galhotra, in a statement, said the plants will include “additional safety measures to protect returning workers” from contracting COVID-19.

Following Ford’s announcement, Fiat Chrysler announced its plants in the United States and Canada are intended to remain closed until April 14th.  The re-openings are dependent on state stay-in-place orders and the readiness of each facility to return to work. The announcement both came after President Donald Trump announced he wants the U.S. economy to open back up by Easter Sunday.

Urged by the United Auto Workers union, Ford, Fiat Chrysler and General Motors announced plans to temporarily shutter their plants due to the coronavirus on March 18. Ford initially wanted to reopen its North American plants on March 30, however withdrew that timeline earlier this week because of various stay-at-home orders.

Shares of Ford were down by almost 5% during pre-market trading, and remained down by 2% following the announcement. Fiat Chrysler shares were trading up 1.1% following the company’s announcement. GM’s stock was up 4.4%.

Neither company has released a plant-by-plant breakdown of openings. Fiat Chrysler, according to a statement, “continues to take important steps to help flatten the curve of the spread of COVID-19, and put the health and safety of our workforce, and the communities where we live and work first.”

Coronavirus Bailouts Could Extend to Auto Industry

Plans were recently announced to provide economic assistance to U.S. businesses hit hardest by the Coronavirus pandemic. Many anticipate this will extend into the auto industry.

Groups representing major automakers and suppliers asked U.S. lawmakers to consider new tax relief and delay a new trade deal as automotive sales have declined due to the virus. The proposals are due to many automakers closing plants and cutting production, including BMW AG.

The Alliance for Automotive Innovation joined forces with the Motor and Equipment Manufacturers Association to draft a letter urging lawmakers to help ensure sufficient liquidity remains available to them.  General Motors, Volkswagen, BMW and Toyota all endorsed the proposal to create credit facilities that provide loans and loan guarantees to employers with more than 500 employees experiencing loss of revenue due to COVID-19.

Automakers and suppliers have backed a series of actions to help the industry, and warn the fast approaching date for the new USMCA North American trade deal puts compliance pressures on them.  The letter notes support to lawmakers giving tax deductions or credit to maintain workforce and delay quarterly federal tax payments.

Honda Motor Co has sent their own letters to Congress in support of tax proposals. “The auto industry, like so many industries is going to be severely harmed by the dramatic economic downturn over the coming months,” Honda executive vice president Rick Schostek wrote, adding that companies based outside the United States but with significant American operations should not be “arbitrarily barred from any federal assistance or regulatory relief.”

Automotive Associations Urge Vehicle Supply and Repair Businesses to Stay Open

As the coronavirus continues to impact businesses, many automotive associations are urging dealerships and repair shops to consider the importance of motor vehicle supply and repair facilities.

The actions began with John Bozzella, president and chief executive officer of the Alliance for Automotive Innovation and National Automobile Dealers Association president and chief executive officer Peter Welch sending a joint letter to President Trump.

“As our nation continues to confront the coronavirus’s challenges, we want to underscore the importance of ensuring that consumers have access to a safe and well-functioning motor vehicle fleet,” Bozzella and Welch wrote in their letter. The federal government includes manufacturing as a critical infrastructure when it comes to economic continuity of the United States. Safe transportation remains an important aspect, and vehicles must remain properly maintained.

Cody Lusk, president and chief executive officer of the American International Automobile Dealers Association (AIADA) shared a similar message. In a separate statement, Lusk emphasized that dealerships and their service shops are essential to the communities they serve.

“These are uncharted waters for all of us. As Americans determine the best way to move forward and protect each other, AIADA asks that lawmakers keep in mind the tremendous value dealerships offer their cities and towns, and the many important services they perform — from brake repairs to addressing critical recalls to providing vehicles to essential workers who can no longer rely on public transportation,” Lusk said.

Many dealers are working overtime to ensure compliance with CDC guidelines and to further establish safe conditions for both employees and customers. Six other trade associations representing the transportation industry have called on local governments to take preventative action.

In addition to the Auto Care Association, the letter was signed by the U.S. Tire Manufacturers, American Trucking Association, Motor Equipment Manufacturers Association, Tire Industry Association and Automotive Oil Change Association.

Auto Industry Faces Uncertain Threat from Coronavirus in Europe

The cancelation of the Geneva Auto Show didn’t stop European automotive leaders from meeting.  They stayed home and met online instead. Chairman of Mercedes parent Daimler, Ola Kaellenius mentioned the possible ramifications of the coronavirus in live-stream speeches.  BMW and Volkswagen didn’t address the issue.

It’s typical that major brands express their views on the state of the world and economy at these large trade shows, but most of those companies were among those who pulled out this year weeks before the show was canceled. No-shows included Cadillac, Jaguar, Lamborghini, Land Rover, Mitsubishi, Subaru and Tesla.  “We are monitoring the situation (with the coronavirus) of course, with day to day management of the situation. Production is back up and running in China, it’s too early to say how this will work out,” Kaellenius said via an online link from the company’s Stuttgart headquarters.

Mercedes had originally planned to launch the new E-class sedan at the Geneva show, but did some online instead. Reuters recently reported that Daimler’s car production in China was stable and supply chains secure, according to Mercedes sales chief Britta Seeger. It was too early to forecast the impact of coronavirus on Mercedes’ sales, according to Seeger.

Germany’s Center for Automotive Research (CAR) has said that German auto companies have annual China business worth about $170 billion, close to 35% of its annual global sales.  They also noted that China’s  business earns high margins, and roughly 40% of German annual auto profits are in danger.

At the online show, BMW unveiled a new electric sedan, the i4, claiming it could travel 400 miles on one charge.  According to GlobalData, “Live-streaming new product presentations may well be seen as a better way forward for manufacturers concerned over the costs and diminishing effectiveness of exhibiting at trade shows.”

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.