Nissan will control Mitsubishi. What’s going to happen next?

Mitsubishi_eK-Nissan_Dayz-Kei_cars-cooperationIt shouldn’t really surprise anybody that Mitsubishi finally got taken over by a larger auto maker, the brand was simply too small and too irrelevant in the world’s most important markets to survive on its own. But the way Nissan played its cards was a stroke of genius, whether intentional from the get-go or just improvising on the opportunity at hand. Mitsubishi has supplied its bigger rival with Japanese market minicars (“Kei” cars, as described in my article on the Japanese auto culture) since 2011 and when Nissan was testing the pre-production next generation cars they found some irregularities with the reported fuel economy figures. This led to a public scandal in which Mitsubishi had to admit some of its engineers had been using a trick with tire pressures for the past 25 years to overstate fuel economy of its Japanese market cars (and perhaps some cars sold outside of Japan), causing Mitsubishi’s share prices on the stock market to almost halve. Nissan then scooped up 34% of these shares at the heavily discounted price for a controlling stake to become Mitsubishi’s largest single shareholder. It’ll take a few months to complete the takeover, and there are still quite a few issues to be handled before the deal will be finalized, but looking ahead: what will Nissan do with Mitsubishi?… Continue Reading …

Does a tie-up between Google and Fiat-Chrysler make sense?

Google-autonomous-carThe future of mobility looks quite different from how we know it today, and most automakers are hedging their bets to make sure they’re part of that future, where they may no longer be called automakers but mobility providers. Autonomous driving, car-to-car communication sharing information like traffic conditions and a (at least partial) shift from ownership to a shared economy are among the most likely developments to become mainstream as soon as the next decade. And it’s not only the established automakers that are trying to establish their place in the future, it’s no secret that Apple and Google are aiming for a piece of the mobility pie as well. Although Google is testing with their own Google car, as well as with autonomous versions of existing models, their ultimate goal is not to produce their own cars and become a full-blown auto maker, competing with the likes of Ford, General Motors or Toyota, but rather to become a technology supplier and a mobility supplier, offering self-driving cars that would rival Uber in the ride-sharing business.

However, to test and eventually showcase its capabilities in autonomous driving, Google will have to forge a cooperation with an existing automaker and get its system built into one or more of that company’s cars. Such a tie-up would combine Google’s experience from millions of miles of autonomous driving by its fleet of a few dozen self-driving cars with the manufacturing and development capabilities of a large automaker.… Continue Reading …

What’s Tesla’s long-term business model?

Tesla-CEO-Elon_MuskAfter revealing the Tesla Model 3 last Thursday, Elon Musk tweeted the company had received 276.000 pre-orders by the end of Saturday. (UPDATE: THE FIRST-WEEK TOTAL NOW STANDS AT 325.000). That would translate to more than $10 billion in revenue if all of those orders end up being delivered. In less than 72 hours, it also almost fulfills the company’s full-year goal of 300.000 Model 3 sales, in a total of half a million annual Tesla sales by 2020. Filling the order base this quickly for a model for which not a lot of specs have been released so far and which won’t start deliveries for at least another year-and-a-half is an amazing performance from the start-up manufacturer by any measure. And if the rebound of its stock price continues, Tesla’s market capitalization will close in on that of General Motors again. However, FCA chairman Sergio Marchionne has been quoted last year that car makers need to sell at least 5,5 to 6 million cars per year in order to survive in the long run. And despite its quick rise out of nowhere as a challenger of the establishment, Tesla is still a long way from selling that kind of volume worldwide, and to reach it would require vast investment in additional models and in expansion of the distribution channel. So assuming Marchionne is right, what’s Elon Musk’s strategy for building Tesla into a long-term viable auto maker?

Let’s just drop the bomb right here: I don’t think he has such a strategy, because I believe he thinks of himself more as the boss of a tech company that happens to produce cars than as the boss of a car company in the traditional sense, like General Motors or Ford. For tech companies, making money in their first few years is much less relevant than achieving a certain network size and scale so their new technology can claim to have set the standard for others in that market to follow. Elon Musk’s vision for Tesla therefore is probably to set the technology standard upon which all future electric cars can be built, using his batteries and perhaps even his platform. That vision is reflected in the structure of the company, the design of the cars, the size of their battery factory, their decision to give away the patents to their technology and their Supercharger network and in their ability to do over-the-air software upgrades on their cars.… Continue Reading …

Post-retirement in China, part 4

This is our fourth and (for now) final installment in our series on cars that survived their original production life-cycle by being sold to Chinese auto makers who gratefully will continue production until eternity. Also read part 1 about the Seat Toledo I, Seat Ibiza I, MG ZT, MG TF, Rover Streetwise and LDV Maxus, part 2 about the Volkswagen Jetta, Audi 100, Daihatsu Move and Austin Maestro/Montego and part 3 about the Suzuki Alto, Daihatsu Terios, Fiat Palio/Siena, Fiat Multipla and Lancia Lybra. If you know of any other models that would fit this list, please let me know!

 

Jeep Cherokee XJ (1984-2001) -> BAW Qishi (2009-2013)

Auto-sales-statistics-China-BAIC_Qishi-SUVThe oldest Joint Venture between a Chinese manufacturer and a foreign auto maker is that between American Motors and Beijing Auto Works, which was established in 1983, making the Jeep Cherokee XJ in China, starting in 1985. When Chrysler took control of AMC, the Chinese JV fell into their lap, and it even continued after the merger with Daimler. US production of the Cherokee ended in 2001, but production in China continued until 2007. A few years earlier, Beijing Jeep Corporation had bought the production line for the Jeep Grand Cherokee WJ which ended US production in 2004. Chinese production of the Grand Cherokee started in 2006 and lasted only that year, when DaimlerChrysler decided to drop local production of the two Cherokee models as SUVs made up only 5% of the market at that time, while sedans took 90%. They started Chinese production of the Chrysler 300C instead, followed by the Sebring in 2007. The two models suffered from slow sales and when DaimlerChrysler split up again later that year, Daimler held on to the partnership with BAIC, pulling the plug out of Chrysler production in China, leaving Chrysler in the wind. Eventually Fiat bought Chrysler out of its bankruptcy and included the American brand in its manufacturing Joint Venture with GAC, starting production of the new generation Jeep Cherokee at the end of 2015.

Meanwhile, BAIC started production of the BAW Qishi (Chinese for Knight) in 2009, which was its own version of the Cherokee XJ, now with a five-slot grille and Nissan-sourced 4-cylinder engines. The Qishi was not very successful, which isn’t surprising considering it was based on a 25-year old design, no matter how good it was. A 2011 upgrade and rename to Qishi S12 didn’t help much.… Continue Reading …

For China with Love! | Global Brand China-only Cars You Probably Never Heard About

 

By Jean-Philippe Launberg, and in partnership with Escopo Automotivo.

Months ago I wrote about China’s domestic OEMs fast evolving automotive design capabilities (see Chinese Cars: Just Copycats?).

This time I want to highlight another developing aspect of the Chinese market: foreign brands are now frequently designing cars exclusively for the China. This is an expensive practice, but one that is justified by the market size, particular tastes of (some) Chinese customers, and the business dynamics between these brands and their local joint-venture partners. As an example, the domestic Compact Car segment is so large, that by itself it would rank among the 5 largest car markets in the world. This means automakers have to cater to large and diverse customer groups; hence the opportunity for several models from individual brands to effectively compete in it.

Love China 3

One may start thinking of how some of the China-exclusive models might fare if exported or produced abroad, which is exactly the point I would like to open for debate today. Certainly it would be no hardship to export into Emerging Markets; China’s regulations, environmental and usage requirements are as strict ― or stricter ― than most, so changes would be few and small in scope (with the exception of right-hand drive conversions). For Developed Markets, some extra engineering might be required to comply with safety regulations and requirements, but since many of the China-unique models are based on global platforms, it should be quite feasible. I suspect the greatest challenge is that these models are Made-in-China, which is a pity as the design, development philosophy and practices, as well as the quality and sophistication of tools and equipment are far more important than the country of manufacture. Chinese plants, for example, are among the newest in the world, and well-equipped given the massive recent investment. It’s a pity potential international customers are still locked in the old paradigm, but perceptions do matter. I have no qualms about buying a Chinese-made BMW, Honda, etc. I would even seriously consider some of the latest domestic brand products from Geely, BYD, Haval, Roewe and others.

Moving on, here are some interesting foreign brand ― in alphabetical order, not importance ― models made exclusively (at least so far) in China and for China. Let us know, by commenting, if you believe any of them would have appeal outside of China.Continue Reading …

Post-retirement in China, part 3

Auto-sales-statistics-China-Zotye_Z200HB-hatchbackThis is our third installment of our series on car models which continued to be produced under a new owner and a new name in China after having been retired from their original market. In part 1 we discussed the Seat Toledo, Seat Ibiza, MG ZT, MG TF, Rover Streetwise and LDV Maxus and in part 2 the Volkswagen Jetta, Audi 100, Daihatsu Move and Austin Maestro/Montego. In part 3 we’ll look at Zotye, a small auto maker based in the Zhejiang province in China that’s presently best known for blatantly copying foreign car designs. But Zotye hasn’t always taken illegal inspiration from Western designs, they started off large scale production by legally acquiring a number of obsolete platforms and designs from Western automakers, some of which never even made it into full production.

Suzuki Alto 2nd generation (1984-1988) -> Zotye Jiangnan Alto (1988-2013)

The second generation Suzuki Alto, produced in Japan between 1984 and 1988 has proven to be a true evergreen. After its short first life, production moved to no less than four different manufacturers, two of which still continue to sell the model today. The first one was Maruti, Suzuki’s own branch in India, which has sold the model as the Maruti 800 from 1986 to 2003. In neighboring Pakistan, Suzuki’s local branch Pak Suzuki started production of the Alto in 1988 and still continues to do so today as the Suzuki Mehran.

Auto-sales-statistics-China-Zotye_Jiangnan_Alto-minicarIn China, Suzuki licensed production of the Alto to two manufacturers. Changan Auto, Suzuki’s manufacturing Joint Venture partner, produced the Alto from 1988 until 2008 as the Changan SC7080. Simultaneously, Jiangnan Auto produced their own version of the Alto, called the JN Auto. Jiagnan also exported CKD (Complete Knock Down) kits to PSA in Tunisia for local assembly as the Peugeot JN Mini (just over 7.500 assembled until 2003) and to Iran Khodro until 2000 for assembly as the Iran Khodro Alto, to compete with the Saipa Nasim, which was a locally assembled Kia Pride/Mazda 121. Jiangnan was taken over by Zotye in 2009 and the car was renamed Jiangnan Alto or Jiangnan TT. It was marketed at the end of 2010 as the cheapest new car in the world, with a price of 18.800 yuan, or US$ 2,830 at that moment’s exchange rates, close to the price of India’s Tata Nano. Production is said to have ended in 2013, but new registrations are still reported in 2016. Reportedly as a replacement to the TT, Zotye started production of the Z100 in 2013, which is “coincidentally” a carbon copy of the 7th generation Alto, the one produced from 2009. They’ve even made an all-electric version of the car: the Zotye Z100 EV. Zotye doesn’t have the license for this design, as it’s already produced by Changan-Suzuki, but so far they’ve gotten away with it, which unfortunately supports their decision to stop buying licenses and just copy existing designs.… Continue Reading …

Post-retirement in China, part 2

After showing you that the first car built by Chery was a first-gen Seat Toledo for which the Wuhu government bought the rights and production line without knowledge of Volkswagen management and without a license to produce cars from the Chinese government, we’ll continue with part 2 of our series of cars which continued production in China under a new owner and new brand after they retired in their original market. We’ll start with one more SAIC product, one that had already been briefly mentioned in the first article. And that’s also one of the reasons why I included it here (also because I just liked the story), even though it doesn’t really belong here because it didn’t change owner after retirement in Europe and the US.

Volkswagen Jetta II (1984-1992) -> Volkswagen Jetta (1995-2013)

Auto-sales-statistics-China-Volkswagen_Jetta_Pionier-sedanVolkswagen has been the most successful foreign car brand in China, thanks to being one of the first players in the market, as early as 1978. And in 1984, Volkswagen beat Peugeot-Citroën in to set up the first passenger-car production Joint Venture in China when it closed a deal with SAIC (Shanghai Automotive Industry Corp.) to assemble Santana sedans, a model that would continue uninterrupted production for 30 years. A few years later, in 1990, VW started a second Joint Venture in China, this time with the oldest local car maker FAW (First Auto Works). Because of plunging gasoline prices in North America in the 1980s, US demand for the Volkswagen Rabbit (Golf), Rabbit pick-up and Jetta had decreased sharply. As a result, Volkswagen’s Westmoreland Assembly Plant near Pittsburgh, Pennsylvania was operating way below capacity and a huge loss-maker for the company. The plant was shut down in 1988, and VW subsequently moved the production line to Changchun, China and started production of the Jetta at the end of 1991. The Jetta became famous in China for its bullet-proof durability, helped by the proven 1.6 liter 8-valve engine that would power every Chinese Jetta until 2013. After 21,5 years of Chinese production (29 years since its original launch) and three exterior facelifts the Jetta II was finally replaced by an all-new China-only version that year.… Continue Reading …

Post-retirement in China, Part 1

We recently wrote about how some Chinese car makers still can’t resist the temptation to simply copy existing car designs, a practice that may work in the short term, but won’t do their brand perception any favors in the long run. To build a brand beyond a certain threshold, and especially if you’re looking to export, you’ll need to develop a style of your own. And although foreign car makers are required to work with a local partner if they want to produce cars in China, they’ll be less likely to co-operate with a partner known for stealing intellectual property rights. Therefore, not all copying is done illegally. Some Chinese auto makers have bought the design license and sometimes even the entire production line from obsolete foreign models after those ended their original life cycle and production abroad. This practice has happened a lot in the past and continues today, not always with entire designs, but also with platforms, the most expensive part in the development of a car. I’ll try to make an as comprehensive list as possible, if you have any more input from platforms I may have forgotten, please let me know!

Seat Toledo I (1991-1999) – > Chery A11, a.k.a. Fengyun or Windcloud (1999-2006), later updated to Chery A15 a.k.a. Cowin, Flagcloud or Amulet (2006-2015)

Auto-sales-statistics-China-Chery_Fengyun_Windcloud-sedanOne of the most interesting stories involves Chery, now a 500.000 annual volume car maker, and Spanish brand Seat. Chery was founded in the mid-1990s by the government of Wuhu in the Chinese province of Anhui. At the time, the central Chinese government restricted the issue of licenses to produce cars to new players, but they would allow the production of engines. But the Wuhu government was determined and had acquired the production line of an outdated Ford engine and moved that from the UK to their province. However, they didn’t have any customers to purchase and use those engines, so they decided to contact Yin Tongyao, a former engineer at the FAW-Volkswagen Joint Venture who had worked on the FAW-Volkswagen Jetta. Tongyao struck a secret deal with Seat, whose first generation Toledo (Seat’s first model developed under VW ownership, built on the  VW A2 platform of that same Jetta, the European Jetta II) was near the end of its life cycle.… Continue Reading …

UK car production and Brexit: what’s at stake?

British-auto-manufacturing-brexit-consequences

Photo credit: Auto Express

Car production in the UK has had its fair share of changing fortunes over the years. The demise of British Leyland in the 1980s and ’90s was offset by investments in car plants by Japanese automakers Nissan (Sunderland, 1984), Honda (Swindon, 1985) and Toyota (Burnaston, 1989). Even with all surviving British brands currently in foreign ownership UK manufacturing has thrived, as for the past three years more cars were produced in the UK than in France. UK car production is expected to reach a record 1,95 million cars next year, beating the previous high from 1972.

Jaguar-Land Rover has overtaken Nissan to become the biggest producer of vehicles in the UK, after the new Indian owner Tata invested over £ 11 billion in UK manufacturing since 2009. In six years time, production the two luxury brands has more than tripled from 158.000 units when it was on the brink of bankruptcy to almost 490.000 units in 2015, 81,5% of which is exported. During that period, J-LR’s UK payroll has increased more than five-fold to 35.000 employees.

Earlier this week Aston Martin gave UK car manufacturing another boost, when it decided to invest £ 200 million in its second UK factory in Wales instead of opting for Eastern Europe, Alabama, USA or any of the 18 other places it had considered. This will create another 4.000 jobs in the UK and comes right at the time when the UK manufacturing industry may be threatened by the upcoming referendum in June on a British exit from the European Union.… Continue Reading …

Why a too powerful lobby is bad for the automotive industry

Emissions_test_labLast Wednesday, the European car industry has proven to be firmly in control in the Brussels government. The European Parliament voted for the decision of October 28th, which allows diesel cars until 2020 to emit more than twice as much nitrogen oxides than has been stipulated in a law from 2007, and fifty percent more after 2020. A veto against this decision has not made it through the parliament as a result of strong lobbying by the automobile manufacturers. In return for not having to meet the emissions requirements, a new fuel efficiency test will be implemented from September 1st 2016, in which cars will no longer be tested in a lab (on a dyno) but on the road instead, which should lead to more realistic fuel economy test results. This test is logically called the Real Driving Emissions test (RDE). However, the lobby of the manufacturers has also succeeded in getting some elements of this test toned down or even deleted.

Read this interesting article about how the car manufacturers were able to dictate the European Commission which amendments to make to its proposal for the RDE and how most of their input got accepted. The very imperative tone of the e-mail Volkswagen has sent on behalf of the ACEA, the alliance of European Car Manufacturers to the EC in 2014 perfectly illustrates who’s in control in this relationship.… Continue Reading …