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 …

Chinese automakers suspect in EV subsidy fraud

Zhi_Dou_D2-EV-ChinaUnder pressure because of air quality concerns in its major cities, the Chinese government has heavily subsidized the sales of electric cars since 2010 and forced municipal governments to do the same. These subsidies could slash more than half of the price of the car or even more, as CarNewsChina reports the Zhi Dou D2 EV can be bought for just 49.800 Yuan ($7.560) after subsidies, which total an astonishing 109.000 Yuan ($16.550).

Such a scheme is bound to cause a distortion in the market place, but even worse: cause companies to fraud, and that’s exactly what has happened, according to various Chinese news media. The Economic Observer in Beijing and National Business Daily in Shanghai reported that unspecified domestic automakers have over-reported sales of their plug-in cars in order to wrongfully claim government subsidies. Some of them are claimed to have reported sales of EVs to subsidiary “shell” companies, only to remove the batteries and reuse them in the next production run.… Continue Reading …

LCV alliances shake-up: who’s breaking up and who’s tying up?

LCV-sales-statistics-Europe-Fiat_Ducato-Citroen_Jumper-Peugeot_BoxerThe Light Commercial Vehicle business in Europe has always been one of low margins and high volume. That’s why so many LCV models are co-developed in alliances of automakers who would otherwise be each others rivals. Some of these alliances have been in place and successful for decades, take for example the “Sevel Sud” alliance between Fiat and PSA Peugeot-Citroën, which has been producing the Fiat Ducato, Peugeot Boxer (originally known as J5) and Citroën Jumper/Relay (originally the C25) since 1981. However, in the upcoming few years, some of these alliances are due for a shake-up as a result of two new partnerships in the European car landscape. The first one is a cooperation between PSA and General Motors, even though this partnership already been reduced from its initial target, it will still involve Light Commercial Vehicles, and the other is the tightening of the relationship between Renault-Nissan and Daimler. Each of these four automakers already have tie-ups with other brands in the LCV market, most notably the cooperation between General Motors and Renault-Nissan.… Continue Reading …

Is Kia manipulating its fleet CO2 emissions with the Soul EV?

The German “Manager Magazin” reports that Kia is re-exporting newly registered Kia Soul EVs to Norway in order to bring down the average CO2 emissions of its fleet.

Kia_Soul_EV-CO2-emissions-scandalThis alleged manipulation came to light when Kia reported sales of almost 1.000 Soul EVs in Germany in October, 87% of all Kia Soul models delivered in that country, which raised suspicion considering the Soul EV is almost twice as expensive as the gasoline powered version (starting price € 30.790,- vs. € 16.990,-). And also because those 980 units of the Soul EV were in sharp contrast with the 67 units Volkswagen sold of its € 34.900,- e-Golf or the 61 units of the Nissan Leaf, which starts at a much more affordable € 23.060,-.

So what appears to be the case? Well, let’s first explain some background information: the European Union has mandated carmakers to lower the CO2 emissions of their fleet to an average of 130 g/km on average in 2015, with each carmaker getting an individual target, which lies at 131 g/km for Hyundai-Kia. However, it appeared that the South-Koreans weren’t going to meet their target for this year, which meant the carmaker would face a hefty fine from the EU of € 95,- per gram over their target, multiplied by their annual sales. One possible solution to this problem could be to sell more electric cars in order bring down the average fleet emissions. In this specific case, selling an additional 4.000 units of the Kia Soul EV could help to bring down the carmaker’s average CO2 emission down by one gram, potentially saving them € 80 million in penalties.… Continue Reading …

VW diesel emissions scandal, are they the only ones to blame?

A lot has been written about the Volkswagen diesel emissions scandal that’s been uncovered in the US. But not yet here on Left-Lane.com. That’s not because we’re secretly supporting VW and refuse to write anything bad about them. It’s because we refuse to just republish news stories that you can find elsewhere on the internet. Left-Lane aspires to offer its readers unique content that you will not find elsewhere. And since I (Bart) have been very busy with other obligations the past few weeks (as you may have noticed, while Krzysztof and Rutger have been very busy, I haven’t published any articles in 3,5 weeks), I haven’t had the time to sit down and contemplate our angle on this perhaps industry-changing matter. Quality goes before quantity, so I hope this article meets your expectations. If so, or if not, please post your comments below. Thanks!

Volkswagen-diesel-emission-scandalVolkswagen is facing serious trouble in the US and worldwide after admitting it had misled US regulators by installing “cheating software” designed to make sure the cars emit much less nitrous oxide (NOx) during the standard testing procedure than they actually do in real life. Besides facing a hefty fine of up to $18 billion (but probably much less than that maximum figure) VW can expect just in the US, the fallout from a marketing and image perspective is potentially many times worse if the company doesn’t act swiftly and firmly to restore confidence in the brand.

Let’s hope confidence in the automotive industry also remains intact, after Toyota’s unintended acceleration safety failure, GM’s faulty ignition switch scandal (see a trend here with companies trying to become the biggest in the world?) and the recent scandal with Takata airbags.

But is VW the only one to cheat in emission tests?

No matter how incredibly and unforgivably wrong Volkswagen has been in this matter, I refuse to believe they are the only manufacturer to manipulate its software or other parts of their vehicles in order to perform better in fuel efficiency or emission test procedures. They were simply the first ones to get caught and have therefore been made into the piñata of the automotive industry. What this whole scandal may have actually done is lay bare the issues with testing procedures that are too far off reality and which can be too easily manipulated. The big drop in share prices across all major automotive OEMs, though not as badly as the drop in VW shares, signals that investors also believe Volkswagen is not alone in this and the industry as a whole may face tough times ahead.… Continue Reading …

US vs Europe – an introduction

To kick-start our coverage of the US car market we figured it would be good to give our European readers a bit of background on what the car market is like across the Atlantic. Here are 6 trends that differentiate the two markets:

1.   The stereotypes are true: SUVs and pickup trucks are much more important in the US

While mainstream cars make up 60% of car sales in Europe, they only make up less than 40% of the US market. This becomes even more stark once you add the premium derivatives – the proportions become 75% vs 45%. Instead, the SUVs chunk of the market is almost twice as large in the US (30%) as it is in Europe (17%). Add to that another 14% of the US market that’s captured by pickups, and the high-level difference between the two markets becomes clear.

US vs Europe - overall split
Data reflects sales in the first half of 2015
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Automotive mergers: necessary, welcome or a threat?

Sergio-Marchionne-Chrysler-FiatLet’s talk about automotive mergers again, because Sergio Marchionne, CEO of Fiat-Chrysler Automobiles, keeps going on about them being necessary to achieve the economies of scale needed for automakers in the current, highly competitive marketplace, and in order to spread the cost of investments in fuel efficiency, connectivity, autonomous driving and electrification. Okay, in all honesty, Sergio isn’t the only one saying it’s becoming “too expensive to make cars”, but he is the most outspoken one on the subject and he keeps flirting with other automakers to merge, most notably General Motors, so he’s an easy target for my rants.

And to a certain degree I can relate with him. Like he says, it doesn’t make any sense at all for every single automaker to develop -for example- hydrogen fuel cell technology in-house, so each of them has to “invent the wheel” by all themselves. Of course it would save tons of money for the automakers, and therefore for new car buyers, if development costs of a new technology could be spread among a cooperation of automakers, but guess what? This already happens a lot without any of them having to actually merge. Besides that, a lot of technologies in vehicle safety or fuel efficiency already get developed by suppliers, like Bosch, Magna or Denso, who then sell a license to the technology to a number of automakers, and thus spreading the development costs.… Continue Reading …

Why Skoda should become Volkswagen (for the US market) w/ POLL

Volkswagen’s struggles to sell cars in the US market at anything close to the rate its mainstream competitors are managing are well documented. Try as it may, the German manufacturer has been unable to punch beyond the niche of cars for people who want to be different and are willing to pay a little extra for the privilege. Its list of faux-pas is long: from bungling the local production of the Golf/Jetta in the 1980s that lead to myriad quality issues, through trying to sell cars that were too small and too expensive for the US market, all the way to missing out on the crossover wave. While the “right-sized” US/Chinese Passat and Jetta helped matters a little bit in the early 2010s, these cars have since slid back behind their competitors in terms of sales and appeal.

So, this might be the right time to try something drastic – rather than develop more US-specific cars or struggle with their Euro-centric line-up, VW should take Skoda’s mainstream offerings, rebrand them as VWs in the US and watch as they fly off the shelves.

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Sure, this is by no means a new idea, but arguably now it’s more true than ever, for five reasons:

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Piëch ousted as VW-chairman, but keeps pulling the strings

When Kriss documented the “Game of Thrones”/House of Cards-like power battle between Volkswagen Group chairman Ferdinand Piëch and CEO Martin Winterkorn last week, I posted the reaction that Piëch is a tough businessman and a shrewd Machiavellian whom I suspected of backing off because he couldn’t win the fight, but already had some play in mind to win the battle.

Ferdinand_Piech-Volkswagen-board-photo_credit-ReutersThis week it became obvious he did indeed have such a play in mind, but he must have confided in at least one wrong person. After he lost support from the rest of VW’s top decision makers, including his cousin Wolfgang Porsche and the state of Lower Saxony (Niedersachsen), one of the largest non-family shareholders, Piëch publicly claimed that he would back Winterkorn as well. But in the background, he was secretly rallying other family members to support him in an all-out coup to kick Winterkorn out and replace him with Porsche CEO Matthias Mueller.

When this word of this coup spread, VW’s work council and Lower Saxony forced an emergency board meeting, in which they gave Piëch the choice to either resign on his own, or to be forced out after a vote. A casual observer would now think this was the end of it, but Ferdinand Piëch wouldn’t be Ferdinand Piëch if he wouldn’t still be pulling the strings behind the scenes. … Continue Reading …

Marchionne wants another merger, he should look to China

Sergio-Marchionne-black-sweaterFiat Chrysler Automobiles CEO Sergio Marchionne has again claimed that the automotive industry needs more consolidation, and that within a few years time, automakers that sell less than 6 million cars a year worldwide won’t be able to stay competitive. Toyota, Volkswagen and General Motors currently sell at around 10 million units a year, Renault-Nissan 8,5 million and Hyundai-Kia 8 million, which means at 4,75 million sales in 2014, FCA is trailing both its main competitors and its own “bar for succes”. Before 2020, Marchionne envisions himself making another “huge deal” with another automaker in order to reach sufficient economies of scale. He has also hinted that he would like to get either General Motors or PSA Peugeot-Citroën at his table to negotiate the possibilities of a merger. But I think he’s looking in the wrong direction.

Managers at the new GM still flinch when they recall the last deal the old GM struck with Marchionne, the one that forced them to either buy the remaining 80% of the money-losing Fiat brand they didn’t already own, or to pay them $ 2 billion to get out of the contract. They opted for the latter and Marchionne used exactly that money to turn Fiat around before buying Chrysler out of bankruptcy. PSA has been saying for a while they’re only interested in partnerships and collaborations, not in mergers.… Continue Reading …