Kalashnikov, the Russian company best known for making the AK-47 assault rifle is planning to enter the growing electric-vehicle market. Last week at the Army 2018 International Military Technical Forum in Kubinka, Russia, Kalashnikov unveiled the CV-1 concept.

The design is inspired by the Soviet Izh-Kombi hatchback built between 1973 and 1997. There are some modern touches such as LED headlights and a set of lightweight wheels. Technical details are scarce, with Kalashnikov saying the model has an electric motor producing 295 horsepower, a “revolutionary inverter”, and 90 kWh modular battery pack. 

Kalashnikov clams that once development is completed, the vehicle will have a range of 220 miles on a single charge and boast a top speed several times higher than its current electric vehicles - the company builds off-road vehicles and motorcycles along with the AK-47.

"This technology will let us stand in the ranks of global electric car products such as Tesla and be their competitors," a Kalashnikov spokesperson told Russian news agency RIA-Novosti.

Source: Autocar, BBC News
Pic Credit: Kalashnikov

Last week, Tesla CEO Elon Musk revealed that Saudi Arabia's Public Investment Fund (PIF) could help provide the necessary funding to make the company private. But a new report hints that the PIF could invest its money into a different electric automaker.

Reuters has learned from sources that the PIF is in talks with Lucid Motors about a potential investment. The two have drawn up a term sheet where the PIF could invest more than $1 billion into Lucid Motors and become the majority stakeholder. One source adds that the first investment would only be for $500 million and that subsequent investments would only come if Lucid Motors is able to hit  certain production milestones

The sources do caution that the talks may not result in a deal.

Despite the PIF having $250 billion in assets, Reuters says the fund has already made a number of substantial investments into other things such as a $45 billion investment into a giant technology fund. This leaves them with limited funds, which makes the deal with Lucid more appealing. Banks have estimated that Tesla could need up to $72 billion if Tesla pays the $420 per share announced by Musk a few weeks ago. However, the price could drop if current shareholders keep their shares in the private company.

Lucid Motors made a big splash in 2016 with the introduction of the Air. The model made some big promises such as having the interior space of a Mercedes-Benz S-Class and a max range of up to 400 miles on a charge. Lucid was planning to start production of the sedan this year in Arizona. But last year, the company pushed back production to 2019 as they needed to raise more funds. 

Source: Reuters

Most people aren't so keen on letting an autonomous system take control of their vehicle according to a new survey done by Cox Automotive.

Nearly 85 percent of the 1,250 people surveyed said they should have the option to drive themselves even in a self-driving vehicle. Only 16 percent said they would feel comfortable allowing a autonomous driving system take over. When asked if they would be a fully-autonomous vehicle (Level 5 under SAE's vehicle autonomy guidelines), almost half said no. Automotive News notes that is up from the 30 percent of people surveyed in 2016.

Why the increases in overall apprehension? It mostly comes down to number of crashes that autonomous vehicles have been involve in, such as the Uber crash that killed a pedestrian.

“People now have a deeper understanding of the complexities involved when creating a self-driving car, and that has them reconsidering their comfort level when it comes to handing over control,” said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book.

In the past two years, awareness into self-driving tech increased 24 percent. But the perception of the safety of self-driving vehicles dropped 20 percent.

Despite the trepidation, Cox believes the adoption of self-driving vehicles will gain traction - bringing big implications for automakers and dealers.

“Miles traveled will shift toward fleet-owned vehicles, causing what we believe to be a potential 40 percent reduction in consumer vehicle sales,” said Isabelle Helms, vice president of research and market intelligence at Cox Automotive.

We should note that Cox Automotive does an interest in the self-driving marketplace. Automotive News says the company has created a new unit that will sell software and services for car-sharing, ride-hailing, subscription programs, and, eventually, self-driving taxi fleets.

Source: Automotive News (Subscription Required)

When the EPA and NHTSA unveiled the proposal for revised fuel economy standards, there was a key part that brought up a lot of debate: The claim that the new regulations would reduce the number of fatalities and crashes. As we pointed out in our story, there were a number of holes in that argument. It seems we were not the only ones questioning this.

Yesterday, the review of the proposal done by the White House's Information and Regulatory Affairs was made public. In it are hundred of pages of correspondence, analysis, and drafts. Bloomberg went through the documents and found that EPA officials were questioning the rationale put forth by NHTSA on reducing crashes.

The “proposed standards are detrimental to safety, rather than beneficial,” wrote EPA staff in a memo dated June 18th.

Their basis for this was analysis done by the agency after making a number of corrections to a Transportation Department model. It showed that freezing fuel economy standards "would lead to an increase in traffic fatalities and boost the overall fatality rate."

The EPA questioned the validity of the Obama administration standards “coincided with an increase in highway fatalities” claim.

“What data supports the implication that the standards to date have led to fatality increases?” said the EPA in feedback on June 29th.

Also, the EPA questioned NHTSA's model that overestimates the number of old and unsafe vehicles on the road if the new regulations go into effect.

Quote

In the comments, the EPA said NHTSA’s model over-estimated the number of older, less-safe cars that would remain on the road if drivers didn’t buy new cars due to higher prices caused by the Obama-era standards, effectively inflating projected traffic deaths.

In July, NHTSA fired back, countering that EPA’s corrections assumed the size of U.S. vehicle fleet and the number of miles driven would remain constant, rather than changing because of the fuel economy standards -- an outcome the agency said “would be much more reasonable to expect.”

How the EPA and NHTSA came to an agreement is unclear at the moment. What it does reveal is that the dispute between the two agencies could affect plans to try and create a comprise that would appease both automakers and California regulators.

“These emails are but a fraction of the robust dialogue that occurred during interagency deliberations for the proposed rule. EPA is currently soliciting comments on eight different alternative standards and we look forward to reviewing any new data and information,” said EPA spokesman John Konkus.

Irene Gutierrez, an attorney with the Natural Resources Defense Council sees it a bit differently.

"...that even the EPA had deep reservations about the bogus safety arguments being pushed by the Department of Transportation. We know that automakers can make cars both more fuel efficient and safer; it’s heartening to find out EPA’s technical experts agree.”

Source: Bloomberg

Under the current standards for vehicle emissions, automakers have a variety of ways to achieve compliance. These are known as "compliance flexibilities" which allows an automaker to sell electric vehicles to off-set gad-guzzlers like SUVs as an example. But the recent proposal by the Trump administration to ease emission standards, will remove these flexibilities.

The proposal unveiled last week would freeze fuel-economy and emissions standards at their 2020 levels for several years beyond that. This would seem like a positive for automakers as trucks and SUVs/crossovers are selling like hotcakes. But the removal of this provision has automakers crying fowl, saying these help with global vehicle development. The heads of the Alliance of Automobile Manufacturers and the Association of Global Automakers wrote a letter to Trump stating that the “flexible compliance pathways that pave the way for research and deployment in advanced fuel-saving technologies”.

“We are global manufacturers; to compete around the world, we must continue to invest in both more efficient internal combustion engine technologies, electric-drive technologies and fuel cells,” said Mitch Bainwol of the Alliance, and John Bozzella of the Global Automakers.

But there is a reason the government is removing those compliance flexibilities as it "existing fuel-economy program easier to administer and more transparent". This makes it easier for regulators and consumers to verify an automaker's claim. The current system is somewhat confusing, as thirstier automakers can buy into compliance by trading emission credits from more efficient ones. The trades and prices can be shielded from public viewing.

Source: Bloomberg

Fiat Chrysler Automobiles is none too pleased with the Indian automaker Mahindra & Mahindra Ltd as they're planning to sell an off-road vehicle that looks very much like the original Willys Jeep.

Bloomberg obtained a complaint filed by FCA to the U.S. International Trade Commission on August 1st. The document claims that Mahindra's Roxor infringes key characteristics of Jeep's signature design - namely the “boxy body shape with flat-appearing vertical sides and rear body ending at about the same height as the hood.”

“They are a nearly identical copy of the iconic Jeep design. In fact, the accused product was ‘modeled after the original Willys Jeep."

The Roxor is a small, two-seat off-road vehicle. There is a lot of resemblance to original Jeep design and there is a reason for that. Beginning in 1947, Mahindra got a license to build the Willys CJ3 for the Asian market. They would do so until 2010. At this point, Mahindra introduced an updated model known as the Thar that meets India's road going passenger vehicle standards and looks like a 1990's Wrangler.

Now the Roxor isn't being sold as road-legal vehicle. Instead, Mahindra is selling this as a side-by-side off-road utility. That means its not road legal. Which brings us to the next key part of FCA's complaint. The company is arguing that Roxor imports "threaten it with substantial injury as they are underselling Jeeps." This is due to Mahindra manufacturing the parts and creating a knock-down kit, which is then shipped to a plant in the Detroit area for final assembly. We're not sure about this partly due to the arena the Roxor competes in, but also the price. The model begins at just under $15,500. Comparable models from Polaris and Honda begin at under $10,000.

While Mahindra has had some success in the U.S. with tractors, they haven't had the same when it comes to automobiles. Previously, the company was planning to offer a diesel pickup through a distributor. But plans were scrapped and Mahindra would find itself in a lengthy court battle. The Roxor is the next attempt at possible entry for Mahindra to enter the automotive market. They have spent almost a quarter-billion dollars for a new assembly plant where they currently employ around 300 people. Last November, the company announced a $600 investment and plans to employ as many as 670 workers by 2020.

Source: Bloomberg

The talk about whether any of the major auto shows still matter has been going on for few years as a number of automakers pulling out has been increasing. But what you haven't heard is a major head of automaker questioning them, until now.

“Motor shows are dead,” said Herbert Diess, chairman of the Volkswagen Group.

“They are a product of the 1960s and they are not as relevant anymore. They’re not delivering what we want and they’re not delivering what car buyers want.”

The Detroit Auto show is a poster child of this as automakers in the past few years have been pulling out. Reasons are numerous: Automakers are holding their own events as they can control the message and not fight with others for attention in the spotlight. It's also quite expensive as an automaker needs to design the exhibit, bring in labor to build and tear down, getting the vehicles to the show, and much more.

Diess believes the likes of the Goodwood Festival of Speed could be one way for the auto show to evolve.

“People need to see more interaction with the product. They expect it. Those days of relying on tradition are gone. It’s events like the Goodwood Festival of Speed that are showing us the modern way to show cars to people.”

Organizers of the Detroit Auto Show are taking note. Earlier this week, organizers announced the show would be moving to June in 2020 and feature such things as rides and drives of new vehicles.

Source: Motoring

Fuel efficiency guidelines and California's right to set its own vehicle emissions standards are in the crosshairs of the Trump administration again.

Bloomberg has learned from sources that the administration will be introducing a proposal later this week that revises key parts of the Obama-era standards. This includes capping federal fuel economy requirements at 2020 level of 35 mpg fleet wide, instead of the 50 mpg requirement by 2025. There is also a provision that would revoke the Clean Air Act waiver given to California that allows it to set its own emission regulations.

Sources go onto say that the proposal is in the final stages of a "broad interagency review" being done by the Office of Management and Budget.

These changes were first introduced back in April and got massive pushback from various environmental groups, along with the state of California. A month later, a coalition made up of California, Washington D.C. and sixteen other states filed suit against the rollback. Automakers who pushed for the rollback began to panic as this could result in two different emission regulations they would have to meet. 

Source: Bloomberg

A new audit released by the U.S. Transportation Department’s Office of Inspector General rips the National Highway Traffic Safety Administration (NHTSA) over its handling of the Takata airbag recall.

In the report, the Inspector General says NHTSA's recall monitoring process "does not ensure that remedies are reported completely and in a timely manner," nor does it "verify recall completion rates, although it has the authority to do so." Other issues the audit found included the long time it took the agency to determine the scope of the Takata recall and missing documents due to limited monitoring and inadequate procedures.

"In June 2014, RMD [NHTSA's Recall Management Division] received a recall notification for Takata airbag inflators in over 140,000 vehicles. The notification stated that the manufacturer planned to tell owners to take their vehicles to dealerships for repairs in February 2015. However, as of February 2018, RMD had not received the manufacturer's remedy documents, and [the Office of Defects Investigation's] recall recordkeeping system does not indicate that RMD staff requested those documents," the report said.

The Inspector General makes six recommendations including better training for staff, creating a system to handle missing documents and communications, and documenting various lessons from the Takata recall.

NHTSA in a letter said it "did not endorse all of the report’s findings," but did agree to some of the recommendations.

The agency has come under fire for a number of years due to its poor handling of various auto safety issues, including Toyota's unattended acceleration crisis and GM's ignition switch mess. This latest audit is fourth since 2011 by the inspector general. The last audit done in 2015 said NTHSA failed to investigate safety issues carefully, hold automakers accountable, and adequately train their staff which resulted in “significant safety concerns being overlooked.”

Source: Reuters

PSA Group has been hard at work on its plan to return to the U.S. by 2026. They already have a brand chosen that will lead the launch (bur aren't saying if it will be Citroen, DS, Peugeot, or the recently acquired Opel/Vauxhall) and has open their U.S. headquarters in Georgia. The next step is figuring out where they'll begin selling vehicles.

Larry Dominique, CEO of PSA Group North America told reporters that he has his eyes on 15 states to launch. Among the states mentioned include,

• Arizona
• California
• Florida
• Georgia
• Illinois
• Maryland
• Massachusetts
• New Hampshire
• New Jersey
• New York
• North Carolina
• Texas
• Virginia
• Washington

"Those states are of the most interest to me at this point in time because they're high volume and import receptive," Dominique told Automotive News.

But there is an elephant in the room concerning PSA's plan, tariffs. As we have been reporting for the past couple of months, the U.S. Commerce Department is conducting an investigation into imported cars and car parts as a matter of national security. This could result in vehicles being hit with a 25 percent tariff. 

“Tariffs are on our minds. Tariffs impact how fast and at what price point we import vehicles into the U.S. I’m crossing my fingers," said Dominique.

According to Bloomberg, PSA Group could look into entering the Canadian market first and play the waiting game for the U.S. if tariffs do go into effect. The company may also offer more expensive vehicles to balance out the hit made by tariffs.

Source: Automotive News (Subscription Required), Bloomberg

The U.S. Commerce Department is asking automakers to spill their secrets; product planning, financing, supply chains, and other bits that aren't in public filings.

Bloomberg reports that the department’s Bureau of Industry and Security sent out a  34-page questionnaire asking for sensitive details to several automakers. Failure to do so could result "in a maximum fine of $10,000, imprisonment of up to one year, or both" as mentioned on the first page of the survey.

“The breadth and depth of this request is invasive, requiring massive amounts of proprietary and confidential business data from global operations -- all under the pretense of national security,” said Gloria Bergquist, spokeswoman for the Alliance of Automobile Manufacturers - a group that represents a number of companies including General Motors, Toyota, and Volkswagen.

“Frankly, it’s stunning from an administration committed to getting government out of the way of business.”

This is part of the Commerce Department’s investigation into whether or not the imports of cars and car parts hurt U.S. national security opened in late May. It may result in imported vehicles being hit with tariffs as high as 25 percent.

What is being asked in this survey?

Quote

The Trump administration wants such things as how much each company’s research budget goes to specific areas such as autonomous driving, electric drive, connected vehicles, and lightweight technology. The questionnaire also seeks a list of suppliers for major vehicles systems and where they’re located.

Other questions deal with the business plan from now until 2020 and whether or not imports hurt sales.

Susan Helper, a former chief economist of the Commerce Department during the Obama administration said Bureau of Industry and Security has conducted dozen of these surveys in the past, mostly dealing with sectors closely linked to the defense industry.

“This is a consequence of the Trump administration’s expanded definition of national security I hadn’t thought about. I can see both sides on this -- it is burdensome for companies, but on the other hand it’s important for policy makers to understand global supply chains as they have an increasing impact on the U.S. economy,” Helper told Bloomberg.

Dave Sullivan, an analyst at AutoPacific told Bloomberg that the level of information that the government is asking is "disturbing'.

“The only time I’ve seen something like that is when a supplier is not doing very well financially and the automaker is trying to understand their financial state and their future. They’re fully undressing automakers and how they do their business to a disturbing level.”

The Commerce Department will be holding a hearing on the investigation on July 19th in Washington D.C. Around 45 people, representing various automakers, labor unions, and more will be testifying.

Source: Bloomberg, Link to Questionnaire

Like many countries, China offers various incentives to spur the sales of electric vehicles. But a report from Bloomberg says the Chinese government is considering reducing various subsidies beginning next year. 

According to sources, the government is considering cutting the average incentive by more than a third from where they currently stand. Also up for consideration is incentives being eligible on models that can travel at least 200 kilometers (about 125 miles) on a single charge. Why? The government wants automakers to keep innovating by making EVs cheaper and go much further on a charge.

“China is switching away from carrots. The government wants to ensure automakers will launch models that would be appealing to consumers hence setting subsidies contingent on minimum driving range requirements,” said Ali Izadi-Najafabadi, an analyst at Bloomberg NEF.

In 2017, the Chinese government spent 6.64 billion yuan (about a billion dollars) on various subsidies for electric vehicles. But this year saw the government begin to cut various incentives. For example, cars that have a driving range of less than 300 kilometers (about 186 miles) saw their incentives reduced. 

“Government policy has a huge impact over the new-energy vehicle sector and every adjustment made on the policy front over the next two years will result in tremendous changes in the industry,” Li Yixiu, sales chief for Beijing Electric Vehicle Company earlier this month.

"We believe there isn’t a chance for carmakers to raise prices to make up for the reduction of government fundings. Instead, we have to come up with competitive new products and services to respond.”

Source: Bloomberg

When we last reported on the date change of the Detroit Auto Show, organizers had made the final decision on what month it would be held beginning in 2020 - either October or June. A new report from The Detroit News says June will be month that will be announced at a press conference on July 24th.

Sources tell the paper that back in January that the Detroit Auto Dealers Association (DADA), organizers of the show sat down and started discussions as to moving the show. Originally, DADA had October as the month as it would move the show from the harshness of winter and give some breathing room from the Consumer Electronics Show (CES).

But plans changed after The Detroit News interviewed General Motors' senior vice president of global communications, Tony Cervone. He said a move to June had the potential to create a "massive festival of automotive" for consumers. The hope is that this event would draw people into visiting the various venues and concerts in Detroit. Organizers released a teaser video late last month showing outdoor test tracks and vehicle displays.

This brings us to a new twist. Ford is urging DADA to pull elements from the Goodwood Festival of Speed for this reimagined show. The Festival of Speed, being held this weekend, features a hill climb with a variety of racing and production cars, and a moving auto show that allows the press and would-be buyer to experience new vehicles. It should be noted that Ford has been a sponsor of the Festival of Speed for 23 years.

Source: The Detroit News

Back in 2010, Renault-Nissan and Daimler announced a new partnership that would see the two share powertrains and work on various projects. Some of those have come to fruition such as the Infiniti QX30, which is a Mercedes-Benz GLA-Class in different clothing and the platform that underpins the Infiniti QX50. But other projects between the two have been halted.

Late last week, the Nikkan Kogyo business daily reported that joint development of luxury compact car project has been suspended. The paper cites the change in consumer preference to crossovers and the uncertainties over tariffs. The second reason is important as the new compact sedan was expected to built at a plant in Aguascalientes, Mexico. The plant is 50/50 joint venture between Daimler and the Renault-Nissan-Mitsubishi alliance.

Nissan spokesman Shiro Nagai declined to comment when asked by Automotive News. He did say that Nissan remains committed to the partnership.

Source: Nikkan Kogyo via Automotive News (Subscription Required)

The threat of a 20 percent tariff on vehicles exported from the European Union has a number of automakers panicking. But that tariff could be taken off the table if the EU removes their tariff on vehicles exported from the U.S.

German paper Handelsblatt learned from sources that a meeting was held between the US ambassador to Germany, Richard Grenell and number of CEOs from German automakers. Grenell presented an offer directly from President Donald Trump - "elimination of all tariffs on automobile imports on both sides and removal of non-tariff barriers, such as regulations on the size of rear mirrors."

Currently, the U.S. levies a 2.5 percent tariff on vehicles imported from EU. A 10 percent tariff is slapped on by EU members on vehicles imported from the U.S. 

The hope is that German automakers can put some pressure on the government to possibly bring this up with other EU members.

Diamler, Volkswagen, the German Economy Ministry, and the European Commission declined to comment when asked by Reuters.

Source: Handelsblatt, Reuters

It is now official, the Detroit Auto Show will not be held in January beginning in 2020. Organizers of the show made the announcement yesterday afternoon and released a teaser video showing what the show may look like in its new date, complete with outdoor test tracks and vehicle displays.

The Detroit Auto Dealers Association (DADA) will be holding a press conference on July 24th announcing the new date. As we have reported previously, DADA was considering moving the show to October not only for better weather (a complaint for a number of journalists who cover the show), but to also give it some breathing room from another show, the Consumer Electronics Show (CES) that takes place around the same time.

There is also another month possibly up for consideration, June. This is being pushed by General Motors that sees the show being reworked as "massive festival of automotive" that would be aimed at consumers - not the media. The hope is that it will draw more people to Detroit to the various venues. It should be noted that June is when the Detroit Grand Prix on Belle Isle is held, and is sponsored by Chevrolet.

Organizers are also considering a name change. A source tells The Detroit News there are twelve names under consideration, but will likely not be announced on the 24th.

Source: Automotive News (Subscription Required), The Detroit News

Automakers have been edge for a few months with talk of a trade war and possibly putting up to a 25 percent tariff on imported new vehicles. They only would be pushed further to the edge as President Donald Trump tweeted last week a 20 percent import tariff on all cars assembled in the European Union. Now, automakers are rebuking the President over this.

Reuters reports today that two trade groups, representing nearly every major global automotive brands have issued comments saying the president shouldn't go forward with tariff. The two groups in question are the Association of Global Automakers (represents Honda, Hyundai, Kia, Nissan, Subaru, Toyota, and others) and Alliance of Automobile Manufacturers (represents General Motors, Ford, FCA, BMW, and others). 

The primary concerned brought up by both groups? Jobs. 

“Rather than creating jobs, these tariffs would result in the loss of hundreds of thousands of American jobs producing and selling cars, SUVs, trucks and auto parts,” said the Association of Global Automakers.

Both groups cite a study done by the Peterson Institute for International Economics which estimates job losses between 195,000 to 624,000 depending if other countries retaliate with their own tariffs.

Next up is the increased cost on a new vehicle. The Alliance of Automobile Manufacturers says a consumer could expect to pay an average of $5,800 more on a new car. This number is based on analysis of 2017 sales data and factoring in a 25 percent tariff. New cars are already expensive - Kelly Blue Book said the average transaction price for May stood at $35,635.

The final concern brought up deals with a decrease in investments into new technologies such as electrification and autonomous vehicles.

“We are already in the midst of an intense global race to lead on electrification and automation. The increased costs associated with the proposed tariffs may result in diminishing the U.S.’ competitiveness in developing these advanced technologies,” said the Alliance.

The U.S. Commerce Department which is investigating new car imports on the national security has said that it hopes to wrap up their investigation either next month or August.

Source: Reuters

With President Donald Trump tweeting last Friday threating a 20 percent tariff on all imports of European Union assembled cars, the EU has responded by saying it would raise their tariffs on imports of U.S.-built vehicles.

“If they decide to raise their import tariffs, we’ll have no choice, again, but to react,” said EU Commission Vice President Jyrki Katainen.

“We don’t want to fight (over trade) in public via Twitter. We should end the escalation.”

This comes a month after the Trump administration announced an investigation into new car imports on the grounds of national security. U.S. Commerce Secretary Wilbur Ross said late last week the department is expected to wrap up their investigation by late July or August. A number of groups have condemned the investigation and threat of tariffs, one saying that it is “confident that vehicle imports do not pose a national security risk.” Diamler AG announced last week full-year earnings will be slightly lower than last year because of the threat of tariffs.

Source: Reuters

Tesla and General Motors lead the pack when it comes to the sales of plug-in vehicles. Data from Automotive News says Tesla stands at 193,344 vehicles, followed by GM at 181,062, But there arises a problem; once they cross the 200,000 mark, the phaseout of the $7,500 tax credit begins. Tesla is expected to be first with some predicting it taking place next month (provided they don't run into more production troubles). GM will follow sometime next year.

Barring some sort of extension of the program, it will put the two automakers in a bit of bind where they'll be playing on an uneven playing field due to increased costs. It should be noted that the tax credit won't disappear. The way the phaseout works is that the $7,500 credit sticks around for two more quarters after the 200,000 mark is reached. After that, the credit is cut to $3,750 for the next two quarters, then it drops to $1,875 for two more quarters before it is gone.

"The groundbreakers, the people who forged ahead and got these products out there first, could be at a significant disadvantage now. I don't think it's fair to reward a company that hasn't been as innovative with an incentive that begins when someone else's ends," said Rebecca Lindland, executive analyst at Kelly Blue Book.

Industry experts expect GM to take a bigger hit than Tesla due to the credit affecting decisions on "lower-priced vehicles such as the sub-$40,000 Chevrolet Volt more than a $75,000-plus Tesla Model S or X" according to research done by the Institute of Transportation Studies at the University of California-Davis.

A study in 2016 bears this out. 40 percent of Chevrolet Volt buyers admit they wouldn't have purchased one without the tax credit. Only 14 percent of Tesla buyers say the same. 

This likely explains why various GM executives have been pushing the White House for a possible extension of the credit.

"At the end of the day, we think having the benefits is great for the customer, because obviously it makes the EV adoption easier and more attractive," GM North America President Alan Batey told Automotive News.

Source: Automotive News (Subscription Required)

The project of a trade war between the U.S. and China (along with the European Union) has many automakers on edge. Some are beginning to speak out about the possible dangers it may bring.

Mercedes-Benz's parent company, Diamler AG announced yesterday that its full-year earnings will be slightly lower than last year. Their reasoning comes down to consumers in China buying fewer SUVs that are imported from the U.S. Most of Mercedes-Benz SUVs are built in Alabama.

“Remember, for those following from a Trump/global free trade perspective, this is now a German car maker, warning on the profits coming from their Alabama-made SUVs, which are then sold/exported into China –- a complicated situation indeed!!” wrote Evercore ISI analyst Arndt Ellinghorst.

According to Bloomberg, shares in Diamler dropped 4.4 percent on this announcement.

Meanwhile, Volvo Cars CEO Hakan Samuelsson said the trade war could affect plans in the U.S. Speaking at the opening of the Swedish automaker's new assembly plant in South Carolina, Samuelsson told Bloomberg that Volvo would have to limit the number of models it sells due to threat of a 25 percent tariff on imported vehicles.

“I would have less models to choose from and they would cost more -- that would be the consequence. Shorter menu and higher prices -- not a very good restaurant,” said Samuelsson.

The factory in South Carolina will provide a small relief for Volvo if tariffs do go into place. Small is the key word as LMC Automotive estimates 87 percent of the vehicles Volvo sells in the U.S. next year will come from other places - Sweden and China.

Samuelsson also warned that the trade dispute could mess up plans to create up to 4,000 new jobs at the new plant.

"If you have trade barriers and restrictions, we cannot create as many jobs as we are planning to," explained Samuelsson.

"We want to export and if suddenly China and Europe have very high barriers, it would be impossible. Then you have to build the cars there. And then all cars will be more expensive, you have to invest more tooling and have every model in every country. That's against all the logic of modern economies that trade with each other."

Source: Bloomberg, (2), Reuters

The National Highway Traffic Safety Administration has sent a cease-and-desist letter to Dolder, Falco and Reese Partners LLC, the company behind an aftermarket device called the Autopilot Buddy.

Autopilot Buddy is a small, weighted device that clips onto either side of the wheel to place minor amounts of torque. This fools the Autopilot system into thinking that a driver has their hands on the wheel. The company markets the device as "nag reduction device", reducing the amount of warnings to tell driver to keep their hands on the wheel.

The company has a disclaimer on Autopilot Buddy that states,

Quote

Note: Autopilot Buddy is for Track Use Only. This is not marketed for "street use".  "Autopilot Buddy" is installed you the driver assumes responsibility for the car.*  

This would be ok if a video demonstrating the product didn't appear to be on a public road of sorts. 

“A product intended to circumvent motor vehicle safety and driver attentiveness is unacceptable. By preventing the safety system from warning the driver to return their hands to the wheel, this product disables an important safeguard, and could put customers and other road users at risk,” said NHTSA Deputy Administrator Heidi King in a statement.

NHTSA has given Dolder, Falco and Reese Partners LLC till June 29th to respond and certify to NHTSA "that all U.S. marketing, sales, and distribution of the Autopilot Buddy has ended."

Source: Roadshow, NHTSA

With more people trending towards trucks and utility vehicles, it would be expected that prices on cars would be falling. But not on used cars according to Edmunds.

In their latest Used Car Report, Edmunds says the average price for a used subcompact rose 3 percent in the first quarter. Compacts saw their average price increase by 3.9 percent. The reason according to the report is due to the increasing cost for a gallon of gas. 

"Used-car shoppers are typically more price-sensitive to changes in the market, but this is the first time in years that we're seeing renewed demand for smaller vehicles With rising fuel costs breathing fresh air into this segment, subcompact and compact cars are finally retaining value again," said Ivan Drury, senior manager of industry analysis at Edmunds.

With rising gas prices, the expectation would be that prices on used trucks and utility vehicles would drop. But Edmunds says prices for these models are holding steady as buyers are willing to pay a bit more at the pump as they place "value on increased cargo capacity, ride height, and other SUV and truck features". 

Source: Edmunds

If the Trump administration goes forward with placing a 25 percent tariff on new cars, it could cost automakers between one to two million sales.

Analysis done by researcher LMC Automotive said if automakers pass on the full 25 percent tariff to customers, it could cut sales by about two million - about 10 percent of annual U.S. sales. If automakers absorb some some of tariff, the sales drop would reduce to just a million.

Jeff Schuster, senior vice president of forecasting for LMC Automotive tells Bloomberg that consumers would react in one of three ways.

• Look at the used car market
• Move to domestically built products with cheaper pricetags
• Put off buying a new car with the hope this is only temporary

While new car sales have been slipping from the record high of 17.6 million in 2016, LMC Automotive is predicting a still-strong 17.1 million deliveries by the end of the year.

Source: Bloomberg

President Donald Trump is no fan of German automakers. Take for instance this quote from last January,

Quote

“When you walk down Fifth Avenue, everyone has a Mercedes-Benz in front of their house. How many Chevrolets do you see in Germany? Not too many, maybe none at all, you do not see anything over there, it’s a one-way street.”

He has also made comments about BMW in the past few months in light of possible tariffs (which appear to be going into effect today). Now, new comments have been brought to light where the president wants to try and ban German cars from the U.S.

German magazine Wirtschaftswoche reports that during French President Emmanuel Macron's visit to the U.S. in April, Trump said that he will maintain his current trade policy "until no Mercedes models rolled on Fifth Avenue in New York." This information comes from several unnamed European and U.S. diplomats. At the time of this writing, Reuters hasn't able to verify this information.

As we reported last week, the Trump administration has ordered a probe into new car imports on the basis of national security. It may result in imported vehicles being hit with a 25 percent tariff.

Let's suppose that President Trump somehow presents a ban on German cars, trying to get it implemented may be quite problematic .For one, not all vehicles from German automakers will fall under the ban - an example is the Mercedes-Benz G-Class is built in Austria by Magna-Steyr. German automakers also have a sizable production presence in the U.S. Germany’s auto industry association VDA said German automakers built 804,000 vehicles in the U.S. last year.

One thing is for sure; automakers will be dealing with more uncertainty for some time.

Source: Wirtschaftswoche, Reuters

One of the key materials used in electric car batteries is cobalt. But there are growing concerns that the supply of cobalt is getting scarce as more and more automakers begin building electric cars.

A new report from Bloomberg New Energy Finance says cobalt shortages are expected to happen earlier than previously forecast. This issue possibly brings a big challenge to the rollout of electric vehicles over the next five to seven years.

"The long lead time to bring on new mines and the concentration of cobalt reserves in the Democratic Republic of the Congo mean there is a real possibility of supply shocks in the early 2020s," analysts from BNEF wrote.

"If capacity does not grow as planned, cobalt prices could continue to spike and there could be a major cobalt shortage. This would have serious implications on the electric vehicle market."

The price of cobalt has tripled within the past two years as more automakers begin building electric vehicles. Peter Deneen, the managing director at consultancy EV-Metals Resources Group said in an email that the market price for cobalt has risen in the "prospect of supply constraints". But the price doesn't include the potential risk of political upheaval in the Democratic Republic of the Congo - accounts for more than two-thirds of mined cobalt.

Concerns have automakers accelerating development of batteries that have smaller amounts of cobalt. Chinese automaker BYD is expected to introduce batteries that have a nickel-manganese-cobalt ratio of 8:1:1 by the end of this year. BMW is expected to follow in 2021 with a similar ratio. According to BNEF's report, this chemistry will account for 57 percent of EV batteries by 2030.

There is also the idea of recycling batteries that could provide 100,000 metric tons of cobalt a year by 2030. But the amount would have to mean all batteries from consumer electronics are recycled. Currently, the recycling rates around between 25 to 50 percent according to the report.

Source: Bloomberg via Automotive News (Subscription Required)

PSA Group's decade-long plan of possibly returning to the U.S. continues forward and they are facing their next roadblock, setting up a dealer network. Trying to convince dealers to sell brands that haven't been sold since the early nineties. But the French automaker believes they have a solution, using a tech-centric approach that will be affordable.

"We see the high cost of doing this business; we see the challenges that exist in profitability for dealers and OEMs. We believe with the new tools, the new technology, the new customer expectations, there are leaner, more agile ways to do this," said PSA North America chief Larry Dominique to Automotive News.

"We need to find a way to reduce our fixed costs. We want people to make a profit selling a new car."

A possible strategy could look similar to Hyundai's Shopper Assurance where a customer can do a number of tasks at home such as scheduling a test drive, apply for financing, and complete paperwork. There are things that will benefit from a physical presence such as service and vehicle delivery. Dominique said that he will not be asking those who decide to sell whatever brand PSA Group has in mind to go crazy with building a facility.

The bit about making a profit with selling a new vehicle is important here. Data from the National Automobile Dealers Association reveals that new vehicle losses for dealers rose $22 per car in 2015 to $421 in 2017. Used cars got hit worse with dealers losing $2 per car in 2017, from making $132 only three years ago.

Source: Automotive News (Subscription Required)

In 2009, the U.S. saw its lowest number of pedestrian deaths. But since then, that number has increased by 46 percent as pedestrian crashes have become more frequent and deadlier. Why is that?

The Insurance Institute for Highway Safety released a study today investigating the possible reasons. One key indicator is the number of crashes involving SUVs. According to IIHS data, between 2009 and 2016, fatal single-vehicle crashes involving SUVs rose 81 percent - the largest increase of any vehicle segment. Aside from the growing popularity of SUVs and crossovers, the tall body height and larger footprint mean in a pedestrian crash, the vehicle is hitting a person's chest or head.

SUVs weren't the only metric to see an increase. IIHS reports that urban environments, arterial roads, nighttime, and non-intersection crashes have seen large increases.

Can anything be done to help reduce pedestrian fatalities? According to the IIHS, there is a lot that can be done.

• Softening the front ends of SUVs
• Improving pedestrian detection systems and headlights (The latter would be helped if NHTSA can get its act together on updating their headlight regulations)
• Lower the speed limits
• Adding more "pedestrian hybrid beacons" - Kind of a sudo-stop light where a pedestrian activates it before crossing. Begins flashing yellow, before transitioning to solid yellow, and then solid double red.

"Understanding where, when and how these additional pedestrian crashes are happening can point the way to solutions. This analysis tells us that improvements in road design, vehicle design and lighting and speed limit enforcement all have a role to play in addressing the issue," said IIHS President David Harkey.

Source: Insurance Institute for Highway Safety

We all know someone who takes things a bit a too far. In the case of automakers, that someone is EPA Administrator Scott Pruitt. Back in April April, Pruitt announced a serious rollback of fuel economy regulations that were set in stone during the Obama administration. In a summary of the proposed draft, the EPA would rollback the fleetwide average from 46.8 mpg for the 2026 model year to around 37 mpg - the fleetwide average for the 2020 model year. The draft also mentions pre-empting "California's authority" on setting their own emission standards under the 1975 Energy Policy and Conservation Act. This move has caused California and a collation of other states to file suit over the proposed changes.

According to Automotive News, the changes proposed by Pruitt go a bit too far for automakers. All they wanted was the emission targets for the 2022-2025 model years to "ratchet up more gradually and offer more compliance flexibility." Now, they have to worry about litigation and uncertainty.

"I don't think anybody in industry, when asked for reopening of standards, asked to level out to zero," said an unnamed lobbyist for a major automaker.

However, certain groups argue that automakers should have expected something far-reaching under this current administration.

"You've got to know your audience. If you go to [EPA Administrator] Scott Pruitt and Donald Trump and say you want relief from the rules and they are going to cost jobs, this is what you end up with," said Andrew Linhardt, deputy director of the Sierra Club's clean energy campaign.

Later this week, executives from the major automakers will be meeting with officials at the White House to see if they can get the federal government and California to agree to some sort of comprise.

Source: Automotive News (Subscription Required)

The past month has been quite strenuous on the relationship between the Environmental Protection Agency and the State of California. Back in April, EPA chief Scott Pruitt announced they would be rolling back the fuel-efficiency regulations set towards the end of President Obama's tenure. The EPA also announced that it was considering revoking California's waiver to set their own emission standards. A few days later, we reported that the officials from the White House, California, and automakers were trying to work out a possible emissions deal to prevent a legal fight. It seems those talks went nowhere as California along with sixteen other states and the District of Columbia have filed suit challenging the rollback.

On Tuesday, the collation led by California filed a suit in the U.S. Court of Appeals for the District of Columbia challenging the rollback. This group makes up 40 percent of the U.S. auto market.

"The states joining today's lawsuit represent 140 million people who simply want cleaner and more efficient cars. This phalanx of states will defend the nation's clean car standards to boost gas mileage and curb toxic air pollution," said California Governor Jerry Brown in a statement.

The suit alleges that the EPA decision to roll back the regulation lacked any scientific reason. The EPA is also accused of failing to follow its own regulations and violating the Clean Air Act.

“This is California saying: You really want war? We’ll give you war. It’s a signal to the administration that they’re not going to get away with anything in this space,” said Dan Becker, director of the Safe Climate Campaign to the New York Times.

According to Reuters, the Department of Transportation has a draft proposal of the changes that is expected to be released to the public later this month. The draft would freeze emission requirements for vehicles at 2020 levels through 2026. The draft also asserts that the Energy Policy and Conservation Act of 1975 bars California from imposing their own rules, even with the waiver. This proposal has already earned the ire of the public and various members of the U.S. Senate. One Senator, Tom Carper, D-Delaware obtained a copy of the proposal and sent a scathing letter to Transportation Secretary Elaine L. Chao and Pruitt. 

“Such a proposal, if finalized, would harm U.S. national and economic security, undermine efforts to combat global warming pollution, create regulatory and manufacturing uncertainty for the automobile industry and unnecessary litigation, increase the amount of gasoline consumers would have to buy, and runs counter to statements that both of you have made to Members of Congress,” wrote Carper.

There is a lot riding on this suit as it could possibly cause the U.S. to have two different emission regulations and automakers having to meet both of them.

"Enough is enough. We're not looking to pick a fight with the Trump administration, but when the stakes are this high for our families' health and our economic prosperity, we have a responsibility to do what is necessary to defend them,"  said Xavier Becerra, California state attorney general. 

Yesterday, the White House announced that it will be meeting with leaders of the major automakers next week. The meeting will be talking about the planned changes to the fuel efficiency rules. It is expected that automakers will be trying to push the Trump administration and California to agree to a national standard.

Source: New York Times, Roadshow, Reuters, (2), U.S. Senate (Carper's Letter)

More and more automakers are launching subscription services as another option to get into new or used cars. But a new report shows the subscription services are still flying under the radar for most consumers.

Autolist recently conducted a survey with 1,428 car shoppers in the second half of April. This is what they found out.

• 70 percent of shoppers had no idea that such a thing existed
• Out of the 30 percent of shoppers who knew about subscription services, only half could actually name one
• 33 percent would consider a subscription service for their next vehicle. The number climbs to 45 percent when asked if they would consider it in the future
• The big draw to subscription services? 37 percent of shoppers said the ability to switch between different types of vehicles. This was followed by no long-term commitment (32 percent).

The results aren't really that surprising. Only one subscription service, Care by Volvo is available nationwide. All of the other services are in limited to one or a few cities. Book by Cadillac is only available in New York, but there are plans to expand it to Dallas and LA in the coming year. Not helping is most of the services being offered come from luxury automakers which means high prices. 

Source: Autolist

Earlier this week, the Environmental Protection Agency announced that it would be rolling back the fuel-efficiency regulations that were approved during the Obama administration. The agency also announced possibly revoking California's waiver that allows it to set tougher standards on vehicle emissions. The state vowed to fight this. But a new report from the New York Times says California and officials from the Trump administration are in talks about possibly reaching a deal to avoid a legal fight.

Speaking to a half-dozen of sources briefed about the talks, the Times reports that the two parties, along with representatives of major automakers, "are searching for a compromise that could save a uniform set of standards for the entire country." 

One of the proposals on the table is to keep the Obama fuel economy standards, but allow automakers to take advantage of more generous loopholes to meet them. In turn, the Trump administration would honor California's wavier through 2030. There could be other proposals in the cards as the EPA, National Highway Traffic Safety Administration, and the White House begin to coordinate their various strategies.

There are a number of obstacles that could derail the talks. Various automakers "are in different positions” on how to proceed with the talks. According to a source, some are focused on rolling back the standards through 2025, while others want to have the discussion to reach a compromise to avoid having to build vehicles to different standards. The talks themselves seem to be spinning their wheels. Last week, William Wehrum, the EPA's senior clean air adviser met with Mary D. Nichols, chairwoman of the California Air Resources Board. Depending on who you ask, the meeting didn't amount to anything or was considered to be productive.

Source: New York Times

In a move that was expected to happen soon, the EPA announced that it plans to revise the fuel-efficiency regulations that were approved during the President Obama administration. 

“The Obama EPA’s determination was wrong. Obama’s EPA cut the midterm evaluation process short with politically charged expediency, made assumptions about the standards that didn’t comport with reality and set the standards too high,” said EPA chief Scott Pruitt in a statement today. 

The statement goes on to say that the agency will begin working on new standards for cars for 2022-2025 with the National Highway Traffic Safety Administration.

The regulations that were finalized during Obama's tenure would require automakers to have fuel economy fleet average of over 50 mpg by 2025. Automakers have been pushing for the standards to be rolled back as it would cause vehicles to become more expensive, and consumers aren't buying fuel-efficient vehicles.

“This was the right decision. To ensure ongoing fuel economy improvement, the wisest course of action is to keep new vehicles affordable so more consumers can replace an older car with a new vehicle that uses much less fuel -- and offers more safety features," said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers - a trade group that represents a dozen automakers including GM and Ford.

Unsurprisingly, this move has brought forth criticism from both consumer and environmental groups.

“EPA’s decision defies the robust record and years of review that show these targets are reasonable and appropriate,” said David Friedman, director of cars and products policy and analysis for Consumers Union, the advocacy division of Consumer Reports.

“Undermining these consumer protections will cost consumers more at the pump while fulfilling the wishes of the auto industry.”

The EPA also announced that it was considering revoking California's waiver that allows it to set its own emission rules that are tougher than the federal regulations. Aside from California, 12 other states have adopted these standards that together account for a third of car sales in the U.S.  Since President Donald Trump entered the white house, the relationship between the EPA and California has become very strained. California officials have vowed to fight back if the EPA goes forward.

Source: Automotive News (Subscription Required)

It is no secret that buyers are gobbling up SUVs and crossovers, nor is it that automakers are introducing new and redesigned models. Take a look at the New York Auto Show this week where a number a new models (Toyota RAV4 and Subaru Forester) and concepts (Lincoln Aviator) made their debut.

According to automotive consultancy firm LMC Automotive, there are currently 63 mainstream crossover and SUV models, and 53 luxury models. By 2023, LMC is projecting 90 models for both mainstream and luxury. But this prompts a question - how much is too much?

“I think everyone has read the same tea leaves - right now there seems to be insatiable demand,” said Cadillac president Johan de Nysschen to Reuters.

“Everyone is going into these segments with compelling new entries and that means there are going to be winners and there are going to be losers.”

Already, there are signs this boom could be heading downward. LMC Automotive is forecasting a slow growth for SUVs and crossovers in 2018 and continuing through 2025.

“There are still some legs left to grow in the SUV market, but growth is slowing and will eventually level off. This is a bright spot in the market, which is why everyone is flocking to it with new product,”  said Jeff Schuster, LMC’s senior vice president of forecasting.

A key reason comes down to the large number of SUV and crossovers that will be going off-lease and entering the market, proving a less expensive option for buyers. Cox Automotive forecasts that 40 percent of the roughly 4 million nearly new vehicles expected to come off lease this year will be SUVs and crossovers. The number is expected to rise to 44 percent.

“Now that you’re seeing more SUVs starting to come off lease, that will automatically put pressure on new SUV pricing,” said Karl Brauer, executive publisher forKelley Blue Book.

There are those who don't buy this argument though. Sam Fiorani, vice president of global vehicle forecasting with AutoForecast Solutions says there is still room to grow if automakers dive into different niches such as sporty models and limited editions.

“The market is not yet saturated and there are all kinds of niches that have yet to be filled. We’re five or 10 years from even thinking about market saturation.”

Various automakers claim there is always more room for products, provided they can stand out.

“There are clearly a lot of entrants, but we are going to differentiate ourselves with a completely different look to our brand," said Lincoln president Joy Falotico at the New York Auto Show.

But Karl Brauer points out a simple fact: “Simple math suggests that you’ll have more models with lower volume.”

“You can’t have that many SUVs on the market and have all of them grow volume. Some of them are going to have to give,” explained Brauer.

Source: Reuters

Ever since PSA Group announced that it would be making a return the U.S. as part of a 10-year plan, there has been a large amount of speculation as to which brand would be sold. Would it be Citroen, DS, Peugeot, or the recently acquired Opel/Vauxhall?

“We’ve chosen a brand, but it’s too early to talk about it,” said Larry Dominique, president and CEO of PSA North America to Car and Driver.

PSA Group is still in the first phase of its plan with the Free2Move mobility aggregation platform (shows various ways of getting around such as bikes and electric vehicles) in Seattle. Somewhat worrying is that the company has only “activated its marketing” in Seattle recently according to Dominique - Free2Move launched back in October.

Out of all of the brands under PSA Group, Car and Driver says there is a good chance that Opel could be the brand coming to the U.S. They point out a comment made by PSA Group CEO Carlos Tavares saying after purchasing Opel/Vauxhall is that Opel engineers can “ensure the future products for this market will be fully U.S. compliant,” in terms of regulations and taste.

But there is a possible complication to PSA's plans. Yesterday, President Donald Trump's tariffs on imported steel and aluminum went into effect. There is also talk about a possibly matching up the tariff on imported vehicles - currently, the U.S. imposes a 2.5 percent tariff on imported European vehicles. Earlier this month, Tavares told Automotive News that he is watching the situation closely and that if a new vehicle tariff does come, it will make the company rethink their plans.

“If the overall framework of tariffs change, it may have an impact on our strategy. That’s clear, because if we don’t have a profitable business plan, then we don’t go,” said Tavares.

Dominique is a little bit more hopeful. Speaking at the J.D. Power Automotive Summit this week, Dominique said he doesn't believe an increase in the tariff will happen and expressed confidence that the various trade issues could be worked out.

Source: Car and Driver, Automotive News (Subscription Required), 2

The Geneva Motor Show saw Mercedes introduce their new AMG GT 4-Door and BMW revealing their M8 Gran Coupe concept. We still find ourselves scratching our heads as to why these vehicles exist in the first place, but a new Bloomberg report explains an interesting reason as to why automakers are building them.

These high-performance models with high price-tags will help generate the cash needed to develop electric vehicles. BMW for example is in the midst of its largest rollout of new models and variants. Most of them will be higher-margin to help get more cash into their coffers.

"The market for high-end, high-performance four-door coupes will get significantly more crowded," said Tim Urquhart, an automotive analyst with market researcher IHS Markit. "They are high-value models aimed at boosting margins and brand prestige" and have proved "popular with sports- and supercar owners who need a four-door when they start a family."

It doesn't hurt that four-door coupes are easy to develop since they share platforms and engines with regular sedans. All that's needed is a sleek body.

Source: Bloomberg via Automotive News (Subscription Required)

A big complaint you'll hear from journalists covering the Detroit Auto Show is the month that it is held. January is a miserable time in the north with cold temperatures and endless amounts of snow. But there could be some relief coming.

The Wall Street Journal has learned from various sources that organizers of the show are considering moving the show from January to October. Crain's Detroit Business adds that show officials have been floating this idea for more than a year with automakers, city officials, and Cobo Center. Both say the show's leadership team has yet to make the final decision and could happen as early as 2020.

A spokesman for the Detroit Auto Show comfirmed to the Wall Street Journal that a change is being considered, saying organizers are “exploring opportunities to better leverage the how and the region.” 

“I would love to see it in October,” said Wes Lutz, Owner of Extreme Chrysler, Dodge, Jeep, and Ram Trucks in Jackson, MI.

“I think we’d get even better attendance.”

Moving the show to October would not only provide better weather, but also give some breathing room between it and the Consumer Electronics Show, which occurs the week before Detroit. CES has become a prime place for automakers to showcase new technologies and make vehicle debuts - Chevrolet Bolt comes to mind. It also might stem the loss of automakers from the show. Auto companies such as Mazda, Volvo, Porsche, Jaguar, and Land Rover were no-shows at this year's show. Mercedes-Benz has announced that it will be skipping the 2019 show. 

But there are some issues with this move. Crain notes that show officials signed a new $11.8 million contract with Cobo Center back in July to keep the show there and in January. Moving it to October will likely require a new contract. It would also require shorter setup schedule for the show. Currently, work begins in October as workers build up the various exhibits that make up the show.

Source: Wall Street Journal  (Subscription Required), Crain's Detroit Business

Geely Automotive's chairman Li Shufu made headlines last week by dropping $9 billion for 9.69% stake in Daimler AG, making him the biggest shareholder in Mercedes-Benz's parent company. This follows a trend by Geely in buying automakers (Volvo in 2010, a 51 percent stake in Lotus last year). But a new report from Bloomberg reveals Shufu had his eye on a possible bigger prize.

Last year, Shufu approached Fiat Chrysler Automobiles about "a potential takeover". According to people familiar with the matter, Geely and FCA held informal talks. Nothing would come to fruition however as the two disagreed on how much FCA would be worth after the completion of the current five-year plan - expected to end this year. At the time of Bloomberg's report, FCA had a market cap value of 27 billion euros (about $33 billion).

FCA and Geely declined to comment on Bloomberg's report.

Back in August, Automotive News broke the news that various Chinese automakers were interested in possibly acquiring FCA. In fact, one unnamed automaker submitted a bid, but was rejected by FCA for being to low. At the time, Automotive News didn't mention the automaker in question, but Bloomberg's report possibly puts Geely as the one. 

Later that month, Chinese automaker Great Wall said they were interested in purchasing Jeep, although plans for this would fall apart.

Source: Bloomberg

Germany's highest court, the Federal Administrative Court ruled today that cities can ban older diesel vehicles to help cut pollution. 

According to Reuters, the case was brought to the Federal Administrative Court after local courts ordered the Düsseldorf and Stuttgart governments to ban older diesel vehicles. The states disagreed with this decision and appealed it to the highest court. Originally, the Federal Administrative Court was expected to rule on the case last week, but it was pushed back.

In the ruling, the court said the two cities should introduce the bans gradually and exemptions can be made for certain types of vehicles like ambulances.

“It will not be easy to implement,” said Fritz Kuhn, mayor of Stuttgart during a press conference.

Kuhn added that it would likely take six months for the regional government to agree on a plan.

The decision was welcomed by environmental groups.

“It’s a great day for clean air in Germany,” said Jürgen Resch of the environmental group DUH.

But a number of politicians and business lobbies disagree with the decision, saying it could deprive a number of drivers across the country, many who might not be able to replace them.

“The court has not issued any driving bans but created clarity about the law. Driving bans can be avoided, and my goal is and will remain that they do not come into force,” said Germany's environment minister, Barbara Hendricks.

Hendricks told Reuters that she hopes cities are able to find other ways to improve air quality. One example she brought up is to retrofit exhaust treatment systems to older diesel vehicles. As to who would pay for it, Hendricks said it should be the automakers since they sold the vehicles in the first place.

German Chancellor Angela Merkel stressed the bans were localized and wouldn't affect most drivers in the country.

The ban could cause German automakers a number of headaches as it would likely cause sales of diesel vehicles to drop even further, along with decreasing the resale value of them.

Source: Reuters, (2), The Guardian

Another wave of fallout from the Volkswagen diesel emission scandal could be coming later this week in a German court. Reuters reports that Germany’s federal administrative court will be ruling whether or not local governments could ban diesel vehicles. 

Environmental group DUH sued the Stuttgart and Duesseldorf governments for over levels of diesel particulate matter exceeding European Union limits after Volkswagen admitted to cheating on emission tests. Local courts ordered the governments to ban diesel vehicles that don't conform to current EU standards on days when pollution is bad. The two states where a number of automakers and suppliers reside appealed the decision to the federal administrative court.

This move could cause serious damage to German automakers as it would cause a fall in resale values and overall sales. Investment Evercore ESI forecasts a five percent drop in diesel residual values, resulting in a loss of 1.6 billion Euros (about $2 billion) in operating profit "across eight European and U.S. carmakers."

Source: Reuters

If you have been following auto sales for the past few years, then you know that SUVs and trucks currently dominate the sales charts partly due to the low gas prices. This is especially true when it comes to the luxury segment, where utility models are eating sedans. But a new report from The New York Times reveals that American automakers are eating the lunches of luxury car manufacturers. 

According to data from Edmunds, the likes of Ford, Chevrolet, and GMC have seen their share of domestic sales of models with an average price of $60,000 steadily climbing, while luxury brands like Mercedes-Benz, Porsche, and Lexus have been declining. GMC, in particular, has shown the largest growth, accounting 11.3 percent of domestic sales of $60,000-plus models in 2017. Five years ago, the brand only made up 0.1 percent of those sales. A lot of this credit can be laid at the feet of GMC's Denali brands. At a recent investor conference, GM showed data that the Denali line had an average sale price of $56,000 - more than the average price of an Audi, BMW, or Mercedes-Benz.

“This thing is a money machine,” said GM's president Dan Ammann about Denali.

Over at Ford, more than half of F-150 sales are made up by the Lariat, King Ranch, Raptor models. Only a few years ago, those models made up a third.

Why are American automakers seeing a massive increase in expensive SUVs and trucks? Part of it comes down to price, but there is also the image.

“We’ve been taking in Lexuses on trade-ins, BMWs," said Gary Gilchrist, owner of a GMC dealer in Tacoma, Washington.

“People used to want German cars for the image factor. Now, if you have a Denali, you get that. People turn their heads to look.”

Source: New York Times

January is usually not a strong month for car sales as it just after the holidays and people don't have the money to buy a new car. This is reflected in our January sales figure ticker where most automakers post small increases and decreases. There were some automakers that posted some surprising numbers. Nissan reported a 10 percent increase and Toyota noted an impressive 16.8 percent rise. The two automakers credit their utility as a key reason for the rise. But Bloomberg reports there is another reason for these rises.

Pulling data from Cox Automotive, Bloomberg found out that fleet deliveries for the month rose 46 percent for Nissan and 69 percent for Toyota. Most of the sales came from rental car companies. 

“If you want to claim 10 percent market share, that’s a way to do it. The danger is that you create a large number of late-model used cars that will compete with your new cars and bring down prices and profits,” said Maryann Keller, an independent auto industry consultant.

A number of automakers have been turning away from fleet sales for this very reason. GM which has been a poster child for fleet sales has been cutting back.

Toyota spokeswoman Amanda Roark told Bloomberg that fleet deliveries will be lower during the second half of this year and will likely make up "about 10 percent of its total U.S. sales in 2018." Judy Wheeler, Nissan vice president of U.S. sales explained the increase in fleet sales was due to them clearing out 2017 models to make way for 2018 models.

“It’s really just a timing situation for us,” she said.

It needs to be noted that Nissan has been increasing their sales to fleets within the past year.

Source: Bloomberg

The New York Times dropped a bombshell of a report last week saying that German automakers funded an experiment that had 10 monkeys in airtight chambers, inhaling diesel fumes from a Volkswagen Beetle TDI. The experiment took place back at an Albuquerque, New Mexico laboratory in an effort to prove newer diesel vehicles were cleaner than older models. But researchers were unaware that the Beetle used in the experiment was equipped with a defeat device that allowed it produce fewer emissions in the lab than on the road.

This experiment was brought to light via a lawsuit against Volkswagen in the U.S.

The European Research Group on Environment and Health in the Transport Sector (E.U.G.T) commissioned the experiment. Funding for the group was provided by Volkswagen, BMW, and Daimler. The group did not do any research itself, instead commissioning scientists to conduct studies that could be used to defend the fuel. Last year, the group was shut down amid controversy over its work. The three automakers told the Times "the research group did legitimate scientific work."

"All of the research work commissioned with the E.U.G.T. was accompanied and reviewed by a research advisory committee consisting of scientists from renowned universities and research institutes,” Diamler said in a statement.

Both BMW and Diamler told the publication "they were unaware that the Volkswagen used in the Albuquerque monkey tests had been set up to produce false data." Volkswagen said at the time of original story that researchers involved in the study did not publish a complete report. Since then, Volkswagen has issued an apology.

“We apologize for the misconduct and the lack of judgment of individuals. We’re convinced the scientific methods chosen then were wrong. It would have been better to do without such a study in the first place,” the German automaker said in a statement obtained by Bloomberg.

But there is another twist to this story. German newspaper Stuttgarter Zeitung reported yesterday about a study done by the University of Aachen in Germany that had 25 people breath in diesel exhaust as part of a clinic. The study was funded by the E.U.G.T. and was referenced in annual reports from the group. The University said that it "had followed typical procedures, such as approval by an independent ethics commission as well as written consent from each participant." It is unclear whether or not participants were told what the experiment would entail.

Nevertheless, it is another black eye for German automakers and diesel.

Source: New York Times, Bloomberg, (2), Stuttgarter Zeitung, Automotive News (Subscription Required)

We have heard countless promises and teases from various Chinese automakers about entering the U.S. market. But one automaker appears to be making a serious effort to make it a reality.

Last week at the Detroit Auto Show, Guangzhou Automotive Group (GAC) announced that it plans on launching the GS8 SUV in later 2019, and will attend this year's National Automobile Dealers Association convention in March. 

"We will attend the NADA convention in preparation for entering the North American market in the fourth quarter of 2019," said GAC President Yu Jun.

“We will explore all sorts of channels, including partnering” with other dealership groups, he said. “We will also try to build our own dealership network in the future. All of these options are on the table.”

GAC has been doing a lot of work behind the scenes preparing to launch in the U.S. They have already opened a technical center in Silicon Valley and is planning on opening a second one in Detroit. The company has also been studying the marketplace and conducting research to measure demand.

"They've been doing preparation on the ground, talking to consumers. They've been running clinics to find out what consumers care about. This is the real deal," said Michael Dunne, president of Dunne Automotive Ltd. and an adviser to GAC.

But there a number of issues that GAC needs to address. For one, GAC was planning to introduce the Trumpchi brand for the U.S. But given current affairs, the name could be problematic and executives have hinted that a name change could happen. There is also the impression that Chinese-built product doesn't have the same quality as others. GAC could use J.D. Power’s Initial Quality study where it has been the top-scoring Chinese automaker for the past five years.

"It looks like they have a good quality product. There is still a stigma of 'made-in-China,' but it's largely a perception issue," said David Sargent, vice president of J.D. Power's global automotive unit.

"If you talk to the automakers, they'll say the quality they are getting in China is as good as anywhere else — and sometimes better."

But the biggest roadblock that GAC could face is the U.S. Government. Both President Donald Trump and the top U.S. Senate Democrat, Chuck Schumer of New York cited GAC's plans and used this as a launching pad to criticize China's automotive trade rules. China levies a 25 percent tariff on U.S.-built vehicles. The U.S. only slaps a 2.5-percent on Chinese-built vehicles.

Source: Automotive News (Subscription Required), 2, Reuters

PSA Group CEO Carlos Tavares told attendees of the Automotive News World Congress yesterday they are employing the know-how from Opel engineers to develop vehicles for the U.S. market. Tavares declined to say which brand will lead the charge but did hint that future Opel models would be engineered to be compliant with U.S. regulations. 

Launching one of PSA Group's brands will be the last step in the company's 10-year plan of re-entering the U.S. market. Already, PSA is offering mobility services in parts of the U.S. and will launch a car sharing service in two to three big cities within the year.

“A 10-year plan gives us the appropriate time to properly understand this crucial market and launch the right products and services,” said Tavares.

Travares also revealed that PSA is planning to offer all of its vehicles with some sort of electrification option (electric, plug-in hybrid, and hybrid) by 2025.

Source: Automotive News (Subscription Required), Reuters via Autoblog

You find yourself in the showroom, ready to drive away in a new Chevrolet Bolt, Nissan Leaf, or Tesla Model S. But there is one big question that needs to be decided, do you buy or lease it? According to a report from Bloomberg, most buyers of EVs tend to lease.

In the U.S., almost 80 percent of electric vehicles on the road are leased according to their report. It also says that 55 percent of plug-in hybrids are leased. More than 80 percent of BMW i3s are leased as an example. The key reason comes down to the belief that electric vehicles will continue to improve and buyers can simply trade them - similar to purchasing a new smartphone.

"When there’s new technology coming out, and it’s coming out so rapidly, and you’re improving on it so constantly, typically people only want to lease it,” said Steve Center, a vice president of American Honda Motor Co., back in April.

This bet seems to be paying off as the range of electric vehicles has been increasing, while prices of batteries have been going downward.

“If you look at what can happen across the lifetime of a lease, you’re really talking about doubling the range of these vehicles,” said Edmunds analyst Jeremy Acevedo.

The imbalance between leasing/buying an electric vehicle has also made used EVs to become a steal. According to auto analytics firm Black Book, compact electric vehicles sold in 2014 only hold 23 percent of their original sale price. A comparable internal combustion vehicle holds about 41 percent. Doing a quick search on Cars.com, we were able to find low mileage 2015 Nissan Leafs ranging $14,000 to $16,000.

The big question is will this trend continue down the road, considering the likes the Model 3 and models coming from German automakers.

Source: Bloomberg

As lawmakers continue to work on comprehensive tax reform, one item related to the automotive industry on the table was the tax credit for electric vehicles.  The credit, which can be up to $7,500, was dropped in the House version of the bill but kept in the Senate version.   The credit was started in 2009 as part of the economic stimulus package as a way to encourage investment by auto manufacturers in the development of electric powered or assisted vehicles.  The the current version of the bill in reconciliation keeps the credit.  Analysts estimate that scrapping the credit would save $200 million over the next 10 years. 

The credit is capped at 200,000 qualifying vehicle per manufacturer, which no automaker has yet reached. Most manufacturers have announced billions of dollars in investment for sweeping changes to their lineups with many models gaining plug-in hybrid variants over the next 5 to 7 years.

Related: GM Launching 20 EVs by 2023

Europe is starting to develop a case of pickup truck fever. According to data from JATO Dynamics, 80,300 trucks were sold in Europe in the first half of this year. This pales in comparison to the 1.1 million full-size and 216,194 midsize trucks sold in the U.S. in the same timeframe. But sales in Europe are climbing. LMC Automotive says sales of trucks in Europe are up 19 percent and they predict sales will crest 200,000 next year.

Why this steady rise in pickups? According to Automotive News Europe, it comes down to the lack of alternatives and government regulations.

"One of the reasons is usage. Previously people used large, body-on-frame SUVs to tow boats or horse trailers. Nowadays, with high regulations and pressure [to move to] small engines with dual-clutch automatic gearboxes, it's not really possible to use SUVs to tow. People with these hobbies need to have a truck," said Renault's product director of pickups, Anton Lysyy.

Take for example the Land Rover Defender. When production of this off-road icon ended last year, many buyers switched to the likes of the Ford Ranger as it offered the off-road capability of the Defender.

Truck manufacturers have taken notice of this increase in sales and are starting to offer more extras. That includes new infotainment systems, active safety equipment, and a long list of accessories such as hardtops. New manufacturers are wanting to take a slice of this growing market as well. Mercedes-Benz will soon be launching their X-Class, while Renault announced their Alaskan truck (both models based on the Nissan Navara). PSA Group revealed earlier this year that it would be working with Chinese automaker Changan Automobile on developing a new truck that would be sold in China and Europe in 2020. 

Source: Automotive News Europe (Subscription Required)

A self-driving shuttle service got off to an auspicious start yesterday in Las Vegas when it was involved in an accident with a delivery truck.

According to NBC affiliate KSNV, the accident took place during the shuttle's first hour of service when a delivery truck back into the shuttle. According to an AAA representative on Twitter, the driver was cited by Las Vegas Metro Police.

"The autonomous shuttle was testing today when it was grazed by a delivery truck downtown. The shuttle did what it was supposed to do, in that it’s sensors registered the truck and the shuttle stopped to avoid the accident. Unfortunately, the delivery truck did not stop and grazed the front fender of the shuttle. Had the truck had the same sensing equipment that the shuttle has the accident would have been avoided," a representative of the City of Las Vegas said in a statement.

The shuttle in question comes from Navya, a French company that specializes in self-driving technology. It features lidar, radar, and video cameras around the vehicle and is powered by an electric motor. The shuttle is part of a year-long study by Navya, AAA, shuttle operator Keolis North America, City of Las Vegas, and the Regional Transportation Commission of Southern Nevada to see how the shuttle fares on public roads and whether or not riders are accepting of it.

Source: KSNV, Car and Driver,  (2)
Pic Credit: KSNV

Whenever Bob Lutz speaks, many people tend to listen as he a number of years of being in the automotive industry under his belt. Recently, Lutz wrote an editorial for Automotive News' Redesigning the Industry where he predicts we are “approaching the end of the automotive era,” within the next 20 years.

“The end state will be the fully autonomous module with no capability for the driver to exercise command. You will call for it, it will arrive at your location, you’ll get in, input your destination and go to the freeway On the freeway, it will merge seamlessly into a stream of other modules traveling at 120, 150 mph. The speed doesn’t matter. You have a blending of rail-type with individual transportation,” Lutz wrote.

Lutz sees governments pushing for a 'no-human-drivers' mandate when it becomes clear that self-driving vehicles are much safer than vehicles operated by humans.

"The tipping point will come when 20 to 30 percent of vehicles are fully autonomous. Countries will look at the accident statistics and figure out that human drivers are causing 99.9 percent of the accidents."

This according to Lutz will have catastrophic effects for the industry. Most of the driverless pods will be owned, operated and branded as "Uber or Lyft or who-ever else is competing in the market." Many automakers will be forced out of the business as people turn to sharing and not owning a vehicle. Some will remain, but acting as a supplier. Other parts of the business such as dealers, repair shops, and enthusiast magazines will fade away.

"The era of the human-driven automobile, its repair facilities, its dealerships, the media surrounding it — all will be gone in 20 years."

We're not fully on board with Lutz's train of thought. The time frame is a bit too soon as we are still on the ground floor when it comes to autonomous technology and the numerous hurdles that still need to be overcome. Plus, how will this driverless pod system work in rural areas?

That isn't to say it will not happen. Elements of Lutz's viewpoint are coming into focus. For example, Waymo will not have any way for a human to intervene in emergency situations. 

We highly recommend reading this piece.

Source: Automotive News (Subscription Required)

Luxury automakers have been taking full advantage of the high-demand for SUVs and crossovers and raking in the dough. But as Neuton's third law of physics tells us, "for every action, there is an equal and opposite reaction." In the case of luxury automakers, they have a number of sedans and coupes from lease turn-ins that they cannot sell.

“It’s not necessarily the overwhelming amount of vehicles, it’s the mix of those flood of vehicles. You’re throwing all these cars into the marketplace a couple years after it has evaporated and jumped into SUVs,” said Scott Keogh, president of Audi of America to Bloomberg.

This puts a lot of strain on luxury automakers as there is too much supply and not much demand, causing the value on used cars to fall. In turn, automakers have to raise the prices on leases to make up for the amount of depreciation over the term of the lease. It will cause consumers to be priced out of marketplace or automakers to offer generous incentives on leases. For luxury automakers, this is a big problem as they rely on leasing more than mainstream brands. According to Autodata, most luxury brands have increased incentives on their cars through the first nine months of the year.

• Audi: $4,696 (up $314)
• Lexus: $5,323 (up $296)
• Mercedes-Benz: $6,732 (up $289)

So if you find yourself wanting a luxury sedan or coupe, now might be the best time to score a really good deal.

Source: Bloomberg

A number of companies that are working on autonomous driving systems are implementing features that require a driver to take control in hairy situations. But Waymo, the self-driving unit of Alphabet (Google's parent company) recently revealed they have stopped developing these features. The reason is simple, drivers lacked the awareness to take over driving.

Waymo's CEO John Krafcik told reporters yesterday the decision to scrap this technology comes down to experiments done back in 2013 with Google employees that were filmed. The videos shown for the first time outside of Google showed people messing on their phones, putting on makeup, and even someone deciding to take a nap.

“What we found was pretty scary. It’s hard to take over because they have lost contextual awareness,” said Krafcik.

After the napping incident, plans for a driver to intervene were scrapped. Since then, Waymo has been working on technologies that didn't require human interaction. As such, Waymo's Chrysler Pacificas running in Phoenix, AZ only have two 'drive' buttons: one to start a drive and the other to tell the vehicle to pull over at its earliest convenience.

Source: Reuters

Between now and 2022, at least 50 electric vehicles will be launched. They'll be coming from the likes of Volkswagen, Diamler, and General Motors. Heck, even Dyson is getting into the game. But why this rush to get EVs on the road? It comes down to two things, Tesla and upcoming regulations.

“Nobody doubts that the future will be electric. The car companies dragged their feet with electric. Now they are being dragged into it by Tesla and by regulations,”  said Erich Joachimsthaler, founder and CEO of brand-strategy firm Vivaldi to Bloomberg.

Tesla makes sense as they have created a cult of personality with rabid fans and somehow selling vehicles like hotcakes. As for the regulations, various countries such as France and Great Britain have announced bans on internal combustion engines in new vehicles in the near future. Other places such as China and the state of California are considering similar bans. China has also introduced regulations meant to cut emissions and pollution by 2030. One of those is for automakers to sell a certain percentage of "of so-called new-energy vehicles -- which include electric cars" to obtain credits to sell models with internal combustion engines.

But there are questions about this move. For one, how is any automaker going to make money with EVs? At the moment GM loses $9,000 for every Chevrolet Bolt EV sold, while Fiat Chrysler Automobiles loses an eye-watering $20,000 on each Fiat 500e sold. Battery tech is one of the key reasons for this, but new technologies and improvements are helping bring the price down. 

Also, will consumers embrace this onslaught of EVs? Last year, EVs only made up less than one percent of the U.S. market.

“Companies are committed to electric cars, but there is little evidence that there is a lot of consumer demand for it,” said Kevin Tynan, senior analyst with Bloomberg Intelligence.

Source: Bloomberg

The State Fair of Texas began last week and truck manufacturers were out in force with new models to tempt consumers in the largest truck market in the U.S. Both Ford and Ram Trucks rolled out new luxury trims of their pickups - Ford with the Limited and Ram with the Longhorn Southfork. Both trims can easily reach $100,000 which to some is pushing it. But marketers at the truck manufacturers tell Automotive News they don't know where the ceiling is on how much consumers are willing to spend.

"It's hard to guess how big the market is. I don't think trucks have found a ceiling yet. You get customers who want every bell and whistle," said Todd Eckert, Ford's truck group marketing manager.

"For us, it is not about the dollar amount. It's about meeting the needs of the customers. We see an opportunity in the marketplace to bring the Limited trim to Super Duty. We know customers will demand it."

Luxury models are in demand and truck manufacturers are having a difficult time keeping them in stock. For example, more than half of Ford's F-Series Super Duty trucks sold are the high-end models - Lariat, King Ranch, and Limited.

As there is no ceiling yet, manufacturers are considering going even further. Sandor Piszar, Chevrolet truck marketing director said they have found a group of customers that are willing to pay "for a bigger, more luxurious and more capable truck."

Source: Automotive News (Subscription Required)

It seems everyone is getting into the car business, whether that is through autonomous technologies or electric vehicles. The latest entrant may surprise a number.

Yesterday, Dyson (yes, the vacuum cleaner maker) announced that it was working on an electric vehicle. Rumors about this have been swirling for a few years. Last year, the documents from the UK government revealed a £16 million ($22.54 million) grant was awarded to the company for the research and development on batteries, which added more fuel to the fire. In the announcement, founder James Dyson revealed that company has been working on this project for more than two years. 400 people are working on the project and is looking to hire more people.

It may seem crazy for a vacuum cleaner maker to go into the electric car business. But Dyson highlights their experience in developing batteries and electric motors for their hair dryers and cordless vacuums. This, in theory, should help them get their electric car project off the ground.

The plan is to have the EV on sale by 2020. We'll believe it when we see it.

Source: Dyson, Auto Express

California is considering joining France and Great Britain in banning the sale of gas and diesel-powered vehicles.

Governor Jerry Brown has been expressing an interest in banning the sale of internal-combustion engines according to Mary Nichols, chariman of the California Air Resources Board.

“I’ve gotten messages from the governor asking, ‘Why haven’t we done something already?’ The governor has certainly indicated an interest in why China can do this and not California,” she said to Bloomberg.

As we reported earlier this month, China is also considering a ban on internal combustion engines.

California has set an ambitious goal reducing carbon dioxide emissions by 80 percent from 1990 levels by 2050.

“To reach the ambitious levels of reduction in greenhouse gas emissions, we have to pretty much replace all combustion with some form of renewable energy by 2040 or 2050. We’re looking at that as a method of moving this discussion forward,” said Nichols.

If California was to go forward with this, it would send massive shockwaves in the automotive industry due to the size of state's auto market. Last year, more than 2 million new passenger vehicles were registered, topping countries like France and Spain. Automakers would be under new pressure on making EVs the standard.

But that doesn't mean California will have an easy time with this. While the state has the authority of writing its own pollution rules thanks to the 1970 Clean Air Act, they cannot be enacted with getting waivers from the EPA. With the Trump administration going on record that it would challenge California on any new environmental act, the state is looking for alternative ways to get what they want.

“We certainly wouldn’t expect to get a waiver for that from EPA. I think we would be looking at using some of our other authorities to get to that result,” said Nichols.

Nichols did say it will be a long time before something like this is implemented.

“There are people who believe, including who work for me, that you could stop all sales of new internal-combustion cars by 2030. Some people say 2035, some people say 2040. It’s awfully hard to predict any of that with precision, but it doesn’t appear to be out of the question.”

Source: Bloomberg

Most new cars and trucks sitting on dealer lots have fuel economy estimates on their window sticker. The only group of vehicles that don't are heavy-duty trucks. This is due to the EPA not requiring automakers to publish estimates on trucks with gross weight ratings that exceed 8,500 pounds. This makes it difficult for folks to compare the heavy-duty trucks with one another or comparing the diesel variants with the light-duty gas versions. Consumer Reports doesn't believe it should be this way and is working on an effort to change this.

Consumer Reports recently tested a Chevrolet Silverado 2500HD, Ford F-250 Super Duty, and Ram 2500 equipped with their optional diesel engines to gauge fuel economy and compare it to their light-duty gas counterparts. Their results show the HD trucks were 1 to 2 MPGs lower than their light-duty counterparts. Of course, you might be saying, that's because heavy-duty trucks have more weight to move. Also, most buyers who are going for this type of truck tend to know what they're getting into.

Heavy-duty trucks begin to show their advantage when it comes to intense workloads, becoming more efficient than a similarly-equipped gas truck.

Still, we think heavy-duty trucks should have fuel economy estimates to help buyers when it comes time to purchase a heavy-duty truck.

“Heavy-duty pickup shoppers shouldn't be left in the dark when it comes to fuel economy,” said David Friedman, director of cars and product policy and analysis for Consumers Union, the policy and mobilization arm of Consumer Reports. 

Source: Consumer Reports, Letter to Congress (PDF)

As PSA Group - parent company of Citroen, DS, and Peugeot - gradually makes moves into possibly selling vehicles into the U.S., they are taking the next step by engineering their next-generation vehicles to meet U.S. regulations.

"That means that from three years down the road we'll be able to push the button, if we decide to do so, in terms of product compliance vis-a-vis the U.S. regulations," said PSA Group CEO Carlos Tavares to Automotive News.

Tavares also said PSA has decided which of three brands will be the first appeared in the U.S., but it isn't ready to announce which one.

Source: Automotive News (Subscription Required)

Automakers have been trying different technologies and ideas in an effort to boost fuel economy and reduce emissions. On paper, the new technologies do make a difference. But in the real world, it is a completely different matter. 

Emissions Analytics, an independent U.K.-based company has been investigating what technologies actually make a difference in reducing emissions and fuel consumption. For the past four years, the company has tested over 500 vehicles in the U.S. since 2013 in real-world driving situations. Globally, it has tested over 1,000 vehicles. Next month, the company will be releasing a study showing which of those technologies help and hurt.

"You can only decide if you have the right information. The EPA sticker is — I would say — good up to a point, but we can give a lot more information," said Nick Molden, Emissions Analytics' founder and CEO.

Their data shows that over four years of testing in the U.S., there is "no actual improvement in overall fuel economy and no decrease in CO2 emissions," despite new technologies and complex powertrains.

Quote

Vehicles with engines smaller than 2 liters have seen essentially no change in fuel economy; vehicles with engines 2 to 3 liters (the most common) have seen fuel economy decrease by around 8 percent, while vehicles with engines 3 liters or larger have seen an 8 percent increase in fuel economy.

This decrease among the most common vehicles is magnified in the U.S. because Americans are commuting longer distances without switching to smaller vehicles.

"If like-for-like the vehicles are not becoming cleaner, those other two shifts are actually going to drag up total CO2 emissions," Molden said.

 

EA's data also revealed that downsized turbo engines show huge discrepancies between the EPA's findings and the real world. In the lab, the engines aren't put under stress and can produce high fuel economy figures. But it is a different story out in the real world when the turbos are engaged to keep up with traffic and becomes less efficient than a non-turbocharged engine.

"Downsizing is a good thing up to a point. You go past a certain inflection point and actually you can find that the real-world mpg will actually get worse if you go too small," said Molden.

"As soon as you start going below 2 liters, that's where we start seeing the gaps open up between EPA sticker and real world."

The study did deliver some good news for hybrids. EA found traditional hybrid vehicle provided high fuel economy figures and reduced emissions. Other technologies such as multispeed transmissions, adding lightness, and picking the right tires provide a meaningful impact.

Source: Automotive News (Subscription Required)

The recovery process of Hurricane Harvey is in full swing and nowhere is this more apparent than the amount of people heading to dealers. 

Steven Wolf, chairman of the Houston Automotive Dealers Association tells Automotive News that dealers in the Houston area "abnormal" traffic as people come in looking for a replacement. The sudden rise isn't that surprising as the Houston metro area is about the size of New Jersey. Wolf said the first order business for many folks is to get back into a vehicle so they can get around.

"People have moved past the 'Oh, my God, what am I going to do?' [stage] to 'Let's get a plan; we need to do this, this and this.' At the top of the list, it is, 'Let's get a replacement vehicle,'" Wolf explained.

To give an idea of just how busy dealers have been in the Houston area, Wolf said that the dealership group he works for - Helfman Motors saw barely any traffic on August 30. The next day saw a small amount of traffic flowing in. Then things went crazy as people were coming in droves. This momentum hasn't slowed down since.

As we reported last week, analysts believe sales for September will bounce back, partly due to those affected by Hurricane Harvey. 

Source: Automotive News (Subscription Required)

China is the latest country to investigate possibly ending the sale of gas and diesel vehicles.

According to the state's Xinhua News Agency, deputy industry minister Xin Guobin told an auto industry forum over the weekend has started "research on formulating a timetable to stop production and sales of traditional energy vehicles."

“Some countries have made a timeline for when to stop the production and sales of traditional fuel cars,” said Guobin.

“The ministry has also started relevant research and will make such a timeline with relevant departments. Those measures will certainly bring profound changes for our car industry’s development.”

This move is not really surprising when you take into consideration China's major cities have suffered from extreme air pollution. Some of this comes down vehicle emissions. But there are also various industrial sites using coal and other fuels that provide a fair amount of pollution. Both local and national governments have been working on ways to help cut back on pollution. One of those ways is China requiring automakers to have 20 percent of new car sales by 2025 be made up of hybrid and electric vehicles.

Both France and Great Britain have announced plans to halt sales of new gas and diesel powered vehicles by 2040.

Source: Associated Press, Reuters

Analysts believed that August was going to be the month the auto industry would post its first year-over-year increase for 2017. But then Hurricane Harvey hit Texas, leaving a path of destruction and extensive flooding. Sales for the month would drop 1.9 percent to 1.48 million vehicles when compared to the same month a year ago.

"Harvey will also depress one of the most critical selling periods of the year, spanning the August sales month close and Labor Day weekend. In 2016, these 11 days alone accounted for 4.1% of retail sales, or 580,000 units, nationally,” LMC Automotive said in a report.

But analysts believe sales - new and used - will bounce back in September. 

"We expect the recovery in vehicle sales to be quick. People need transportation to get their lives back in order, and in Houston, that transportation is the automobile," said Jonathan Smoke, chief economist for Cox Automotive.

Estimates from Kelly Blue Book puts the amount of vehicles damaged in Harvey between 300,000 to 500,000. 

As people get their checks from insurance companies and begin the process of finding a replacement vehicle, automakers are redirecting vehicles to their dealers in Texas. Because of this, Kelly Blue Book has bumped up their sales outlook for the year to top 17 million new vehicles sold.

Whether this pans out or not remains to be seen, especially as Hurricane Irma is projected to hit Florida sometime this weekend.

Source: Detroit Free Press

The past few years have been tiring if you happen to be a millennial. There has been countless articles talking about how this group are not buying houses or vehicles. Of course, the reason is that millennials don't have the money (saddled with more debt, having entry-level salaries, etc). But that is changing. According to a report from Bloomberg, millennials are beginning to head out to the suburbs, and purchasing houses and cars. The reason? They're having their baby boom.

According to data from the Zillow Group, Americans aged from 18 to 34 have become the largest group of home buyers, with almost half living in the suburbs. They're upsizing their vehicles as well to go with their new home. Large SUV sales jumped 11 percent in first half of this year according to Ford Motor Co. Midsize SUVs rose 9 percent and small SUVs jumped 4 percent in the same timeframe.

“We do see that demographic group driving larger sport utility sales as they acquire homes, create families and gain some wealth,” said Michelle Krebs, an analyst at car-shopping website Autotrader.

“They started with compact sport utilities and now, with families, they’re moving up.”

Expect more millennials to follow suit. LMC Automotive estimates that sales of large SUVs will rise 25 percent between now and 2025.

“There’s no question people are waiting longer, but people still want to have children. As long as people have children and those children grow and acquire friendships, it requires more space,” said Erich Merkle, Ford’s U.S. sales analyst.

Currently, the largest group of buyers for midsize and large SUVs are Gen Xers, but millennials are expected to eclipse them due to there being a large number of them - about 80 million.

“There’s going to be an extra 25 million people passing into and through the 35- to 44-year-old demographic over the next 10 to 15 years,” Merkle said.

“That’s going to lead to a gradual increase in the growth of large and midsize SUVs that’s already starting to happen.”

Source: Bloomberg

Only a few weeks ago, Toyota and Mazda surprised everyone by announcing a new alliance. The two would collaborate on a number of projects including a $1.6 billion assembly plant, possibly bringing 4,000 new jobs. At the time, the two automakers haven't decided where the plant would go, which sent various states in a frenzy.

A report from the Detroit Free Press has learned that the two have sent out a blind request for proposals from states in Midwest, mid-Atlantic and South. Sources tell the paper that the request was from an unidentified employer that was considering options for a new project known as 'Project Mitt'. State officials have sent preliminary proposals that include potential tax incentives, job training programs, and investments in infrastructure.

Opportunities like this are very rare and states are pulling all of the stops out to land this plant.

“You have to be able to punch the ticket. You have to be able to say you’ve got the workforce, you’ve got the land, you’ve got the transportation systems and rail spurs, community college and education and a place where people want to live,” said Kristin Dziczek, director of industry, labor and economics at the Center for Automotive Research.

“Once you’ve got all that, tax incentives come into play.”

We recommend checking out the Free Press' report as it lists the states in contention from Alabama to Texas with pros and cons.

Source: Detroit Free Press

The Frankfurt Motor Show is only just a month away, where will see a new selection of production and concept vehicles. But there will be some no-shows.

Automotive News Europe has learned of nine automakers that will be skipping the show. They include,

• Alfa Romeo
• DS
• Fiat
• Infiniti
• Jeep
• Mitsubishi
• Nissan
• Peugeot
• Volvo

The nine automakers combined make up 20 percent of all automotive sales in Europe.

So why are they skipping? One issue is the cost as automakers have to spend a fair amount of cash to take part. Ian Fletcher, principal analyst for IHS Markit said it is becoming very difficult for a company to justify spending so much money for a small boost in sales.

"I would question what the translation rate is between attendance on public days to transactions -- I bet most customers now are happier to do research online," said Fletcher.

The other reason is automakers are beginning to do their own events or use other showcases such as the Goodwood Festival of Speed. This allows an automaker to directly reach out those interested and allow them to be the star, not be lost in the noise of an auto show.

Source: Automotive News Europe (Subscription Required)

While the primary focus at PSA Group for the past few months has been purchase of Opel and Vauxhall from General Motors, there has been another project that has been going in the shadows, the return of the French automaker to the U.S.

Speaking at the CAR Management Briefing Seminars this week in Traverse City, MI, the CEO of the recently established PSA North America Larry Dominique gave a status update.

Back in April, PSA made their first foray into North America with the launch of car-sharing service TravelCar in Los Angeles and San Francisco. The next step is the launch of the Free2Move application into North America. Already launched in Europe, the application allows users to book and pay for a variety of transportation services such as public transit or ride hailing. For Europe, the application has eight different services on offer.

Dominique said the app allows PSA Group to "interact with consumers more often than engaging solely in car sales."

“We’re going to be starting to engage with millions of Americans. By the time we’re ready to sell cars, selling cars will just be the exclamation point at the end of the sentence,” Dominique told Automotive News on the sidelines.

Also in the works is figuring out a dealership with the various services such as financing, servicing, and parts. Building out a dealer network will cost a fair chunk of cash and trying to something different with selling their vehicles is a no go for the time being.

“We are looking for progressive, innovative and digital-minded partners,” said Dominique in an effort to reduce costs.

“I’m not prepared to talk about how we are going to come to market (in North America) but it will be practical, traditional and use technology.”

Dominique is aware of how big of a challenge that he is taking on and they only get one chance to get it right.

“We’ve got to be able to do things in a new, innovative way. I don’t have the infrastructure and the legacy in place. We have a chance to do this right once.”

Source: Automotive News (Subscription Required), Wards Auto

Great Britain is planning to ban the sale of conventional gas and diesel vehicles from 2040 to help reduce air pollution. The government announced this in a paper published by the Department for Environment, Food and Rural Affairs (DEFRA).

"There should be no new diesel or petrol vehicles by 2040," said environment minister Michael Gove to BBC Radio.

This is part of the government's £2.7bn blueprint for tackling air pollution. This includes investments going towards building out a charging infrastructure, more efficient public transport, and promoting walking and bicycling. It needs to be noted that the ban will not affect models with hybrid and plug-in hybrid drivetrains - early reports said all gas and diesel vehicles would be banned. 

This announcement comes a few weeks after France made a similar announcement to ban gas vehicles by 2040.

Source: Reuters

Electric car startup Lucid Motors has been in process of trying to raise extra cash to move forward with the development of their first model, the Air and a factory in Arizona. But Bloomberg has learned from sources at the startup that Lucid reached out to Ford about a possible sale. Reportedly, Ford said they are not looking for a deal at the moment. Currently, the blue oval is undergoing a 100-day review by new CEO Jim Hackett. Interestingly, a source went on to say that Ford isn't ruling out a deal down the road.

For the time being, Lucid has called in Morgan Stanley to help with raising the extra funds.

“We don’t have the money in place. That’s why we need to secure Series D,” said Lucid Motors' Chief Technology Officer Peter Rawlinson to Bloomberg back in April.

“It would be irresponsible to start moving earth or start anything until we have a financial runway to execute that professionally and with absolute integrity.”

When asked about how the investments were going this month, Rawlinson said the company is "thrilled with the response from investors." He declined to comment on the scale of investments and the possible meeting with Ford. A Ford spokeswoman said "We don't comment on speculation."

Source: Bloomberg

Unless you have been living underneath a rock, then you know that the popularity of crossovers and SUVs have been booming. A new analysis reveals this popularity will not be going away anytime soon.

IHS Markit looked at consumer loyalty rates for various body styles from 2012 to April 2017 and found that 66.2 percent owners of SUV and crossover models returned to buy another - the highest IHS has ever recorded. To give some perspective, pickups come second at 50.9 percent.

"We collect this data and provide it to our clients once a month, but we felt that the results were so extraordinary in terms of consumer loyalty numbers for SUVs and CUVs that we wanted to publicly release it," said Tom Libby, manager of automotive loyalty and industry analysis at IHS Markit.

More surprising is how much the loyalty rate for SUVs and crossovers has been rising since 2012. That year saw a loyalty rate of 52.9 percent.

"While one can make the case that a factor is gas prices, there are some other key drivers to sport and crossover utility. One is wide range of selection in price and size of crossover vehicles. SUVs also have the appealing combination where the driver gets the comfort level of being in a car but also gets the versatility of being in a larger vehicle," Libby said.

With one body style going up, one must go down. In this case, it happens to be the sedan. In 2012, loyalty for sedans stood at 56 percent. Since then, the rate has been dropping - stands at 49 percent through the first four months of this year. IHS Markit analysis revealed that in the first four months of 2017, two-thirds of sedan owners that bought a new vehicle chose an SUV/crossover. Those likely to switch from a sedan to an SUV/crossover are ones that have owned only one sedan.

But don't expect sedans to go away anytime soon.

"While loyalty in sedans has gone down, sedans aren't going away. Sedans still play a significant part in the market, and that's not going away anytime soon," said Libby.

Source: Automotive News (Subscription Required)

Airbag manufacturer Takata is at the center of one the largest automotive recalls which affect an estimated 100 million vehicles from two dozen automakers around the world. The airbags in question have inflators that can rupture and send shrapnel flying in the event of a crash. They have been linked to at least 16 deaths and 180 injuries. Now, the next chapter begins as Takata filed for bankruptcy.

Yesterday, TK Holdings (Takata's U.S. operations) filed for Chapter 11 bankruptcy in Delaware on Sunday with liabilities totaling between $10 billion to $50 billion. The company would file for bankruptcy in Japan today.

Takata also announced that it would be selling its key assets to Key Safety Systems, a Michigan-based supplier owned by China's Ningbo Joyson Electronic Corp. The purchase will cost Key $1.6 billion.

At a press conference today in Tokyo, CEO Shigehisa Takada said the company had no choice to sell their assets due to liabilities increasing and finances collapsing.

"We spent much time on negotiations, it was extremely difficult to reach an agreement with more than 10 carmakers worldwide and a sponsor candidate company," said Takada.

"If things are left as is, we are aware of risks that we may not able to raise fund and to continue stable supply of products. In light of the management environment we face, the state of negotiations with the sponsor candidate and carmakers, and the external expert committee's opinion, we have decided today to file for bankruptcy protection."

Takata attorney Nobuaki Kobayashi said the total amount of liabilities was still unknown and the company is in talks with automakers to figure out the worldwide cost. According to Automotive News, analysts put potential liabilities as high as $10 billion for ongoing recalls, penalties and settlements. A report from Tokyo Shoko Research Ltd., puts Takata total liabilities at 1.7 trillion yen (about $15 billion).

Back in February, Takata pleaded guilty to wire fraud charges in the U.S. for withholding key information about the defects and manipulating test data. 

Source: Automotive News (Subscription Required), Reuters

Towards the end of Obama presidency, the administration unveiled guidelines for testing and deployment of self-driving cars in the US. But there is a new presidency in the White House and that means things will be changing - although details are scarce as to how.

U.S. Transportation Secretary Elaine Chao said in Detroit yesterday the Department of Transportation would revisit and revise the guidelines put forth by the previous administration within the next few months.

"The pressure is mounting for the federal government to do something" about autonomous vehicles, said Chao.

"We don't want rules that impede future technological advances."

Chao didn't go into details about the changes that would be made or how it would differ from those made under the Obama presidency.

The current guidelines introduced last fall includes a 15-point assessment that automakers would use to determine whether an autonomous vehicle was ready to go on the road or not. The assessment includes such items as privacy and validation methods.

Automakers have voiced concerns on the guidelines, saying it would delay the testing by months and requires them to hand over data.

Source: Reuters

While car sales are down, the number of people opting for loan lengths from 73 to 84 months is going up.

 Karl Kruppa, senior automotive solutions consultant for Experian said at a conference last week that the share of 73 to 84 months car loans has been rising over the past eight years. Through February of this year, 33.8 percent of loans were for terms longer than 73 months.

Other numbers to take into consideration,

• In the fourth quarter of 2010, three-fourths of new-car loans were between 73 to 75 months. Only 17.1 percent of loans were 84 months.
• Fast forward to the fourth quarter of 2016 and 28.7 percent of new car loans reached 84 months.

Why the sudden increase? It might be due to buyers seeing the small payments on an expensive vehicle, without taking into consideration fully about the length of the loan.

More worrying however is the growing popularity of long-term loans on used vehicles. Most of these loans are being used on late-model vehicles - about 30 percent of 2016 model year vehicles are being financed with 73 to 84-month terms. But long-term loans are being used on vehicles that are five years or older.

"You know what's kind of startling? There's actually 10 percent of [2010 model-year] used vehicles being financed at a term between 73 and 84 months. Longer terms are here, and more and more lenders are willing to do that," said Kruppa.

Source: Automotive News (Subscription Required)

Here is a paradox for you: Automakers have been increasing the number of safety features in their vehicles to help protect or avoid a crash. But this has also brought an unforeseen consquence; crash your vehicle and it is more likely that your insurance company will total it.

That's according to a story from Automotive News who spoke with Bob Tschippert, senior vice president of Dallas-based underwriter Risk Theory. Tschippert explained that all of these new features has increased the costs of repairing a vehicle, thus causing the chance of an insurance company totaling vehicle to rise.

"In the past, if you had a front-end collision, you had damage to the engine or the front end. But now, with the number of airbags that can run from $1,000 up to $4,000 and all the sensors up front, you're seeing more totals," said Tschippert.

Throwing a wrench into this is the gargantuan Takata airbag recall. The backlog of vehicles needing replacement airbags might make it more likely for an insurance company to total a vehicle with Takata airbags in an effort to reduce the backlog.

Other factors include an increase in the amount people drive and the issue of distracted driving.

If there is a winner with this increased trend in totaling, it has to be salvage auctions. Insurance Auto Auctions Inc., announced back in March that it would be expanding some of their largest auctions in seven states.

Source: Automotive News (Subscription Required)

April's auto sales are one most automakers would like to pretend never happen due to big declines. But if there is a silver lining to April sales, it has to go to small sports cars.

Automotive News ran the numbers and found that sales of small sports cars rose 3.4 percent so far this year. Contrast this with 12 percent drop in overall demand for cars. The big winner in this group was the Mazda MX-5 Miata with sales up 35 percent so far this year. Sales in April declined slightly from March (1,319 vs. 1,345 units), but rose sharply when compared to January (929) and February (1,108). 

Other models saw noticeable increases:

• Fiat 124 Spider saw its sales rise from 240 in January to 465 in April
• BMW's Z4 rose 42 percent so far this year (though it should be noted this model went out of production last August)
• Toyota 86 saw a small rise in overall sales
• Jaguar F-Type posted its best monthly sales of 406 units

Source: Automotive News (Subscription Required)

Sales of new cars in the U.S. have been dropping in the past three months and analysts believe April's sales results will be much the same. But why are sales falling? It comes down to prices of new cars going up and up.

According to data from ALG True Car, the average new-car price rose two percent when compared to last year. Kelly Blue Book reports that the average transaction price in March increased 1.7 percent to $34,342 when compared to the same time last year. There are a number of factors as to why consumers are balking at larger prices; credit not being as easy to attain, younger buyers being saddled with debt, and inflation.

“It’s not just the price of the cars -- it’s the price of everything else. The price of things like health care, shelter -- all of that is fighting for the budget,” said Michelle Krebs, a senior analyst with Cox Automotive.

Automakers are trying to stem this decline by increasing the amount of incentives available. J.D. Power reports incentive spending reached a new high in the first half of April with an average of $3,499. 

Source: Bloomberg

Chinese automakers see the U.S. as a land opportunity and have been making promises to start selling vehicles in the near future. None so far have made it. Now one Chinese brand is reconsidering their plans.

SAIC Motor Corp., China's largest automaker and partner with GM, has put their U.S. ambitions on hold. Michael Yang, executive director of SAIC Motor’s international department said at a briefing that they have uncertainties about the trade policy between China and the U.S. due to the election of Donald Trump. Yang went on to say that the company would implement their U.S. strategy once it has gotten clarity. For the time being, SAIC has moved up plans to start selling vehicles in the European Union.

“Eventually we aim to have all, but at the moment we are focusing on” China and then Europe, Yang said. “The reason is the ‘climate change’ after the new presidency.”

This contrasts with another Chinese automaker, Guangzhou Automobile Group Co., (GAC) which plans on entering the U.S. by 2019 with their Trumpchi brand. Although there is talk that GAC is considering changing the name of the brand before arriving in the U.S.

Source: Automotive News (Subscription Required)

The rivalry of the Chevrolet Camaro and Ford Mustang has been going for ages in the U.S. But now this fight has expanded into China.

Automotive News reports that a growing group of Chinese buyers are being drawn towards to these models as the exude the no-apologies Americana attitude.

"We're seeing the beginning of a muscle car culture here. Something that is uniquely American appeals to the Chinese consumer. The image that it relays to the automotive public is very positive," said James Chao, a China market auto analyst with IHS Markit.

Sales of both models are small with Chevrolet only moving 2,000 Camaros since its launch 2011. Ford is doing slightly better with 6,200 Mustangs sold since its launch in 2015. In the first quarter, Mustang sales saw a 90 percent increase to 963 vehicles. Part of the reason for the slow sales comes down to the price. The Camaro starts about 399,900 yuan (about $58,000) - more than double of the base price of $26,900 in the U.S. The Mustang isn't that far behind, costing about $15 dollars less. Prices are increased due to a 25 percent import tariff on U.S. made vehicles, homologation and shipping fees, and Chinese buyers trending to splurge on higher-time models.

But despite the low sales, the Camaro and Mustang are bringing buyers to dealers. These models act as eye candy to help draw shoppers into showrooms with the hope they'll purchase a vehicle, where it be the eye candy or something a little less exciting.

Source: Automotive News (Subscription Required)

Last October, Chinese automaker Geely unveiled a new global brand called Lynk & Co. This brand stood out in a few ways,

• Vehicles will be sold online
• Owners will be able to share their Lynk & Co vehicles to make some money
• An open application programming interface to develop in-car applications
• Recently announcing all of their vehicles would come with lifetime warranties

The plan was for the brand to launch in China this year, with Europe and U.S. following in late 2018. But a new report from Automotive News says the launch for Europe and U.S. has been pushed back to 2019.

“We think we will start in Europe between the first quarter and the first half of 2019 and enter the U.S. some months later,” said Alain Visser, Lynk & Co's senior vice president of marketing and sales.

The reason for pushback comes down to Lynk & Co needing more time to establish a company-owned dealership network as it is taking slightly longer to find the locations. Visser said the company wants to build up a network of 500 dealers comprising of flagship and temporary pop-up stores. Despite having stores, vehicles will be sold online and delivered to the owner's house or office.

Visser said plans for the Chinese launch is still on schedule with the 01 crossover launching towards the end of the year.

Source: Automotive News (Subscription Required)
Pic Credit: Newspress

PSA Group is slowing making end roads into U.S. as part of their 10-year plan. We have already reported on their carsharing service, TravelCar that will be launching in select markets this month. Now, the French automaker has taken the next step by announcing former Nissan and TrueCar executive Larry Dominique as a Senior Vice President of PSA North America.

Automotive News reports Dominique's role will first deal with the car-sharing aspects before starting to make progress on one or all of the brands in the U.S.

“This is a market that, as a full-line automaker, you need to be part of. But this is a 10-year project. It’s not about jumping in and creating market share as quickly as possible.” said Dominique.

“Positioning a brand in the U.S. marketplace -- which is very crowded today -- is going to take patience, analysis and data. And it’s going to take careful execution. That’s why we’re not rushing into this.

There are a lot of unanswered questions facing Dominique such as which brands will be sold in the U.S. and how will the vehicles be sold - dealer network or some other way. 

“It’s going to be a significant amount of money to re-enter the market. But we haven’t set a number. If we can find more efficient ways to market and sell our vehicles -- whether it’s in a traditional partnership with investors or not -- those are things that can heavily influence the cost of coming to market,” said Dominique.

Source: Automotive News (Subscription Required)

For the past few years, luxury automakers have been trying to fill every single niche they could think of. It's why we have such models as the BMW 5-Series GT and Mercedes-Benz GLC-Coupe for example. But now, BMW and Mercedes-Benz admit they have too many models and are planning to cut some.

“The checkerboard of body styles and segments is rather full, although there are still a few to be finished. We’ve got an X2 and an X7 coming, and there are a few others, but I also know—because we’ve taken decisions—that some body styles will be removed in the future,” said Ian Robertson, BMW’s head of sales and marketing, to Car and Driver.

“There’s definitely more of a move toward four-door coupes. We’ve done the Gran Coupes; they’ve really worked. People like the lower seating position and the sporty dynamics but also the fact there’s a door in the back. It’s fair to say that when we look at the checkerboard, because of the new things we’re putting in, there are some things we can take out,” Robertson went on to say.

Dieter Zetsche, head of Mercedes-Benz cars harbors the same thoughts.

“The specialty cars, these coupes and convertibles, were always niche cars. The expansion into China and other emerging markets [has given] huge opportunities for sedans, but they did not take up these specialty cars. Which makes the business case for these vehicles less easy.”

Yep, it seems coupes and convertibles are on the chopping block - not the SUV-coupe things you were likely hoping for. Now Zetsche did say that would still offer two-door models, but it would not be “in the variety we are having them right now.” Taking into consideration there are coupe and convertible versions of the C, E, and S-Class, along with the SLK and SL roadsters, and the AMG GT coupe and convertible, we wouldn't be shocked if a couple of those models disappear.

Source: Car and Driver

In a not surprising move, President Donald Trump announced today that his administration will reopen a review into the 2025 fuel economy standards set by the EPA before the end of President Barack Obama's term. 

“We’re going to work on the CAFE standards so you can make cars in America again. There is no more beautiful sight than an American-made car,” said Trump at an event in the former Willow Run bomber factory in Ypsilanti, Michigan - soon to become a testing ground for autonomous vehicles.

"These standards are costly for automakers and the American people. We will work with our partners at DOT to take a fresh look to determine if this approach is realistic. This thorough review will help ensure that this national program is good for consumers and good for the environment," said EPA Administrator Scott Pruitt.

In the closing days of President Obama's second term, the EPA announced that it would keep the strict standards that will require automakers to raise their fleetwide fuel economy average to 54.5 mpg by 2025. Automakers cried foul, saying the upcoming standards are costly and out of touch with the current market (i.e. low gas prices and people gobbling up crossovers, pickups, and SUVs). 

It is expected that the 54.5 mpg average will drop, but no one is sure how much it would drop.

Reaction to this announcement has been mixed. Automakers and lobby groups approve of this move as it allows them to focus on building vehicles people want, instead of being pushed into building vehicles that will not sell.

"The Trump Administration has created an opportunity for decision-makers to reach a thoughtful and coordinated outcome predicated on the best and most current data," said Mitch Bainwol, chief executive of the AutoAlliance, an industry lobby group that represents a number of automakers including Ford and GM.

Other groups are not so pleased with this move.

"Today's announcement of backtracking on vehicle standards for model years 2022-2025 puts at risk tens of billions of dollars of fuel savings for consumers and big reductions in tailpipe emissions," said Therese Langer, transportation program director for the American Council for an Energy-Efficient Economy, in a statement.

"Any delay in settling efficiency standards introduces uncertainty that will disrupt manufacturers' product planning. What is certain is that technological stagnation is not a recipe for continuing the remarkable success our domestic manufacturers have achieved in recent years."

Democratic U.S. Senator Edward Markey of Massachusetts tells Reuters this move could actually hurt consumers.

"Filling up their cars and trucks is the energy bill Americans pay most often, but President Trump's roll-back of fuel economy emissions standards means families will end up paying more at the pump," said Markey

Source: Automotive News (Subscription Required), Reuters, Roadshow

Hatchbacks have never sold well in the U.S., but that could be changing thanks to new entrants and hotted-up models. According to a forecast done by IHS Markit, sales of hatchbacks are projected climb 19 percent this year. By 2020, the firm projects sales of 567,000 hatchbacks. What has changed?

Some of this comes down to hatchbacks finding a niche market. Michelle Malcho, spokeswoman for Chevy cars and crossovers tells The Detroit News that active, urban buyers who are wanting a bit more functionality with their vehicle are turning to hatchbacks.

“I think the U.S. likes the functional thought. The hatch for some people offers that without stepping up to that next level ... It really does fit what you need to do on a daily basis,” said Malcho.

Helping out are new models and hotted-up versions. The Chevrolet Cruze hatchback made up 10 percent of the model's total sales in January. Over at Ford, the sales of hotted-up versions of the Fiesta and Focus grew 21 percent last year.

But Stephanie Brinley, senior analyst with IHS Automotive cautions this will only cause a slight spur some growth in the compact class.

“Hatchback sales have not traditionally been good in the U.S. It’s a relatively small opportunity ... they should help stem the losses in the (small car) segment,” said Brinley.

“The cars are just so much better than they were, and it’s no longer a penalty (to drive a hatchback). It’s taking a while, but people are starting to understand.”

Source: The Detroit News

Since President Donald Trump was elected, automakers have been pushing for him to relax the stricter fuel economy and emission regulations coming into effect by 2025. Now there is another group calling for this.

At the National Automobile Dealers Association (NADA) annual conference, dealers voiced support for the new president ease the upcoming regulations. 

"You inflate the price of the vehicle and a car that was maybe within reach of being affordable now may not be," said NADA's new chairman, Mark Scarpelli to Reuters.

Scarpelli argues that the tech needed to improve fuel economy adds $1,500 to $3,000 to the price of a vehicle. He also says that a "different phase-in period" for the regulations would be welcomed.

The big argument dealers are using is the regulations would cause automakers to build vehicles that buyers aren't interested in.

"They've got to make regulation more in line with consumer demand so (the automakers) can build what people want and not what the government’s telling them they have to build," said Pete DeLongchamps, vice president of Group 1 Automotive Inc.

Source: Reuters

The CEOs of Detroit's three automakers met with President Donald Trump this morning to talk about investments. Specifically, investments into U.S. manufacturing. 

"We have a very big push on to have auto plants and other plants -- many other plants," Trump told reporters at the meeting. “We’re going to make the process much more simple for the oil companies and everybody else that wants to do business in the United States.”

During the meeting, Trump told the CEOs that he plans on cutting corporate tax rates to 15-20 percent, and reduce regulations by 75 percent.

“We think we can cut regulations by 75 percent. Maybe more. When you want to expand your plant, or when Mark wants to come in and build a big massive plant, or when Dell wants to come in and do something monstrous and special -- you’re going to have your approvals really fast,” said Trump. 

One regulation that is likely going to be shown the door are the EPA's 2025 fuel economy regulations which were set in stone during the final days of President Obama's tenure. Automakers have been asking President Trump to rethink the aggressive mandates set by the agency.

“I am, to a large extent, an environmentalist. I believe in it. But, it’s out of control,” said Trump.

After the meeting, Ford CEO Mark Fields seemed the most upbeat when speaking to reporters.

 "As an industry we're excited about working together with the president," said Fields.

GM CEO Mary Barra said she sees a “huge opportunity” with working with the president to “improve the environment, improve safety and improve job creation.” FCA CEO Sergio Marchionne was less enthused than the other two, stating the meeting was a positive one.

Source: Automotive News (Subscription Required), Detroit Free Press

Technology is moving at a rapid rate and it seems every aspect of our lives are affected by it. Take for example cars, many believe in the future that cars will be fully self-driving and be powered by some sort of alternative powertrain. One person believes that kids born now will not even need a driver's license because of this technology. 

Henrik Christensen, head of UC San Diego’s Contextual Robotics Institute said in an interview with The San Diego Union-Tribune said in about 10 to 15 years, autonomous vehicles will be a regular part of our lives.

“My own prediction is that kids born today will never get to drive a car. Autonomous, driverless cars are 10, 15 years out. All the automotive companies — Daimler, GM, Ford — are saying that within five years they will have autonomous, driverless cars on the road,” said Christensen.

The paper asked Christensen his feelings on future generations not driving, he said,

“I love to drive my car, but it’s a question of how much time people waste sitting in traffic and not doing something else. The average person in San Diego probably spends an hour commuting every day. If they could become more productive, that would be good. With autonomous, driverless cars, we can put twice as many vehicles on the road as we have today, and do it without improving the infrastructure.”

Christensen also believes car ownership will be a thing of the past as well.

“There would be no need to have parking garages in downtown San Diego. In theory, you’d get out of the car and say, ‘Pick me up at 4 PM.’ Long-term — we’re talking 20 years into the future — you’re not even going to own a car. A car becomes a service.”

Do you think Christensen is on the right track or is his head in the clouds?

Source: The San Diego Union-Tribune

The Takata Airbag recall now stands as the largest vehicle recall ever due to how many vehicles around the world use them. In the U.S. alone, 19 auto manufacturers have recalled 49 million vehicles with the airbags that can shoot out shrapnel in the event of an accident. 11 deaths and 184 injuries in the U.S. have been linked to these airbags. Due to this, Takata has been facing numerous lawsuits and investigations. A new report says that Takata is close to closing one of those investigations.

The Wall Street Journal has learned from sources that Takata is in negotiations with the U.S. Justice Department about a possible settlement. The deal would see the Japanese supplier pleading guilty to criminal misconduct and paying a fine ranging from hundred of millions to $1 billion. The settlement could be finalized early next year, but sources say the timing could slip.

Reaching an agreement with the Justice Department would put Takata in better standing when it comes to another supplier (possibly Autoliv) taking over the company. It would also close one door in a massive scandal.

Source: Wall Street Journal (Subscription Required)

More and more police departments are going towards crossovers and SUVs for their fleets. According to Automotive News Canada, police departments are going with these vehicles over their sedan counterparts as they are able to fit all of their equipment needed on a daily basis. Officers like them as crossovers and SUVs are easier to get in and out.

“We’re all dealing with the same issue, and that is the vehicles are getting smaller, yet there’s still demand for more gadgets and equipment put into those cars. It’s always a bit of a tradeoff and a challenge to make it all fit,” Julie Furlotte, the Royal Canadian Mounted Police's national mobile assets manager.

The RCMP's current fleet is made up of around 1,200 to 1,300 police package sedans and 1,600 police package utility vehicles. 

There is also another plus point for utility vehicles, durability. 

“I’m hearing from my customers anyway that when they look at the sedan versus the SUVs, the SUVs are a little bit more expensive (but) they actually get better durability out of them,” said GM Canada’s manager of fleet marketing and government sales.

There is the question of the performance gap. Pursuit vehicles are mostly sedans as they offer better than their utility counterparts. But that is changing.  Sgt. Michael McCarthy of the Michigan State Police (MSP) precision-driving team - they're the group behind the annual test of pursuit-rated vehicles - says the performance gap is shrinking.

“LAPD (Los Angeles Police Department) are buying a larger percentage of SUVs than they are of the sedans. They are very capable. They have a fairly short turning radius. They’re deceptively fast.”

Source: Automotive News Canada (Subscription Required)

There is a right way and a wrong way when it comes to testing autonomous vehicles on public roads. Uber has demonstrated the wrong way.

Yesterday, the company launched eleven driverless Volvo XC90s in San Fransisco as part of a pilot program. But by late morning, two of the eleven vehicles were running amok. The San Fransisco Examiner got their hands on a dash cam video showing one of the XC90s running a red light at 10:37 A.M. Later that morning, a freelance producer and writer tweeted “Just passed a ‘self-driving’ Uber that lurched into the intersection on Van Ness [Avenue], on a red, nearly hitting my Lyft.”

“It was close enough that both myself and the driver reacted and were like, ‘Shit. It stopped suddenly and stayed like that, as you see in the photo,” said Annie Gaus to the Examiner.

Because of these incidents, the California Department of Motor Vehicles ordered Uber to halt the program.

In a statement obtained by The Truth About Cars, Uber said the incident on video was due to human error and not the technology. 

“This incident was due to human error. This is why we believe so much in making the roads safer by building self-driving Ubers. This vehicle was not part of the pilot and was not carrying customers. The driver involved has been suspended while we continue to investigate.”

Not the most reassuring statement considering said vehicle looks like one from the pilot program. At the moment, Uber has drivers in the self-driving vehicles to control them in case of an issue.

But there is a bigger problem at hand. Uber did not have the permit to legally have their autonomous vehicles on the road. A press release on Uber's Newsroom announcing the program said they didn't need one. Here are the paragraphs in question,

"Finally, we understand that there is a debate over whether or not we need a testing permit to launch self-driving Ubers in San Francisco. We have looked at this issue carefully and we don’t believe we do. Before you think, “there they go again” let us take a moment to explain:

First, we are not planning to operate any differently than in Pittsburgh, where our pilot has been running successfully for several months. Second, the rules apply to cars that can drive without someone controlling or monitoring them. For us, it’s still early days and our cars are not yet ready to drive without a person monitoring them."

Unsurprisingly, the California DMV is not happy with Uber and threaten legal action if Uber did not halt the program and obtain the permit.

“If Uber does not confirm immediately that it will stop its launch and seek a testing permit, the DMV will initiate legal action,” wrote DMV attorney Brian Soublet in a letter sent  Anthony Levandowski, who heads Uber’s autonomous car program.

This isn't the first time Uber's autonomous program has found itself in hot water. Back in September, Quartz reported on the issues Uber was having with their autonomous program in Pittsburgh from a vehicle going the wrong way down a one-way street to a minor accident.

Source: San Francisco Examiner , (2), The Truth About Cars , Quartz, Uber Newsroom
Pic Credit: Uber

Only a couple of months after electric vehicle start-up Lucid Motors came out of the dark and unveiled an unnamed prototype vehicle, they have unveiled their first model named the Air. The model is taking direct aim at Tesla and their Model S sedan.

The Air is powered by two electric motors - one on each axle - and can be paired with either a 100 kWh or 130 kWh battery pack. Total output stands at 1,000 horsepower. In terms of range, the 100 kWh battery pack is estimated to provide over 300 miles and 130 kWh battery pack is estimated to provide around 400 miles.

Outside, the Lucid Air looks like something out of Minority Report. The front is short and features slim headlights and 'grille'. The windshield extends over the driver's head to make the interior feel more airy. The back reveals a short decklid and an extended roofline. The interior looks richly appointed with reclining rear seats, a number of screens, and a 29-speaker audio system. Despite overall exterior dimensions being close to a Mercedes-Benz E-Class, Lucid promises interior space to be on par with larger sedans.

Lucid Motors is making the Air ready for Level 4 autonomy - a system where it can control the vehicle in most conditions and don't require a lot of attention from the driver. There are six radar modules, eight cameras and four LIDAR sensors around the vehicle. The Air will display any obstacles it detects on the dashboard to give the driver some confidence in the system. Whether the Air will launch with Level 4 autonomy capability remains to be seen as this is still working its way through the legal system.

Pricing hasn't been finalized, but Lucid estimates the Air will begin somewhere around $160,000. Production is expected to begin in 2018 at a new factory in Arizona.

Source: Automotive News (Subscription Required), Roadshow

The past few years have seen a number of start-ups tackling an issue that has been a thorn in the side of consumers, buying a used car. Companies such as Beepi, Carvana, Shift, and Vroom have their own take on selling used vehicles, but the goal is the same - make it less of a hassle to buy a car by selling directly to a consumer through the internet at a lower price. But one of these companies has folded most of their operations.

Beepi, one of the first companies to launch back in 2014 folded most of its operations last week and announced yesterday that it would be merging Fair.com, a soon to launch online vehicle retail platform. As a result, 180 people lost their jobs while the remaining 80 employees and Beepi CEO Ale Resnik will move over to Fair.com.

"It's disappointing. We were collectively working to make a massive industry better. I was in support of what they were trying to do -- to bring more visibility to us all," said Gaurav Mishra, chief marketing officer for Vroom Inc. to Automotive News.

Beepi's business model worked like this; a consumer would contact Beepi about selling their vehicle. The company would send out a team member to inspect the vehicle. If it meets their criteria, pictures of the vehicle would be taken and would be posted online. If someone decides to buy the vehicle, Beepi will deliver the vehicle with a bow. If the vehicle didn't sell within 30 days, Beepi would offer to buy them.

Seems like a good business plan except for one thing, a buyer couldn't test drive the vehicle. Alan Haig, president of buy-sell advisory firm Haig Partners said one of the big issues for these companies is that a customer cannot kick the tires. A study done by Auto Trader back in 2015 backs this up with 90 percent of shoppers would not buy a vehicle without doing a test drive.

"Eighty-eight percent of consumers say they will not buy a car without test driving it first. (Beepi) spent millions of dollars on TV and radio trying to convince consumers that buying without ever seeing a car is the future. We, on the other hand, provide customers with an amazing test drive delivered to your door experience," said Shift CEO George Arison in an email to employees and obtained by USA Today.

This email also revealed that Beepi reached out to Shift about possibly buying them.

Beepi also lost one of their major backers earlier this year. TechCrunch believes that SAIC which was revealed to be an investor last year decided to pull out. It is unknown as to why SAIC decided to leave.

"There are plenty of companies out there claiming to be on the cusp of 'obsoleting' the traditional car-buying process, but it’s easier said than done, and nobody has accomplished it despite a lot of time and money spent trying," said Karl Brauer, an analyst with Kelly Blue Book.

Source: Automotive News (Subscription Required), TechCrunch, USA Today