The news from Europe is like a broken record: cut costs; cut costs; cut costs…and cut them again. And issue profit warnings, as BMW did last week, warning that pre-tax profit is set to drop 10% or more, on the heels of an earlier warning about a month or so ago. Ford is cutting 5,000 jobs in Germany; Volkswagen is cutting 7,000 just at its VW brand. Everyone is talking to everyone else about platform, technology, engine and component sharing.
What’s driving this latest round of cost cutting? Before we get into the specifics, let’s remind ourselves that the automobile industry has been cutting costs…forever. The earliest cars were extremely expensive, and Henry Ford saw a huge opportunity. As did Alfred Sloan. And the opportunity for competitive advantage—or just trying to keep up with the rest of the industry—by cutting costs faster has never ended, although there have been periods of complacency. Real (adjusted) labor costs have grown faster than other costs, and thus the perpetual and relentless drive for efficiencies.
But this current crisis in Europe is being fueled by a number of factors that didn’t exist before, making this an unprecedented event.
The issues are manifold; an unwelcome convergence of geopolitical and regulatory disruptions and a technological revolution. Brexit, China-US trade/tariff issues, China’s economic slowdown, the diesel’s death sentence, CO2 standards, WLTP (the new EU emission testing scheme), mobility alternatives, a demographic decline, and of course the real elephant in the room: the transition to EVs.
The last one is the biggest single drain on manufacturer’s capital: they see no choice but to commit billions to EVs, without knowing if the market will be there, or develop quickly enough. Or profitably. Almost certainly not, at least for the first some years. Battery costs are still well above the cost of an IC engine. And a huge efficient and profitable supply chain making IC drive trains is going to be deeply impacted, if not largely destroyed. Developing a whole new industry for battery production on a comparable scale will soak up vast amounts; over $100 billion in commitments have already been announced.
If there was any remaining doubt about EV’s being the way forward for the German manufacturers, it was dispelled this past week. From electrive.com:
During a (joint 40 minute) call, executives of VW, BMW and Daimler have agreed on a common approach towards electric mobility following Volkswagen’s recent demand for technological clarity. Insiders report the trio being in agreement that the future belongs to battery-electric vehicles.
In the coming decade, battery electric mobility will be the only technology to enable carmakers to comply with environmental laws in the EU, claim the Germans. Apparently now, the bosses of the big three, VW, BMW and Daimler jointly agree that the focus will be on battery-electric cars. The trio do not think fuel cell cars will be ready for market in the next ten years.
VW’s “demand for technological clarity” is a push to get the VDA, Germany’s powerful automobile industry association behind EVs and lobby for a change in the German incentives for EVs, to increase them for shorter EVs, like VW’s upcoming ID cars, and reduce them for longer sedans, like the Tesla Model 3. VW wants as much federal support as possible for its huge investment.
Speaking of Tesla, European deliveries of its Model 3 started in mid-late February, and it quickly became the best selling EV in Norway and the Netherlands, and was trending to the #1 spot in Germany as of mid March.
But without yet having any confidence in being able to build EVs profitably for the initial ramp-up period, which may take some years, manufacturers have no choice but to slash costs associated with their existing IC-related operations in order to free up necessary cash and maintain some semblance of a decent profit margin.
BMW’s profit margin for 2019 will be in the 6 – 8% range, well below their stated target of 10%. Ford is struggling to just break even, and is looking at its ever-deepening alliance with VW to jointly build two different vans and for Ford to use VW’s new EV platform. And for VW to share Ford’s autonomous technology (Argo). From an autonews.com article:
VW Group CEO Herbert Diess said the joint development is worth the effort for both sides: “It’s mitigation against potential cost increases because of the new drivetrains we need for the electrification in this segment and also the CO2 penalties we are facing,” he said.
The Ford-VW alliance could extend to combining autonomous vehicle development while Ford is considering whether to use VW’s MEB platform for EVs. “It’s an attractive area,” Ford CEO Jim Hackett said. “Both the EV and AV are big costs for investment. Both are really important to both companies’ future. That is part of the incentive to find ways to cooperate.”
One way costs are being cut is by eliminating complexity, whoever possible. VW plans to drastically reduce the various stand-alone options and bundle them, as has become the norm in the US.
VW brand COO Ralf Brandstätter cited the Golf as an example in an interview last November. “In 2018 [so far] we have sold about 84,000 Golfs in Germany of which more than 58,000 had a different configuration. Fewer than 400 models were identical,” he said.
By bundling options and increasing the number of identical models, you need less logistics space, optimize your supply chain and reduce lead times, he said. Under the VW brand’s Future Pact, the company targets 3 billion euros in cost cuts through 2020.
Germans have typically ordered their new cars; that’s bound to change. It’s inefficient, as the Japanese showed the Americans back in the late 60s. Volvo is at it too:
“The XC40 [compact crossover] is essentially a one-spec, high-price car,” Lex Kerssemakers, head of Volvo in Europe, told journalists in January. “We don’t want to go back to the days of Henry Ford and say, ‘The only color is black.’ But I think we are at a turning point. People don’t buy complexity any more. It also brings our cost down.” Volvo is planning to reduce options further later this year.
Volvo, along with PSA, have become low-cost leaders in Europe.
“Circumstance forced us to reinvent ourselves when the Ford era ended [in 2010 and Ford sold the company to Zhejiang Geely Holding],” he said. “Geely did not come in with a bag of gold. We had to finance it [Volvo’s revival]. And when you are poor you become very inventive,” he said.
When it created its Compact Modular Architecture it saved by co-developing the platform with sibling brand Geely Automotive.
Volvo also made sure there was plenty of carryover from its larger Scalable Product Architecture. “With one engine bay, one firewall layout and the same engine family, you start to be extremely efficient,” Kerssemakers said.
Platform and engine sharing is expanding drastically, as automakers seek to cut back to just one or two flexible “building blocks”. This was the key to Opel’s rapid turnaround after being bought by PSA. Opel is dropping from nine platforms and ten powertrain combinations to two platforms and four engines.
Engine sharing is rapidly on the rise. PSA’s 1.2 L turbo gas engine is being built in six countries all over the globe. And PSA is eager to sell it to anyone who wants it. Evercore ISI analyst Arndt Ellinghorst says;
“With the exception of certain sports cars, full-size pickups and larger premium offerings, we believe that the powertrain is of diminishing interest to the vast majority of consumers,” he said.
Continuing to invest in combustion engines on a stand-alone basis is a “flagrant waste of capital,” Ellinghorst said. By treating engines as a commodity and buying from suppliers, the industry could save $30 billion a year, Evercore ISI predicted.
Speaking of shared platforms: the hot story as reported by the German Sueddeutsdche newspaper was that BMW and Mercedes are in talks to develop common platforms. The potential saving for each firm would be some seven billion euros each. From electrive.com:
The German report also states that cooperation is notably driven by Mercedes’ development director Ola Källenius, who will be taking over from Dieter Zetsche as the new Daimler boss in May. One of the reasons is that the cost structure at Mercedes is significantly less favourable than at BMW. As is well known, the Bavarians are relying on a so-called convergence architecture for their electric offensive, according to which cars of different motorizations are produced on one platform and also on one production line. Mercedes’ strategy, on the other hand, is split into an electrical construction kit for electric branch-offs of existing models and one for independent (premium) electric vehicles. Both approaches could quickly reach their limits as demand for the vehicles rises, which would explain the cooperation intentions.
What will be left to distinguish a Mercedes from a BMW? The exterior skin, the interior, and the software, presumably?
However, it is also clear that parts of the savings potential would probably have to be reinvested in differentiation so that future BMW and Mercedes-Benz models based on the same platform would be sufficiently different. The preservation of the respective brand cores is an issue for both companies. Because despite the different approaches, both manufacturers are still courting the same target groups.
I would not be surprised if within 10-15 years, BMW and Mercedes merge their automobile operations. Germany Inc. will do whatever it takes to stay competitive.
Meanwhile, PSA, the undisputed champ at cost cutting, has announced that it is ready to swallow bigger fish after having digested Opel so well. CEO Carlos Tavares has the backing of the Peugeot family to pursue other acquisitions.
“We supported the Opel project from the start. If another opportunity comes up, we will not be braking, Carlos knows that,” Robert Peugeot said. There were no concrete projects at the moment, he said. “The Opel operation is an exceptional success, we didn’t think that the recovery could be as fast,” he told the paper.
The primary candidates? JLR and FCA. JLR is struggling currently, but just how good a fit it is with PSA is a question, as its luxury platforms don’t offer the obvious synergies as did Opel’s. Meanwhile, FCA would give PSA a huge opneing into the US market, which it has already committed to re-entering. And although FCA didn’t comment, there was some indication that FCA is reluctant to increase its exposure in Europe, as it’s seen as a difficult and shrinking market. Maybe PSA should knock on GM’s door instead?
Who could have foreseen that PSA would be the company all the Europeans are having to chase after, in terms of cost-cutting? And what of the old saying “You can’t cut your way to prosperity”? Actually, the long history of the automobile industry shows otherwise, and PSA is clearly proving it to be the case currently.
Some of this rings true. It appears to me that fewer and fewer people care about what they drive. I think you could give 90% of the US population a gray RAV4 and they would be perfectly happy. The market is changing and automakers must change along with it.
There have always been a significant number of people who viewed a vehicle simply as means to get from Point A to Point B with a minimum of fuss and expense. In the 1960s, they drove Ramblers and stripped versions of Big Three compacts and intermediates (depending on how many people they regularly transported).
I’m sure it will be the same as we transition to alternative power plants. Some people won’t care, and some people will still want their alternative-power vehicle to look or drive in a specific way. It will be up to the manufacturers to find which market “niche” they can best serve.
I think you’re overlooking something very key. Yes, the basic underlying vehicle will become increasingly homogeneous, but the key differentiator will be tech. It’s what drives folks to buy different phones or tablets or digital assistants. Cars are going to become the “chassis” that supports various tech functions: entertainment, various types of driver assists/autonomy, and whatever else all the tech folks can think of to stuff in a car.
This is why car companies are only hiring in one area: software. In fact, they can’t hire software folks quickly enough. Software will be the key difference, just like an iPhone is different from an Android phone, and more.
My partner, who drives a gray RAV4 Hybrid and is perpetually amused at my encyclopedic knowledge of automobilia, would agree with your statement 1000%!
Thank you, Paul, for another interesting piece of the big automotive picture. If only this country could invest in renewables like Europe, so we don’t just burn more coal to make all the extra electricity. I’m afraid in the long term the US may end up the backward one as everywhere else goes into the future.
Like the vast differences between our automotive markets, the US and European environmental policies reflect local conditions, and each region has their share of challenges, successes, and failures.
Case in point, the EU auto manufacturers are playing catch up on the electrification front partially because they promoted diesel engines as both clean and low in CO2 emissions. The Volkswagen cheating scandal shattered that argument, and more importantly reduced air quality in the name of profits. I might also note that the environmental scientists that exposed the cheating were located here in the US.
When pointing to regions lagging in environmental policy, look to the emerging markets.
Contrary to the rhetoric from certain quarters, the large-scale switch in this country has been to cleaner natural gas, which has resulted in a decline of carbon dioxide emissions.
This country is investing in renewables, and coal use drops each year.
35% of Germany’s electricity comes from coal vs. 27% in the US.
This is going to be interesting. I have long argued (with some significant pushback from several here) that CAFE forced the American industry to completely re-invent what it built and how it built them. Those regs largely left the generally much more efficient cars from Europe and Japan alone. European and Japanese environmental regs had the same effect they had on the US industry before CAFE – it was significant but not soul-altering.
We are now looking at the first time Japanese and European companies are having to go back and re-invent themselves and their products. The American companies of the 80s survived in part because (tarriff-protected trucks aside) they began building cars like the Euro/Japanese companies built. Now the reverse is true, and the companies abroad are having to learn how to build cars like Teslas.
CAFE was in essence a mandate that for US automakers to build Honda Accords. Yes US automakers got too bloated and wasteful, Yes they fought tooth and nail presumably wasting lots of money that could be better spent in the process, but despite these common and valid counterarguments, they don’t address that core issue – No Japanese automaker had to change a thing on their products to comply, American automakers had to change everything on their products to comply.
Ultimately this will end the same way for the Euro brands this time around too
No Japanese automaker had to change a thing on their products to comply, American automakers had to change everything on their products to comply.
Oh my…that’s taking things a bit far. CAFE played a part, but what really changed things was a changing market. Let’s not forget that the Vega and Pinto came along years before CAFE. And a whole lot of other small-car dreck out of Detroit.
The big car market was in decline; frankly it had been ever since about 1965, after the Mustang and a wide range of mid-sized cars started gobbling up an ever bigger share of the market. That combined with a trend to smaller families, and two car households, and other big trends sweeping the country all conspired to make the big car increasingly obsolete.
But even then, the big car didn’t die. Sure, the 1980-up big cars suffered from crappy little engines and weak transmissions for a few years, but that was in direct response to the 1979 energy crisis.
If Detroit had done a better job with the technology sooner, big cars could have been essentially unaffected by CAFE. If the Olds diesel V8 had been a solid engine, and gotten turbocharging, it could have made a terrific solution to CAFE without neutering the big car, for those that still wanted one.
As it was, what was wrong with big cars after about 1985 or so, when they got FI? They were plenty powerful. But the market continued to move on, away from big cars.
I don’t buy the argument that CAFE killed Detroit. Detroit killed itself for failing to see that the market was moving away from big cars, starting already in the late 50s. And that was just a foreshadowing of what was to come.
The ridiculous extremes of Detroit’s finny monsters in the late 50s dented their image forever. Yes, folks kept buying them, but as other/better alternatives came along, not so much so.
Let’s face it; whether you like it or not, CA really is the bell weather for the rest of the country. And big cars were already quite “out” there as family cars starting long before CAFE was ever dreamed up.
And I don’t buy the argument that pickups became popular because CAFE killed the big car. Pickups and SUVs were part of the same trend: the fragmentation of the market. Folks were sick of all riding in the same old same old big sedan. Everybody wanted to drive something that reflected their personality. That’s what the 60s were all about, right? And big sedans were the victim of that, not CAFE.
Almost nobody drove a truck or 4×4 in the 50s or early 60s as every day transportation. But this huge swing to individualization and fragmentation suddenly made them cool. And this really appealed to those living away from the “leftie” coasts; now conservative folks could embrace individualized transportation too.
Did Detroit ever take small(er) cars really serious? Not since 1960, when they gave it a decent shot. But they quickly got distracted again.
Update: the only significant thing CAFE did to the Big 3 was to force them to keep building their crappy small cars at a loss because the market wouldn’t value them as being worth more. But whose fault was that?
What you say is not wrong, but I think it only looks at a partial picture. The big American car was basically dead after 1979. The 1977 B body was a pullback from the heady excesses of 1969-71 and in many ways an improvement. That might have been a good platform going forward but CAFE was a large part of it being jettisoned everywhere but at Cadillac (and Chevrolet) after 1984-85. By 1985, without exception every single big car had had every ounce of appeal sucked out of it. The 77-79 Cadillac with its 425 had been a car with the kind of power someone expected in that class. The 307 that it got saddled with (especially coupled with the tall axles to game the EPA estimates) was not. By 1985-86 there was just no need to compromise on power given gas prices back to normal. But these cars were made for that temporary world where it was still 1979-80.
Think about this – the 85 Crown Victoria/Grand Marquis was on the same wheelbase as a 1964 Olds F-85. It made a good Grandpa sedan but a terrible sedan for a young family. Plus all of the lower priced versions disappeared because all manufacturers had to ration them to stay CAFE compliant, and did so by running the prices up. We can say that younger people didn’t buy what was offered, but we also have to recognize the economists point of view that we must look at what was not offered. And none of the manufacturers dared to make any mainstream version of the car appealing to younger buyers or more powerful because if they sold more then they would have to start throwing in a free Escort with each purchase.
I spent a lot of time in the final big sedans. But I bought them all old, used and cheap. I would never have spent new car money for one of those as they were just excruciating to drive for lack of power. Old timers bought them because they could afford them, the cars were what they were used to, and because they didn’t really need the room or power afforded by something more like an Olds 88 of the mid 60s. I had 3 kids in car seats and could barely squeeze them into my 1984 Oldsmobile 98 – a car that everyone claimed was a full sized car. It had the length (119 inch wheelbase) but not the width or the motive force to make it a really pleasant choice for family use. My 93 Vic was (blessedly finally) a good driver but it was just too small to be really satisfactory for a family of five.
You argue that everyone who could afford one jumped to a Suburban because it was a style thing. But then we were in a world where there was no equivalent of a 1969 Country Squire. If you wanted a car with the width that made for genuine room and something that provided the power of the old 390, well then you had no choice but a Suburban. And would the Suburban have developed in refinement the way it did if there had been something as roomy available as a passenger car? Remember that the Suburban only started becoming really popular as a well-equipped vehicle when rich Texans could no longer get a really big Cadillac to pull the Airstream or the horse trailer. We will never know if a big passenger car could have found a market after gas came back down because such a passenger car was made an uneconomic proposition for reasons that had nothing to do with the wishes of buyers and sellers. Buyers may buy all of these trucks today for style reasons. But then again there is nothing around on the passenger car side that is a reasonable substitute. Which was not true before CAFE.
think about this – the 85 Crown Victoria/Grand Marquis was on the same wheelbase as a 1964 Olds F-85. It made a good Grandpa sedan but a terrible sedan for a young family.
In 1985, any young family that didn’t live under a rock and could afford a new car bought a Caravan/Voyager, or a Jeep Cheroke, or the corresponding competitors in those classes. Their interest in a low end Ford CV sedan would have been zilch, no matter what was under their hoods.
And those early four cylinder Caravans and 2.5 or 2.8 powered Cherokees were dogs, performance-wise. I’ll bet they were slower than the ’85 CV. And didn’t get any better mileage either, especially the Cherokee. And the Caravan was precisely the equivalent of the CS, except a hell of a lot shorter, meaning the Missus was actually happy driving it to the store. You think women really cared about whether there was a 390 under the hood? My mom was never happier when she ditched her 318 Coronet wagon for an early ’81 Escort with that crappy 70hp four and the weird automatic. She was in love!! Because parking at the A&P was suddenly a breeze.
Jim, time had moved on. In 1985 young families weren’t interested in a big sedan, no matter what was under the hood. The only folks that were buying them new was old folks, and they really didn’t care about the performance anymore either.
I’m only a few years younger than you are…although I married and had children much later. I had zero interest in traditional full-size cars of the 1980s. I had grown up on a steady diet of Oldsmobile 88s (1967, 1976 and 1982 models), and didn’t want one.
During my teenage years, in our small town, there were no dealers selling new imports (aside from the Dodge-Chrysler-Plymouth dealer selling rebadged Mitsubishis). I fervently hoped that my father would come home with a Colonnade Cutlass Salon or Pontiac Grand Am. Which never happened.
If I’d had a family at the time (1980s), I’d have gone with a Taurus wagon or a Chrysler minivan. Even in our conservative region, younger families were already moving to those alternatives. They were new and trendy at the time.
Meanwhile, people were moving to Suburbans because they had a more youthful (and somehow more upscale) image than a Caprice Estate wagon, Oldsmobile Custom Cruiser or Ford Country Squire.
It’s always risky to extrapolate personal experiences to the country as a whole. But that is what I saw happening in our region during the 1980s and early 1990s. Once the Ford Explorer debuted, the switch really kicked into high gear.
“Meanwhile, people were moving to Suburbans because they had a more youthful (and somehow more upscale) image than a Caprice Estate wagon, Oldsmobile Custom Cruiser or Ford Country Squire.”
I get the point that you and Paul are making, but both of you are making the point that young people bought cars that were fresh and new. Minivans were fresh and new in 1984 and Suburbans were hot as all get out in 1993. As was the Explorer and Grand Cherokee. Compare all of these with the larger passenger cars that had been frozen in amber 10 to 15 years earlier. The box Caprice wagon was 15 years old by 1991 and got almost no upgrades in that time – other than a big cut in power. The successor was a bloated ugly mess that was still an ancient car underneath.
I am saying that with CAFE everyone moved to minivans, trucks and SUVs. But there really weren’t any choices in passenger cars that were competitive – particularly with the Suburban. Without CAFE we cannot assume that everything else would have remained equal. Manufacturers would have made their decisions based on customer trends. There was clearly money to be made in larger vehicles – because that has become the only thing that Detroit has done consistently well in over the past 20 years. CAFE was an artificial constraint born of a governmental panic over a short-term phenomenon. If it isn’t doing anything, why do we still have it (albeit in a different version) forty years later?
Without CAFE, would the price of gas stabilized?
CAFE was an artificial constraint born of a governmental panic over a short-term phenomenon. If it isn’t doing anything, why do we still have it (albeit in a different version) forty years later?
So global warming is a short term phenomena?
Are you aware that scientists were already pointing out the coming problem of GW to LBJ? As a future security/economic risk? And that Jimmy Carter put solar panels on the White House in part because of his concern on the issue. And that all through the 1980s. the warnings became ever more acute and dire?
Reducing fossil fuel consumption hasn’t just been in response to the two energy crises. They just gave it some political cover and impetus.
If you really want to understand the history of GW and how it was repeatedly ignored because of political pressure from the anti-GW forces, read this: https://www.nytimes.com/interactive/2018/08/01/magazine/climate-change-losing-earth.html
And how much less CO2 is in the atmosphere today because of CAFE? Good question.
Here’s a magazine cover from 1979.
Here’s a chart showing the continued improvement in US fleet mileage and reduction in CO2 output per vehicle. This is what CAFE is all about, not a response to a shortage of oil. That was in 1979.
I don’t mean to drag this issue out, but that graph is sort of a basic truism, isn’t it? Is there any way that burning less fuel could result in something other than a corresponding reduction in CO2?
And I do not dispute that there were some voices in the wilderness worrying about CO2 in the mid 70s but the big climate worry getting all the attention when CAFE was being debated was a new ice age.
The public and thus the political class was convinced that we were running out of oil and CAFE never would have passed had that not been the case.
Somewhere along the line CAFE morphed from a fuel savings measure to a CO2 reduction measure.
Correct, Jim, and thank goodness.
US carbon emissions by sector, 2018. As natural gas has largely replaced coal for power, industry and buildings, transportation has pulled into #1.
Full sizers weren’t the only segments impacted though. The writing was on the wall for the BIG big cars well before CAFE just as you said but intermediates were very healthy through the 1970s with large dimensions, CAFE pulled all model lines down to “small car dreck” during the 1980s, most notably K cars and all of GM’s FWD cars – RWD B bodies, Panthers and M-bodies merely got stays of executions as fuel costs stabilized, they were all on the downsizing chopping block prior, and is why they never got major updates.
I can’t dispute that the market fragmented and people wanted the next hot thing, but that’s always been the case hasn’t it? Customers can only buy what’s provided to them, they didn’t demand the various segments from thin air. I argue that CAFE limited what could be provided to them in the “car” classification. I don’t believe after years of reading and learning on the subject that “light trucks” was the evil loophole that created the SUV boom, but I still feel it certainly didn’t hurt. Why test the waters with a stylish new sedan with pre-downsized dimensions and packaging when you can market a Ranger with a passenger body as a rugged lifestyle vehicle and not worry about the gas guzzler penalty?
Either way, despite the long branch of debate it still doesn’t really seem like my take is that far. Honda/Toyota/Datsun had full lines of cars each well within the bounds of the initial and projected CAFE standard beforehand, they could(and did) simply use their ever growing revenue to improve and refine those lines of cars(and ironically grow them in size after successive generations). American makes only had their dumpy subcompact penalty boxes in compliance at that point, above that everything from a Nova to a Caprice needed a costly crash diet, and in or out with the trend setting Californians, these were still among their best selling and profitable lines to be put into jeopardy. The resulting half baked and cheapened out crap boxes rushed to the market turned off a massive chunk of their repeat business.
I’m firmly with you that the demographic shifts were far more impactful than CAFE in and of itself, but my conclusion is that CAFE placed an urgency on product planning that may have played out in a less destructive way on a natural course and timetable than the “downsize everything now and cross our fingers” strategy implemented.
GM’s decision to concentrate on smaller big cars (the FWD C/H cars) in the early 80s was in anticipation of expensive gas, not CAFE.
“CAFE was in essence a mandate that for US automakers to build Honda Accords.”
Sadly, too many of the US automakers built Austin Marinas instead. 🙂
The Ford/VW partnership has been running into different visions wrt EVs, as Ford wants to focus on big, expensive, vehicles, while VW wants to focus on smaller, moderately priced vehicles.
Ford executive raises doubts about VW deal for electric vehicles
VW is primarily targeting low-cost, passenger car segments with its battery-car program
“Ford’s bet is on commercial vehicles and performance vehicles,” a top Ford executive says.
https://www.cnbc.com/2019/02/12/ford-executive-raises-doubts-about-vw-deal-for-electric-vehicles.html
This article’s focus is on Europe, not the US. If Ford decided to build a passenger car EV in Europe, VW’s platform will most likely be quite suitable and be used.
In the US, it’s a different story.
That reminds me of another article in French I saw about the Ford-VW alliance. https://www.leblogauto.com/2019/02/alliance-vw-ford-couple-bat-deja-de-laile.html
Ford and VW had once a joint-venture in Brazil in the 1990s who didn’t turned well for Ford as they hoped. http://boitierrouge.com/2017/09/17/ford-versailles-et-royale-lalliance-ratee-de-vw-et-ford-au-bresil/
Btw, I wonder if these news could give some imagination to car fans to photoshop some Fords models to turn them into VW and VW models into Fords? 😉
Btw, I wonder if these news could give some imagination to car fans to photoshop some Fords models to turn them into VW and VW models into Fords?
Given Ford’s lack of interest in small cars, the Fiesta and Focus are both being dropped in South America this year, and Hackett’s comments about the future of Ford Europe being “Ford *brand*” cars, rather than saying “Ford cars”, I wouldn’t be surprised if Ford Europe’s future is as a marketing company pedaling badge engineered Skodas.
If Electric was the way, IS the way, to go, then let it compete on its own merits. No subsidies.
Electric is the way to go for a more controlled society, where the hoi polloi have less choice about their transportation options.
By now, it’s become obvious, even to doubters like me, that the EU is the Trojan Horse for German domination of Europe. In that context, the German automakers’ moves make perfect sense (recall that, if Detroit was the arsenal of democracy, Daimler Benz and corporate Germany were the arsenal of the 3rd Reich)
By developing a “standard” electrical template, the German automakers are developing a “Euro” electrical template. THis will keep the outsiders (Asians, US) out, and also keep other Europeans out. ALL of Europe will subsidize the costs of Electrical cars, but the profits will accrue to corporate Germany.
How lucky those Europeans are to have the enlightened Germans lead the way!
No…I much preferred things when German cars represented ‘useful’ expertise–that is to say, going fast with out using lots of fuel, in stylish package that conveyed an image of quality, vs electronic gimmickry.
The new electric cars won’t use any fuel, of course. But the level of control electric vehicles offer to the state and corporate world, I don’t like in general. And with Germany, even less so.
The environmental gains are dubious, the power grid will need to be made larger and more robust, and we will need more nuclear…or we will need to use less electricity in general.
If Oil was the way, IS the way, to go, then let it compete on its own merits. No subsidies.
Keep in mind that the reason diesel became so popular in Europe was because of a massive subsidy for it in the form of reduced taxes.
And congratulations! You’ve proven Godwin’s law again! https://en.wikipedia.org/wiki/Godwin%27s_law
The Germans are not creating a “template” for all EVs. Where do you get that idea? They’re just pushing their industry association and the German govt. (not the EU) to modify subsidies to favor smaller, more affordable EVs and not larger, more expensive ones. But these subsidies are available for all manufacturers.
Yes, it’s going to be WW3, and this time the Germans will use EVs instead of panzers to finally create world domination.
I don’t think so.
My sense in Europe is that, by now, many companies that were household names in the 70s and 80s have either gone under, or been bought by German firms.
My sense is that, without the single European currency, had the D-Mark continued, it would have inevitably risen in value, which would have made it harder for German products to compete outside and even inside Germany, and help ‘balance’ things inside Europe.
The Euro has proven a boon for German industry, and disaster for southern European countries that had always relied on inflation to ‘bail themselves out’, since they can no longer inflate their way out.
Developing a common standard is prudent–I give the German automakers a lot of credit. It’s not all selfless. It will also help cement their control over this growing field that so many influential people are so enamored of. What other European automakers are going to compete with them? Peugeot? Renault? FCA? The British? No. But if they do, it will be on the German auto industry’s terms. And as this product matures, the profits will accrue to…corporate Germany.
It would be prudent for GM and Tesla to work together to do the same here. I’d say, it would be prudent for ALL of them to develop a common standard.
On the subject of electric technology, this story illustrates how fast that technology is moving. It certainly wasn’t something I was expecting to see, for a decade or even more.
https://www.theglobeandmail.com/canada/british-columbia/article-top-seaplane-airline-harbour-air-switching-to-battery-powered-aircraft/
Yes, indeed, electric airplanes! The short hop between Victoria and Vancouver, BC, is an ideal way to get started on commercial operations. It takes over three hours by car and ferry, just 30 minutes harbor to harbor by seaplane.
If PSA merged with FCA, they could call it Franco-Italian-American-Transportation.
Or French Italian & American Trouble? 🙂
How about Franco American Motors?
Or Franco-Italian American Motors? 😉
“French Italian & American Trouble”
😂👍
WLTP (the new EU emission testing scheme)
I will let a couple of citations from Wikipedia expands what WLTP is:
The worldwide harmonized light vehicles test procedure (WLTP) is a global harmonized standard for determining the levels of pollutants and CO2 emissions, fuel or energy consumption, and electric range from light-duty vehicles (passenger cars and light commercial vans).
Automotive experts from the European Union, Japan, and India, under guidelines of UNECE World Forum for Harmonization of Vehicle Regulations, developed the standard with a final version released in 2015.
I keep wondering whether United States will finally move away from EPA and CARB regulations and embrace the WLTP. That would reduce the burden and cost of engineering the mechanical systems, programming the ECUs, and certifying the vehicles individually for two (or three if you count CARB) different emission control standards as well as ensuring that no cheating techniques were allowed.
It makes no sense for the United States and, to the extent, Canada to have their own regulations when many countries have adopted or implemented UNECE WP.29 regulations, including China, the biggest automotive market. As the history has shown many times, the American manufacturers often missed the boats when they were slow to change with the sudden shift of comsumer demand, especially during the oil criseses of 1973 and 1979 as well as the Great Recession of 2008-2010 which saw the fuel price spiking up so much. If United States had never come up with FMVSS and EPA in the 1960s or had adopted the UNECE WP.29 (in 1958 when the regulations were adopted), the American manufacturers would simply build their European equivalent of small cars in the United States without extensive reengineering work and certification process.
Australia is very similar to the United States in geographical sense and consumer preference, yet Australia has the most robust automotive market with wider range of choices, including brands, engine and gearbox choices, body styles, etc.
Another argument is that ITU-P has standardised many of telecommunication regulations which are used by many countries. Today, it’s amazing to be able to travel to different countries and use the same mobile phone, same computer, etc.
“as well as ensuring that no cheating techniques were allowed.”
I’m not sure how harmonized standards ensures a lack of cheating- Volkswagen had to build software that defeated at least several regional standards, and got away with it for multiple model years. Building software to cheat a single standard appears to be the easier task.
Also, I’m not sure I want US cars built to Euro standards- We have a greater focus on HC emissions, since they lead to ozone formation in cities with high UV concentrations. Since Europe on average further north, this issue receives less emphasis. (They do have a strong focus on NOx emissions due to acid rain formation).
WLTP is a completely new testing scheme created in response to VW’s cheating. It requires over-the-road testing, among other things. The opportunities to cheat are drastically lower.
I’m a big fan of over the road testing, but the reason the US doesn’t use it (yet) has nothing to do with harmonization. When I worked in the emissions industry 15 years ago, OTR testing was a desired goal, but available tech did not support it.
In fact, the technology is so new, the VW cheating scandal appears to have been unearthed during beta testing- The emissions from VW diesels exceeded that of other vehicles in the test, which led to the developers to the PCM software cheat.
“Under a small grant from the International Council for Clean Transportation, Dr. Daniel K Carder of West Virginia University (WVU) uncovered on-board software “cheats” that VW had installed on some diesel passenger vehicles (Dieselgate scandal). The only way the discovery could have been made was by a non-programmed, random, on-road evaluation – utilizing a Portable Emissions Measurement System device.” –Wikipedia
No fact is the cheating was not something that could only be uncovered through over the road testing, at least the original cheat. The way that CARB finally did resolve the discrepancy between the on the road testing and the in lab testing was to run the FTP75 twice w/o shutting down the vehicle and thus bypassing the cheat software. Once the 4 min was up the emissions went up. Now the next cheat that VW updated the cars, which was to double the length of time that the emissions cheat software had control. Again that was uncovered by CARB and then the EPA by just running the vehicle for a longer time. The final cheat once CARB notified them again of non-compliance would not have been detected on the dyno since it kept the vehicle in cheat mode as long as the steering wheel angle did not change.
The outcome for the European brands is going to loudly echo GM circa 1980-1985. Consolidate, cut costs, cut differentiation, sell on the badge and the fond memories from their (aging)loyalists to meet a goal that may be less pressing in a few years, all while the hip competition makes it ten steps ahead as you merely play catch up.
Or the considation efforts that formed British-Leyland (call it 1965-1975). Same story, different company.
Surely the elephant in the room is the raw material needed for EV batteries. Never mind the fact that you really need your own driveway for re-charging a pure EV at home, and many city dwellers don’t have one.
I might celebrate my 90th birthday ( if I live that long) by buying an electric lawn-mower, but if I had an electric car I would need an I.C motorcycle to compensate, and I’m too old for two wheels.
I don’t mean this sarcastically or ironically, but has anyone ever figured out the true price of gasoline to the US if you factor in the military cost of protecting all of the oil from the Middle Eastern countries? Or is it not that easy to itemize it like that? Paul may have that number off the top of his head.
My dear Mann, the US is not only self-sufficient in oil, but now even exports it, because we produce more than we can use. There’s this technology called “fracking” which allows drillers to extract it in places that were previously not suitable.
Oil is a global commodity; the prices are set purely by the commodity markets. And it’s fairly cheap these days, because the world has more production capacity than there is demand for the stuff. Which is why OPEC has decided to limit their production, to keep the price from being even significantly lower.
Thanks for replying. I understand how the market works, but US taxpayers have been supporting the uninterrupted supply of oil into the global market for decades with dozens of bases, all the aircraft/tanks/soldiers/support services necessary for this to a much larger degree than other NATO partners in places such as Saudi Arabia, Jordan and UAE. This is a cost to US consumers like a tax, and after so many years I figured someone would have figured out a dollar amount of it. It’s basically all going on the big credit card anyway, with the ever-growing debt. I was wondering if the actual adjusted cost of gasoline after all that into the mix that is actually competitive with other energy sources anymore. Not to mention the subsidies to the petroleum companies to locate and develop new sources.
I limited my inquiry to money, leaving out the moral costs of wars/dead American soldiers/decades of pollution and the health care costs of all that. In my opinion, all of this should be factored into the actual cost rather than just the 3 bucks on the sign, or the summer blend/winter blends argument. By the way, I used to make those detergent blends. The primary difference in those blends is a few cents per tens of thousands of gallons of fuel with a citrus-based moisture-absorbing compound. Actually, it’s amazing how much water a drop of it will encapsulate. So they’re ripping people off with that anyway. Didn’t mean to send argumentative, but your reply came off as kind of condescending and dismissive, my dear Paul.(okay, that was kinda dickish, sorry…)
I suppose I’ve passed the boundaries of my usual comments, and I considered not sending this, but I’ve never seen you get overexcited over this kind of stuff before. You are fair and logical, so I’m not too worried about offending you. But as I type this I realize I don’t enjoy this sort of commenting, and probably won’t do this psuedo-political stuff anymore. I’m happier complaining about ugly faces on modern cars, and advocating for weird cars like the Matador coupe. Thanks for tolerating this long, rambling posting.
It’s a good question. I’d say it was somewhat more relevant 10 or so years ago than today. And I’m sure there were folks out there who probably came up with the kind of numbers you were looking for. It would take a bit of searching.
It might be very difficult to unravel just what degree our involvement in the Mideast was to protect oil supplies and for other reasons.
I don’t think I was being over excited at all. I answered the question directly; I don’t assume or know just how knowledgeable a commenter is. But in any case, I don’t have a good answer for you.
I’m always impressed by your knowledge and use of numbers to show long-term patterns and trends. It was a little presumptuous of me to expect you to know everything about everything. I just like to go to the people with bigger brains than mine for answers. This site is full of well-informed people. I’m not on social media and have never interacted with any online platform besides this one. Ironically, it is because I follow politics closely (and it has not made me any happier) that I enjoy coming here for the car stuff. It is my escape from world news, my dreary job and the general blah-ness of where I live. I didn’t learn a lot in school, and didn’t have much interest in learning about the world until the internet came along. I primarily use it to watch and listen to smarter people than myself from everywhere, and taught my kids to do the same. So maybe they can live somewhere better than where we are. I’m 47 and still playing catch-up with the smart people. You guys are nice here, too, which I appreciate.
I think theMann is onto something! The quick answer is take the cost of our Middle East wars and divide by barrels of oil used.
That is the crude answer…. When I tell my friends who don’t object to war in the middle east that we need to pay for it, I fall back on the above formula..just tax gasoline. Then let’s see how many people agree….
America’s involvement in the middle east helps some countries, our supposed “allies”. It also helps American firms that provide the munitions and supplies for our military, and for our “allies”, who buy the stuff from US companies with grant/loans funded by…the US taxpayer.
In the meantime, we are drowning in debt, and are incapable of competing in several hi-tech areas.
And given Paul’s encyclopedic knowledge of cars, it’s easy to ask him what and why–and expect a correct answer:)
Anyway, I’ve commented too much here today as it is ( like Mr. Mann, this is one of my ‘escape’ websites), but Mr. Mann, you are onto something. I liked your comments.
In the USA today, there are many subsidies…and we all pay for them.
The history of the West appropriating Middle East oil goes back 100 years. Britain and France, faced with upgrading their navies from coal to oil, had to been getting that oil in Mexico. Those two countries decided to chop up what was remaining of the Ottoman Empire and use the Middle Eastern oil instead. The US was a relatively late entry into the situation and now really doesn’t need any Middle Eastern oil.
The US is not self-sufficient in oil production, nor are we a net exporter in the sense that we produce in excess of our needs. We do export a lot of “finished products” which can be used to fudge the numbers a bit, but we still consume more oil than we extract domestically, though that gap has shrunk dramatically over the last 10 years.
https://www.forbes.com/sites/rrapier/2018/12/09/no-the-u-s-is-not-a-net-exporter-of-crude-oil/#48b0c8ee4ac1
There is no doubt that US involvement in the Middle East has to do with oil to some extent but who knows how much of a factor it is. That would be impossible to quantify I would think.
Meanwhile back at the ranch. . . .
While the rise of the EV gets a lot of attention, I’d argue that the combination of increasing urbanization and the advent of practical self-driving vehicles will have an even bigger future impact.
Cities are choking with sheer numbers of cars. On-demand self driving EVs may be the future of transport for many city dwellers. Drastic shrinking of the private ownership base of cars could completely transform how cars are designed, marketed and sold – or not.
Predicting the future is risky business.
Vehicle sharing might reduce parking problems, but it doesn’t inherently reduce vehicle miles traveled. People go places and use vehicles to do it.
I’ll take an electric 504 wagon, please.