The car business is going through its most turbulent times ever. It makes for terrific breakfast reading, although sometimes that spills into lunch and dinner too. Here’s a couple of articles I found interesting in the past day or so.
The big news this morning is that Honda is ending all of its European production by 2020, which most of all affects its Swindon plant in Great Britain. And although Brexit is an extenuating factor, it’s not the primary one. Because the EU now has a very favorable trade deal with Japan, Honda will importing all of its EU bound cars from Japan. Nissan is also cutting back local production in Europe for the same reason. Swindon, which opened in 1985, will lose some 3,500 jobs. As it turns out, about 55% of Swindon’s output of Civics is exported to North America. And a plant in Turkey will also close.
Here’s what’s really going on:
As part of the realignment, Honda said it will commonize the European lineup with the brand’s offerings in China, where environmental standards put similar demands on emissions. Future product for Europe will be exported from Honda plans in Japan and China, Hachigo said.
Basically, the NA market can support (and build) its own specific cars, but Honda’s EU products will be harmonized with China. In both areas, EVs are going to be required to meet tightening CO2 emission requirements.
More at autonews. com
If you (and Bill Ford) are wondering why American car company stocks are languishing, here’s a good primer on the subject: Can Car Companies Ever Win on Wall Street?
In a nutshell, Wall Street is bearish on car companies because a slowdown in the car market is inevitable, and the demands on them in terms of the evolving marketplace with electrification, autonomy and mobility suggests that 2018 may have been a high water market for private car sales. And it’s not just the Big 3; Tesla’s stock hasn’t done much since 2014 either.
In fact the best performing stock of the bunch has been FCA, which is widely perceived to be the most intelligently managed of the Big 3, in any case. FCA simply has squeezed more out of its capital, in part by continuing to build older cars (Dodge Caravan, Ram Classic, etc.) longer and delaying investment in expensive new platforms, and ditching loss-leader sedans.
here’s a fascinating video that I found at the New York Times this morning. “Inside Japan’s Chicano Subculture”. I’ve always been amazed at how Japan appropriates so may different cultural themes over the decades. But this one surprised even me.
German car makers are desperate to find more tech workers. Here’s why:
Roughly 90 percent of all future innovation in vehicles will take place in the electric/electronic area. The bulk of that will be in software, according to VW Group. This field will increasingly be a competitive differentiator as the number of lines of code in vehicles could grow to 300 million from the 50 million to 100 million they have today. This doesn’t even include all the IT systems needed to provide connected services outside the car.
The problem in Wolfsburg is that VW Group has 10,000 engineers but only a few hundred programmers.
The automobile is transitioning from a largely mechanical device into a high tech one. Here’s the full story at autonews. The big question is whether the car manufacturers can win “the battle of the dashboard (center screen)” against the tech giants, which are all spending vast sums to implant themselves at the real heart of modern and future cars.
“Those auto manufacturers that prefer to sit in their own walled garden thinking they can bring these guys in, control them and then throw them out in two years, they are the ones most at risk,” said Bearing Point analyst Angus Ward.
Contrast this with companies such as Google that join with rivals to co-innovate, which slashes capital requirements and time to market. “They [carmakers] have to beat the tech giants at the tech giants’ own game,” Ward said.
That’s going to be a tough battle. The tech giants see future cars as just a vehicle (literally and metaphorically) for their tech wares, especially as autonomy becomes a factor, which it will at some point. The battle between the OEMs and Silicon Valley is going to be epic. FWIW, Tesla is already there, but squeezed somewhat precariously between the two. Their cars are the template for the future, but big guys have the capital, production expertise and quality experience, and the high tech firms have the scale for the software.