Auto File: China Crashes Munich’s Autofest

Cummins

06/09/2023 16:01

Joe White
Global Autos Correspondent
 
Greetings from the Motor City!  
 
After years of covering the global auto industry, I know that
Detroit is not the center of the universe. Still, the universe
decided to give me a reminder. We had Monday off for Labor Day
in Motown – but the rest of the world kept right on rolling. 
 
So there’s a lot to catch up on this morning. Get your motor
running. 
 
Today -  
    *  China looms over Germany’s auto show 
    *  How EV price war pressure drops on workers
    *  Why it’s so hard to fix an EV

 
    * Auto Angst in Munich 
German automakers came out swinging at the Munich auto show
during the weekend. 
 
BMW  BMWG.DE  took the wraps off the latest prototype for its
next-generation electric vehicle, reviving the historic “Neue
Klasse” name for the most expensive product program in the
company’s history.  
 
Mercedes  MBGn.DE  unveiled a prototype of the first vehicle
that will debut with its new MMA EV/software architecture. The
future CLA and the Neue Klasse are both aiming to boost
efficiency to 13 kWh or less per 100 kms (62 miles). 
 
That number looks like the industry’s new benchmark – roughly
where the Model 3 is today. 
 
But by Tuesday, Chinese automakers had taken over the Munich
stage. A celebration of German industry prowess was transformed
into a revealing demonstration of how the industry’s balance of
power is shifting. 
 
Of the automakers at the show, 41% were from Asia and double the
number of Chinese brands had stands compared to the last show.  
 
    European industry executives fretted that the European
Union’s drive to eliminate new combustion vehicle sales by 2035,
coupled with relatively open trade policies, give the edge to
Chinese EV makers who have China’s dominant battery makers at
their backs. 
 
Chinese executives such as BYD’s Wang Chuanfu, CATL chair Robin
Zeng and Xpeng’s Brian Gu called on German automakers to build
more partnerships with Chinese rivals.  
 
Their remarks walked a line between respectful and “nice auto
industry you’ve got here, shame if something happened to it.” 
 
“Germany has great principles and a well-established order for
competition so I hope we can get to the next level together,”
said CATL’s Zeng. “There is a proverb in Germany, if we go along
the river we will discover the ocean. If we move forward and do
it in an accessible way, we really will get to where we want to
be.” 
 
    Wan Gang, the senior government official known as China’s
“father of EVs,” used the Munich stage to reinforce the message
that international collaboration is the best path. (He hardly
needed to remind listeners of China’s increasingly
uncollaborative relationship with the United States.) 
 
“International collaboration” used to mean German automakers
using Chinese manufacturers as junior partners to gain access to
the world’s largest market. Now, Volkswagen  VOWG.DE , BMW and
Mercedes are playing catch up in China, and battling to avoid
losing more share to Chinese brands in their home market.  
 
It wasn’t all long faces and handwringing at the show. There was
some street theater: Greenpeace activists sunk several cars in a
lake near the show venue. Protestors carried signs reading:
“Shrink now or sink later.” 
 
And Volkswagen unveiled a fun concept for a sporty electric GTI
compact hatchback. Yes, please! 
 
    * Essential Reading 
    *  The logic behind a lithium mining deal
    *  What’s behind the S. Steel takeover? Cars
    *  The threat from China’s battery glut – FT/paywall

 
    * EV price war pressure hits China’s workers 
    Workers at Chinese EV makers are having their hours squeezed
and working conditions degraded as automakers cut costs to
offset the revenue lost to price cuts, Reuters colleagues Zoey
Zhang and Brenda Goh report. 
 
The EV price war that Tesla ignited in China is having ripple
effects throughout the industry. Auto parts makers in China are
scrambling as auto manufacturers – the OEMs in industry-speak –
demand that they cut prices by 10% or more.  
 
Overall profit margins in the Chinese auto sector have fallen to
4.9% from 6% just two years ago. 
 
This is not just a Chinese issue. In the United States, the
tensions between the United Auto Workers and the Detroit Three
automakers are driven in part by concerns about EV profitability
– or rather, the lack of it. UAW leaders are fighting industry
efforts to keep wages down at new battery plants, and contain
wage and benefits increases at assembly factories. 
 
A top General Motors  GM.N  executive on Tuesday said the UAW’s
demands for 40% + pay increases threatened the company’s
“manufacturing momentum” as it transitions to EVs. 
 
    * The EV repair problem 
So do you think finding a functioning EV charger is a problem?
Try finding a repair technician who can fix the complex insides
of an electric vehicle. 
 
The vehicle repair industry worldwide is short of tens of
thousands of technicians with the skills required to repair
high-voltage EV systems, Reuters colleagues Nick Carey, Paul
Lienert and Giulio Piovaccari report. (Getting a shock from a
12-volt lead acid battery in a conventional vehicle is annoying.
Crossing wires on an 800-volt EV power unit could be the last
mistake you make.) 
 
Training people to work on EVs safely is one problem. Footing
the bill for the equipment required to diagnose and repair EV
electrical systems is another. Governments are stepping in with
new education subsidies to encourage more people into the
trade. 
 
    * America: A nation divided over EVs  
    New data from JD Power shows that EV adoption rates in the
50 U.S. states are starting to mirror the political divisions
among “red” (conservative) and “blue” (liberal) states. 
 
By 2035, Power forecasts EVs could capture 94% of the California
new vehicle market. “Michigan, not so much,” Power writes. EV
adoption rates are falling in heartland states such as Iowa,
North Dakota and Wyoming – all states where Detroit Three truck
brands are strong sellers. 
    
    * Fast Laps 
    U.S. regulators want 52 million 
    potentially dangerous airbag inflators recalled, but
manufacturer ARC Automotive so far has refused, the agency said
Tuesday. Regulators said they know of one death and seven
injuries linked to exploding ARC inflators. 
 
    Daimler, Cummins and PACCAR have formed a joint venture with
plans to invest $2 billion to $3 billion to produce lithium-iron
batteries for commercial electric trucks. Daimler and PACCAR
together have a 50%+ share of the North American heavy truck
market. 
 
    Renault  RENA.PA  is aiming for a $10 billion valuation for
its Ampere EV operation, the automaker’s CEO said. As a
reference, Tesla is worth more than 70 times that much. 
 
    Robotaxi operator Cruise had another clash with San
Francisco authorities over the Labor Day weekend. The city’s
fire department said Cruise robotaxis got in the way of an
ambulance carrying an accident victim to a hospital. The victim
later died. Cruise denied that its vehicles slowed the
ambulance, and TechCrunch reported that a video supported the
company’s view. 
 
    The trillion-dollar war to control “green” metal resources –
lithium, copper, nickel, cobalt – is the subject of a book by
Reuters colleague Ernest Scheyder, coming out in January. The
dirty side of clean cars will be getting more attention as the
EV industry scales up. Are we substituting anxiety about OPEC
and oil for anxiety about green minerals and China? Read all
about it.  
 
    Tesla Shanghai hit a milestone. The EV maker’s largest
factory just built its 2 millionth car. 
 
    Qualcomm  QCOM.O  will supply chips to power infotainment
systems in future BMW and Mercedes vehicles, the company said at
the IAA-Munich auto show. Qualcomm expects automotive sector
revenue will grow to $9 billion annually by 2030 – more than
double 2026 projected revenue of $4 billion. 
 
    The concept of “e-fuels” – liquid fuels created with
renewable energy – got a boost this week when Stellantis said 24
of its 28 combustion engines could work with synthetic fuels.
The EU has proposed exempting combustion engines that run on
carbon neutral liquid fuels from the proposed 2035 ban on sales
of new ICE powertrains. That would be great news for Stellantis,
Porsche, Ferrari and others that could benefit from getting
longer life for bought and paid-for piston powertrains. 
 
    Toyota said a server malfunction forced it to shut down
production at its Japanese factories last week. The issue: Not
enough disk space.  
     

 (Editing by Emelia Sithole-Matarise)