Auto File: Europe calls an end to the Combustion Age

Hyundai Autoever

29/06/2022 16:00

June 29 - Joe White
Global Autos Correspondent
joe.white@thomsonreuters.com
     
Greetings once again from Munich!
     
I picked a good week to be in Germany, the nation that gave
birth to the internal combustion car and makes some of the
finest examples of the technology you can buy - but not for
long. Get your orders in now.  
     
Today, Europe gets serious about ending the combustion engine
era by 2035, Tesla cuts more jobs and there's bad news for the
industry on quality.
     
Here we go -
     
* Europe calls an end to the ICE Age
It took 16 hours or more of haggling, but European Union
policymakers early Wednesday agreed on a deal to end sales of
new combustion vehicles by 2035. The agreement leaves open a
very narrow loophole for automakers to try to prove by 2026 that
synthetic "carbon neutral" fuels could be developed in
commercial quantities and used in hybrid vehicles.  urn:newsml:reuters.com:*:nL1N2YG0D3
 urn:newsml:reuters.com:*:nL8N2YF25U
         
EU regulatory processes are excruciating to watch. Paint drying
and Tigers baseball are more exciting. However, the methodical
approach by Brussels has given European automakers plenty of
time to get their post-combustion strategies in order….or at
least to try.

Speaking at the Reuters Automotive Europe conference today,
Mercedes CEO Ola Kaellenius and Volkswagen Chief Financial
Officer Arno Antlitz waved caution flags.

"What I would hope from the political side - once you have made
the decision we are going to decarbonize - now, it's all about
what are the enabling factors to make it happen?" Kaellenius
said. 
     
Will there be enough charging infrastructure? Will the electric
grid be ready? Will workers be ready to take on the jobs an
electric auto industry will produce - coding software or
assembling electric motors - as fast as jobs assembling piston
engines and automatic transmissions disappear? (Kaellenius said
the industry will lose powertrain jobs as it goes electric.) 
     
For his part, Antlitz said battery production will be the auto
industry's biggest challenge. "The single most limiting factor
is battery supply," he said.  urn:newsml:reuters.com:*:nL1N2YG0L9
     
Whatever their doubts, European automakers are accelerating
investments to meet the new age - pushed by customers, investors
and the German prosecutors who keep raiding vehicle
manufacturers' offices pursuing evidence of diesel emissions
test cheating.   urn:newsml:reuters.com:*:nL8N2YF2CR
     
Stellantis on Wednesday hailed plans to convert what was once
the world's largest diesel engine factories into an electric
motor production center.  urn:newsml:reuters.com:*:nL1N2YG0M0

Mercedes mapped out plans to convert its European assembly
plants to build electric and combustion vehicles as they
transition to all-electric lineups by 2030.  urn:newsml:reuters.com:*:nL8N2YG379
* Volkswagen keeps its eyes on the Porsche prize
Volkswagen is still on track to launch an IPO for Porsche in the
fourth quarter, CFO Antlitz said Wednesday. 
     
Yes, markets have been volatile. "But on the other hand, there
is a lot of capital out there," Antlitz said. "We are quite
optimistic we can use that capital with a brand that is really
iconic."
     
Plus, Antlitz said, Volkswagen needs the funds it could realize
to finance its electric vehicle transformation - a
transformation not made easier by the recent surge in materials
and supply chain costs. 
     
While VW executives, including Antlitz, say they are optimistic
that the second half of this year will be better than the first,
the CFO said in a statement Wednesday "there must be a renewed
focus on cost work… to compensate for price increases, e.g. on
the raw materials side."  urn:newsml:reuters.com:*:nL8N2YF2Z5
     
* LG rethinks a U.S. battery plant
If Volkswagen management sees the economic glass half full,
executives at South Korean battery maker LG Energy Solution
apparently see a glass half-empty. LGES said it is re-evaluating
a planned $1.3 billion battery factory it committed to build in
Arizona just three months ago because of "unprecedented economic
conditions and investment circumstances" in the United States.
 urn:newsml:reuters.com:*:nL1N2YG00D
     
* Tesla layoffs
Tesla closed an office in San Mateo and laid off about 200
workers who did coding work related to the Autopilot assisted
driving system. The move is consistent with Elon Musk’s
statement that he wanted to trim the company's staff.  It is
also consistent with a company about to report rough second
quarter numbers. Tesla could report Q2 deliveries as early as
Friday, or over the weekend.
     
* EV gripes, supply chain troubles tank U.S. vehicle quality
Supply chain snarls and novel technology proved to be a toxic
combination for new vehicle quality last year, according to the
latest survey by J.D. Power. The Power Initial Quality Study
reported the worst industry new vehicle quality scores in the
study's 36 years.  urn:newsml:reuters.com:*:nL4N2YE299   
         
Tesla does not cooperate with JDPA, but the research firm had
enough data to reckon that the electric vehicle leader's new
vehicle quality would be well below the industry average. https://www.jdpower.com/business/press-releases/2022-us-initial-quality-study-iqs
 And, once again, one of the biggest sources of customer gripes
was the infotainment system.
     
* Electrify America charges up
Electrify America, the U.S. EV recharging business created by
Volkswagen as part of its penance for Dieselgate, is now worth
$2.45 billion after $450 million in investments from VW and
additional capital from charging gear maker Siemens. https://www.volkswagenag.com/en/news/2022/06/volkswagen-and-siemens-invest-in-electrify-america-s-ambitious-g.html
* U.S. clean vehicle jobs outpace fossil fuels
The number of U.S. jobs related to low carbon vehicles grew at a
faster pace than jobs in the fossil fuel industry, according to
a new federal report. https://www.energy.gov/policy/us-energy-employment-jobs-report-useer
 Good material for when you get tired of arguing about sports
trivia with your brothers-in-law.
     
* Quitting Russia
More auto sector manufacturers are heading for the exit in
Russia as the government considers new legislation to seize
foreign corporations assets. Tiremakers Michelin and Nokian said
they will exit, or hand over operations to local managers.
Nissan said it would suspend production in Russia for six
months.

* Software: Not just for cars
The auto industry's software revolution does not stop at the
car. The increasingly complex machinery in auto factories are
getting connected, and their data pulled in for analysis by
artificial intelligence. Renault said it will partner with
software firm Atos to improve productivity through more
sophisticated analysis of its production system.
     
Toyota falls short
Toyota's global production has fallen nearly 10% short of its
goals for the first five months of 2022, based on output figures
for May. Early on in the supply chain crisis, Toyota appeared to
be one of the industry's best performers. Now, the company that
invented the "just in time" supply chain management discipline
appears to be struggling, in part because of the COVID
disruptions in China.  urn:newsml:reuters.com:*:nL1N2YG07S
Essential Reading
     
U.S. grid operators warn of power outages  urn:newsml:reuters.com:*:nL2N2X225V
     
U.S. consumer confidence hits a 16-month low  urn:newsml:reuters.com:*:nL1N2YF0WV
     
The iPhone turns 15 today. How it has changed us. https://www.wsj.com/articles/the-iphone-turns-15-today-heres-how-it-changed-us-11656459694?mod=hp_lead_pos5
    
* Auto File is published on Mondays, Wednesdays and Fridays.
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