|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's range||170.60 - 171.20|
|52-week range||140.50 - 184.15|
|Beta (5Y monthly)||N/A|
|PE ratio (TTM)||N/A|
|Forward dividend & yield||N/A (N/A)|
|1y target est||N/A|
(Bloomberg Opinion) -- The greatest shakeup in automobile history reordered the stock market this month when a minnow grew larger than a whale.Tesla Inc., the 17-year-old Palo Alto maker of battery-powered, zero-emission vehicles, is now the second-largest automaker measured by market capitalization, overtaking No. 2 Volkswagen with a value of $101 billion. It wasn’t long ago that no industry analyst would have predicted that the 82-year-old Wolfsburg, Germany-based seller of 30 times as many vehicles last year would become an also-ran to Tesla. Most of them remain unconvinced that Tesla is worth its price of $558 a share and less than 32% recommend buying the stock, according to data compiled by Bloomberg.But Tesla customers and investors are making the case that the reliance on the internal combustion engine by Volkswagen — and by the 39 other major automakers committed to a commercial fossil fuel machine invented in the 19th century — is a dubious strategy. Tesla is worth $131 billion less than No. 1 Toyota Motor Corp., but its sales growth has been more than nine times the industry average during the past decade and 832 times Toyota's 25% appreciation since Tesla became a public company in June 2010 with an initial valuation of $2 billion. It opened its largest service center in Germany last year and agreed in December to build its first European car factory, in the state of Brandenburg.All of which explains why Tesla has been poised to catch Volkswagen in the stock market since 2014. That’s when U.S. regulators confirmed that Volkswagen equipped more than 10 million vehicles worldwide with software to defeat emissions tests, an existential moment for the industry. The global sales leader in effect revealed that growth depended on making cleaner vehicles, and that it would cheat if necessary to stay ahead.Volkswagen subsequently admitted that it had conspired to violate the U.S. Clean Air Act and paid a $4.3 billion fine. Several senior executives were sentenced to prison and former Volkswagen Chief Executive Officer Martin Winterkorn and six other Volkswagen executives were eventually criminally charged by German prosecutors.Volkswagen still is beloved by industry analysts, 86% of whom favor the German automaker with a “buy” recommendation, according to data compiled by Bloomberg. Volkswagen now wants to emulate Tesla and recently raised its battery electric production target to 1.5 million vehicles in 2025. Tesla sold a record 367,500 vehicles in 2019.“The time of the traditional car manufacturers is over,” said CEO Herbert Diess in prepared remarks at an internal Volkswagen meeting this month. “The magnitude of our task and the brevity of time” necessitated by Tesla's challenge “gives us exactly one single try,” he said. Diess, who was a member of the management board at Bayerische Motoren Werke AG before he joined Volkswagen as chairman and CEO in 2015, should know. As recently as 2013, Volkswagen's $109 billion valuation was seven times more than Tesla's. By 2015, the gap had narrowed to $22 billion and was just $10 billion after the first week of January. During this period, the average 5-year and 3-year returns (income plus appreciation) for the 10 largest automakers were 30% and 28%, respectively. Volkswagen investors suffered by comparison with a loss of 4% and a gain of 20%. Tesla shareholders crushed the industry, earning 181% and 120%, according to data compiled by Bloomberg.Yet too few analysts agree with Diess's assessment. The Bloomberg Recommendation Consensus shows that the appraisal of Tesla by 36 analysts, measured on a scale of 1 to 5 (the most bullish), has fallen 37% from 4.1 in 2015 to 2.57 when the comparable measure for the Russell 3000 is 4.05. Bloomberg ranks the performance of analysts by calculating the total return of their buy and sell recommendations. The top 10 analysts have a target price for Tesla of $454 a share. The bottom 10 have a target of $397 a share.Ryan Brinkman, the automotive equity research analyst for JPMorgan Chase Bank, is among the biggest Tesla bears, with a target price of $240 a share and a sell rating for the next 12 months. He has issued 28 consecutive sell recommendations since February 2015; Tesla has appreciated 178% since then. During the preceding three years, he initiated 14 “neutral” or hold ratings in a row as the shares were climbing 487%, according to data compiled by Bloomberg.Colin Rusch, a top-10 performer in the group and the Oppenheimer & Co. analyst who is most bullish on Tesla, said on Jan. 13 that the shares were worth $612, a 59% increase from his $385 target price published Jan. 3. He said the company was a buy on Aug. 2, 2018 and rated the shares a buy even when they lost almost 50% between August 2018 and June 2019. Tesla shareholders who followed Rusch's buy and sell suggestions throughout the past 12 months made 90%, according to data compiled by Bloomberg.Investors who followed his advice on the 26 stocks he covers reaped a total return of 41% as against the 16% return that would have gone to followers of his top 10 peer group. More than half of Rusch's companies are committed to clean energy rather than being traditional auto stocks.As for Tesla, Rusch is the lonely analyst who agrees with Volkswagen's Diess. “While Tesla has stumbled through growing pains, we believe the company has reached critical scale sufficient to support sustainable positive free cash flow,” Rusch wrote earlier this month.That's another way of saying that the best for Tesla is yet to come.\--With assistance from Shin Pei.To contact the author of this story: Matthew A. Winkler at firstname.lastname@example.orgTo contact the editor responsible for this story: Jonathan Landman at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Matthew A. Winkler is Co-founder of Bloomberg News (1990) and Editor-in-Chief Emeritus; Bloomberg Opinion Columnist since 2015; Co-founder of Bloomberg Business Journalism Diversity Program in 2017. During his 25 years as Editor-in-Chief, Bloomberg News was a three-time finalist and winner of the Pulitzer Prize for Explanatory Reporting and received numerous George Polk, Gerald Loeb, Overseas Press Club and Society of Professional Journalists and Editors (Sabew) awards.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.German business expectations took a surprising turn for the worse at the start of the year, underscoring the challenges Europe’s largest economy faces in exiting a protracted slowdown.The unexpected drop in the closely watched Ifo confidence index puts a dent in some of the optimism about Germany after stronger-than-forecast manufacturing figures on Friday. But the latest report was mixed rather than wholly negative. January’s decline was driven by dwindling prospects in services and construction while manufacturing improved.The euro was little changed at $1.1023 at 12:40 p.m. Frankfurt time, having earlier weakened in the wake of the Ifo report.The German economy is only slowly finding its feet after 2019’s manufacturing slump, and policy makers have been hoping that rising optimism among companies would lead to a broader recovery. Surveys published last week showed that factory activity in the euro area is still shrinking, though at a slower pace.“The stabilization we saw in manufacturing last year is continuing, and because manufacturing is so important to the German economy we take this overall as a good sign despite the decline in the overall index,” Ifo President Clemens Fuest said in a Bloomberg TV interview.What Bloomberg’s Economists Say“Manufacturing is recovering from a substantial shock. A big rebound remains unlikely while industry grapples with structural issues that take time to work through. But we expect Germany’s economy to expand slightly faster in 4Q than the 0.1% growth rate recorded in 3Q. And some further acceleration can be expected this year as sentiment improves.”\-- Jamie Rush. Read the GERMANY REACTYet there’s still some way to go amid continued risks to growth that’s sluggish at best. The Chinese economy, one of Germany’s top three trading partners, is slowing, and President Donald Trump’s threat of tariffs on European cars is still looming large. That would hit Germany -- home to Volkswagen, the world’s largest carmaker -- particularly hard.Fuest sees a trade war and a sharper slowdown in China as the biggest threats.“China continues to be a very important market for Germany, has a huge impact on the global economy,” he said. “That is the major threat -- more I would say than the threat of a trade war with the U.S.”Last week, the European Central Bank expressed hopes about signs of stabilization in the 19-nation euro area, citing easing global trade tensions following a U.S.-China deal on trade and a mildly expansionary fiscal policy. In Germany, government spending on infrastructure is close to record levels, according to Finance Minister Olaf Scholz, after the country ran budget surpluses for the past six years.(Updates euro in third paragraph)\--With assistance from Harumi Ichikura, Kristian Siedenburg and Francine Lacqua.To contact the reporter on this story: Carolynn Look in Frankfurt at firstname.lastname@example.orgTo contact the editors responsible for this story: Paul Gordon at email@example.com, Jana Randow, Fergal O'BrienFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Volvo Car AB is counting on tripling sales of plug-in hybrid models this year as a way to avoid paying what could amount to hundreds of millions of euros in European penalties for the sale of its more polluting yet popular combustion-engine SUVs.A fifth of all new Volvos sold in 2020 should be plug-ins or all-electric, compared with just 6.5% of the total last year, according to Chief Executive Officer Hakan Samuelsson. That would see hybrid sales rising to more than 150,000 based on the pace of growth in 2019. The company is only planning to start shipping its first fully-electric model -- the XC40 Recharge -- later this year.The stakes are high for Volvo’s electric strategy because conventional SUVs made up more than half of sales last year and are largely behind the carmaker’s success since the takeover by China’s Zhejiang Geely Holding Group Co. a decade ago. As Europe’s tough emissions rules kick in, the company could pay dearly. PA Consulting Group puts Volvo’s potential fines for this year at a quarter of annual operating profit.“Paying fines is something that just shouldn’t be in the equation,” Samuelsson said in an interview at the company’s headquarters in Gothenburg, Sweden. “That’s not part of our plans. We want to invest in product development, not in fines to Brussels.”The CEO pointed to Volvo’s goal for half of all cars sold in 2025 to be all-electric and the rest plug-in hybrids. It will relaunch its battery-powered range under the “Recharge” moniker, and while the volume of the electric XC40 will be modest this year, Volvo has the capacity to produce “tens of thousands” next year, he said.The question for Volvo and other conventional manufacturers selling cars in the EU is whether consumers will buy into the plans. Rival automakers including Daimler AG’s Mercedes-Benz, BMW AG and Volkswagen AG’s Audi are also rolling out battery-powered models. The threat of penalities for the companies, dubbed “the 2020 CO2 cliff” by Evercore IS auto analyst Arndt Ellinghorst, comes at a tricky time, when the region’s market is expected to shrink.Read more: Trump Hits EU Carmakers With Trade Threat as Outlook SoursPA Consulting Group earlier this month warned that the EU could inflict 14.5 billion euros ($16.1 billion) in fines on the region’s 13 largest carmakers for surpassing carbon-dioxide targets. The penalties will be calculated on the basis of the average emissions of new car registrations. For Volvo, they could reach 382 million euros by 2021, based on the assumption that only 14% of its sales will be all electric or plug-in hybrids, the consultancy said.Volvo’s bet on plug-ins comes despite criticism of the technology for being a half-measure that doesn’t go far enough in reducing emissions, especially as some users run them on fossil fuels without charging the battery. European sales dropped in the first nine months of last year, but according to a report by BloombergNEF are expected to rise quickly this year due to new models on the market and the emissions crackdown.Volvo’s own studies indicate its plug-ins run on battery 40% to 50% of the time. The company plans to promote recharging by paying owners’ electricity costs.“We don’t feel that there’s any reason to feel guilty about plug-in hybrids,” Samuelsson said. “Plug-ins are necessary for the transition, but it’s also a more long-term solution for those who may not have adequate access to charging.”To contact the reporter on this story: Niclas Rolander in Stockholm at firstname.lastname@example.orgTo contact the editors responsible for this story: Anthony Palazzo at email@example.com, Tara Patel, Andrew NoëlFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Sign up here to receive the Davos Diary, a special daily newsletter that will run from Jan. 20-24.Volkswagen AG Chief Executive Officer Herbert Diess is preparing to muscle Elon Musk out of the electric-car lead.While Tesla Inc. is paving the way in sustainable mobility, the world’s biggest automaker is buying software companies and ramping up investments in electric vehicles and battery cells, Diess said Friday at the World Economic Forum in Davos, Switzerland.“It’s an open race,” Diess said in an interview with Bloomberg TV. “We are quite optimistic that we still can keep the pace with Tesla and also at some stage probably overtake” the U.S. carmaker.Tesla’s market value surpassed Volkswagen’s for the first time this week, even as the U.S. company sells a fraction of the cars VW churns out and has yet to record an annual profit. Volkswagen rose as much as 1.7% in Frankfurt trading after Diess’s comments.Still, Tesla has a competitive edge in electric cars and software, technologies that are underpinning a shift toward cleaner mobility. The threat is underscored by Musk’s plan to establish a factory near Berlin, in the heart of Germany’s automotive industry.While they’re competitors, Diess and Musk have cultivated somewhat friendly ties. The German CEO in October hailed Tesla as a serious competitor that’s pushing the industry toward sustainability -- just a few weeks after the South African-born billionaire tweeted that Diess is doing more than any big car CEO to go electric. Diess repeated his respect for Musk in Davos, saying Tesla’s product lineup “describes the future of the auto industry.”Last week, the German CEO called on his top managers to speed up Volkswagen’s overhaul efforts to make the German industrial giant more agile or risk being pushed aside. Volkswagen has earmarked about $66 billion to invest in electrification, hybrids, and digitalization, and in October plans to start churning out e-cars at a factory near Shanghai, where Musk opened a plant last year ahead of schedule.“The company which adopts fastest and is most innovative but also which has enough scale in the new world will make the race,” Diess said Friday.Trade ThreatTesla isn’t Diess’s only concern. The CEO was among executives who attended a dinner with U.S. president Donald Trump in Davos on Tuesday. While the meeting was “positive,” the threat of U.S. tariffs on European carmakers hasn’t been averted, he said.“It’s very difficult to read President Trump but he stated that he’s still not happy with Europe,” Diess said. “We’re doing what we can to avoid tariffs.”Volkswagen has been relatively resilient so far to industry headwinds exacerbated by trade friction, higher tariffs and a slowdown in China, the German manufacturer’s largest market. The company also will have to comply with Europe’s new fleet emission targets, he said, meaning VW will have to sell more sustainable cars or face penalties.“2020 for the auto industry will be a very difficult year,“ Diess said. “But we’re doing the right things to be competitive.”(Updates with Volkswagen shares in fourth paragraph.)To contact the reporters on this story: Christoph Rauwald in Frankfurt at firstname.lastname@example.org;Francine Lacqua in London at email@example.comTo contact the editors responsible for this story: Anthony Palazzo at firstname.lastname@example.org, Stefan NicolaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Volkswagen AG is disappointed with the offers so far for its MAN Energy Solutions division, according to people familiar with the matter, potentially dealing another blow to the German automaker’s efforts to focus on cars.VW has been holding bilateral talks since last year with potential buyers including Cummins Inc., said the people, who asked not to be identified because the discussions are private. Competitors including Mitsubishi Heavy Industries Ltd. have previously shown interest, they said, adding that the carmaker may decide to retain the business unless better offers emerge.Abandoning a sale of MAN Energy Solutions would mark a setback for VW’s efforts to concentrate on its core passenger car operations, which are requiring heavy spending to make the transition to electric vehicles. It sold a smaller-than-expected 10% stake in the Traton SE heavy-truck division in an initial public offering last year after months of delays and a previous attempt to divest the Ducati motorbike division was shot down by key stakeholders.VW declined to comment on the effort to sell MAN. A representative for Cummins didn’t immediately respond to a request for comment while Mitsubishi Heavy couldn’t immediately be reached for comment outside of regular business hours. The shares rose were up 0.7% as of 10:43 a.m. Friday in Frankfurt.VW decided about nine months ago to review strategic options including a sale of the specialist in large engines used in ships and factories. It also put industrial transmissions maker Renk AG, on the block. The power engineering group, which includes both Man Energy Solutions and Renk, has an sum-of-the-parts value of 2.5 billion euros ($2.76 billion), according to Bloomberg Intelligence analyst Michael Dean.A deal for Renk could still materialize as the maker of large gearboxes for tanks and other machinery has drawn interest from buyout firms EQT AB and Triton as well as German defence company Rheinmetall AG, according to people familiar with the matter. A winning bidder is expected to be selected in the next few weeks, they said.A representative for EQT declined to comment. Representatives for Triton and Rheinmetall didn’t immediately respond to requests for comment.MAN Energy Solutions has about 14,000 employees worldwide and recently changed its name from MAN Diesel & Turbo to highlight its sustainability offerings, which was seen as an effort to broaden the appeal of the unit.(Updates with estimate of asset value in fifth paragraph)To contact the reporters on this story: Aaron Kirchfeld in London at email@example.com;Christoph Rauwald in Frankfurt at firstname.lastname@example.org;Eyk Henning in Frankfurt at email@example.comTo contact the editors responsible for this story: Anthony Palazzo at firstname.lastname@example.org, Tara PatelFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Tianqi Lithium Corp. had everything going for it: generous subsidies, Beijing’s blessing on the electric-vehicle industry it supplies, and the hype of Tesla Inc. getting its sedans off the production line in China. The only thing interrupting this nice fairy tale is the reality of demand and making money.Over the past few years, China has supported its electric-car industry by doling out large subsidies; giving preferential treatment to domestic companies; and providing large outlays for charging infrastructure. The sector has surged as a result. The kickoff of Tesla’s Model 3 in Shanghai last month sparked a fresh rally among producers of lithium – a key ingredient in batteries – and other suppliers.All this is excitement is bubbling away despite the cratering of the lithium market. After peaking more than a year and a half ago, prices have slumped over 50% and inventories have piled up. The glut, a problem China knows all too well, has weighed on producers.This reality is starting to settle in for Tianqi Lithum. Earlier this week, the company canceled its bondholder meeting as worries about repaying investors 318 million yuan ($46 million) in principal and interest loomed. Its bonds fell to just over 64 cents on the dollar from around 75 cents days earlier.While China reported its first monthly slump in electric-vehicle purchases in July, Tianqi Lithium was struggling before then. The world’s second-largest producer reported its first quarterly loss in almost six years years in September, following two quarters of declining net income.Like many fad-commodity producers before it, Tianqi Lithium is seeing the painful consequences of China’s supply and demand mismatch. The adoption of electric cars and progress on battery technology have both been slower than anticipated. Expectations were so far off the mark that despite lithium prices falling, analysts adjusted higher their estimates for the average selling price of batteries last year.Tianqi Lithium booked a 63% increase in government subsidies in the nine months to September as non-operating income from a year earlier. The government's supportive rhetoric also led the company to pile on debt as it sought stakes in Chile’s Sociedad Quimica y Minera de Chile SA and an Australian lithium mine. The company eventually financed its way to commanding a 16% share of global lithium production; but now its balance sheet looks bloated and questions about the company’s ability to refinance its debt – and at what cost – are becoming more pressing.For all the hopes pegged to its expansion and profitability, Tianqi Lithium didn’t have enough cash to cover the 3.1 billion yuan of short-term debt it owes as of September. The company has already tapped various channels of funding, from medium-term notes to an equity raising. When Moody’s Investors Service downgraded the company last month, it cited Tianqi Lithium’s inability to raise enough capital through its rights offering, saying it would have trouble deleveraging.Expectations for the electric-car industry are starting to recalibrate. With targeted subsidies shifting from cars to batteries and infrastructure, the bargaining power has moved from manufacturers of one to the other. The likes of Geely Automobile Holdings Ltd., BMW AG and Volkswagen AG are locking in long-term contracts and partnerships with battery makers, but these car giants are no longer calling the shots.Battery makers nevertheless face their share of challenges: They haven’t quite figured out how to advance technology safely, while bringing down prices and preserving margins. Any reduction in subsidies will pass through to suppliers as well. It may be time for a more realistic reassessment.Tianqi Lithium may be able to keep rolling over its debt, but that doesn’t change the fact that we’re still years away from widespread adoption of electric cars. A few thousand Teslas on the streets of China isn’t going to change that. EV suppliers may be better served keeping an eye on their balance sheets than Elon Musk’s production line.To contact the author of this story: Anjani Trivedi at email@example.comTo contact the editor responsible for this story: Rachel Rosenthal at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- As major players jostle for market share in large-scale power storage, American Electric Power and Nissan Motor Co. are testing new technology that re-uses old electric vehicle batteries to slash costs.The pilot study in Ohio will road test technology that could lower system costs by about a half and extend the life of lithium-ion batteries by about a third, according to its Australian developer.Costs of energy storage systems are falling globally on technology improvements, larger manufacturing volumes, increased competition between suppliers and as the sector adds more expertise, BloombergNEF said in an October report. That’s driving an expansion in investment in projects to store power, with as much as $5 billion worth of deals possible this year for systems paired with renewable energy, according to the forecaster.American Electric’s Ohio study is using expired Nissan Leaf car batteries and is intended to test the innovations at scale after laboratory work in Australia and Japan.Results so far appear promising, Ram Sastry, American Electric’s vice president, innovation and technology, said by phone. “It’s in a facility that we own, but connected to the real grid.” he said.The technology is developed by Melbourne-based Relectrify and uses old, or second-life, vehicle batteries and reduces the number of components needed, the company said Friday in a statement. That can reduce costs for key parts of typical industrial or grid storage systems to about $150 per kilowatt hour, it said.That compares with a current average price for similar technology using new batteries of $289 a kilowatt hour, according to the BloombergNEF 2019 Energy Storage System Costs Survey.Companies like BMW AG and Toyota Motor Corp. are already putting re-used cells to work in applications including renewable energy storage, electric vehicle charging, and to power street lights and homes. About three-quarters of vehicle batteries are eventually likely to be reused, according to London-based researcher Circular Energy Storage.Cheaper energy storage with batteries could provide an alternative to adding more capacity at electricity substations, or building more transformers. It could also be harnessed to provide backup power and bolster reliability for consumers, according to American Electric’s Sastry.“There are many use cases that we have for batteries that are predicated on the cost,” he said. “If the battery goes lower in cost, it can compete with the wires.”Yet even as the price of lithium-ion battery cells has fallen, it’s been difficult to reduce costs of components such inverters. “The inverter is the Achilles heel of energy storage,” said Bradley Smith, president of Covington, Louisiana-based Beauvoir Consulting Services and previously an executive developing second-life battery products at Nissan.Relectrify’s system reduces the need for separate electronics for both the inverter and battery management system, lowering costs, Smith said.The technology can also extend the lifespan of either reused or new batteries by offering more precise management of individual cells, according to Valentin Muenzel, CEO of Relectrify, a 14-person firm launched in 2015 that’s collaborated with companies including Volkswagen AG and International Business Machines Corp.Some potential end users remain wary of re-using lithium-ion batteries over concerns about their longevity and costs of re-purposing cells, according to BNEF’s head of clean power Logan Goldie-Scot.“Many customers are not yet comfortable with second-life batteries even at a steep discount,” he said. Tesla Inc. has in the past suggested it will favor recycling spent packs from vehicles to recover raw materials, rather than seek to re-use the cells first.Relectrify, which is holding talks with battery manufacturers and distributors, sees potential to eventually help improve performance of batteries for the auto sector, in addition to energy storage.“We see stationary storage as the low hanging fruit,” Muenzel said. “We’re already getting demand for use in some mobility applications and we expect that is an area that will continue to grow with time.”To contact the reporter on this story: David Stringer in Melbourne at email@example.comTo contact the editor responsible for this story: Alexander Kwiatkowski at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The fallout continues from the diesel emissions scandal for the German car giant, which has also been leapfrogged by Tesla as the world's second most valuable carmaker.
(Bloomberg Opinion) -- The world’s largest car market is cratering and there are few signs of a recovery. It was never supposed to get this bad — and even if it got close, a helping hand from Beijing would steer things out of any prolonged trouble. Or so people thought... Instead, passenger car sales in China fell 9.5% last year, more steeply than the 4.3% in 2018, which was the first annual sales decline in over a decade. The drop has dragged down the global automobile industry and its deep supply chain. That leaves automakers in limbo. After years of relying on the Chinese market for its double-digit volume growth, they don't seem too sure about whom to build cars for, or what kind. Beijing’s lackluster stimulus last year included a grab-bag of measures: removal of car-purchase limits, support for buying electric cars and incentives to build infrastructure like rural gas stations. They haven't done much to revive demand. Consumers were waiting for more, which simply led to a steeper slide in sales. With no new sweeteners and the distortions of past stimuli fading, a real picture of demand is emerging. It’s nuanced. There are fewer first-time buyers, and more who are purchasing replacement vehicles. They’re increasingly looking to upgrade, and also buying more used cars. In a word, consumers are being more discriminating.Luxury carmakers account for around 15% of the market and are doing better than the rest. Porsche Automobil Holding SE, for instance, delivered 86,752 vehicles to customers in China last year, up 8% from 2018. In December, BMW Brilliance Automotive Ltd.’s average daily vehicles sales rose 21% on the year, up from 5% in November. Down the food chain, buyers of family-friendly cars are upgrading. Demand for sports utility vehicles and sedans remains depressed but is shifting toward higher-end, in-between cars, according to analysts at Goldman Sachs Group Inc. Buyers of these so-called multi-purpose vehicles, or MPVs, have long bought the same few basic models, priced between 40,000 yuan ($5,800) to less than 100,000 yuan. As the market was flooded with SUVs, aspirational buyers stayed away. Now, manufacturers are improving design and comfort, and raising prices.A slew of MPV models will be released this year. Going by low discounts compared to the rest of the market, demand remains sturdy. Goldman’s analysts estimate that in every 1% of demand that moves to the higher-end MPVs lies an annual revenue opportunity of almost 50 billion yuan ($7.25 billion). Here’s the hard reality: The double-digit growth days of selling nearly 25 million cars a year are vanishing in the rearview mirror. So are outsize profits from China. Much like the U.S. market, the type of demand will evolve and how people get around will change. Younger Chinese are more inclined to use ride-hailing services. The older people get, the less likely they’ll obtain driving licenses. China’s population is aging rapidly. This is a structural slowdown.In theory, China has plenty of room to sell more cars. Penetration rates are low and so is the national percentage of licensed drivers. The carmakers are banking on semi-urban China, ostensibly the most upwardly mobile consumers. But sales are unlikely to top 20-some million a year, even with the push toward electric vehicles (only 5% of cars sold now) and regulations that will eventually force buyers to go green. For now, higher technology only raises the cost of car ownership out of reach.The market is oversupplied, no doubt. The good news is that inventories are coming down as automakers try to stay in the black. Toyota Motor Corp. has increased the types of models it sells in China and gained market share. As weaker players drop out and the industry consolidates, the likes of Honda Motor Co. and Volkswagen AG are taking a bigger piece. Failure to rigorously manage output will mean a pile of clunkers. Changan Ford Automobile Co. is sitting on some of the highest levels of inventory, as is SAIC General Motors Corp.’s Baojun. GM continues to lose market share. Ford Motor Co. said last week that its sales in China dropped 26% in 2019. European carmakers have also struggled. Making money by churning the assembly lines won’t cut it anymore. The China Road to success is a lot narrower. Only the companies that drive it smarter will survive. To contact the author of this story: Anjani Trivedi at email@example.comTo contact the editor responsible for this story: Patrick McDowell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Volkswagen was charged in December with importing nearly 128,000 vehicles into Canada violating emissions standards. VW pleaded guilty after being charged with 60 counts of breaching the Canadian Environmental Protection Act and providing misleading information. The fine was by far the largest environmental penalty in Canadian history, prosecutors said.
Volkswagen was charged in December with importing nearly 128,000 vehicles into Canada violating emissions standards. VW pleaded guilty after being charged with 60 counts of breaching the Canadian Environmental Protection Act and providing misleading information.
(Bloomberg) -- Tesla Inc.’s market value has climbed above Volkswagen AG’s for the first time to more than $100 billion, a threshold that will trigger a huge payout for Elon Musk if he can sustain the feat for months.The electric-car maker’s shares soared as much as 8.6% on Wednesday to a new intraday high of $594.50. At that price, Tesla’s market capitalization was roughly $107.2 billion, exceeding Volkswagen’s $99.4 billion and trailing only Toyota Motor Corp.While Musk’s skeptics are dubious that Tesla should be worth more than a carmaker that sold almost 30 times as many vehicles last year, Volkswagen’s own Herbert Diess isn’t so dismissive. He’s been arguably the most vocal CEO among traditional carmakers to praise Tesla and point to its role in a radical shakeup of the more than century-old auto industry.After saying three months ago that Tesla was no niche manufacturer anymore, Diess told top Volkswagen executives at an internal meeting in Germany last week that connected vehicles will almost double the time consumers spend online, and that cars will “become the most important mobile device.”“If we see that, then we also understand why Tesla is so valuable from the view of analysts,” he said.Diess, 61, is rolling out the industry’s largest electric-car fleet and aims to boost the company’s value to a level rivaling Toyota, whose $232 billion market cap is still more than Tesla and VW’s combined.“Tesla has high innovative strength regarding battery-electric vehicles as well as connectivity, which can partly explain the high market capitalization,” Stefan Bratzel, a researcher at the Center of Automotive Management near Cologne, Germany, said in a report Wednesday. The relatively low valuation of traditional automakers is linked to uncertainty over whether they can navigate the looming industry shift, he said.The jump above $100 billion is about more than just bragging rights for Musk, Tesla’s billionaire chief executive officer. He’s eligible to receive the first tranche of an all-or-nothing pay award if the company’s market value stays above that threshold for a sustained period. On paper, the first chunk of the award would net him about $346 million.Tesla shares have more than doubled since the company reported a surprise third-quarter profit and told investors it was ahead of schedule bringing out its next product, the Model Y crossover, and opening its factory near Shanghai.The stock has room to run as Tesla grows in China, Wedbush analyst Dan Ives wrote in a report Wednesday. He boosted his target price to $550 from $370 while maintaining the equivalent of a hold rating.What Bloomberg Intelligence Says:“Tesla’s tepid 0.3% gain in 2019 domestic unit sales suggests a tapped-out U.S. Sales in China skew the U.S. demand picture, which should become clearer by year-end with the ramp-up in Shanghai output.”\- Kevin Tynan, senior autos analystClick here to read the researchGary Black, who was chief executive of Aegon Asset Management from mid 2016 through September and now holds Tesla as a private investor, said he expects Tesla to earn more than VW by 2025 and believes consensus estimates for vehicle deliveries this year are too low. He expects Musk to forecast at least 550,000 units for 2020 during next week’s earnings webcast and to tout the launch of the Model Y.While at least eight analysts have boosted their price targets by more than $100 since the year began, consensus is still well below where Tesla’s shares are trading. The average target is $363.92 with just 10 analysts rating the stock a buy, compared with 10 holds and 16 sells.(Updates with VW’s EV plans in sixth paragraph.)\--With assistance from Cécile Daurat, Tom Randall and Anders Melin.To contact the reporters on this story: Dana Hull in San Francisco at email@example.com;Christoph Rauwald in Frankfurt at firstname.lastname@example.org;Gregory Calderone in New York at email@example.comTo contact the editors responsible for this story: Craig Trudell at firstname.lastname@example.org, ;Anthony Palazzo at email@example.com, Cécile DauratFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- German rangers stand guard to shoo away visitors from a nondescript stretch of forest near Berlin, where a sign nearby warns of “Lebensgefahr” (mortal danger).The precautions are part of the frantic activity underway to set up Tesla Inc.’s latest assembly plant, Elon Musk’s most daring attack on the German auto establishment. Workers wielding metal detectors have started combing through an area covering some 200 football fields to search for errant ammunition lurking beneath the sandy surface of tiny Gruenheide.It’s the first stage to prepare a site that could churn out as many as 500,000 cars a year, employ 12,000 people and pose a serious challenge to Volkswagen AG, Daimler AG and BMW AG. Once deemed free of World War II explosives, harvesters and trucks will roll in to clear thousands of trees in the first stage of development. The work needs to be done by the end of February to meet Tesla’s aggressive timetable. The project represents a second chance for the quiet town, nestled between two lakes on the edge of a nature reserve southeast of Berlin.Gruenheide lost out on a similar factory two decades ago, when BMW opted for Leipzig. That missed opportunity helped town officials to move quickly when Tesla expressed interest in building its first European factory in Germany, with a plot set aside for industrial use and offering easy access to the Autobahn and rail lines.Read More: Elon Musk’s German Factory Started With Love Letter From Berlin“The investment is a unique opportunity,” Mayor Arne Christiani said in his office, where a map of the Tesla project hangs on the wall. “It gives young people with a good education or a university degree the possibility to stay in our region—an option that didn’t exist in past years.”If it clears Germany’s red tape, the plant will make batteries, powertrains and vehicles, including the Model Y crossover, the Model 3 sedan and any future cars, according to company filings. The factory hall will include a pressing plant, paint shop and seat manufacturing in a building that will be 744 meters (2,440 feet) long—nearly triple the length of the Titanic. There’s space for four such facilities.Musk is taking his fight for the future of transport into the heartland of the combustion engine, where the established players long laughed off Tesla as an upstart on feeble financial footing that couldn’t compete with their rich engineering heritage. He casually dropped the news at an awards ceremony in Berlin in November, leaving the top brass of Germany’s car industry shell-shocked.“Elon Musk is going where his strongest competitors are, right into the heart of the global auto industry,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “No other foreign carmaker has done that in decades given Germany’s high wages, powerful unions and high taxes.”Building a factory in Europe’s largest car market is a major test of Musk’s global ambitions. Demand in the region is flat, and buyers are more loyal to local brands. Meanwhile, labor costs in Germany’s auto sector are 50% higher than in the U.S. and five times what they are in Poland, just an hour’s drive away from Gruenheide.Gruenheide TimelineEnd February: Finish tree logging before migrant birds nest March 5: Deadline for comments from nearby residents March 18: Public meeting to discuss the project Mid-2020: Construction expected to begin July 2021: Targeted start of productionOn the positive side, electric cars require less labor to build, and Germany has a deep reserve of auto experts. The location also offers the soft-power advantage of proximity to the country’s leaders.Under pressure for being slow to pick up on the electric-car shift, Chancellor Angela Merkel’s government extended a welcoming hand to Musk. Economy Minister Peter Altmaier offered to try to ease regulatory hurdles that may snag construction. “There’s a lot at stake” in Tesla’s plan, he said soon after the project was announced.Musk’s incursion comes at a strategically opportune time. Riding a wave of optimism after successfully starting deliveries of its China-built Model 3 sedans a year after breaking ground on a factory there, Tesla’s stock has doubled in the past three months.Meanwhile, German peers are struggling with the costly shift away from combustion engines. Volkswagen and Mercedes-Benz parent Daimler announced thousands of job cuts last year, when German car production fell to its lowest level in almost a quarter of a century. For Gruenheide, the planned investment has suddenly transformed the town of 8,700 people into a sought-after location. Local officials receive development proposals on a daily basis: anything from 22-story apartment towers to U.S.-style shopping malls, said Christiani, who hopes the plant will help unlock financing for public transport, schools and medical facilities.In the town hall, five thick binders are available for locals to peruse the project’s details, including 463 trucks expected to roll into the plant each day, a rail spur for train deliveries and an on-site fire brigade.Tesla still has to jump through a number of hoops. Residents have the chance to raise objections, and some have bemoaned that they’ve seen little from the company since its blockbuster announcement. Meanwhile, the local water utility warned it won’t be able to supply the site in time and raised concerns over its location in a zone meant to help protect drinking water supplies.And then the company has to carry out initiatives to protect wildlife—including scaring off any wolves in the area, relocating hibernating bats and removing lizards and snakes until construction is finished. The U.S. carmaker also has to replace felled trees.The mayor expects these hurdles to be cleared so that the first made-in-Gruenheide Teslas can roll out in July 2021.“The forest is classified as a harvest-ready, inferior pine forest,” Christiani said. “It was never supposed to be a rain forest.”—With assistance from Hayley Warren (Adds criticism from water utility in 17th paragraph.)To contact the author of this story: Stefan Nicola in Berlin at firstname.lastname@example.orgTo contact the editor responsible for this story: Chris Reiter at email@example.com, Craig TrudellChad ThomasFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
HONG KONG/BEIJING (Reuters) - Volkswagen AG is set to take a 20% stake in Chinese electric vehicle battery maker Guoxuan High-tech Co Ltd, two sources told Reuters, as the German firm accelerates its electric push into the world's largest auto market. The deal would mark Volkswagen's first direct ownership in a Chinese battery maker and comes as the Wolfsburg-based automaker strives to meet a goal of selling 1.5 million new energy vehicles (NEVs) a year in China by 2025, including plug-in hybrid cars. The top foreign automaker in China plans to acquire the stake in Shenzhen-listed Guoxuan via a discounted private share placement in the coming weeks, the two sources with knowledge of the matter said.
Poland's consumer watchdog UOKiK said on Wednesday it was fining Volkswagen more than 120 million zlotys ($31.6 million) for misleading customers about the emissions of its vehicles. The fine, the biggest ever given by the regulator for violation of consumer rights, is the latest chapter in a global emissions cheating scandal that has cost Volkswagen about 30 billion euros in fines, vehicle refits and legal costs, and also triggered a global backlash against diesel vehicles. "False information in advertising materials caused misinformation - they referred to Volkswagen's pro-ecological attitude, when in fact the cars were not environmentally friendly," UOKiK president Marek Niechcial said in a statement.
(Bloomberg Opinion) -- Renault SA pledged back in February to make its 20-year-old Alliance with Nissan Motor Co. “irreversible,” after the shocking arrest of the French carmaker’s boss Carlos Ghosn on charges of financial misconduct exposed deep rifts on both sides.That goal now looks further away than ever, with Ghosn’s dramatic escape to Lebanon and his repeated denials of the charges reopening old wounds, and neither firm succeeding in bridging the political and governance divide between France and Japan.The Financial Times reports that Nissan is ramping up contingency plans in case of a breakup — which, while financially painful and costly for both sides, shouldn’t be ruled out. With both Renault and Nissan under new management, and advocates of closer integration on the wane, time is running out to prove that this isn’t an alliance in name only.The spectacle of Ghosn holding court for several hours in Beirut last week was a grim reminder of the Alliance’s fragility. Whether you believe in his conspiracy narrative or not, the political meddling clearly ran deep: Ghosn pointed to France’s doubling of its voting rights in 2015 as the seed of Japanese resentment against Paris’s out-sized influence within the partnership. The fact that Paris was dreaming of a full-blown merger, while the Japanese wanted nothing of the sort, shows that the fundamental issues around control and governance go well beyond Ghosn.Renault Chairman Jean-Dominique Senard’s efforts to show that the Alliance is bigger than the man who forged it haven’t really paid off, either. Conversations about how to save the partnership have failed to get past the question of whether it should become more equitable: Renault, in which the French state has a 15% stake, owns 43% of Nissan, while Nissan owns 15% of its partner. Nissan has sought more sway in the alliance, including a reduction in Renault’s stake, given the Japanese company’s bigger size and superior earnings performance in recent years (though the latter has started to tail off). Meanwhile, Renault’s bungled attempt last year to strike a deal with Fiat Chrysler Automobiles NV managed to both annoy the Japanese and benefit its French arch-rival Peugeot SA, the company that Fiat is now set to merge with.Politics and governance are one side of the equation — but what about money? It seems strange to let a corporate partnership fall apart after 20 years when it’s clearly been a financial success. Renault and Nissan’s Alliance sells over 10 million cars a year, almost on par with industry leaders Volkswagen AG and Toyota Motor Corp., and they’ve been avidly working together to find more synergies. The companies said in 2018 that their annual cost savings would exceed 10 billion euros ($11.1 billion) by 2022. In an industry that’s facing growing spending requirements amid the shift to electric cars, that’s an obvious advantage.But even the financial benefits of the Alliance require a harmonious partnership. To achieve those savings, Renault and Nissan need to ramp up common manufacturing platforms and roll out more jointly-developed projects. The companies have pledged to build two-thirds of all cars sold on common platforms and three-quarters of all cars sold using common power-trains (up from one-third) by 2022. That looks hard in an environment where, according to the FT, the view inside Nissan is that the relationship is “toxic.” And the fact that both Renault and Nissan have recently moved to replace their CEOs shows how tough the post-Ghosn era has been.Today, the best argument for keeping the Renault-Nissan Alliance together, like many an unhappy marriage, is the cost of breaking it up. At a time when national pride is trumping economic self-interest, that’s not good enough. Until those in charge can prove there is an incentive in closer cooperation, it will be hard to convince stakeholders on both sides that this is an irreversible alliance.To contact the author of this story: Lionel Laurent at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Volkswagen AG and Nissan Motor Co. are among automakers planning new plants in Ghana to target West Africa’s 382 million people. Their challenge: Finding banks that will offer loans to make new cars affordable.In a country where about 70% of imports are second-hand, new car ownership is rare, said Believe Alorbu, who sells older models shipped from the U.S. at half the price of a new one.“People will sometimes leave the plastic wrapping on their seats” when they buy new cars, she said at her dealership in the capital, Accra. “Even if the government increases tariffs on used cars, people will still not be able to afford new ones if they don’t get access to financing.”Less than 5% of new car sales are financed by banks, according to the Ghana Automobile Dealers Association. In some cases, lenders demand employers agree to redirect part of the purchaser’s salary toward the debt, or that the owner take out insurance to cover a default. Interest rates of 22%-30% also make loans “largely” unaffordable, said Koketso Tsoai, an auto-industry analyst at Fitch Solutions.Once their facilities are running, VW, Toyota Motor Corp., Nissan, and possibly Renault SA will need to contend with second-hand cars like those sold by Alorbu. Ghana’s government is trying to make it more attractive with planned import duties on second-hand cars of 35%, from 5%-20%, and fiscal incentives that improve as the companies move from assembly to local production, with tax holidays of as long as 10 years. It has also pledged to promote regional exports.“We don’t look at it only for today,” Nissan Africa Chairman Mike Whitfield said by phone from Cairo. “We continue to see Africa as the last frontier left in the automotive market, West Africa being a key part of it.”About 10% of West Africa’s population are able to spend more than $11 a day, according to data compiled by World Data Lab. It is this group that the industry is targeting on a continent that adds some 10 million new consumers annually. By 2030, Africa’s middle- and upper-income class is expected to exceed 300 million of the world’s 4-billion consumer market, the data shows.‘Huge Opportunity’Standard Bank Group Ltd., Africa’s largest lender, is also preparing for future growth by replicating its South African car-financing business in other parts of the continent, including Ghana.About three quarters of auto loans still go to companies, Patrick Koduah, head of vehicle and asset finance at the company’s Stanbic Ghana unit, said in an interview. “There’s a huge opportunity to grow personal demand.”About 30,000 passenger vehicles were imported into Ghana in 2018, according to estimates from Fitch Solutions. Ghana had 7,073 new vehicle registrations in 2018, of which 4,268 were passenger cars, according to the International Organization of Motor Vehicle Manufacturers.While the government has said its auto-incentives program would include the creation of an asset-based vehicle financing component, a trade ministry spokesman couldn’t provide details on how it would work.Pan-African lender Ecobank Transnational Inc. said in an email that the average car loan in Ghana amounts to $30,000. Banks typically demand a high down payment and limit loans to no longer than five years if they do grant credit, while dealers sometimes allow buyers to spread repayments over six months.More than 90% of new vehicle sales in South Africa, the continent’s biggest market, are probably financed, Thomas Schaefer, the head of Volkswagen’s local unit, estimated. The country had a penetration rate of 132 passenger cars per 1,000 people in 2019, compared with 22 per 1,000 people in Ghana, according to Fitch Solutions.“If I would take out the financing options in South Africa, our market would disappear,” Schaefer said.The Wolfsburg-based carmaker plans to start a ride-hailing service in Accra, modeled after a similar one in the Rwandan capital, Kigali, to ensure its output is absorbed.Regional Gateway“The assumption is that in Africa, out of the more than 1 billion people, there are only about 100 million people who can afford a new car, but you may have a couple 100 million people who need to go from A to B and a bit of money in their pocket,” said Schaefer. “You need to tap into this market.”Nissan sees its assembly plant starting by the end of the year, depending on when Ghana’s auto-policy is signed into law. Volkswagen plans to start by April. Toyota, which described Ghana as “an extremely important market in West Africa,” declined to share details about its strategy.Ghana won’t be the first country to position itself as a gateway to West Africa. Nigeria announced a very similar policy in 2013. However, after a change in government and years in the legislative system, President Muhammadu Buhari rejected the bill in July last year. Automakers have also signed agreements with Ivory Coast’s government.“Ivory Coast has already taken some steps in the right direction, which aim to limit the import of used vehicles,” said Leonce Yace, managing director of Ivorian lender NSIA Banque. The company, one of the key players in vehicle finance in the country, saw a 41% year-on-year increase in auto loans in 2019.“It is not about who should be the hub, it’s about who offers the best deal,” said Chris Ndala, managing director of CICA Motors Liberia, a subsidiary of the French group CFAO SA.The car companies are beginning small in Ghana, with 5,000 units a year or less, and are expected to partner with local firms.“We’ll all go as the business and the market goes,” Nissan’s Whitfield said. “The critical thing is that it’s starting.”Alorbu, the second-hand dealer, doesn’t see the used-car business getting displaced anytime soon.“They make it sound like used-car dealers are the enemy, but we are helping the consumer,” she said. “If the government is not ready or willing to provide financing, selling new cars will be a problem.”(Adds detail of tax incentives in fifth paragraph)\--With assistance from Tsuyoshi Inajima, Leanne de Bassompierre and Ekow Dontoh.To contact the reporter on this story: Yinka Ibukun in Accra at firstname.lastname@example.orgTo contact the editors responsible for this story: Andre Janse van Vuuren at email@example.com, ;Stefania Bianchi at firstname.lastname@example.org, Vernon WesselsFor more articles like this, please visit us at bloomberg.com©2020 Bloomberg L.P.
LAS VEGAS/SEOUL (Reuters) - South Korea's SK Innovation Co Ltd plans to build a second electric vehicle (EV) battery plant in the United States and is considering expanding another factory in Hungary to meet soaring demand for EV cells, its chief executive told Reuters. Kim Jun also said he expects more Asian manufacturers to make batteries in the United States instead of importing them to avoid tariffs and meet demand from U.S. automakers locally. SK Innovation's second plant at its under-construction production site in the U.S. state of Georgia could have a capacity equivalent to 10 GWh, Kim said, declining to identify customers.
Volkswagen Group said on Thursday its vehicle deliveries last year were slightly above the previous year's level, revising up an earlier forecast which predicted 2019 sales would be level with the year before. Volkswagen chief executive Herbert Diess issued the revised forecast during an investor presentation in New York. Volkswagen is due to release 2019 earnings on March 17.
HAMBURG/FRANKFURT (Reuters) - Volkswagen is seeking more than 100 million euros ($112 million) in damages from former supplier Prevent, it said on Tuesday, adding it had filed a first claim for one of its subsidiaries. The row dates back to 2016, when suppliers ES Guss and Car Trim stopped supplies shortly after being acquired by Prevent in a bid to raise prices, causing production losses at six of Volkswagen's factories in Germany. Volkswagen has filed a first claim for its Skoda unit with the Brunswick regional court, it said, adding that the Dresden higher regional court would determine which courts are responsible for further damage claims.