Economic failures = new car models for European automakers. Month in review.
The economy is hurting and more and more carmakers are suffering. Not all are doing poorly, though. Audi, as an example reported record sales for 2008, with over 1,000,000 vehicles sold. Lamborghini, owned by the VW/Audi Group, also posted record sales for 2008. Both companies produce sports cars that retail at over US$100,000.
Let us examine the developments of the last month by automaker:
Porsche. There is no substitute for a strong economy. A poor economy negatively impacted sales at the sports car maker, and even a significantly revised 911 model did not save it from a virtual sales slump. Porsche is tighter with numbers than most companies, but while sales were slowing, the company hopes that new models in 2009 will help it combat slumping sales. A four-door car, the Panamera should hit showroom floors in the first half of 2009, while you can expect to drive a 2009 Boxster/Cayman with revised powertrain as soon as March.
In financial news the company announced the first week of January that they had bought an additional 8.16 per cent stake in VW worth 6.1bn Euro/US$8.2bn. Porsche now owns 50.76 per cent of VW Group but may gain further stake in VW, rising to 75 per cent in coming months (if all goes as planned). In November, news came out that Germany’s upper house of parliament passed new laws regarding ownership of VW, despite European Commission rulings that such laws were illegal.
In November, the high profit-maker in the world gobbled up a stake, which sent hedge funds scrambled to recover from trading, which briefly left VW as the most valuable company in the world. Porsche’s finance team effectively practiced something called “cornering”. Let us not forget that Porsche is better as an investor than as a carmaker – though they are a damned good carmaker. In 2007, the company made 3.6 billion Euros on investments, and only a paltry 1 billion Euros on cars. At a 12 per cent profit margin, the decision to invest in VW stands financial positioning, and partly seeking a partner with whom to share technology development costs.
Still, everyone is watching the dollars and cents these days. Even Porsche has announced that is it pulling out of the American LeMans series for 2009 – in part. It is pulling the P2 team, but not pulling support for the 911 GT3 RSRs in the GT2 category.
Mercedes-Benz. Mercedes has finally announced the much-anticipated E-class for 2009. The new car replaces the round headlights with more rectangular ones, perhaps in the style of the C-class or a Lexus.
Rather than new headlights, Mercedes would be much better off with some more fuel-efficient automobiles. The carmaker racked up a near-record US$28.9 million in CAFE fines from the National Highway Traffic Safety Administration for 2008.
To meet those needs, Mercedes is planning to focus on three fuel-saving systems for its entry-premium model range. These cars were introduced at the Detroit auto show. The plan is to introduce an electric car, a plug-in hybrid, and a fuel cell car. The plug-in model should be something akin to the GM Volt concept. No word if Mercedes will get investment money from the US government as GM hopes to get.
· BlueZERO E-CELL with battery-electric drive and a range of up to 200 kilometers using electric drive alone
· Blue ZERO F-CELL (fuel cell) with a range of well over 400 kilometers using electric drive
· BlueZERO E-CELL PLUS with electric drive and additional internal combustion engine as power generator (range extender) – This version has an overall range of up to 600 kilometers and can cover a distance of up to 100 kilometers using electric drive alone.
On this note, Mercedes is opening new facilities for production in Rastatt, Germany and Kecskemet, Hungary, slated for completion by 2010. Here, the company plans a few new models including a rival to the BMW X1 and new A-class and B-class cars.
Lotus. It is a well-known fact that the chassis used for the Lotus Elise/Exige line is the basis for the Tesla electric car. Lotus CEO Mike Kimberley told the Financial Times that his company is working on electric vehicle technology.
Apparently, the company has spent US$88 million to make its already efficient cars even more efficient. Lotus has, under the direction of the late Colin Chapman, always believed that the key ingredient to a strong sports car is “adding lightness”.
Range is always the key hurdle for electric vehicles, and the Lotus is no exception. Using a small gas engine to charge the onboard batter gives the Lotus EV a range of at least 300 miles.
Electric car batteries. Bob Kanode is the CEO of vehicle battery maker Valence Technology. He argues that Europe’s need for electric vehicles outweighs America’s since energy costs are far higher. He points also to the European over-dependence on foreign oil as well as government mandates to lower CO2 emissions. Europe has the toughest emissions standards in the world.
The development of battery technology has proven slower in the US, while the market for more fuel-efficient vehicles outpaces availability throughout Europe.
Valence also plans to use their expertise in car batteries to assist electricity suppliers in storing wind and solar energy, which overcomes many of the disadvantages to those present technologies.
Despite great interest and demand in the US, California-based Tesla Motors is desperately seeking additional funds. CNET reported on December 1, 2008 that Tesla was seeking an additional US$400 million in low-interest loans from the federal government. Whether that money exists to assist the company (and VC firms) in covering the costs of building a second and third electric car remains to be seen.
Tesla has now announced a new sports car, the Roadster Sport, which can be seen here: http://news.cnet.com/8301-11128_3-10140206-54.html
Ferrari. The supercar maker announced in early December that it would shed 10 per cent of its workforce (300 jobs). Ferrari claims the global economic recession has left it unscathed, but one has to wonder the legitimacy of this claim as global sales dived from 600 cars per month to 92, practically overnight.
The company is producing a new model called the Ferrari California, which is a front-engine convertible, but even if this does boost sales, it is unclear whether or not Ferrari chairman Luca did Montezemolo’s prediction of 10,000 car sales per year in 2010 is anything more than wild optimism.
Ferrari’s logic is that a slow-down in sales would it allow it to catch up with backorders, which even in the UK and US exceeded three years. This is curious because it is also shutting down its factories for an extended winter vacation this year. Di Montezemolo has also stated that he likes customers to wait a long time to make the feeling of receiving a Ferrari an extra special one. Good things come to those that wait, right?
MINI. Forecasts at MINI are increasing for 2009 driven by the anticipated Crossman “off-roader”, in addition to extending the electric car program it has introduced in select markets, including southern California. At the end of November, MINI had sold 217,400 vehicles worldwide, thus putting it well in the position of surpassing the 222,900 sales of calendar year 2007. Part of this sales increase was due to the introduction of the MINI Clubman, an extended wheelbase version of the MINI Cooper.
BMW. MINI’s parent company had a slew of product announcements in 2008, including a X6 M model due out in 2009. Hardly any car escapes the M-treatment these days, with the 7-series being a notable exception. For a very long time, the 7 has had a diesel engine, at least in the EU and world markets. Diesel has been slow to catch up in the US. Strong demand has BMW North America’s Jim O’Donnell thinking that a US-spec diesel 7 is possibly a good idea. One option is the 730d, which uses a turbo-charged 6-cylinder engine. It returns 45 mpg, a figure that Daimler would no like to see on its American cars!
Conclusion. Fiat’s CEO Sergio Marchionne believes that the only way for an automaker to survive the economic crisis is to make more that 5,500,000 cars per year. He sees a world with only six major players. Fiat, he argues, will have to merge with another company to remain viable.
One analyst, Jürgen Pieper, argues that private or family-owned companies, including PSA/Peugeot-Citröen and BMW argues that as the share prices of these companies dip, the pressure will be on the current owners to sell their stakes in the companies, thus diluting their power.