Daimler, not Tesla, points to the auto industry’s future

I have lately been testing a parade of Mercedes-Benz and smart cars – from a fortwo cabriolet the size of microwave oven to a sporty little SLC 300 hardtop convertible; a GLE sport-utility; an E-Class sedan and coupe; and, even an exquisitely imposing S550 convertible hardtop.

Mercedes-Benz Concept X-CLASS

I’ve not spent much time in a muscular sprinter van, popular with police breathalyzer units, and the smaller Metris van remains untested, too. But I can say that both are very good fleet values, according to the research firm Vincentric.

Point is, Daimler AG has been delivering a steady stream of new Mercedes, smart and Freightliner models for years now. They come in all shapes and sizes, and across price ranges: the smart fortwo starts at $17,300 while a Maybach S600 starts at $232,400.

In the heart of the Canadian market, Merc has its Honda Accord-fighter, the CLA, not to mention the B-Class station wagon. They run in the mid-$30,000s and up. Merc, while a luxury brand, has managed to cover an impressive swath of the marketplace. Rival BMW AG surely must have noticed.

Mercedes, in fact, passed BMW last year to become the world’s No. 1 premium car brand in the world. Why is quite simple: Mercedes has unleashed a torrent of new products in the last few years, while BMW’s new model cadence has been slower and certainly more haphazard.

Mercedes-AMG SLC 43

I believe BMW has become sidetracked by its floundering i-Brand of electric cars and hybrids. The “greening” of BMW seems to have sapped the Bavarian company of energy and enthusiasm for what buyers want today, right now.

BMW has spent billions on the i-Brand and related “green” initiatives with not much to show for it in sales, revenue and profits. At least for now. The result: the gang in Munich could only wave as waved Mercedes passed them in the fast lane.

Daimler hasn’t been mortgaging the future to fund the present, however. No, the company is plowing billions into electrification and hybrids and cleaner assembly lines and all the rest, while also growing sales and revenue, and maintaining very healthy profit margins. True, Daimler has been caught in a worrisome diesel emissions scandal that reeks of collusion among car companies from Germany. This could end up costing Daimler dearly. Regardless, it’s a black eye for the company and the other German automakers involved.

The Mercedes-Benz GLA shares its platform and powertrain with the QX30.

Nonetheless, if I were an investor (and I am not, not in car companies, not any of them), I would take a closer look at Daimler. The stock is cheap and offers an appealing yield. Moreover, Daimler is investing in products, technologies and services that should make the company a formidable player in the auto industry for many years to come.

Consider: Daimler is making a $10 billion investment in electric vehicles and plans to roll out 10 new electrified passenger cars by 20200. Daimler estimates electric vehicles will account for 15-25 per cent of Mercedes-Benz sales by 2025.

Daimler is also building its own in-house battery (take note, Tesla), is developing an electric semi for its Freightliner division, and is moving quickly to take advantage of the rapidly emerging importance of electrified vehicles in the world’s biggest car market, China.

Mercedes-Benz G-Class: used to chase Jason Bourne.

In China, Daimler is working to expand its presence in a joint venture that is being called Beijing Benz Automotive. Daimler and its Chinese partner, BAIC, plan to produce Mercedes-branded battery electric vehicles (BEV) by 2020, while also developing a deep and rich research and development presence in China.

This brings me to autonomous driving technology, where Daimler is a world leader. That’s good. Also good is Daimler’s vision for the smart brand. Smart is the tip of the spear for car-sharing and city car initiatives.

More immediately, if you’re a car buyer today, well, Mercedes quality is world class and resale values are excellent. Indeed, the Mercedes brand is strong and valuable and Daimler’s global infrastructure is good for owners and poses a formidable competitive challenge for all luxury brands.

The AMG GT is one of the very hot AMG products from Mercedes-Benz — so hot they’re driving sales to great heights.

Daimler isn’t the darling of investors, though, just consumers. Indeed, Daimler’s stock market capitalization is a relatively modest $64.76 billion. Tesla, you might wish to know, has a market cap of $58.63 billion (all figures in U.S. dollars).

This, of course, makes no sense. Daimler did $153 billion in sales last year and earned a profit of $8.53 billion. Tesla’s sales amounted to just $7 billion. Not surprisingly, Tesla lost $674.91 million.

Daimler is a juggernaut, but Tesla is the toast of Wall Street and a legion of true believers. You may go ahead and be entertained by Tesla and its Tweeting, starlet-dating CEO, Elon Musk. But if you want to know where the auto industry is headed, watch Daimler.

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Volvo signals the age of EVs has really and truly arrived

This was inevitable.

Volvo Cars has jolted the car market, announcing that every new model it launches from 2019 will be electrified in some way. If anyone ever doubted, it’s clear now that we are witnessing a global shift to electrified vehicles (EV). The internal combustion engine (ICE) that’s dominated the industry for more

Håkan Samuelsson – President & CEO, Volvo Car Group

than 100 years isn’t dead. Not yet. But we can all now see its inevitable end.

Volvo’s move, however, should not come as a surprise to anyone who knows and understands the company and the broader marketplace in which the auto industry competes for customers – and government approval. By that I mean car companies around the world must deal with ever-tightening environmental regulations and they – and customers — are also chasing government subsidies and favours of all sorts.

But let’s start with Volvo, a Chinese company based in Europe and owned by Zhejiang Geely Holding Group Co., Ltd. Volvo is an upmarket European brand bought out of near-bankruptcy from Ford Motor seven years ago for the bargain-basement price of $1.8 billion (US).

Volvo, then, straddles the two largest new-car markets in the world (the U.S. is No. 3). And both China and Europe have fully embraced the electrification of the automobile.

Let’s start with China, which quite clearly aims to become the world leader in EVs – in terms of production, sales and technology. The Chinese government has embraced the electrification of the automobile. China as a whole believes that technology leadership in EVs is critical for car companies to thrive in the coming decades.

Government help is rich and broad and it’s working. The Chinese government offers electric vehicle manufacturers rich subsidies – up to 50-60 per cent of the retail price of a car. Buyers, meanwhile, are exempt from sales taxes on locally-made models.

As well, local governments offer their own incentives. Owners in some places are exempt from registration fees and EV drivers often have preferred access to cities. And the Chinese authorities have been busy rolling out recharging networks across the country.

Today, China is the world’s largest market for electric vehicles. Last year, EV sales hit 409,000 units, up 65 per cent from 2015, reports the China Association of Automobile Manufacturers (CAAM). Another 98,000 plug-in hybrids were also sold. Thus, sales of these so-called “new-energy” vehicle hit 507,000 units, for a 53 per cent year-on-year jump.

T8 Twin Engine – Electric AWD

China has more EVs in use than any country or region. Yale Environment 360, a publication of the Yale School of Forestry and Environmental Studies, notes there are 600,000 all-electric vehicles on China’s roads. The plan is to get to 5.0 million EVs by 2010. Europe has about 500,000 EVs on its roads, with the U.S. at fewer than 500,000.

Ah, Europe. As The Guardian notes, European governments prefer the stick — legislation – over the carrot — subsidies — to electrify the automotive fleet.

Wolfgang Bernhart of the consulting firm Roland Berger told The Guardian that the European Union has set mandatory emissions-reduction targets that will lead to a 40 per cent average emissions reduction in all new cars sold by 2021. The only way to get there is to adopt EVs quickly and on a large scale.

Which is precisely what Volvo is doing.  Volvo will launch five fully electric cars between 2019 and 2021, three of which will be Volvo models and two of which will be high performance electrified cars from Polestar. Sales of older pre-2019 gasoline vehicles could extend out to 2025. Volvo hopes to sell 1.0 million electric or hybrid cars globally by 2025.

Volvo and Tesla are the only major automakers to make a 100 per cent EV commitment. But long-term success in the auto industry depends on innovation and the next battleground will be electric vehicles.

Thus, the three leading German carmakers, Volkswagen, Daimler (parent of Mercedes-Benz) and BMW are particularly focused on Tesla, arguably the world leader in if not EVs, certainly in creating a drumbeat of interest and expectations in them. Add Volvo to this list, along with the Nissan-Renault Alliance.

Volkswagen, coming off the smear of the “Dieselgate” scandal, says it will “leapfrog Tesla in the electric car race. The goal is to sell more than 1.0 million battery driven vehicles by 2025.

Daimler is accelerating its $10 billion (US) investment in electric vehicles. The goal is to launch 10 new electric car models by the year 2022. BMW has similar plans, the most interesting piece of which is the all-electric 3-Series to be introduced this fall.

The 3-Series EV is aimed at the Tesla Model 3. Tesla CEO Elon Musk, through his Twitter account, says the first Model 3 will roll off the assembly line Friday, July 7 – wearing serial number 001. A “handover party” for the first 30 customers is planned for July 28. Musk suggests that it “looks like” Tesla could be producing as many as 20,000 Model 3s a month by the end of the year.

Other automakers, of course, are committed to EVs. General Motors has successfully launched the Chevrolet Bolt and more EVs are planned. Jaguar is now testing its all-electric iPace crossover wagon. Nissan is about to launch an all-new LEAF EV – the world’s best-selling EV by far. Toyota is now committed to a quick expansion of its EV lineup, as is Honda. And so on.

Volvo, though, has set the EV standard among established automakers with a long history. Given the nature of the Volvo brand, its parent company and where Volvo competes most aggressively, this was inevitable.

As is the steady push to a world in which EVs dominate.

 

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Fiat brand in crisis

Some have argued that the 1957 Fiat 500, known then as the Nuova 500, was “a piece of genius.” That’s how BBC’s Top Gear put it, adding that because this car was so novel and innovative, the 500 “set the pace” for future bits of automotive brilliance like the 1959 Austin Mini.

The current 2017 Fiat 500c side-by-side with the original.

Indeed, Top Gear concluded that “the Fiat 500 is the greatest car in the world.”  Top Gear is hardly alone. Edmunds.com, in fact, ranks the original Cinquecento No. 25 on its list of the Greatest 100 Cars of All Time.

Most who know these things agree that the 500 of the ‘50s is a classic, — a clever conjuring of creativity borne of economic crisis. Here was Fiat’s solution to the financial limits of a country and people rebuilding after WW II. The Cinquecento, of course, was the answer to Italy’s post-war middle class transportation needs.

In 2017 when we think of Fiat, minds race to the 500, a cheap and tiny little car that arrived with an appealing look and an incredibly flexible design. Sure, Fiat made a coupe and convertible 500, but there were also sporty versions like the R, and bigger, even more practical ones like the 500 Giardiniera wagon from 1960-1975 and a panel van called the 500 Furgoncino.

I suppose some also associate Fiat with truly gorgeous cars. The 124 Spider from 1966-82, the 1200 Turismo Veloce, convertible and the Fiat Dino Coupe come to mind. Any discussion of Fiat needs to include the 124 sedan, a collaboration with the old Soviet government that also spun off the Lada or Zhiguli. And who can forget the 1960 600 Multipla, a six-passenger mini minivan that was the perfect taxi.

2017 Fiat 124 Spider and 1968 Fiat 124 Spider

But let’s be honest: Fiat is the 500. Fiat Chrysler (FCA) officials in North America appear to have had only a superficial understanding of all this when they relaunched Fiat here in 2012.

They positioned the 500 as a kind of sporty design statement worthy of a premium price, not a bargain-basement, mass-market line of runabouts aimed at younger buyers who crave style but lack cash. Today, the least expensive 500 lists for more than $19,000. That’s a crazy price.

Worse, FCA has failed to get the quality right. Fiat finished dead last in the just-released J.D. Power and Associates Initial Quality Study. Earlier this year, Fiat also was at the very bottom of J.D. Power’s long-

124 Special Sedan: a joint venture with the old Soviets. Can you say Lada?

term Vehicle Dependability Study. Fiat also mined the deepest depths of Consumer Reports’ 2017 Brand Report Card. Shoddy workmanship at a premium price is not a formula for success.

And so Fiat in Canada remains the most niche of niche brands. To date, just 1,752 Canadians have bought some sort of Fiat. In fairness, Canadian sales are up 71 per cent on the year, but that only shows how bad things were in 2016.

Fiat’s current Canadian lineup has been boosted by the latest 124 Spider, a joint venture roadster with Mazda that is a treat to drive and a pleasure to see. But it starts at $33,495.

2017 Fiat 500L Trekking: the definition of ugly.

Fiat also sells a little all-wheel-drive SUV, the 500X ($30,950 base). This is Fiat’s version of Jeep’s Renegade. Neither is a design masterpiece and both drive like pigs. This joint venture SUV within the FCA family has been a stunning disappointment.

Delicious: 1959 Fiat 1200 Turismo Veloce Spider.

And then we have the 500L, a long-wheelbase, four-door 500 that starts at $25,245. This may not be the ugliest car for sale in Canada today, but if it isn’t, what is?

Fiat in 2017, then, is a mess. The basic 500 two-door, coupe and convertible, has a certain charm, but the lineup top to bottom is just too expensive.

2017 Fiat 500X Trekking: handles like a pig.

Yes, I’ve had loads of fun tossing about the 500 Abarth, but it’s nearly $30,000 to start. Yikes. The 500L is a visual catastrophe, the 500X is the automotive equivalent of a root canal and the 124 Spider is nice but hardly novel. Mazda has been selling the MX-5 Miata for decades.

Fiat in 2017, at least in North America, is a brand in crisis. Today’s lineup has nothing in common with the greatness of the 500 in 1957, other than a name and some design cues. It is not a work of genius by any measure. As a whole, the 500 can be fairly called an over-priced, poorly-built collection of grocery-getters.

Perhaps it’s impossible to reimagine Fiat for today’s North American buyer by digging into the truly great roots of the brand – creative designs at spectacularly affordable prices. If that’s the case, Fiat won’t be here in Canada for much longer.

 

 

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With self-driving cars, you’re never alone

You might not yet have heard of Super Cruise and no, it’s not a 21st century spinoff of the hit 1970s TV series The Love Boat. You are visiting an automotive site, not Nickelodeon Online.

Super Cruise is an autonomous driving system that will be offered in the 2018 Cadillac CT6 this fall. Cadillac claims it’s “the industry’s first true hand-free driving technology.”

A steering wheel light bar indicates the status of Super Cruise™ and will prompt the driver to return their attention to the road ahead if the system detects driver attention has turned away from the road too long.

Buried in a word salad most assuredly co-written by a roomful of lawyers, GM goes on to share the details about Super Cruise: a driver-attention system, precision LiDAR map data combine with a network of cameras and radar sensors to enhance “hands-free capabilities” in the coming version of the CT6. LiDAR or Light Detection and Ranging uses pulsed laser beams to measure distances.

The whole Love Boat…er, Super Cruise system is perfect for long-distance travels and daily commutes, we’re told. This is a “data-rich approach to driver assistance” and it is “unique in the industry.”

Caddy’s claims to the contrary, a stunningly long list of companies are digging into the technologies that enable self-driving cars. The California Department of Motor Vehicles (DMV) reports that 30 companies have been issued Autonomous Vehicle Testing permits. They range from GM to Tesla, Google to Apple, Volkswagen, Nissan, Mercedes-Benz, Bosch, Ford, Zoox Inc., Wheego Electric Cars and even something called Udacity Inc. All aim to revolutionize the auto industry. They want to strip away control from drivers, giving it to computers.

Hands-free driving technology for the highway through Super Cruise™ is a button push away on the 2018 Cadillac CT6 sedan.

A new study by J.D. Power and Associates points out that part of that future is already here. Autopilot hardware and software the likes of Super Cruise is already available in various forms. Tesla’s Autopilot is perhaps the most well-known of the bunch. But the field is quickly becoming crowded.

Power argues that fully autonomous vehicles will not be commonplace for decades, but the vision of intelligent cars that drive themselves will eventually become a reality. But not before many legal, technical and practical hurdles are overcome.

Nonetheless, J.D. Power’s research shows that nearly half (47 per cent) of consumers think fully autonomous vehicles will be available by 2025. Of these, one in five (20 per cent) think fully autonomous vehicles will be ready by 2020.

The driver information cluster showcases the status of Super Cruise™.

Consumers, however, are not sold on the technology, even if they believe it’s coming. Power found that 61 per cent of consumers say they “definitely would not” trust a self-driving vehicle and would not even ride in one.

J.D. Power officials, however, say car companies and their current and future suppliers will clear the engineering hurdles in front of self-driving cars.

“Can we take consumers with us? Can we kind of ferry them over this river of doubt and mistrust and fear and, frankly, lack of understanding and get them to the other side?” asks Dave Sargent, vice-president of global engineering at J.D. Power. “I think we can,” he adds. “The winners are going to be the folks that can do that the best.”

Without question, semi-autonomous technologies grow commonplace, the idea of fully self-driving cars will become less scary. Advanced driver assistance systems are already popular with many consumers and these are some available right now:

  • Smart headlights: capabilities include turning into corners, adjusting their beams depending upon traffic, and even widening in rural areas to help spot animals and pedestrians;
  • Camera rear view mirrors: they replace traditional mirrors with cameras;
  • Emergency braking and steering systems: intervene if a driver doesn’t react quickly enough to avoid a collision;
  • Lane change assist systems: automatically complete a pass or steer around objects.

This brings us back to Super Cruise, which GM argues is a major leap ahead in the race to fully autonomous. The coming system from Caddy watches the driver’s eyes through an infrared camera on the steering column to determine whether or not the driver is monitoring the autonomous driving actions of the CT6 – and not watching a movie or sleeping.

The driver attention system uses a small camera located on the top of the steering column and works with infrared lights to determine where the driver is looking whenever Super Cruise™ is in operation.

As long as the driver looks at the road ahead every seven to 20 seconds, Super Cruise stays engaged. But if you take your eyes off the road for too long, the car will unleash a series of escalating alerts intended to get you engaged. If you don’t respond, your CT6 will eventually slow a stop and alert OnStar for help.

You see, in the age of autonomous vehicles, you are never alone.

 

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U.S. judge sums up VW’s Dieselgate: only the little guy hurt ‘by this corporate greed’

The timing certainly is appropriate.

On the eve of Earth Day, Volkswagen’s operations in both Canada and the United States have reached new settlements and agreed to new penalties in the ongoing “Dieselgate” emissions scandal that has rocked the company’s bottom line. Still, no senior executive has even been charged with a criminal offence in this global cheating scandal.

Courts in Quebec and Ontario have approved a nationwide settlement of consumer claims related to the 2.0-litre diesel emissions cheating scandal. VW Canada will make cash payments to eligible owners and lessees of up to 105,000 Volkswagen and Audi 2.0-litre TDI vehicles.

And there’s more. Eligible owners can also choose to: *

  • sell their vehicle to Volkswagen based on Canadian Black Book values;
  • terminate their lease without penalty;
  • retain their vehicle, under certain circumstances, and have it modified at no charge, with an extended warranty included;
  • trade in the sullied VW at market value, applying that amount towards another VW or Audi model, where eligible.

VW Canada has not released the cost of the settlement in Canada. That’s not just a shame, but unconscionable. Justice should not just be done, but seen to be done and we can’t know if justice has been done without knowing the penalty VW Canada must pay for participating in the three-year global diesel scandal.

Here’s what we know: VW has admitted to rigging as many as 11 million diesel cars worldwide to cheat on emissions tests. This will cost VW tens of billions of dollars in penalties, reparations and settlements.

VW’s own financial reporting pegs total costs of penalties and vehicle buybacks and fixes in North America alone at more than $23 billion (US). But more costs are coming. Volkswagen still faces hundreds of investor lawsuits and a criminal probe in Germany. I have seen final cost estimates that exceed $40 billion (US).

In the United States, just as VW Canada was getting approval for its settlement, a judge ordered VW to pay a $2.8 billion (US) criminal penalty for cheating. VW pleaded guilty to conspiracy and obstruction of justice in the “massive fraud” orchestrated by the German automaker.

U.S. District Judge Sean Cox issued a scathing rebuke in approving the deal negotiated with the U.S. Justice Department involving nearly 600,000 diesel cars.

“Who has been hurt by this corporate greed?” said Cox from the bench. “From what I can see, it’s not the managers at VW, the ones who get paid huge salaries and large bonuses. As always, it’s the little guy,” he added, referring to car buyers and rank-and-file VW workers.

Indeed, not a single senior manager or board member at VW has been charged with any wrongdoing. Instead, seven relatively low-level employees face criminal sanctions in the U.S. Five of the seven are in Germany and are unlikely to be extradited.

The truth is, it’s business as usual at VW. At last month’s results press conference in Germany, Chief Financial Officer Frank Witter’s statement noted that, “In spite of the charges and the challenges arising from the diesel crisis, we can be satisfied on the whole with the group’s business development.”

Last year Volkswagen surpassed Toyota Motor Corp. as the world’s best-selling automaker. At the results conference, VW’s senior leadership was remarkably free of any significant expressions of contrition, regret or admission of guilt or even responsibility. Instead, they focused on how VW earned a 6-7 per cent return on sales in 2016. This level of profitability gives “the Volkswagen Group new momentum and optimism as it enters the next phase of its realignment,” trumpeted a press release.

CEO Matthias Müller said 2016 was both challenging and successful, but offered no apologies. Instead, he said 2016 was a year in which VW “set the course for the biggest transformation in the history of the company – while at the same time performing better in our operating business than many thought possible.”

Scandal? What scandal? Wrongdoing? What wrong doing?

The fact of the matter is, without the U.S. court system and the aggressiveness of justice departments on both the state and federal level in the U.S., VW might have walked away largely unscathed from this calculated act of corporate malfeasance.

Even as the settlements and costs have grown, VW overall has remained resolutely shy in its approach to admitting any failures or wrongdoing on the part of senior leadership. VW’s board, controlled by an incestuous lot of family members descended from Ferdinand Piech and workers’ council representatives, has yet to propose any serious change in how VW conducts its business.

Yet former CEO Ferdinand Piech has alleged that board member and major shareholder Wolfgang Porsche knew about the scandal much earlier that he had claimed, as did former CEO Martin Winterkorn.

Winterkorn, CEO from 2006 until the scandal first broke, was known within and outside VW as an obsessive, micro-managing engineer who many of us spotted peering under the hoods of models on display at auto shows around the world. I and others struggle to believe that cheating activities involving 11 million VW vehicles over many years could go unnoticed by Winterkorn and other senior VW managers.

Winterkorn himself used the “I knew nothing” defence when addressing a committee of German lawmakers earlier this year. He said he was stocked to learn of the cheating, that “striving for perfection could end this way.”

This scandal has yet to run its full course; investigations are ongoing in Europe and lawsuits and other criminal charges have yet to play out all over the world. But if no one in real authority at VW suffers criminal sanctions, if the only penalties VW pays are covered by shareholders in the form of fines and other forms of restitution, then the true scandal is a lack of justice having been served and having seen to be served.

Note: The following 2.0L TDI vehicles are included in the approved settlement program in Canada: Jetta 2009-2015, Beetle 2013-2015, VW Jetta Wagon 2009, VW Golf Wagon 2010-2014, VW Golf 2010-2013, 2015

 VW Golf Sportwagon 2015, VW Passat 2012-2015 
and
 Audi A3 
2010-2013, 2015

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