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Runtime: 10:43
0:00 EU Tariffs on Chinese EVs Kick in Today
1:19 VW Hurt by Weak Demand, Higher Costs
1:58 VW Planning Big Pay Cuts
2:25 BYD Brings in More Revenue Than Tesla
3:18 Siemens Buying Altair for $9 Billion
4:18 Renault Developing EVs in China, But Not for China
5:04 Suzuki & Toyota Team Up on EVs
5:49 Stellantis Sues Another Supplier
6:39 Automakers Also Worried About EU CO2 Van Emission Rules
7:52 Tesla Applies to Double Size of Texas Plant
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EU TARIFFS ON CHINESE EVs KICKS IN TODAY
The deadline for the EU and China to come to an agreement in their EV dispute has passed, so the higher tariffs were formally approved and published in the EU’s Official Journal, which means they kick in today. The additional tariff on imported Chinese EVs are 7.8% for Tesla, 17% for BYD, 18.8% for Geely, 35.3% for SAIC and 20.7% for everybody else. Remember, that’s on top of a 10% tariff for any vehicle imported into the EU and rules like these are typically in effect for 5 years. But SAIC is ready to fight back saying it plans to file a lawsuit with the EU’s Court of Justice with the hope of at least getting its tariff down to a lower level. Reuters reports that China also told automakers to stop investing in countries that supported the tariffs. In a vote earlier this month 10 European countries supported the tariffs, including France, Italy and Poland. And China could slap its own tariffs on European goods as well.
VW HURT BY WEAK DEMAND, HIGHER COSTS
The Volkswagen Group reported its third-quarter earnings and the results show why it’s aggressively trying to cut costs. It sold more than 2.1 million vehicles, which is down 8.3% compared to a year ago and Its revenue fell half a percent to €78.5 billion. But its operating profit slumped nearly 42% to €2.9 billion and its net profit plunged 63% to about €1.6 billion. The Group’s profits were hurt by weak demand for the VW brand, investments in new models and high costs in Germany.
VW PLANNING BIG PAY CUTS
And in addition to plant closings and layoffs, Germany’s Handlesblatt newspaper reports that Volkswagen is also planning significant pay cuts. It says it will cut salaries by 10% as well as cancel bonus payments, allowances and pay raises. This would save the company about €2 billion a year, but that’s only about half of the €4 billion it’s aiming to cut.
BYD BRINGS IN MORE REVENUE THAN TESLA
Meanwhile, it’s a much rosier picture for BYD. It sold 1.12 million electric and plug-in hybrid vehicles in the third quarter, which is a 37% gain from a year ago. Its revenue hit $28.2 billion, which is a quarterly record for the company and it was higher than Tesla’s revenue of $25.2 billion in Q3, which is the first time BYD has beaten Tesla in revenue. And while BYD’s net income rose 11.5% to $1.6 billion, it was below Tesla’s $2.2 billion net profit in the third quarter. BYD now has a market cap of $118 billion, making it the third most valuable automaker in the world behind Tesla and Toyota.
SIEMENS BUYING ALTAIR FOR $9 BILLION
German engineering group Siemens has started to transition away from its heavy equipment business into more software products because it thinks it can make more money there and it’s ready to spend big to do it. Bloomberg reports that Siemens is nearing a $9 billion deal to buy Michigan-based software developer Altair Engineering, which would be its biggest acquisition ever. Altair primarily provides solutions for the aerospace, automotive, energy and financial industries. With the rise of AI, demand for the kind of software solutions that Altair offers is expected to see big growth.
RENAULT DEVELOPING EVs IN CHINA, BUT NOT FOR CHINA
Renault wants to shift more research and development of electric vehicles to China, so it’s building an EV R&D team in the country and plans to start mass producing a new electric car by late next year. It would mark the first time the automaker has invested to develop a new car in China, but reports say the team will report directly to Renault’s headquarters in France and the cars are only intended for Europe and other overseas markets. As you may know, Renault and Geely have a relatively new partnership and a year ago Renault announced it would come out with vehicles on Geely’s CMA platform. So, it may be looking for ways to leverage that partnership with this new R&D team in China.
SUZUKI & TOYOTA TEAM UP ON EVs
Speaking of teaming up on EVs, Toyota and Suzuki are forming a new partnership. Since Toyota is so much bigger you might think that it would supply Suzuki with an EV, but it’s actually the other way around. The model, a battery electric SUV, will be developed and manufactured by Suzuki in India. They say it will be available with 4WD, but other than that the details are vague, like it will be nimble, offer an ample range and have a comfortable cabin. The platform for the SUV was jointly done by Suzuki, Toyota, and Daihatsu, so there could be even more variants. But don’t picture the tiny kei cars they already make together. They say this will be a global model.
STELLANTIS SUES ANOTHER SUPPLIER
Stellantis is in another legal battle with one of its suppliers over a pricing dispute. This time its German parts maker Brose. Stellantis alleges in its lawsuit that Brose is not honoring its contract and is demanding more money for parts. The automaker also claims that it had to shut down its Windsor Assembly Plant back in July for two days because Brose refused to ship parts without a price increase. Stellantis says the production stoppage cost it $3 million. Brose has not filed a response to the lawsuit but said in a statement that it’s “hopeful for a resolution that allows our partnership to continue.” Brose is at least the fifth supplier Stellantis has sued in the past year, mostly over similar pricing disputes.
AUTOMAKERS ALSO WORRIED ABOUT EU C02 VAN EMISSION RULES
Automakers in Europe are lobbying to delay or relax stricter emission rules that go into effect next year because they face fines of up to $15 billion for missing the targets. But it’s not just passenger vehicles, emission standards for vans also get stricter next year and automakers are worried about meeting those targets as well. Companies must cut CO2 emissions from new vans by 17% to 154 grams per kilometer on average. Automakers will have to increase the number of electric vans they sell to meet the targets but the problem is consumers aren’t buying them. In the first six months of the year, EV van sales in the EU fell 3.7%, while sales of diesel vans increased 16%, accounting for 84% of the total market. Meanwhile, EV vans only account for 6% of light commercial sales. But in order to meet next year’s CO2 targets, Stellantis says it will have to increase its EV van share to 20% of sales and Renault says it needs to hit 18%. So to become compliant, the companies say they’ll likely have to reduce sales of ICE vans.
TESLA APPLIES TO DOUBLE SIZE OF TEXAS PLANT
In its Q3 Update Tesla said it would start producing more affordable models in the first half of next year and it looks like it’s getting ready to do that. The Austin Business Journal reports that Tesla has filed 10 applications that would effectively double the size of its gigafactory in Texas. The company says these more affordable models will combine aspects of both its current platforms as well as the next-gen platform, but can still be made on the same manufacturing lines. With the move Tesla expects to get closer to its maximum manufacturing capacity, which is closer to 3 million units and would represent a 50% production increase over 2023.
But that brings us to the end of today’s show. Thanks for making Autoline a part of your day.
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Look up “arbitrary” in the dictionary and this is what you find:
“7.8% for Tesla, 17% for BYD, 18.8% for Geely, 35.3% for SAIC and 20.7% for everybody else”
If Tesla is going to double the size of its factory in Austin, I would certainly hope that it would be able to increase production by 50%.
It’s kind of rich when Stellantis sues suppliers for trying to pass along unexpected cost increases in their business, but Stellantis thinks nothing of raising prices on their vehicles, sometimes multiple times in one year. A textbook case in how to torpedo your supplier relations and ensure that your company does not receive the latest and greatest innovation from its suppliers.
Ron- Actually the varying tariffs were developed from an exhaustive investigation of which companies received subsidies all along the chain of production, from cheap land for factories from local governments to below-market supplies of lithium and batteries from state-owned enterprises to tax breaks and below-interest financing from state-controlled banks.
Seems like Brose bid on a Stellantis job too cheap and can’t really afford to build the parts for the price they quoted. This is one of the problems of sourcing the lowest bidder. They might be cheap parts but turns out they cost Stellantis 2 million when they refused to ship parts.
Lambo2015: So after this “exhaustive investigation” by European bureaucrats we can feel certain that “7.8% for Tesla, 17% for BYD, 18.8% for Geely, 35.3% for SAIC and 20.7% for everybody else” somehow squares with “subsidies all along the chain of production, from cheap land for factories from local governments to below-market supplies of lithium and batteries from state-owned enterprises to tax breaks and below-interest financing from state-controlled banks.” But if they didn’t get it right the first time with all those incentives (otherwise known as “market interference”), why would anyone believe that all those various tariffs will make it all OK?
Interesting that SAIC has, by far, the highest tariff. Is it somehow related to their having the huge, but shrinking 40 year old joint venture with VW?
Ron,
Whatever metric the EU uses, or any other governing entity, the purpose is to either discouraged the sell or put the sell on a more even playing field as the local product. They vehicle will still cost the OEM the same, there us just a tax added if one should still buy the vehicle. I wonder if the tariff applies with a lease? The thing is, with a number of the Chinese imports, the tariff added will only make it about the same as the local vehicles, so no real harm done. You either buy or lease the Chinese vehicle for the same amount as the local one! The vehicles that it will hurt are those built in China that was built to already compete on price, like a number of Volvos, or other legacy auto makers that build in China and ship them back. Since they were priced to sell and market value, that 20% tariff will hurt!
We’ll see how well the EU’s tariffs hold up to WTO scrutiny. If I was to guess, a lot better than truly arbitrary 100% tariffs over all EVs. Of course, if we decide to do without a supranational court like the WTO, then every dispute (and I’m guessing there are many, about very arcane matters) turns into a power brawl among civil servants. When the best environment for businesses is clear, impartially enforced rules.
‘Ad fontes’, as the renaissance scholars said. I searched under (EU) ‘Trade Defense’ with ‘china electric vehicle tariffs 2024’ and found the document in question. Caution, it’s a long one.
https://circabc.europa.eu/ui/group/2e3865ad-3886-4131-92bb-a71754fffec6/library/b4fdb022-86c3-43b2-bc5d-86e72c560b19/details
Ron- Wasn’t saying I agree or disagree with a sliding scale of tariffs, just pointing out that it wasn’t arbitrary. They did actually put some thought behind it and whether they got it right or not is anyone’s guess. Personally, I wouldn’t be surprised if some money changed hands while determining the percentages but that’s just my overly skeptic view of governments doing anything on the up and up. Anytime lots of money is involved, corruption usually isn’t far away.
The problem I have with such a directive is an automaker could get a nice low tariff due to battery sourcing or even materials and then turn around and resource a month later and is the government going to actually keep track of where all these manufacturers get their material and batteries, and it could get very complicated as they shuffle material around through a third party etc.