With the Supreme Court (SC) set to deliver a verdict on a ban on vehicles that are compliant only with BS III emission norms on Wednesday, automakers fear they will lose several thousands of crores on their inventories unless they are allowed to sell existing stock even after April 1. On Tuesday, the apex court reserved its order. An estimated 96,000 trucks that are BS III-compliant are lying with dealers and at an average price of R25 lakh are valued at around R25,000 crore. Moreover, close to 7 lakh two-wheelers — valued at around R2,500 crore — are also in showrooms and in factories. Hero MotoCorp estimated it would incur losses of close to R1,600 crore if the existing stock was left unsold.
On Tuesday, automobile industry body SIAM urged the apex court to give automakers 12 months time to dispose of vehicles with BS III-compliant engines. Lawyers for SIAM argued dealers would need least six to eight months to sell the inventories. The Environment Pollution Control Authority had moved the apex court on Friday to stop the sale of BS III-compliant vehicles from April. The government, however, has sought time for inventories to be disposed of. According to a notification of the ministry of road transport, automakers must adhere to BS IV emission norms from April 2017, but dealers will be allowed to sell the inventory of BS III vehicles.
Commercial vehicle manufacturer Tata Motors has said it is geared up to produce BS IV-compliant vehicles but would like dealers to be allowed to sell the inventory even after April 1. Solicitor general Ranjit Kumar argued that manufacturers be permitted to sell BS III vehicles till stocks last since it was not possible to make BS III-compliant vehicles into BS IV-compliant ones. In the passenger vehicle segment, most players like Maruti Suzuki, Hyundai, Honda and Toyota have virtually no inventory of BS III vehicles.
An angry Berlin has responded with a staunch defense of its policies after President-elect Donald Trump criticized German Chancellor Angela Merkel in two separate Sunday interviews, one with Germany’s Bild and one with the Sunday Times, for her stance during the refugee crisis while threatening a 35% tariff on BMW cars imported into the US.
Germany’s deputy chancellor and minister for the economy, Sigmar Gabriel, said on Monday morning that a tax on German imports would lead to a “bad awakening” among US carmakers since they were reliant on transatlantic supply chains. “I believe BMW’s biggest factory is already in the US, in Spartanburg [South Carolina],” Gabriel, leader of the centre-left Social Democratic party, told the Bild newspaper in a video interview.
“The US car industry would have a bad awakening if all the supply parts that aren’t being built in the US were to suddenly come with a 35% tariff. I believe it would make the US car industry weaker, worse and above all more expensive.” Playing Trump’s threat off Congress, Gabriel added that he “would wait and see what the Congress has to say about that, which is mostly full of people who want the opposite of Trump” as quoted by The Guardian.
In his interviews with Bild and the Times, the US president-elect had indicated that he would aim to realign the “out of balance” car trade between Germany and the US. “If you go down Fifth Avenue everyone has a Mercedes Benz in front of his house, isn’t that the case?” he said. “How many Chevrolets do you see in Germany? Not very many, maybe none at all … it’s a one-way street.”
So, when asked what Trump could do to make sure German customers bought more American cars, Gabriel had a simple suggestion: “Build better cars.”
Volkswagen AG confirmed on Tuesday it has negotiated a $4.3 billion draft settlement with U.S. regulators to resolve its diesel emissions troubles and plans to plead guilty to criminal misconduct.
The guilty plea is part of the civil and criminal deal as the automaker looks to restore its tarnished global brand. Volkswagen said with the addition of the fine, its diesel costs will exceed the nearly 18.2 billion euros ($19.2 billion) it has set aside to handle the problem. VW also said it will face oversight by an independent monitor over the next three years.
Reuters reported earlier the company’s supervisory board is set to meet on Wednesday to approve a civil and criminal settlement with the U.S. Justice Department over the automaker’s diesel emissions. VW said the supervisory board and the management board would meet Tuesday or possibly Wednesday to approve the deal.
VW is expected to plead guilty as part of the settlement as early as Wednesday, a source familiar with matter said. The plea deal will need the approval of a U.S. judge.
Evercore ISI said in a research note it believes the “settlement is intended to draw a line under all remaining U.S. related legal risk. This is good news.”
VW had raced to get a deal done before President Barack Obama leaves office on Jan. 20. A change in administration could have delayed a final settlement for months if not longer.
An alliance between Toyota Motor and Suzuki Motor could be a boon to both sides, helping the former gain ground in emerging markets such as India and giving the latter the engineering needed to compete in an increasingly high-tech industry.
Can’t go it alone
The two automakers said Wednesday they were discussing collaboration on environmental, safety and information technology.
Although Toyota President Akio Toyoda told a new conference that the idea of an alliance came together in just two business days after Suzuki Chairman Osamu Suzuki got the ball rolling, there is more to the story. Suzuki’s next partner had been the subject of speculation since August 2015, when the Japanese maker of economy cars ended a capital and business relationship with Germany’s Volkswagen over management conflicts.
Though Chairman Suzuki had said publicly that his company would look to remain independent going forward, another senior executive had acknowledged that collaboration was “necessary” in some fields. Even in India, a successful market for Suzuki, environmental regulations are growing tougher, making investment in technology like hybrid drive systems essential. Rising incomes have also stoked demand for higher-end vehicles in such countries.
Finding a big automaker ally was seen as essential for Suzuki to ensure a presence in self-driving cars. While a Toyota or a Volkswagen has the financial strength to counter the challenge posed by Google and other tech giants in this field — Toyota’s annual research and development budget comes to around 1 trillion yen ($9.59 billion) — Suzuki, which spent just 130 billion yen on R&D in the year ended March 31, hardly stands a chance alone.
The exit of Britain from the European Union on Friday does not augur well for Jaguar and Land Rover, the luxury car making subsidiary of Tata Motors, as volumes in the rest of Europe and export revenues may decrease significantly due to the depreciation of the pound against the US dollar and economic uncertainty that will prevail due to Britain’s decision to part ways from the EU.
The British pound on Friday initially fell by 11% on Friday and was trading at 1.3887 to the US dollar, down by 6.6% as of 15.41 pm (local time). The currency had plunged to $1.3229 to hit the lowest level in more than thirty years following the outcome of Brexit.
“For Jaguar Land Rover, today is just business as usual. We respect the views of the British people and in line with all other businesses, Jaguar Land Rover will manage the long-term impact and implications of this decision: nothing will change for us, or the automotive industry, overnight,” said Tata Motors
According to experts in the automobile sector, the exports of JLR will be hit significantly and may also impact the profitability in the near term. Last year JLR shipped 2,24585 cars in different markets across Europe which is one the largest market for JLR along with North America, China and home country Britain.
Germany issued a recall for 630,000 cars across Europe after finding emissions irregularities on cars made by Mercedes, General Motors’ Opel unit and Volkswagen Group.
Transport Minister Alexander Dobrindt released the findings of a comprehensive investigation of diesel engines’ emissions, which he established last year after VW admitted to installing “defeat devices” in 11m cars worldwide
Fifty-three car models were tested. Only VW cars – including its Porsche, Audi, and namesake car unit – were found to have software that recognised when the car was being tested and then cheated to understate emissions.
However, others used technology, called “Thermofenster” in German, that switches off emissions treatment systems at certain temperatures. The technology is supposed to be used to protect the engine from over-heating, but Mr Dobrindt said investigators had doubts that it was being used solely for this purpose.
The carmakers have agreed to carry out a voluntary recall to service the cars with a software tweak. The KBA, a German authority responsible for traffic regulation, will then test the cars to make sure they are in compliance.
A spokesperson from Daimler, the owner of Mercedes-Benz, said 247,000 cars will be recalled. He added, “all of our vehicles have been certified and licensed in accordance with the applicable legal requirements.”
Don’t look now, but Renault may be pulling a Volkswagen.
The French company’s shares fell by as much as 23% on Thursday after an apparent raid on what a union official described as “sites that have to do with standards testing and engine certification.”
Earlier, AFP reported that the agents from the fraud office of France’s Economy Ministry visited the sites last week seizing computers as part of an apparent probe into emissions testing.
As Bloomberg notes, “French authorities started a probe in September into whether VW deceived customers about the emissions levels of its diesel cars and promised to expand the probe to cover all carmakers, including Renault and PSA Peugeot Citroen.”
Peurgeot shares fell nearly 10% in sympathy. In October, the automaker said it never used software to cheat emissions tests.
Volkswagen’s UK car sales plunged 20 per cent year-on-year in November to 12,958, after declining 9.8 per cent in October.
Overall UK car sales rose 4 per cent in November, after declining in October for the first time in 44 months, show data from the Society of Motor Manufacturers and Traders.
The German carmaker is feeling the impact of the emissions fixing scandal, which erupted in September and cost chief executive Martin Winterkorn his job.
VW’s market share fell to 7.24 per cent from 9.4 per cent at the same time last year.
While VW sales slumped, the most popular carmakers in the UK, Ford and Vauxhall, enjoyed a hefty jump in November sales. Vauxhall sales leapt 25.8 per cent to 20,945, while Ford sales rose 12.7 per cent to 21,597. Ford’s market share rose to 12.1 per cent from 11.1 per cent, while Vauxhall’s climbed to 11.7 per cent from 9.7 per cent.
But while the diesel emissions-fixing scandal seems to have impacted Volkswagen sales, overall sales of diesel cars have continued to grow. Registrations of diesel cars rose 3.6 per cent in November, while petrol cars enjoyed slightly quicker growth of 3.8 per cent.
Audi has conceded that the engines in a further 85,000 cars from the Volkswagen group contained an illegal defeat device, raising questions of how systematic the cheating was at the German carmaker.
The luxury car brand of the VW group said it estimated that correcting the engine management software used in Audi, VW and Porsche models would cost in the mid-double-digit millions of euros. It admitted that the software was in all three-litre V6 diesel engines manufactured by Audi and sold from 2009 until this year.
The admission further undermines VW’s insistence that the cheating in the two-month-old emissions scandal was limited to a rogue group of engineers. The German carmaker has already admitted installing a defeat device in 11m diesel cars worldwide.
It is also facing a third emissions problem after disclosing that 800,000 cars, including some with petrol engines, had been sold with the stated carbon dioxide levels as too low and the fuel efficiency too high.
Audi sent its chief executive and engineers to meet the US Environmental Protection Agency last week. Late on Monday night, it sent out a statement saying that it had failed to disclose three auxiliary emissions control devices (AECDs) to regulators. Without disclosure and subsequent approval from regulators, AECDs are not legal.
Audi added: “One of them is regarded as a defeat device according to applicable US law. Specifically, this is the software for the temperature conditioning of the exhaust-gas cleaning system.”