Cost Of Doing Battle In China’s EV Market: $17 Billion

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VW’s operations in China have come a long way. Here is a locally-manufactured Polo in 2003.

VW’s operations in China have come a long way. Here is a locally-manufactured Polo in 2003.
Photo: Getty Images (Getty Images)

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If you were going to launch a new range of electric vehicles in China, how much do you think you’d have to spend? In the case of VW, you’re looking at a €15bn price tag. All that and more in The Morning Shift for September 29, 2020.

1st Gear: What A Competitive Market For EVs Looks Like

America is probably the most competitive market for high-end electric vehicles. We’re the home of Tesla, after all. But when it comes to general competitiveness for EVs across all kinds of cars, I don’t think you can beat China. Low-cost EVs are all over the market there, and a good product can win plenty of new buyers, as GM recently proved with its ultra-hot Wuling. Ultra-hot Wuling! What a phrase.

Illustration for article titled Cost Of Doing Battle In China’s EV Market: $17 Billion

VW has been involved in developing EVs for China for years, but it has a new product push coming for 2025, and that push has a price tag, as the Financial Times reports:

Volkswagen and its Chinese partners will pour €15bn into electric vehicles in the country over the next four years as competition intensifies to sell low carbon cars in the world’s largest auto market.

The group on Monday said the investment, made with Chinese joint venture partners SAIC Motor, FAW Group and JAC Motors, will be used to design and manufacture 15 electrified models for the Beijing market by 2025.


By October, VW will begin production in two new Chinese factories dedicated to electric vehicles, with a combined maximum capacity of 600,000 units per year, it said.

Getting things right in China seems like the best way to get big wins in the EV world these days, as nobody else seems to be able to grasp the magic Tesla has higher up in the market. Just ask Audi how its E-Tron sales are doing.

2nd Gear: First German Case Will Test If The Courts Can Convict Actual Execs

Dieselgate never ends, never will end, but there is an exciting new development. The first big court case is coming up in Germany, and it’ll be a test to see if convictions can come down on the big execs. Certainly, VW itself has sent execs packing, but there’s a difference between getting forced to retire and getting convicted in court. Up first is Rupert Stadler, as the New York Times reports:

On Wednesday, prosecutors in Munich will challenge that assertion in court for the first time.[…]The trial is the first in Germany stemming from the scandal, the culmination of an exhaustive investigation involving hundreds of witnesses and millions of documents. But the case will also test whether prosecutors can overcome the difficulties inherent in trying to convict top managers protected by layers of underlings. That is a problem that has also frustrated investigators in the United States when prosecuting corporate crime.[Rupert Stadler, a former chief executive of Volkswagen’s Audi luxury car division] faces charges of fraud and false advertising stemming from accusations that Audi continued to sell diesel cars with illegal software even after U.S. authorities uncovered the cheating in 2015. Volkswagen, Audi and Porsche cars were programmed to meet air-quality standards while being tested, but they spewed copious amounts of diesel fumes in regular driving.Mr. Stadler and three co-defendants, including Wolfgang Hatz, a former head of engine development at Audi, will be the first of dozens of former employees of Volkswagen to face trial in Germany in connection with the scandal.

I appreciate Dieselgate for actually catching car companies cheating on a massive scale, but it’s a bit of a red herring in the world of car pollution. Most of what’s killing the planet are perfectly legal under our current regulations.

3rd Gear: Fiat Chrysler Gets $9.5m Fine In Its Diesel Cheating Investigation

This is just a small piece of the pie, as The Detroit News reports:

Fiat Chrysler Automobiles NV will pay a $9.5 million penalty to settle allegations that it misled investors in 2016 over its vehicles’ diesel emissions, the U.S. Securities and Exchange Commission said Monday.

The agreement is one piece of a greater case brought against the Italian American automaker over allegations that it used defeat devices to cheat on emissions testing. Similar cases have been brought and settled against other automakers, including Volkswagen AG and BMW, and auto supplier Bosch.

More is sure to come, as the Detroit News notes that “Total settlement costs previously were expected to be nearly $800 million in penalties to several government agencies and payments to drivers with affected models.”

4th Gear: German Unions Have The Right Idea

The Financial Times has a great story on German unions taking absolutely no shit over layoffs related to COVID. Now, we Americans might be thinking “oh wow how rude—COVID collapsed the economy so layoffs are understandable.” This is not the German attitude. Union members marched behind a grim reaper with a banner reading “the victims of the purge are the innocent ones” (“Die Opfer der Purge sind die Unschuldigen”).

Truly, who should be carrying the burden of COVID—the execs or the workers? Via the FT:

Under overcast skies, a scythe-wielding man dressed as the Grim Reaper led hundreds of masked protesters out of the gates of one of Germany’s oldest manufacturing sites in the Bavarian city of Nuremberg.

In what local unions termed “a declaration of war”, the Volkswagen-owned MAN Group announced this month that it would cut 9,500 roles, more than a quarter of its workforce, and consider closing production sites across Germany and Austria.


For Nuremberg, the proposed job cuts “would be a catastrophe”, said Markus Wansch, chairman of the works council at the MAN site in the city, where engines and vehicle parts have been manufactured for more than 150 years, and which still employs more than 4,000 people in a working population of approximately 400,000. 

5th Gear: Two More Suppliers Fined Millions In Price-Fixing Cartel

This was a small news item from Reuters today, which goes to show how normal price-fixing is in the car world at the moment. Via Reuters:

The European Commission said in a statement Tuesday that it had fined German suppliers Brose and Kiekert a combined 18 million euros ($21 million) for taking part in bid-rigging activity, known as cartels in Europe.

Brose AG took part in a cartel with Canada’s Magna in the supply of door modules and window regulators for some Daimler vehicles. Canada’s Magna International Inc. and Kiekert AG formed a cartel concerning latches and strikers to BMW and Daimler.


Cartels are called bid-rigging or price-fixing violations in the U.S., where 46 auto suppliers paid about $3 billion in federal fines for price-fixing over the last decade. Kiekert was also fined $6.1 million for bid-rigging in the U.S. in 2017.

The EU, which oversees competition policy in the 27-member European Union, has conducted a series of major investigations into suppliers since 2013, imposing a total of 2.17 billion euros ($2.5 billion) in fines.

Reverse: I’m Actually Rudy Diesel

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