By now even the beardiest hermit in the most far-flung cave won’t have escaped noticing that Covid-19 has put the world’s finances in great jeopardy and the car industry is in as poor a state as any other.
三级成人视频As Jeffries International Equity Research pithily puts it in its latest auto-industry analysis: “At zero production, the clock has started ticking.”
三级成人视频Car makers are simply running out of money and even though most have more cash now than they did in 2007, they aren’t producing cars so there’s no income and the fixed costs are racking up. Jeffries reckons there’s only enough to cover even the most cash-rich car makers for between eight and 18 weeks – “No balance sheet is immune,” it says.
Cash is king
三级成人视频This is much, much worse than the US banking crisis of 2008, which spread like a virus across the world, but I can’t help thinking of then Renault/Nissan boss Carlos Ghosn’s LA auto show speech which I saw him make in November 2008.
“The usual rules of business [are] up in the air,” he said. “Everyone is hoping pent-up demand is building, but no one has a clue how long it will last; one year, two years, three years?
“All companies are paying attention to short-term objectives,” he added. “In other words, don’t burn cash.”
Then and now, he meant batten the hatches, don’t do needless mergers and takeovers, and avoid adventurism and risky investment. It’s not easy, though. Take Ford, for example, which, according to Jeffries, is already loss-making in Europe and is burning through cash at a rate of £2.4 billion a month. It is far from alone.
The trouble is that the EU is demanding the exact opposite of Ghosn’s advice right now. Investment in new CO2-saving technology, be it hybrid, plug-in-hybrid or full battery-electric (or even hydrogen fuel cell) is tearing great chunks out of balance sheets, but it is essential to meet the latest 95g/km corporate average CO2 requirement introduced this January in the EU and the UK. This will be tightened still further next year, before even more radical reductions in corporate average CO2 outputs are required in 2025 and 2030.
And a failure to make and sell these expensive electrified cars to an inevitably poorer public will result in Draconian fines for manufacturers, which some analysts think will top £25 billion in Europe.
三级成人视频Ultimately the EU and the UK are headed towards a ban on internal combustion and a future of battery-electric vehicles (BEVs) or, outside the UK, hydrogen fuel cells, but the investment is colossal.
三级成人视频Volkswagen, for example, is spending £30 billion on an entirely new range of models to be built at two brand-new factories in Europe. And while the European market for BEVs is still low, it has overtaken North America and is now the world’s second largest behind China, with this year’s European pre-Covid-19 sales growth predicted to be the world’s fastest.
Which makers will be most affected?
三级成人视频Basically anyone making big, heavy, thirsty internal combustion-engined cars. While there is a weight-based credit system (as well as “super credits” for selling sub-50g/km cars and further credits for eco innovations) that 95g/km of CO2 requirement amounts to about 69mpg for a petrol engine and 78.5mpg for a diesel.
That sort of economy simply isn’t available to drivers of powerful sports and luxury models or large SUVs, which British car makers specialise in, especially when combined with the more rigorous Worldwide Harmonised Light Vehicle Test Procedure (WLTP) and Real Driving Emissions (RDE) testing, which mean an average fuel efficiency fall of about 22 per cent. Fines will almost inevitably have to be paid…
Which will be able to comply most easily?
Some companies are closer to compliance than others; Toyota, PSA Peugeot/Citroën, Mazda, Renault, Fiat Chrysler and Ford should be able to meet 95g/km with no more than between one and 13 per cent sales of battery electric vehicles. But at the other end of the scale, Mercedes-Benz, Jaguar Land Rover and Volvo might struggle to sell the up to the 25 per cent ratio of BEVs they’ll have to if they want to avoid paying big fines.
Moreover, merely having the capacity to make those battery cars doesn't necessarily mean there is a market for them at the prices that have to be charged to make a profit.
三级成人视频Car makers are going to be on their knees financially - and meeting targets doesn’'t necessarily mean survival.
What can the UK do?
Quite a lot, although it's contentious at every stage, with a strong environmental lobby dogging every decision, strong union and regional government representation, a far-from-unanimous car industry and ongoing Brexit negotiations, which could take any number of directions from the wholesale adoption of EU automotive standards.
三级成人视频In the short term the UK Government could defer CO2 deadlines, particularly next year’s tightening of 95g/km exemptions, which will hit specialist UK luxury car makers hard, or perhaps reduce the level of the fines for non-compliance. This would be contentious not just for the environmental lobby, but also for those car makers that have prepared their ranges better for the new CO2 restrictions (and also have the advantage that they sell more smaller, and more economical, A-, B- and C-segment cars, ie city cars, small and family hatchbacks).
In these circumstances it would be difficult for industry bodies such as the Society of Motor Manufacturers and Traders (SMMT) to speak with one voice for the entire industry, but we understand that some approaches have been made from car makers which will be hardest hit.
三级成人视频In the longer term the further tightening of CO2 emissions in 2025 and 2030 look likely to be more fertile areas for motor industry lobbying, particularly of the UK Government, which is naturally suspicious of things emanating from the EU.
Some want the UK to follow the EU standards, others would prefer an easing of them; no one is asking for a tougher stance.
Is this a gift to China?
Most agree that these further standards will be tough to meet and could well hand the Chinese economy a big bonus because it makes most automotive battery packs and has a burgeoning electric-car industry anxious to extend itself into Europe.
三级成人视频Deferring CO2 deadlines would give the industry more time to build battery capacity in Europe thus saving jobs and investment, as well as allowing the development of cleaner and more sustainable and ethical battery chemistry than the current lithium-ion cells and hydrogen fuel cells.
三级成人视频Another area where the industry seems more inclined to speak with one voice is the proposed ban on all internal combustion, including hybrids, in 2035. The industry sees the latest range of plug-in hybrid vehicles (PHEVs) as a key technology to introduce the public to electric propulsion and to bridge the practicality gap for long-distance driving.
Pure battery cars with long ranges are expensive and heavy, and high-current chargers are also expensive to install and use, are often unreliable and, despite Government promises, are still few and far between.
Repeated use of fast-chargers also harms the long-term health of the current lithium-ion battery packs to the extent that some car makers are considering software which “counts” the number of fast charges so used buyers can see how compromised the battery life is.
As one car maker told us: “Now is not三级成人视频 the time to ask for anything…".
三级成人视频But we understand the industry is starting to make approaches to Government, reminding it no doubt of the £202 billion it contributes to the UK economy, the 12.8 per cent it contributes to UK goods exports, the 168,000 direct jobs and many times that in supplier firms, retail and fleet sales, media and motor racing, not to mention the valuable research contracts it has with UK firms and universities.
The alternative is to have car manufacturers pull out, with all the upheaval that entails. Honda is already going三级成人视频, others could just as simply follow.
“We just can’t afford to keep making vehicles we don’t make money on,” said one UK manufacturer, when asked about new EV standards.
It’s a sobering thought that car companies could just pack up and leave, but it’s one which might cause some rethinking among the Government’s decision makers.
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