WEEKLY REVIEW European capacity utilisation unlikely to reach 85% The European capacity crisis is still showing little sign of ending according to research this week. Meanwhile PSA, Renault-Nissan and Fiat Chrysler all start looking towards a stronger future. Tax incentives from countries like Ireland and the Netherlands are coming under scrutiny from the EU and emission cuts get a surprise boost from Tesla and provide a boost to the aluminium industry. www.eurotaxglass.com 13 June 2014 If you know of anyone else who would like to receive this review then do send us their details or ask them to sign up via our website. Pre-crisis capacity utilisation not foreseeable at the moment Whilst new car sales may be improving, with one or two stutters on the way, the capacity utilisation crisis is still continuing. Most experts agree that utilisation needs to be in the 80-85% rate for a plant to be profitable but it is currently struggling to get above 70% and according to data we have from IHS the earliest it is likely to get back above 70% is the end of this year or even into 2015 which corresponds with predictions from Inovev and PwC Autofacts. However whilst PwC see some regions back above 80% by as early as 2016 we think that is going to be very much brand/plant specific and the industry as a whole is unlikely to be back above 80% until 2019-20. Part of the problem is that whilst the GM and Ford plant cuts are taking circa 650k units out increasing capacity in Central and Eastern Europe is balancing that out and whilst some of that capacity growth is to feed markets like Russia some of it is likely to also come into the rest of Europe. This leaves plants like PSA’s Rennes site and Honda’s Gebze plant very exposed whilst Fiat’s Mirafiori plant has been struggling to run at even double digit levels for the last year or so, although the current temporary layoff whilst the plant gets ready for new models next year partly explains the Fiat situation. http://europe.autonews.com/article/20140610/ANE/140609868/european-plant-capacity-usage-improves-but-breakeven-still-years- away?cciid=email-ane-daily&r=1884G9220467G1V Russian economy still hitting auto sales hard Talking of Russia and whilst capacity may be ramping up, sales are still heading in the opposite direction as they fell a further 14% last month putting the country on course for two success years of decline after the record year of 2012. Whilst there is talk of a potential recovery in the weak rouble next year the increasing capacity and the weak currency are a strong mix to incentivise sales of Russian built products into Europe, assuming the political situation eases. http://internationalfleetworld.co.uk/news/2014/Jun/New-car-and-LCV-sales-down-12-percent-in-Russia/0444014910 Peugeot to invest €300m in a smaller Mulhouse plant Still on the issue of capacity and PSA has announced plans to shrink its second largest plant at Mulhouse in eastern France whilst also investing €300 million on the revamp. PSA also told the unions this week that it plans to introduce two new large cars and a compact model to the plant confirming its future beyond 2020 whilst adding further pressure on the Rennes site. http://www.reuters.com/article/2014/06/12/peugeot-mulhouse-idUSL5N0OT2IZ20140612 Dean Bowkett FCCA Dean Bowkett FCCA Technical Director & Chief Editor, 1 Technical Director & Chief Editor, Global Services Global Services [email protected] [email protected] WEEKLY REVIEW Renault-Nissan target top 3 spot Whilst PSA look at downsizing and reinvigorating its production its French competitor Renault and Nissan have their eye on becoming one of the big 3 global players according to their CEO Carlos Ghosn. The move, which would mean them having to increase sales by around 17% in the medium to long term, is seen by Ghosn as being key to achieving the required economies of scale. http://europe.autonews.com/article/20140613/ANE/140619936/ghosn-says-big-is-beautiful?cciid=email-ane- daily&r=1884G9220467G1V Large brand line up seen as a weakness in Marchionne’s plans Scale is also something seen as being a key requirement for Fiat Chrysler CEO Sergio Marchionne. However, whilst Marchionne believes his nine-brand automotive group is a key requirement for future growth over the next five years a number of analysts believe it will dilute the strength of the investment needed. Some pundits already think that outside of Brazil Fiat is not worth saving and Arndt Ellinghorst at International Strategy & Investment is struggling to see Dodge and Chrysler surviving side by side. Whilst Marchionne has confirmed that Lancia is a dead brand walking, with the only model being the Ypsilon in Italy until it is discontinued in the next few years, it is still hard to see how such a major relaunch across the other brands can be achieved in the 4 year time window he has set the group. http://europe.autonews.com/article/20140611/ANE/140609831/marchionne-insists-fiat-chrysler-needs-9-brands-market- watchers?cciid=email-ane-daily&r=1884G9220467G1V Fiat, Apple and others under EU investigation of tax rulings Another plan of Fiat’s to also come in for scrutiny is the relocation of its tax affairs. The European Commission has announced that it will investigate deals struck by Ireland, the Netherlands and Luxembourg with Fiat, Apple and Starbucks to see if they represent unfair state aid. Fiat has already responded saying it was surprised by the Commission’s actions adding that it was confident in the legitimacy of its tax situation Luxembourg. http://www.reuters.com/article/2014/06/11/us-apple-tax-eu-idUSKBN0EM0U220140611 Toyota recall 650k as Japanese regulator orders other OEMs to consider similar move Recalls were in the news again this week as Toyota announced it was adding a further 650,000 vehicles to the recall list due to issues with the front passenger airbags made by Takata. 3.6 million vehicles were recalled by the likes of BMW, Honda, Toyota and Nissan last year for the same issue and Japan's transport ministry has already cautioned other OEMs to decide quickly if they also need to follow Toyota’s lead and recall additional vehicles using the defective airbag. http://www.reuters.com/article/2014/06/12/airbag-recall-idUSL4N0OT3TF20140612 Fivefold increase in aluminium use in autos by 2020 Back to Fiat Chrysler and Renault-Nissan and whilst they may be looking at future expansion it is likely that the next round of their new models will contain far more aluminium as OEMs try to meet emission rules by swapping steel for lighter alternatives. According to Novelis Inc,’s Vice-President of global recycling, Derek Prichett, the amount of aluminium sheet used in automotive bodies will increase five-fold by 2020 to 1.8 million metric tons. The end result of this will inevitably see the cost of aluminium rising but it may also present some further challenges to dealers, bodyshop repair outlets and others who will need to ensure they have the necessary equipment in place to cope with the change. http://www.bloomberg.com/news/2014-06-11/aluminum-sheet-use-in-autos-seen-climbing-five-fold.html If you know of anyone else who would like to receive this review then 2 send us their details and we will add them to the circulation list. WEEKLY REVIEW Ding and dent products rise along with leasing in US Staying with bodyshop repairs and as vehicle leasing has been on the rise in the US so has sales of so called ding-and-dent products which customers can use to protect the appearance of their cars and avoid being hit with end of lease charges. With PCP on the rise in Europe I can also imagine when these vehicles start to get close to return time demand will rise for similar services in Europe. http://www.autonews.com/article/20140611/FINANCE_AND_INSURANCE/306119998/ding-and-dent-products-gain-from-leasing- bundling?cciid=email-autonews-fandi&r=1884G9220467G1V Tesla share patents But going back to emissions and Tesla has adopted a totally different strategy to reducing emissions. It has surprised many by releasing the patents on its intellectual property in order to accelerate the development of electric vehicles. Elon Musk, Tesla’s CEO, has said they will not take legal action against anyone who "in good faith wants to use our technology." Musk also confirmed that his aspirations for Europe include selling over 160,000 vehicles a year, at which point he will build an assembly plant in the region. http://www.reuters.com/article/2014/06/12/tesla-patents-idUSL2N0OT1CU20140612 Kia plan Q4 2014 launch EV Soul Staying on the EV front and Kia, whose parent company Hyundai are one of the key players in the hydrogen-fuel cell push, has confirmed it will start selling an EV version of its Soul model in Europe later this year. http://evfleetworld.co.uk/news/2014/Jun/Kia-begins-production-of-first-export-electric-vehicle/0438014924 Lights, camera, drive And finally with an alarming rise in driving selfies, taking self-portraits with a smartphone whilst behind the wheel, it looks like BMW, Mini and other OEMs have decided to step in. BMW has confirmed that from July 2014 they will have integrated functionality across the BMW and Mini range which have the respective BMW Apps or Mini Connected option which will work with Wi-Fi equipped cameras from German manufacturer GoPro.