AD #3297 – Chinese Refineries Shun Russian Oil; VW to Drop Models, Move Upscale; Mercedes Intros Electric Turbo
April 6th, 2022 at 11:50am
Listen to “AD #3297 – Chinese Refineries Shun Russian Oil; VW to Drop Models, Move Upscale; Mercedes Intros Electric Turbo” on Spreaker.
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Runtime: 9:20
0:07 Chinese Refineries Shun Russian Oil
0:50 Russian Assembly Plants Grind to a Halt
1:29 VW to Drop Models, Move Upscale
3:03 Mercedes Brings Out Electric Turbo
4:28 CATL Opens Battery Plant in Germany
4:57 NHTSA Investigates LG Batteries
5:33 AIWAYS Unveils EV Concept for Europe
6:32 Canoo Gets NASA Contract
7:13 Comau’s New Robot Line
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CHINESE REFINERIES SHUN RUSSIAN OIL
Here’s something we didn’t expect to see. Chinese oil refineries are refusing to refine Russian oil. And that could have a big impact on prices of gasoline at the pump. Reuters reports that China’s government-owned refineries will not take on new contracts to process Russian oil. They’ll fulfill existing contracts but won’t sign new ones, despite the fact that Russia is offering deep discounts. The Chinese refineries are afraid of getting slammed with sanctions if it looks like they’re helping Russia. But if Russia is cut off from most of the market and China turns to other sources to buy oil, gasoline prices will not be coming down anytime soon.
RUSSIAN ASSEMBLY PLANTS GRIND TO A HALT
Meanwhile car production in Russia is grinding to a halt and thousands of workers are losing their jobs. One city called Kaluga, which is about 120 miles away from Moscow, has been especially hit hard. It has assembly plants for Volkswagen, Volvo and a joint venture between Stellantis and Mitsubishi. About 7,000 autoworkers there are now out of work. Many of them seem to be naive about the global backlash over Russia’s invasion of Ukraine. Reuters quotes one marketing executive at a VW dealership as saying she hopes everything will soon get back to normal.
VW TO DROP MODELS, GO UPSCALE
Should Volkswagen change its name? As you know, Volkswagen means “people’s car.” But now it sounds like it’s going to be the car for people with high income. The company’s finance chief says VW is going to start selling fewer vehicles, and will concentrate on premium vehicles that bring in higher profits. To get there, it’s going to slash the number of models and trim lines it offers. VW plans to get rid of 60% of its gas and diesel vehicles across all its brands over the next 8 years in Europe. Instead of volume and market share, it’s going after margins. As we pointed out in our comparison of R&D spending between car companies, VW spends more on new model development than any other car company. It spent over $17 billion last year, or about the same as Toyota and General Motors put together.
MERCEDES BRINGS OUT ELECTRIC TURBO
Mercedes is showing that there’s still a lot of life left in the internal combustion engine. This is the new entry-level version of the Mercedes-AMG SL, the SL 43. While we’ve shown you the new SL in the past, there’s something a bit special with this model. And like most AMG’s it’s got to do with what’s under the hood. In this case it’s a 2.0L turbocharged 4-cylinder. Doesn’t sound all that special, but this engine features something no other production car in the world has, according to Mercedes, an electric turbocharger. It’s tech that Mercedes developed over the years in Formula 1 and will now use in a production vehicle. The electric motor is mounted between the intake and exhaust side of the turbocharger and uses a 48-volt electrical system to spool up before the exhaust gasses start to drive the compressor wheel. This gets rid of ‘turbo lag’ and allows for more torque at lower revs, as well as the ability to hold boost even when off the gas, so there’s an immediate response when you get back on it again. The setup produces over 380 horsepower, which is really impressive for a 4-cylinder production car. It’s all fed through a 9-speed automatic that sends power to the rear wheels and drives this convertible from 0-100 km/h in 4.9 seconds.
CATL OPENS BATTERY PLANT IN GERMANY
Big news in Germany today as Chinese battery maker CATL is getting set to open its first cell manufacturing plant outside of China. CATL broke ground on the $2 billion plant in 2019 and is now in the final stages of construction. While it can begin cell production, it still needs approval for another building to assemble the cells into modules. Once it’s all up and running, the plant will produce 14 GWh annually.
NHTSA INVESTIGATES LG BATTERIES
And in other battery maker news, LG Energy Solution is being investigated by NHTSA over battery defects that can lead to fire risks. The probe includes GM’s Chevy Bolt recall but NHTSA cited 5 other recalls from smart, Hyundai, Volkswagen and Stellantis that it is looking into. NHTSA wants to notify other automakers that use LG batteries about any potential defects and have them issue a recall if necessary. LG says it’s fully cooperating with the investigation.
AIWAYS UNVEILS EV CONCEPT CAR
NIO isn’t the only Chinese EV startup selling vehicles in Europe. A company called Aiways offers the U5 SUV and it will soon launch a new model, called the U6. Its design is previewed here with a concept, called the U6ion, which is said to be pretty close to the production model. It features a coupe-like silhouette, a shark-nose front end like so many other electric SUVs and a yoke steering wheel. In a quick search we weren’t able to find many details on the model, but the U6 is expected to come out in the third quarter of this year, so we should learn more soon.
CANOO GETS NASA CONTRACT
EV startup Canoo is struggling. It’s under SEC investigation and more than 50 employees have left the company this year. But it just got a bit of a boost. Bloomberg reports that NASA is picking it to build a vehicle to transport astronauts to the launchpad for upcoming missions. The contract is worth nearly $150,000 and Canoo will make at least one vehicle. NASA requested that it be zero emissions, have a range of at least 50 miles and seat up to 8 people. The vehicle is scheduled to be delivered in June 2023 and will be used for Artemis missions that start in 2024.
COMAU’S NEW ROBOT LINE
Did you know that Stellantis owns a robotics company? Most people don’t. It’s called Comau and it makes all kinds of industrial equipment. It just came out with a new robot, called the N-220, that can lift up to 450 pounds and with 6-axis articulation, it can move that load in any direction. Strangely, Stellantis never talks about Comau. The company is not even mentioned in the latest annual report. And that makes us wonder if Carlos Tavares, the CEO of Stellantis, is thinking about selling the operation. If he can find a buyer that money could be invested on the car and truck side of the business as it transitions to electric.
SHYFT GROUP ON AUTOLINE AFTER HOURS
Have you ever heard of the Shyft Group? You’ve probably seen their trucks and didn’t even know it. Shyft is a specialty manufacturer that makes trucks for specific applications, everything from service and delivery trucks to the chassis’ for motorhomes. And now it’s coming out with an electric van, called Blue Arc, with a 150 mile range. We’ve got Daryl Adams, the CEO of the Shyft Group coming on Autoline After Hours tomorrow to talk all about it. And don’t forget, we have Mark Reuss, the president of General Motors coming on next week to talk all about GM’s EV strategy. We’re going to devote part of that show to viewer questions, and we’ve already started compiling the list. So if you’ve got a question you’d like to pose to Mark Reuss about GM’s EV plans, post it in the comments section or send an email to viewermail@autoline.tv
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Comments (21)
April 6th, 2022 at 12:13 pm
I thought the Mercedes in-line six had used an electric turbocharger for a few years, but it must be a different thing from what the four will use. Maybe the six uses a separate electric supercharger with its turbo, rather than the two being combined.
April 6th, 2022 at 12:31 pm
Is Mercedes’ electric turbo-charged engine defined turbo charged because it is in the exhaust stream; I would think it would be more correct to call it a supercharger because it doesn’t rely on exhaust gases. Perhaps a supercharged-turbo charger would work as well.
April 6th, 2022 at 12:33 pm
The VW R&D numbers should not be a surprise. As Autoline has mentioned a number of times, VW is a highly vertically integrated company. They need R&D budget for all of those vehicle brands, but also for the various components divisions, parts divisions, etc. GM’s R&D budget was significantly higher when it owned all of the entities that spun off as Delphi.
In addition, VW has so many brands and so many models that they should have one of the highest R&D budgets for vehicles alone.
One more thought on VW. If the brand is going to abandon the lower price classes in search of better profit margins, won’t they simply be competing even more with Audi than they do now? I also saw mention that Skoda is going to continue moving their products upscale. Maybe VW is reading their crystal ball and seeing they will not be able to compete with incoming Chinese brands on cost, especially in the lower price classes.
April 6th, 2022 at 12:38 pm
Seems the management team at VW have forgotten the Phaeton fiasco.
April 6th, 2022 at 12:47 pm
2 The M-B thing is kind of a turbocharger and supercharger in one item. It’s basically a turbo, but uses an electric motor to spool it up quickly.
April 6th, 2022 at 12:53 pm
3 The linked article sounded like VW plans to drop models from all brands, not just the VW brand. If they drop all of the lower end VWs, Skodas, and Seats, it would seem that they are just opening things up for Chinese companies to dominate the lower end of the market.
April 6th, 2022 at 12:57 pm
This seems to be the constant problem in all business today. Everyone stock portfolio has to perform and bring in great numbers. So companies like VW that produce cars for the average person is forced to go after the higher profit up-scale models. That’s all fine a great for share holders but it really leaves a huge gap for entry level buyers.
What all the automakers tend to forget is those entry buyers eventually become midlevel or the upper level customers. So if they have a great experience with their entry level car. Maybe its Chinese by the time they are ready for a more upscale car the Chinese will likely have what they need. The customer base will grow with their capabilities and soon all those high profit vehicles will be replaced with a Chinese luxury car. They will have gone after the quick buck today to cut their own throat down the road. I guess they figure they will have made their millions and be long gone before its their problem.
April 6th, 2022 at 1:03 pm
I guess VW, GM, Ford, Toyota, Honda, Stellantis, Tesla etc all think everyone who is buying cars are looking to pay big bucks as they are all going upmarket and chasing a slice of a smaller pie. They are the ones who will cause the rise of the Chinese OEMs as formidable global auto companies. All the Chinese need to do is sell cars to fill the gaping hole that the traditional OEMs have decided to abandon. Just as the Japanese did and just as the South Koreans did once the Japanese decided to go upmarket. Good job short term thinking CEOs!
April 6th, 2022 at 1:16 pm
#4 – my thought exactly. VW dealers in my area are definitely not geared for lux
Why is NASA looking at Canoo for this task? Wouldn’t it be simpler to ask for a free Ford Explorer, or a Mitsubishi Eclipse, or a Polestar 1, or a Ford Galaxy, or a Vauxhall Astra, or a Nissan Pulsar, or a Lightyear One. Bet they’d get any of these for free. And thanks to whatcar.com for the list of cars with space themed names
April 6th, 2022 at 1:16 pm
This low cost car problem will be with is until the market says ‘no more’. Complaining but still buying won’t do it.
April 6th, 2022 at 1:33 pm
9 NASA wants something to carry 8 bulkilly dressed people a couple miles. A Transit van with four rows of seats would work, but they always want vehicles with a special “look” for such things.
April 6th, 2022 at 1:44 pm
Doesn’t seem like $150k is enough for a one off vehicle. I doubt that anyone at Canoo is thinking this contract is going to save the company. In fact its probably a loosing proposition financially, so must be for publicity purposes only. Hope they stay in business long enough to deliver.
April 6th, 2022 at 1:54 pm
12 That’s what I was thinking. It’s going to be very much a one off, and may not get built. They should probably just get a limo company to stretch and refit a Tesla Model Y, or something like that.
April 6th, 2022 at 2:59 pm
Any car company should pursue good margin. VW should challenge their engineers to build quality, lower cost cars that produce good margin. Apply some of the Tesla thought to sub-$30,000 cars. Buyers of less costly cars may be in the market for a better equipped vehicles in the future like Audi. VW’s move upscale opens the door to Chinese imports. The Chinese could move upscale in the future. Then where will VW be?
April 6th, 2022 at 3:00 pm
Any car company should pursue good margin. VW should challenge their engineers to build quality, lower cost cars that produce good margin. Apply some of the Tesla thought to sub-$30,000 cars. Buyers of less costly cars may be in the market for a better equipped vehicles in the future like Audi. VW’s move upscale opens the door to Chinese imports. The Chinese could move upscale in the future. Then where will VW be?
April 6th, 2022 at 3:26 pm
7,8 – Very well said. It is like the auto company executives (like politicians) become so far removed from reaity. Ford cancelled the lower cost sedans, and after clamoring from their dealers for an entry level vehicle the Maverick was developed. A huge hit, but they only anticipated 20% hybrid interest and it is more like a 50% take rate, thus causing a delay in fulfilling orders due to supply issues.
April 6th, 2022 at 3:49 pm
At least in the US market Volkswagen needs to stay a economy brand or what is it’s point ? They already have Audi which is a luxury brand, Porsche which is a sports luxury brand . VW has always been the place to go to get affordable German engineering. With already having Mercedes ,BMW Audi and Porsche as mentioned it would no where to go to get a affordable German car and I don’t think they’d easily shake off the stigma of being a economy brand to those that want a luxury German car. As someone mentioned the Phaeton comes to mind as a major blunder. All they need to do is look at Hyundai and Genesis. It has taken years for the opinion that a Genesis is just a gussied up Hyundai and not worth the asking price to some what change.
April 6th, 2022 at 3:52 pm
16 oh and dealers are charging waaaaay over sticker for the ones they have. I looked on Autotrader and there are some being listed at 50K for a 20K entry level price. They never learn.
April 6th, 2022 at 3:55 pm
16 I’m surprised Ford didn’t anticipate big demand for the Maverick hybrid, because the hybrid powertrain is the huge advantage Maverick has over all of the competition. It will get nearly twice the city mileage of the others, and a little better highway mileage. Maverick also has a low starting price, but that goes up $2255 if you want cruise control. Still, the Maverick is a bargain, as pickup trucks go.
April 6th, 2022 at 3:58 pm
18 Dealers that charge over sticker will make some extra money in the short term, but will lose customers for life. I’ve been treated fairly for years by a certain Chevy dealer, so I not only buy cars there, but recommend them. If they’d even tried to charge over sticker for my ordered Corvette, I would look elsewhere.
April 7th, 2022 at 10:21 am
20) Agreed. They are thinking short term for sure. However, I think that the OEMs are also incentivizing them to think short term. With every discussion about getting rid of dealers and selling direct to consumer, why not get the cash while you can? That is why threats from the OEMs over this practice ring a bit hollow to the dealers. If the intention is to get rid of dealers, might as well soak every dollar out of current sales while you can.