FIAT boss says *1 million* cars on a shared platform with GM would be 'minimum' for profit... yikes!

No wonder the car industry is on the nose. FIAT boss Marchionne said 1 million units a year built on a shared vehicle platform is the minimal scale required to be profitable. In other words the current platform sharing (for the uninitiated that means much of the structure if not the running gear is common between brands) is unprofitable, despite FIAT's recent turnaround. So to get to that required volume requires doing another deal with GM to share platforms in Europe, and then to bring the FIAT-Chrysler deal into the arrangement as well.

I do wonder how sustainable it is to manufacture 1,000,000 units of such an elaborately transformed good every year in order to simply turn a minimum profit. That's just one platform, remember, generating just a few models across a small number of brands. Now platform sharing is good, it's far better than each of the models being designed from scratch - but I think it's best not to think too hard about such numbers, too. When you think about all of the brands, and all of the models, and all of the resources consumed to make it happen... I just want to ride my bike instead.

While Aussie car makers stand still, Europe goes electric... #EV #Audi

It's an Audi, or an Audi on a VW platform (nothing new there). Most importantly it's an electric vehicle, and a prestige one at that... and it's real, and it's small. It's a 2+1, would you believe! And whilst it's offered with a range of motors, it's the electric one that'll steal the show. Whilst VW itself is banking on squeezing the last drops out of small, turbo-charged diesel and petrol motors, it obviously has a Plan B, too. If the US car makers (and their Aussie offshoots) don't wake up and smell the roses soon they'll miss the boat, let alone the mixed metaphor, completely.

A variety of engines will be offered, although the star of the show will be an electric powerplant. It incorporates lightweight lithium-polymer batteries and a punchy electric motor driving the front wheels. So the small, agile car will be ideal for city motoring, delivering 0-60mph in around 10 seconds. And with a full charge providing enough energy to travel up to 100 miles helped by regenerative braking, the plug-in machine will have real all-round ability.

Fairfax 'Drive' redefines 'rational' in context of emotional car purchase #car #language

Obviously this is a new way to define the word rational - in the context of 'improved fuel consumption' for a $Aus155K car this motoring journo states that "in the case of the CaymanS... its emotional appeal remains overwhelming, its improved economy rationally pleasing."

Exactly how a rational person can be pleased about a slightly improved rate of gas guzzling when they have shelled out a small hill of cash is beyond me. OK, it's laudable that they have done something positive about the fuel consumption, but (as the writer noted) this is a self-indulgent, emotional purchase, not a rational one.

Cars that still sell, despite the fear and loathing: Hyundai, Kia, Subaru...Jeep? #cars #marketing

I can't verify this statement for accuracy, but here it is, from Forbes mag: A handful of car models, such as the Jeep Wrangler and the Smart, are maintaining their sales despite the general auto collapse. But the only full-sized companies that are holding their own are Korea's Hyundai and Kia, and Subaru. I think he's looking at the US market, but let's look more widely at why these brands are successful.

First up, the Smart makes sense in these difficult times, although I do wonder which model is holding up best. I suspect it's the tiny, cultish FourTwo. It's both an economical, sensible city car and a niche hit. Just search YouTube for the whacky variations and mods you'll find for that diminutive sub-compact. Because it's a bit - or a lot - different, it stands out in the market - whilst garnering some respect via owner Daimler. And it doesn't hurt that it has green cred attached to it, either. If you drive one of these cars you are definitely making a statement, like it or not. Although it's had a rocky road at times, it's now doing exactly what the brand was created to do. It could be a car for the times.

Of course the Jeep Wrangler is another cult hit in a niche market, albeit a very different one to the Smart. Indeed it's almost exactly the opposite in every aspect, with street cred based on roots going back 65 years or so to the original general purpose vehicle. It thus couples a spared-back historical military style (think 'MASH') with a go-anywhere, thumb-your-nose-at-climate-change sort of "freedom" feel. Again, it makes a clear statement about you and your beliefs, or so we may think. Whilst it may not be the most economical car in the world it has a style and a practicality about it that has led to a self-perpetuating following.

On the other hand Hyundai and (Hyundai-owned) Kia are upstart Korean mass producers of a range of increasingly well-built but clone-like cars with little innovation in style, packaging or performance. Like the Smart brand they were created as a product line, rather than evolving out of the bicycle or horse-driven coachbuilding industries, car racing or from post-world-war reconstruction like many 'traditional' European (and Japanese) brands. As such, being late to the party as it were, they have leveraged the manufacturing lessons (and technical input) of companies like Ford and Mitsubishi and designers like Giugiaro to create a line of carefully targeted, inoffensively-styled lower-cost cars. They have also got a sizable local market to fall back on (something the Aussie car makers can only dream of). Whilst they lack the street cred of more traditional brands, their lower unit cost of production has meant that they can sell harder to gain market share, at times burdening each individual vehicle sale with thousands of dollars worth of advertising. To the company's credit they have continually reinvested in quality, style and dynamics, largely closing the gap on the class leaders whilst maintaining their cost advantage. So they have achieved market visibility, acceptance and a lower price point against their competitors. No wonder they are holding their own - surely they are now 'stealing' market share from Toyota, GM and the like.

Which brings me to Subaru, famously the 'ugly duckling' of Japan's auto industry. Subaru does have a legacy (US-market pun intended!) to draw upon, having evolved out of Fuji Heavy Industry's history of aircraft and motor scooter production. In many ways the company has paralleled the traditional car makers with their deep technological and evolutionary roots whilst keeping themselves firmly rooted in the "but strangely different" category. They have also indulged in some 'cred-creation' via motor sports, especially rallying. However their main claim to differentiation has been their strangely awkward approach to exterior car design and their dogged determination to hang on to horizontally-opposed 'boxer' style engines. Coupled with the more recent leveraging of their rallying heritage via a marketing-lead commitment to all-wheel-drive, Subaru has ended up making a name for themselves across a range of seemingly opposing niches. For example their WRX model achieved notoriety both as a world-class rally winner and the car of choice for Australian bank robbers; whilst their Outback model leveraged quirky styling, solid reliability and a bit of Aussie bushbashing charm. (Australia being both a key test market and the source of Paul Hogan, an advertising hit for Subaru in the US.) And as the Forbes article states, it helps sales in snowy or slippery climes if you offer traction built-in. In all, a strange brew.

There is a common theme to all of these brands. Firstly, none are the market leaders, although each may have a model in the top 3 in a segment, somewhere - so they are the underdogs in a way. (People like underdogs, generally, as long as they deliver.) Secondly, they successfully occupy - perhaps dominate - one or more sizable niches. But can they maintain these positions during challenging times? Indeed it will be interesting to see how the car market evolves over the coming months and years, given the spectacular changes afoot. This is a time of financial drama coupled with a game-changing conversion to alternative fuels. Whilst we may get another 50 years out of petrol, we will see increasing opportunities for new players to come in and undermine both the current oil-based fuel refiners and the current vehicle manufacturers. Hybrids and electric cars are just the start. Deep pockets will be needed to fund this shift.

Likely as not we will see struggling companies like Ford, Chrysler and GM partly consumed by - or partnered with - competitors like FIAT, Toyota and VW. And we will doubtless see the rise of Indian and Chinese manufacturers, playing a similar game as the Korean makers have done, leveraging huge local markets first before staking global claims. Whilst the big fish like VW and Toyota will probably maintain their overall positions, the niche players will be joined by companies on the way down, looking to hang on - somewhere, anywhere - and newcomers on the way up. Will trendy quirkiness be enough for Subaru and Smart? Will the up-to-now agile and lower-cost Korean makers cement their current Top 5 position and move up, or will upstarts like India's Tata consume the ground underneath their metaphorical feet?

Should we bother to save GM and brands like Holden and SAAB? #cars #meltdown

What will it take to save these giant auto-manufacturing dinosaurs, and should we bother?

GM, like Ford, has been on the brink for years, selling off assets to stave off the inevitable. Bad bets on dumb cars made in the face of rising fuel and resource prices have only compounded the problem - and now the financial crisis is hitting hard, forcing GM to consider bankruptcy and break-up. If the US government stumps up enough cash, it can be saved - but why? As an unemployment relief scheme, or as a going concern? Can it be a going concern again? Will saving it only preserve the bad investments and poor management that got it where it is today?

It's worthwhile to look at the overall industry. It's past mature, it's commoditizing. Relatively fresh, new brands from Asia are pumping out cheap cars that match - perhaps even better - what the old guard has been offering. These new brands are agile, and they are better prepared to adapt to new fuels and new ways. But these are game-changing times and competive threats will come from unexpected places as new players, armed with new ideas, attempt to leverage the chaos.

This is not a new problem and hardly a surprise. Manufacturing has largely shifted out of the developed world, and services dominate those economies. Big auto companies do represent prestige as well as jobs, though, and nations are reluctant to let them go. Politicians, in defence of subsidies for these doddering corporations often rely on a combination of prestige and the old-world thought of preserving these 'seeds' from which a war machine could be built. 'If we let go of this capability we may not be able to defend ourselves', goes the argument. However we need more than just heavy manufacturing to 'defend ourselves' these days. It's an argument that needs to be answered carefully, but the thought strikes immediately that we probably need diplomacy, trade and strong, positive relations with other nations as much - or more - than we need an auto industry. If you really believe that an auto industry is an essential building block that can't be lost, then you'd have to believe that of all industries - from clothing to agriculture, from electronics to aircraft manufacture - and seek to preserve all of them. But of course we don't, do we? In the end we are pragmatic, and seek to trade with other nations that are better suited to making these things. And instead turn to our own strengths.

Now GM is really a cluster of brands, rather than a brand of its own - which works to the good in a break up. It's not hard to imagine a fire-sale where the best bits are taken over by competitors. Whilst that may happen with Vauxhall and SAAB, less attractive is the Aussie GM brand, Holden. It's outdated, reliant upon subsidies and a long way from other markets. It could possibly be shrunk down to focus on some key competency, if you could determine which competency that may be. As I established some time ago, it's way off the mark in terms of competively manufacturing cars, even the "big Aussie cars" it claims as its heritage:

I have to tell you I was somewhat surprised at the estimated factory cost of the Alfa Brera. It must be wrong, surely? Somewhere my assumptions have gone awry, because seemingly the prestige European sports luxury car has a lower base cost per vehicle than the locally built sedan. But then I wondered if the still-somewhat protected nature of the small Aussie car manufacturing industry may have distorted the real cost of manufacture.

I'm not the only one to crunch the numbers, either: "The Australian government can throw $6 billion or $600 billion at these car plants, but they still won't be economically feasible," he said.

So if Holden goes on the market, who will buy it? The obvious choices will be the extant manufacturers in Australia, namely Ford or Toyota. Ford has its own problems of course, but buying out its traditional foe would surely be tempting, if only to close it down. After all, we don't need - and probably can't afford - 3 manufacturers in Australia. But Toyota is a more logical choice. But why should either bother? If no buyer can be found and Holden closes, the problem is solved. If anything's to be bought here at a decent price it will be brand name itself.

Which leads to a more efficient local industry - 2 manufacturers plus importers. Jobs will still be shed and many tears as well - the Holden name will not rest easily on the shoulders of either Toyota or Ford, after all. But will that be enough to prompt the Rudd federal government to dive in and "save" the company? For the sake of the nation let's hope not. Instead let's seize the day, support the workers in more practical ways and take action that improves the efficiency and sustainability of the industry. Before its all too late.

Chasing a niche market even if it kills us: BMW's M-series 4WDs

I think even Porsche realised that releasing ever-less-logical and humungous 4WDs was eroding the traditional brand values... or at least dampening sports car sales. Which is to say that 911 owners in general were put off by fat trucks with Porsche badges. It's brand dilution, spreading a good thing too far. Perhaps it works overall, by creating a better model spread and lowering the risk profile. Perhaps it gets people in the door and welds them to the brand. Perhaps there are existing owners who hanker after something nice to tow the boat. Maybe. Whatever Porsche may be thinking, and hopefully they are thinking of downsizing, BMW are still at it - diluting the brand.

Check this out: a potent truck, large beyond belief, chasing an ever-smaller niche:

BMW’s renowned M division has finally succumbed to 10 years of temptation by creating its first high-performance versions of the company’s luxury
off-roaders.

By gosh it's quick for a fat truck:

Both the X5 M and X6 M are propelled by the same twin-turbocharged 4.4-litre V8 with 408kW of power and 680Nm of torque – the most powerful BMW production engine currently available. That’s enough poke for the 4WDs to sprint from 0-100km/h in a claimed 4.7 seconds – a tenth quicker than the current segment benchmark for acceleration, the 404kW twin-turbo V8 Porsche Cayenne Turbo S.

But why do it? Is the world crying out for this?

It's meant to be a "hero" car, one that creates a halo effect around the brand. But to me it's taking an unnecessarily large car with rarely-used 4WD abilities and making it go faster, whilst drinking more fuel of course. Maybe it will make them more money but it surely won't be making them any friends with the green set, or even the average guy who just wants a planet to live on into the future.

Cars, gasoline, transport and the future #futurism #cars

It's easy to say that the car market is changing - there are some obvious forces at play. Most clearly we see the pending collapse of the US-owned auto-makers, GM, Ford and Chrysler. In truth it's been a long-time coming and, indeed, it hasn't happened yet. They may be rescued, for example. FIAT may indeed buy Chrysler, or some other deal may arise. GM may cut/sell-off enough arms and legs that it can scrape by, as could Ford. And various governments around the world may stump up more direct cash or indirect subsidies to keep these dinosaurs and their local offshoots alive.

But there's more afoot here - even Toyota reports bad times in the car trade. So let's dig deeper. What is happening here and what can we expect in the future?

• Fuel prices have demonstrated greater volatility, scaring the market out of larger, heavier, faster or potentially riskier purchases
• Awareness has risen in the marketplace, of peak oil and climate change especially, dampening enthusiasm for cars in general and larger, thirstier cars especially
• Global financial collapse has threatened the ongoing provision of capital for the makers and dampened the desire and available cash flow of the consumer
• The rise of developing nations and their car makers has shifted the global focus towards low-impact, affordable cars

It's the last point that really grabs my thoughts right now. In some ways it answers, at least partially, some of the other points, too. By shifting production to smaller, less complex vehicles we not only meet the demand for personal transportation and open up economic possibilities for people in developing countries, we provide renewed competition for established makers in the developed world. It shakes things up and creates hope for greater innovation in addressing both alternative fuel sources and climate change. The fact that lower-cost cars use fewer resources will be an important change in an industry that has arguably become fat, lazy and complacent on a long-term diet of cheap oil. However the downside to opening up new markets is that any growth in manufacturing will increase pressure on our available resources and potentially lead to additional pollution, be it carbon or other wastes. It will also put pressure on public transport to offer effective competition, or to decline, as it has in much of the developed world.

The negatives are obvious, but we also have some positive forces at work here, including a push towards smaller cars with less impact overall, and more flexibility in fuel options. So what have we got in terms of lower-impact, lower-cost cars in the pipeline? The Indian Tata Nano is an obvious one, and from the same locale is the petrol/LPG Suzuki-Maruti 800. We also have the Romanian Renault, the Dacia Logan; the Fiat 178 project's offshoot, produced in several countries - the Palio, with an electric version mooted; and offerings from Russia's Lada. Plus there's Renault-Nissan working with Bajaj on a Tata Nano competitor, and further developments in China.

The flavour here is small, efficient cars with flexible powertrains. Some with the backing of existing large auto-makers such as Renault, FIAT and Suzuki, others based on what has been learnt from previous licensing deals and/or the production of so-called "legacy" or obsolete cars.

Paramount in meeting the developing world's demand for cars is low cost. The consumer will expect - and probably can only afford - a low purchase price with equally low running costs. That means manufacturers will need to scale up volume whilst driving down costs. Margins will be small. There's little room here for complacent "old school" car makers. Yes, they can continue to feast on the wealthy nations and their taste for over-large, over-insulated and overweight vehicles, but not joining in and competing will see these lower-cost makers taking more and more market-share over time. Eventually the penny will drop.

What can we expect to see over the next 10-15 years? There are no guarantees, but there is clearly an emerging market for smaller cars with flexible engine and fuel options, and it's an opportunity that will be addressed by the companies most eager to adapt. Lower-cost cars will gain traction and spread, with exports likely from countries such as China, India and Brazil, to name but 3. A second wave may come from other Asian and South American countries with African production ramping up as well. As these producers gain share existing small-car makers such as Hyundai and Suzuki will join in, as will the more agile of the "old school" makers such as VW, FIAT and Toyota. However many of these companies, and certainly the less flexible makers such as GM and Ford, will find it tough to adapt to this ultra-low-cost environment and will look to premium brands for salvation. Whether there will be enough room on that shrinking island remains to be seen.

We also cannot discount other disruptive entrants into the market. As cars are forced into a better balance with public transport and electric cars gain momentum there is an opportunity also for companies outside of the car-making game to come into play. Whilst hydrogen and fuel cells are largely discounted as power sources in the immediate future, they too may well gain ground as new possibilities emerge. And the very concept of personal transport could be threatened by new forms of flexible, lower-cost public transport. Both heavy and light rail solutions may continue to decline and be replaced by loosely-coupled personal transport modules that forsake some of their "freedom" for a degree of shared infrastructure and scheduling. Combined with electronic control of roadways (using GPS and RFIDs, for example) personal cars of the future may offer a new form of "train" that services wider areas by road rather than inflexible fixed rail. Whilst it may be difficult to imagine the current car owner giving up some of their current freedom to move at will, the sheer volume of cars on the roads and the likelihood of traffic gridlock will compel governments to consider a transition of some sort.

Just nit-pickin'

I just read this: The cars that result are packed with sole destroying usability

OK, he (Rod Halligan, whoever he is) meant "soul destroying", but I have a vision now of this poor guy with rotted feet, blaming car designers for it all. I think the article itself is just hilarious, that an apparent "car-guy" can be so detached from reality as to think that the collapse in car sales is because of "boring" cars. As though only building exciting cars will fix everything. Hmmm.

He also writes of "Gordon Ghekos", a weird sort of gherkin crossed with a lizard, I guess. Stumbling forward the poor guy managed to write "Mulally though through this whole mess is gaining my respect with his management without hand outs and therefore keeping independence from the Car Tzar." Whatever that means. Sad, really.