How can you have global economies supported by both powerful military-industrial complexes and just-in-time manufacturing that requires seamless international trade in peacetime? European carmakers are finding out: you can’t! All this and more The morning shift for March 16, 2022.
1st gear: every little thing
Not to use the word global too often, but modern global trade and manufacturing relies on sourcing parts from around the world and getting them just in time to the factory for assembly. Every little thing that gets moved gets in the way of the whole process.
I think no one has given much thought to where European carmakers got about a fifth of their wiring, but they sure are thinking about it now, as the Financial Times relationships:
Inside each car are nearly three miles of electrical wiring. The meandering threads carry instructions, from steering the wheels to opening the trunk.
This jumble of automotive spaghetti is held together by the harness, a low-cost piece that, until the invasion of Ukraine, automakers almost took for granted.
Both BMW and Volkswagen were both forced to shut down plants across Europe after the Russian invasion forced the shutdown of Ukrainian electrical plants.
The country accounts for around a fifth of Europe’s supply of harnesses, which also come from other parts of Eastern Europe and North Africa, according to AutoAnalysis estimates.
“The problem with cabling is that they are critical,” said Alexandre Marian, managing director of the consulting firm AlixPartners in Paris. “You can’t start assembling even an incomplete car without wiring.”
The right thing to do is for Russia to stop its campaign against the Ukrainian people. What is really going to happen is …
2nd gear: VW moves production and sales to the US and elsewhere
Carmakers who have relied on a somewhat fragile peace for their production are looking to make their manufacturing process a little more robust. In the case of VW, that means moving more production out of Europe, like we ran a little bit yesterday. Automotive News elaborates:
In a surprising turnaroundthe Russian invasion of Ukraine will put “a substantial number” of additional new crossovers on US Volkswagen dealership lots in the coming months.
About Tuesday during the Volkswagen Group’s annual press conferenceCEO Herbert Diess said the German automaker will move more production to North America and China, at least temporarily, due to the war.
This should mean increased production from the VW brand factories in Chattanooga and Puebla, Mexico, as well as the Audi plant in San Jose Chiapa, Mexico, assembling all crossovers sold primarily in the U.S. Chattanooga builds the three-row VW Atlas and Atlas Two-rowed Cross Sport and is currently building unsaleable pilot versions of the ID4 battery electric crossover, while Puebla assembles the VW Tiguan and Taos. The Audi plant produces the popular Q5.
VW had a normal one as far as Ukraine is concerned, with this somewhat cryptic announcement:
For more information on the subject, have fun this Financial Times article where VW imagines … cutting Russia is bad, but what if we cut China?
It took just a week after Vladimir Putin ordered an invasion of Ukraine for Volkswagen, BMW and Mercedes-Benz to suspend production and sales in Russia. The trio of German carmakers, who usually shy away from commenting on international politics, have expressed carefully worded criticisms of the war.
Their decisions were not overly painful. Together, the three automakers sold fewer than 300,000 vehicles in Russia last year, a small fraction of the 13 million delivered worldwide.
Yet there was more than a moment’s hesitation in the boardrooms of the major car manufacturers. The withdrawal from Russia, says a consultant for one of the German automakers, was one thing, but what if, in a similar scenario, there was pressure to withdraw from China, which accounts for more than a third of all three companies’ sales ?
“This,” said the person, “would be close to an existential crisis.”
3rd Gear: BMW notes it would make more money if it weren’t for the Russian invasion of Ukraine
BMW has given the world an update on its financials, and it would be better if it weren’t for the invasion of Russia, like Bloomberg relationships:
BMW AG he said operating returns for its auto business will remain solid this year, even as the war in Ukraine and the global shortage of semiconductors weigh on production.
The company on Wednesday lowered its estimate for carmakers’ yields to between 7% and 9% for 2022, noting that the target range would have been 8% to 10% had it not been for the invasion of the Russia. BMW expects deliveries to remain stable at around 2.5 million.
Shares were up 3.2% at 13:09 in Frankfurt.
While many European manufacturers have expressed uncertainty about the impact of the war in Ukraine, BMW is among the first to quantify the impact on its business.
4th gear: Russia in war is also striking … Japanese used car auctions
We have already written about the huge imports of JDM from Russia, which are so intense the far eastern parts of Russia basically drive on the wrong side of the road.
These imports are running out as Russia enters the war, and this is hitting Japan hard, like the Financial Times relationships:
Since the end of February, the sharp slowdown in shipments to Russia and, with it, the evaporation of the only major source of demand for Japanese used cars, has caused everyone to tear up their old calculations.
The key figure hanging over the used car market in Japan is the monthly average price set by the country’s largest auction manager, Used car System Solutions (USS). For the first time since comparable records began more than 20 years ago, the average price in February surpassed the million yen ($ 8,500), a milestone that still seemed remote a year ago, when the average was 20 million lower. %. But how long will it last?
In common with other developed markets, the pandemic-related shortage of semiconductors has simultaneously reduced the supply of new Japanese cars, prolonged waiting times and inducing more domestic buyers to turn to the second-hand market. This, combined with a phase of multi-year weakness in the yen that bolstered global demand for Japanese used cars, has resulted in a surge to an average of 1 million yen.
All of which is to say that perhaps this is not the best time to look for a used early 1990s Toyota Cresta X80, even if you are the successful co-author of a collection of daily news on the most popular automotive culture website on the internet.
5th gear: in the meantime Tesla closes the Shanghai plant for Covid
Covid is hitting Shanghai hard right now. Traffic congestion is down by over a third, Also. Tesla too, notoriously difficult to enter any type of Covid blockadehe is closing his plant there, like Bloomberg relationships:
Tesla Inc. is suspending production at its Shanghai factory for two days as China tightens restrictions to contain the latest Covid outbreak, according to people familiar with the matter.
Production at the plant will be halted on Wednesday and Thursday, people said, asking not to be identified because they are not allowed to speak publicly. Covid restrictions in the city have prevented many workers from going to the factory, one of the people said.
It’s not that Tesla wanted to shut down down, it’s just that no one can go to the factory to work. Seems legit.
Reverse: Racing legend Mickey Thompson murdered
Mickey Thompson and his wife were killed on this day in 1988 and the killer remained free until 2007, for Reuters:
More than 18 years after auto racing legend Mickey Thompson and his wife were shot dead outside their Los Angeles home, a former business partner was convicted of their murders on Thursday.
Michael Goodwin, who had long been suspected of orchestrating the murders of Mickey and Trudy Thompson in March 1988 over a business dispute, was found guilty of two counts of murder after a six-week trial.
Goodwin, 61, faces life imprisonment without the possibility of parole.
“It was Goodwin the whole time,” Thompson’s son Danny said after the verdict. “I’ve always thought so. I think so now. And obviously the jury thought so and I thank them “.
Neutral: how are you?
I was staring this bike and thinking about putting a new coat of red paint on my old one Fuji hell bike project.