COVID-19 recovery ebbs and flows – the week | Automotive Industry Comment

Ford and VW’s extensive model-sharing plans include a redesigned Ranger pickup with VW Amarok spin-off

It was, as you have probably already noted yourself, something of a mixed week. COVID-19 ebbed and flowed by country, with some pockets of the US flaring back up a little following relaxing of lockdown, other defying the trend with infections and deaths continuing to fall even as people mingled more in newly socially distanced bars, restaurants and, of course, even the slowly reopening casinos of Las Vegas and other gambling hot spots. Here, in the UK we still have, it is claimed, a disproportionately high number of infections and consequent deaths but, under pressure from business, the lockdown handcuffs will be loosened again on Monday 15 June (dentists, oh joy, were allowed back to work Monday this week) as ‘non-essential’ shopping and high street retailers re-open – those left still standing, anyway – and we await news of the hospitality industry and, please Boris, hairdressers also being allowed to reopen (I currently resemble the professor from Back to the Future).

The travel industry is campaigning vigorously against the 14-day quarantine on arriving passengers also imposed this week (turns out, I learned today, auto writers attending events abroad are not doing essential work and would NOT be exempt should such events be resumed). And we have seen the continuation of anti-racism protests worldwide with business, in some cases affected by vandalised infrastructure, reviewing its commitment to diversity and publicly restating that. This was VW’s response to criticism a video clip posted on social media to promote its new Golf 8 was racist.

Today’s news has been dominated by the shock revelation the UK economy contracted by a worst-on-record 20% in April (no surprise really, as the month was in the middle of Level 4 lockdown and our domestic vehicle output plummeted darn near 100%). But, there were again this week, as last week, promising signs of recovery. F’rinstance, PSA’s Vauxhall told us demand for light vans from its Luton LCV factory was so strong it wants to introduce a third (!) shift, ‘borrowing’ workers temporarily from the (also slowly reawakening) Ellesmere Port Astra assembly plant. Day or two ago, Mercedes-Benz UK Vans chief Steve Bridge told Sky News’ Ian King Live daily business segment the results of Business Barometer, a survey of 2,000 UK van buyers. Although Bridge did not discuss specific numbers, it’s clear “this hard-working sector of unsung heroes” [especially the drivers], acclaimed for all their efforts to get groceries and other household needs to locked-down citizens during the pandemic, has created a huge demand for extra vans and the cab-chassis variants ‘pon which supermarkets – scrambling to add extra ‘delivery slots’ and the additional vehicles consequently necessary – build their home deliverymobiles. UK new LCV deliveries have been hampered by lockdown restrictions on dealerships, lifted only a couple of weeks ago, and I expect a surge in build and sales numbers as key players including the aforementioned Daimler and PSA start meeting that pent-up demand.

This doesn’t mean the end of COVID-19 bad news, of course, such as this jobs cut announcement and a Kia plant closure yesterday, but there are other positives such as an overall steady improvement in sales by market – if May results in some territories were not actually up on the same period last year, at least the falls (such as here) have been less harsh than in the ‘peak virus months’ of February (China), March and April. Then there was this extremely positive May result for China. So positive, in fact, our analyst took a deep dive into the data for you.

Among the news and features which drew a lot of just-auto readers this week: Nikola has completed its previously-announced combination with VectoIQ Acquisition and Nikola’s listing on the Nasdaq Global Select Market. The transaction proceeds are expected to accelerate vehicle production, allow Nikola to break ground on its manufacturing facility in Coolidge, Arizona and continue its hydrogen station infrastructure roll out. Good news, sorta: The Malaysian government said it would suspend the sales tax on locally assembled cars this month until the end of 2020 following a sharp fall in sales in the first five months of the year. As part of the short term economic recovery plan announced by prime minister Tan Sri Muhyiddin Yassin, sales tax on imported cars will also be cut – from 10% to 5%.

Our in depth analysis always goes down a treat with readers and it was time for a look at Volvo Cars out to 2030. A balanced spread of sales around the globe is helping the Geely owned automaker weather the ongoing storm. After China began to fall apart last year, the Swedish brand looked exposed yet that market’s comeback is greatly helping it  to offset downturns in Europe and North America. That a year on year tumble of 25.5% is seen as a terrific result nicely summarises how odd 2020 has been for most car makers. That percentage is Volvo’s number for worldwide deliveries in May, the total dropping to 44,830 cars and SUVs. China is up for the second month, Sweden is doing OK, the rest of Europe not so well and the US and Canada seem to be showing signs of a bounce. The weight of China’s influence is reflected in the picture for the first five months: Volvo Cars’ global sales total was 208,479, down 25.0%. The rest is well worth a read. Pull up a coffee.

Still with Geely/Volvo Cars, we also eyeballed Polestar taking on Tesla – will it prosper? Sales volume remains miniscule; still, Polestar believes it has everything in place to thrive as a seller of high priced cars and crossovers. Production of the first two models is under way, market launches in many countries will happen soon and additional models are coming into view. Will this now fully charged sports EV division fly or falter? Before we leave the Geely group, a reminder of last week’s in-depth look at Lynk & Co.

Ford and Volkswagen announced last July they were joining forces on LCVs and EVs. This week, in an extensive announcement, the pair put more meat on the bones of the deal. They have now signed agreements to expand their global alliance to design and develop midsize pickup trucks plus commercial and electric vehicles. The automakers said they expected the alliance to bring more innovative vehicles to market with new technology, widening their respective model ranges. In particular, they expect continued growth in global demand for commercial vehicles and for high performing electric vehicles. With the pressure now on global automakers – CO2 targets and range minimum fuel economy standards (especially in the EU), CO2 emissions-related electrification new model and technology development costs, sales plunging due to coronavirus lockdowns – such alliances make more sense than ever. Model and platform sharing is already common across automaking, and especially in LCVs in the EU (eg the UK Vauxhall plant building mid size van models for four PSA brands). Neither VW or Daimler has really cracked the global ‘one tonne’ pickup truck/bakkie/ute market with their own brand Amarok and X-Class models (both now axed); Ford in contrast has enjoyed huge success with the Ranger pickup (which tops overall model sales charts in some of its markets) and the globally sold Transit small/medium/humongous van lines, built on two continents. So will jointly developed, common platform, brand-differentiated product lines – such as the planned redesigned Ranger/Amarok – give both partners a boost? And that’s before you even think of the economies of scale of sharing EV design, development and ‘productionisation’. I’ll be watching with interest.

Have a nice weekend.

Graeme Roberts, Deputy Editor,

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