While everybody has their eyes on China and possibly India, the car market in smaller South East Asian countries is exploding right below  the RADAR screen. By themselves, car sales in a country like Vietnam don’t seem to amount to much. Now, go to the trouble and add a few South East Asian countries together. The Nikkei [sub] did and notes to its amazement that the car market in Thailand, Indonesia, Malaysia, the Philippines, Vietnam and Singapore jumped 21 percent in the first half year to 1.6 million units.

Now why would The Nikkei be so excited about this?

1.23 million or 77 percent of these rapidly growing sales in the balmy countries are by Japanese automakers. Taken together, the car market for the region is similar to “such emerging markets as Brazil, India and Russia,” as The Nikkei can’t help to note.

In Thailand, sales rose 40 percent in the first half to 606,523 units. Sales in Indonesia rose 28 percent  to 535,263 units.

Emerging market-san: Toyota's Yukitoshi Funo

If you are the executive of a car company, then you better be with both feet in the emerging markets, or seek other employment. Markets in the U.S., Europe and Japan are saturated and off their peaks. At the same time, people in the world’s most populous countries are trading in their mopeds for cars, and this is where you want to be. Sadly, Detroit appears to be underrepresented in these markets.

Toyota Executive Vice President Yukitoshi Funo today singled out Volkswagen, Hyundai, and Nissan/Renault as the companies that are in “fierce competition” with his employer when it comes to the growth markets of Asia and South America. A Detroit company was not mentioned.

Much to the chagrin of some patriotic Japanese reporters in the room, Funo said that Toyota’s production capacity in emerging markets skyrocketed from 450,000 units in 2008 to 3.1 million next year, which is “equivalent to our Japanese domestic production level.”

World car production currently stands at around 80 million units per year. Levels of 100 million or higher are expected soon. These cars, says Funo, will be “built where they are sold.” They will be built in emerging markets, not in the U.S., Europe or Japan. 45 percent of Toyota’s sales already are in emerging markets. Conservatively, the number is expected to climb to 50 percent by 2015.

Bolstered by the success of Toyota’s Etios, Toyota will launch eight new compact cars until 2015, designed for and built in emerging markets. Introduced in December 2010 in India, the Etios pierced the 100,000 mark in cumulative sales just a few days ago.

According to ample hints dropped today, the Etios platform will provide the underpinnings to the eight compact cars that will spearhead Toyota’s continued assault on the emerging markets. The cars will slot “below the Corolla and will have a size similar to the Etios,” said Managing Officer Kazuhiro Kobayashi, who promised that “the Etios platform naturally will be made good use of.”

This was then: Toyota's "wild cow", the 1976 Tamaraw

Toyota has big plans for these cars. They form what Toyota call the “new compact car category.” They are supposed to bring in sales of one million units per year before 2015.

This is now: Toyota Fortuner, a small SUV that is a hit in emerging marekts

They will not be low cost cars. Funo rejected rumors of a low cost car that would retail in the 500,000 yen ($6,300) category. Looking at a green Tamaraw, or “wild cow,” a very basic jeepney-type vehicle that led Toyota’s invasion of the Philippines in 1976, Funo said that times have changed:

“Customers in emerging markets no longer like the Tamaraw. They want to shift to better things, they want better and even better cars.”

Toyota wants to leave the low cost car segment to other makers, including its sibling Daihatsu. Toyota is focused on a price level around $12,000, which leaves room for families, bags, and aspirations.

Today, members of CHAdeMO congregated in the 7^th floor auditorium of Tokyo’s Big Sight for CHAdeMO’s  General Assembly 2012. CHAdeMO is a consortium of mostly Japanese companies with the target of establishing a standard for the charging of EVs. Also in the room was an invisible, but giant Godzilla. They called him “The Combo.” The combo is the product of (in Japanese views) an unholy alliance between U.S. and German OEMs which agreed on their own plug. The CHAdeMO and The Combo are utterly incompatible. Sparks are already flying.

CHAdeMO president Toshiyuki Shiga, normally COO of Leaf-producer Nissan, sets the tone of the meeting by saying that “in the U.S. and in Europe there is a movement to eliminate the CHAdeMO by making the combo a regional standard.” That snub probably is too subtle for American ears, but the Germans will get it and will be appropriately outraged.

The war of the plugs is on. Currently, it is only a war of words. “The Combo” was repeatedly derided today as “the plug without the cars.” This not-so-subtle putdown hints at the fact that the combo is still a nascent standard (the SAE is supposed to declare it a real one,) while CHAdeMO has been adopted by the tens of thousands who bought Nissan’s Leaf and some of Mitsubishi’s iMIEV.

When listening to proponents of either standard, one gets the impression that the plug is a matter of life and death, and fitting the wrong plug can mean the end of the EV as we know it.

Others don’t think so. CHAdeMO had invited Mariana Gerzanych, CEO of 350green, a company that builds electric car charging stations across America.

Allegedly, 350green will use the CHAdeMO plug. I ask Mariana Gerzanych what she thinks of the combo, and she thinks it is “good technology.” Asked which side of the plug wars 350green will be on, Gerzanych answers: “None. We will put both plugs on our fast chargers.”

Doing this is no big deal, various techies at the meeting tell me. The plug represents less than five percent of the cost of the system. Having two different plugs until the dust settles won’t be cost prohibitive. Technical differences of the battling chargers can be settled. CHAdeMO Europe’s Ronald de Haas and various others suggest that CHAdeMO should adopt The Combo’s “power level change during the session” and its narrower, but lower cost “voltage window.” This may sound like Greek to most of us, but at the conference, it did sound like a done deal.

CHAdeMO’s peace initiative does not sit too well with General Motors. At a public hearing convened last week by California Senate Majority Leader Ellen Corbett, GM’s Manager of Environment & Energy Policy, Shad Balch, asked for an embargo of the CHAdeMO. Balch said that “we need to make sure, especially because we’re talking about taxpayer money,” that ONLY the upcoming SAE combo standard is installed going forward. Balch was boooo’d at the hearing, and Torquenews notes that “the SAE committee is dominated by automakers who are fighting Nissan for electric vehicle dominance.”

Asking to leave California’s many Leaf owners stranded, and to favor still non-existent owners of still non-existent EVs that comply with a still non-existent SAE standard, amounts to a real declaration of war, and a rather hamfisted one.

PS: While a spiky-haired President of Japan’s EV Club is on stage selling the idea of a massive round Japan EV rally, a source that requested anonymity whispers in my ear: “Forget it. This is Japan and the charging stations are closed at night.”

Once upon a time, GM’s North American operations spewed red ink across the firm’s balance sheet, with the whole mess kept afloat by relatively strong overseas operations. Now GM makes most of its money at home while its international divisions limp along. No, really: in its just-released Q1 financial report, GM reveals that some $1.7b of its $2.2b global EBIT came from its once-troubled home markets. What a difference a bailout makes!

GM CEO Dan Akerson sums up the situation with refreshing candor, noting

New products are starting to make a difference in South America, but Europe remains a work in progress. We’ll continue to work on both revenue and cost opportunities until we have brought GM to competitive levels of profitability. [emphasis added]

That GM is not yet experiencing the kind of hot streak one might expect from a global titan that’s been stripped of debt and loaded with government cash is self-evident. Like its share price, GM’s performance in the last quarter has been merely adequate. A billion dollars in profit is always a good thing, but around the world GM is still underperforming the market. In fact, The General lost .3% global market share. in Q1 2012, the third straight quarter of such declines, and GM’s share of the world market is now a full point lower than it was in Q2 of last year.

Even in the US market that now provides the lion’s share of its profit, GM is losing ground to the competition. North American market share has also fallen for the last three quarters, now standing at 16.4%, some 2.4% lower than Q2 2011. US dealer inventories jumped dramatically in the quarter as well, from 583,000 to 713,000. All this in the face of above-average incentives (as a % of average transaction price) and subprime financing (8.2% compared to an industry average of 6%). In light of these developments, GM’s ability to earn the majority of its profits in North America speaks to its bailout-streamlined cost structure. Still, there’s no denying that things are not headed in the right direction.

GM Europe continues to be the source of the most serious bad news, although its $300m loss is half of the Q4 2011 number. Still, restructuring and plant shutdowns will cost GM a pretty penny at some point in the not-to-distant future, and until that bitter medicine is administered, GME can only try to control its losses. GM South America turned the corner into profitability, yielding a $100m gain on its lowest production volume in over a year (albeit with steady market share).

But GM’s opaque “International Operations,” which include Korea, Australia and the crown jewel of China show some of the most troubling signs of malaise. With costs rising faster than volume and pricing gains could make up for, GMIO’s EBIT declined by $100m compared to Q1 2011. With the Chinese market cooling off, GMIO is also losing market share at a steady .1% per quarter for the last three quarters. Given how crucial China is to GM’s global future, this is not a promising development.

This is not a return to “Deathwatch” territory by a long shot, as GM still has $31.5b of government cash and equivalents on hand, and $37.3b of available liquidity. But the premise that GM simply needed a bailout in order to soar to global dominance is certainly wearing thin. And with the government waiting for an uptick in GM’s stock price to sell its stock at a politically-palatable price, mediocre results like this will allow the stigma of government ownership to linger.

Two years after the Volkswagen Golf was launched, it received a fuel sipping diesel in 1976. I presented the launch campaign in Wolfsburg, and the ground shook. It wasn’t because of my campaign. It was because of the body stamping presses. The offices of the Zentrale Absatzförderung, VW’s advertising department, were two floors above.

I presented a campaign that was all on savings. The Golf D had one of the, if not the best mileage of all compacts. Herr Plamböck, the gentleman who had to vet the campaigns before the big boss would see them, looked at my grand savings plan, and said: “Let’s have lunch.”

Over a Currywurst, Hartmut Plamböck said: “Bertel, did you check the added cost of that engine?” I forgot how much it was, but it was a lot. “You will have to drive 80,000 kilometers to get your money back!” Mr. Plamböck thundered. The plastic forks jumped as Plamböck pounded the table. He looked around, lowered his voice and added: “And then, the engine will fall out of the car.” At that time, Volkswagens had a bit of a corrosion problem.

I was reminded of that story when I came across a story in the New York Times that provides a sanity check on savings at all costs. Rarely does one recoup the added investment into fuel savings. Little has changed since my Wolfsburg Waterloo. Fuel savings come at a price, and you have to decide whether you pay at the pump or to the dealer. Paying at the pump makes more economic sense, but more often than not, emotions trump math.

One of the worst investments, says the New York Times story that uses data compiled by TrueCar, is the Chevrolet Volt. Says the Times:

“The Volt, which costs nearly $40,000 before a $7,500 federal tax credit, could take up to 27 years to pay off versus a Chevrolet Cruze, assuming it was regularly driven farther than its battery-only range allows. The payback time could drop to about eight years if gas cost $5 a gallon and the driver remained exclusively on battery power.”

Mind you, the 27 year payback time is based on the TrueCar calculated $31,767 price of the Volt. Without the generous government rebate, financed by your tax dollars, the Volt would still be upside down long after it landed in a museum. At full retail, it would take 45 years to get you your money back. Payback is a bitch.

Driven fully on battery power, the Volt would needlessly drag around its heavy range extender machinery, but at least it would compete with Nissan’s LEAF in the ROI race. The Leaf takes 8.7 years to recoup the investment.

According to the study, “eco” upgrades usually are not worth the money. A Ford Fiesta SFE saves you $23 a year at the pump and on average. With these meager savings, the Fiesta actually beats the Volt in the senseless savings discipline. It would take 26.8 years to get you your money back.

As long as fuel saving cars carry huge premiums, you need to pray for higher gas prices, and you need to pray a lot. A survey by Lundberg says that gas prices need to go to $12.50 a gallon for the Volt to break even. The Leaf would be competitive with gas at $8.53 a gallon.

Are there savings that make sense?

If you really want to reconcile eco and economics, the sixth generation descendant of the Golf Diesel, the Jetta TDI,  would recoup the added money before the warranty is up, says the Times. So do the Lincoln MKZ Hybrid and the Toyota Prius. Not only is their mileage much better than the comparison model, their price premium is so low that it can be easily recouped. As Toyota’s Satoshi Ogiso demonstrated a few months ago,  savings at no added costs are the true engineering achievement.

(Hat tip to my man in the mountains.)

Horns are a fixture of Indian driving. Rather than being used to signal anger like in the United States, horns are used for almost everything on Indian roads – one study found that major intersections in Calcutta have one horn honk every three seconds.

Just like Audi’s Chinese cars come with longer wheelbases, Indian Audis have loud horns. Really loud horns. Audi India head Michael Perschke told a conference of luxury retailers that the company actually designs louder horns for the Indian market. According to a report in The Globe and Mail

“Obviously for India, the horn is a category in itself,” he told the Indian financial newspaper Mint. “You take a European horn and it will be gone in a week or two. With the amount of honking in Mumbai, we do on a daily basis what an average German does on an annual basis.”

Perschke said that the horns are blown continuously for two weeks to test their strength. India supposedly has decibel level laws design to eliminate this problem, but like many other regulations in the country, they are flouted with little regard for the law. Traffic wardens and other residents of major cities are experiencing a hearing-loss epidemic, which is being blamed partially on the sheer noise of motor vehicles.  Taking a cue from Chinese vehicles, Audi also said that their future Indian products will focus more on rear-seat comfort, since most well-to-do Indians have a driver.

Today, The Nikkei [sub] writes that Nissan will resurrect its Datsun brand in order to sell low-priced cars in emerging markets. According what the Nikkei “learned” without naming sources, the cars will initially be built and sold in India, Indonesia and Russia. Allegedly, Nissan hopes to “achieve annual sales of 300,000 Datsuns a year soon.”

According to the Nikkei story, the cars will be built on Nissan’s low-cost V-platform, with 90 percent or more local content. “In India, a vehicle with an engine displacement slightly above 1 liter is expected to sell for around 300,000 rupees ($6000,)” The Nikkei says. According to the Tokyo business paper,

“The vehicles will meet safety standards but shed inessential features, such as cabin noise reduction. They will use inexpensive parts and materials, and their warranty periods will be shorter than those of Nissans and Infinitis. The automaker also plans to set up Datsun dealerships with relatively low operating costs.”

It is 3:45 am in Tokyo, obviously no time to get confirmation on this.

While Honda and Mazda are just getting their respective footholds in Mexico (the two automakers are opening up respective assembly plants in Mexico), Nissan has had a long presence south of the border, building cars at its Augascalientes, Mexico plant for decades.

Nissan is set to build an all-new plant in Augascalientes, with a total investment of $2 billion. The plant will produce B-segment cars (such as the Versa). Nissan CEO Carlos Ghosn is on a major push to avoid exporting Japanese-built vehicles due to a strong yen. The Mexican plant will help shore up North American vehicle production, as Nissan’s Smyrna, Tennessee plant will add a range of new vehicles shortly, including the Infiniti JX, the Nissan Rogue and the Nissan Leaf. Greater expansion of the new plant, as well as facilities for suppliers were also in the cards.

With the goal of becoming Latin America’s top Japanese OEM, as well as outselling Honda in the United States, the new plant is crucial to Nissan’s plans. Nissan is hoping to have the factory producing cars in less than 24 months.

There was ample hand-wringing when Volvo announced the death of their iconic station wagon in North America. While enthusiasts mourned the death of a cult classic, Volvo also announced a plug-in hybrid version of their V60 wagon, powered by a diesel engine and a hybrid drivetrain. Naturally, this vehicle was not destined for sale in North America.

The non-available V60 plug-in constituted the ultimate slap in the face for the Volvo faithful. Here was the newest generation of Volvo wagon (as opposed to the warmed over XC70 offered recently) with an environmental bent and the Euro-cachet of a diesel engine – but where was it? As Jamie Kitman of Automobile magazine rightfully pointed out, their core buyer is “green” but refusing to import such a vehicle may not be “lunacy”, because the Swedes have something more suited for American tastes – the same hybrid goodness, packaged as a gasoline-powered crossover.

Rather than the V60 diesel-hybrid, North Americans are being treated to a plug-in hybrid based on the XC60. Set to be unveiled at the North American International Auto Show next week, the XC60 plug-in will use a 280 horsepower 4-cylinder gasoline engine and a 70 horsepower electric motor for a total output of 350 horsepower. The gasoline engine will drive the front wheels, while the electric motor will power the rear wheels. Volvo claims that the vehicle can be driven in electric mode for up to 35 miles and return up to 50 mpg. Stefan Jacoby, Volvo’s CEO, noted that the gasoline powered version will be an important car for China and Russia as well as the United States, as this likely has as much to do with the crossover body style as it does the gasoline engine.

On a personal note, my folks bought an XC60 T6 this summer, and I have spent ample time in it. While perpetually ignored in the marketplace, the XC60 is a car I’m fond of, with a powerful engine, a well-appointed cabin and good driving dynamics. At the time of purchase, I urged my parents to look at the XC70 T6, but it cost a few thousand dollars more and offered little appreciable difference to them. If a couple of upper-middle class car enthusiasts saw little value in opting for a wagon over a crossover, then what chance would a station wagon have with more conventional buyers, who are likely to be even more image-conscious and resistant to the idea of a wagon? On the other hand, my parents have a 5.4 mile commute through a downtown core to their office, and something like this would be right up their alley. Hopefully pricing won’t be so exorbitant that it cancels out any economic benefit for buying the XC60 plug-in.

“Under current foreign exchange rates, there can be no shipments from Japan of totally new projects,” Nissan’s COO Toshiyuki Shiga said. According to the report, anything with a new chassis that is intended for foreign markets will begin its life in those foreign markets. Says The Nikkei:

“Shiga’s comments suggest that there are few benefits to producing entirely new models for export in Japan because of the yen’s surge, but new models that use the chassis of existing vehicles can be exported as they are relatively less expensive to produce.”

Nissan makes only 25 percent of its worldwide volume in Japan. However, half of the Japanese production is currently exported. This will change.

In the interview, Shiga indicated that exports from Japan could fall to 400,000 units. At the same time, the Japanese market (which pays in yen) is supposed to absorb 600,000 units, so that the target of 1 million units can be maintained. In the fiscal year that ended in March 2011, Nissan’s Japanese production was 1.07 million units, of which 610,000 were exported and 460,000 were sold in Japan.

In early November, Toyota had announced a similar plan to maintain its commitment to make 3 million cars in Japan: Fewer cars exported means that Japanese will have to buy more cars domestically.

If the domestic sales don’t pan out as planned, both carmakers can say: “Sorry, we tried.”

Nissan’s plan sounds more decisive than Toyota’s.  Usually, cars are developed and made at home first before they slowly filter abroad.  Starting newly developed cars offshore inevitably will mean that R&D has to follow. Development and production must go hand in hand in close vicinity, at least in the early stages of the cycle.

Japan’s innovative power will be dismantled and shipped abroad. And that is a much bigger loss than a few cars. Japan will slowly turn into a 3^rd world country. It used to be that those got the older cars, while new models hatched at home.

Since the Tokyo Auto Show and some Scion scuttlebutt have us on something of a Daihatsu theme here, I thought I’d show a bit of what the small car specialists are up to these days. The truth: despite the brand’s futuristic showcar image projections, Daihatsu mostly plays in the rough-and-tumble entry-level segments of emerging markets, where the cars are small and the margins can be even smaller.

And it’s had better luck there than in the so-called “mature markets.” Though the third generation Charade flopped on the American market amid much popular ridicule of its name (and, according to gearhead lore, oversight of other favorable qualities), the previous generation became the FAW-Tianjin “Xiali,” one of China’s most ubiquitous cars. Now Daihatsu is ditching Europe and  hustling strangely cool little mini-MPVs built in Indonesia with the taglines “it’s very cheap” and “we build them compact.” Who needs developed markets?


Of course you can’t mention Daihatsu without referencing the fact that it is majority owned by Toyota, and the two firms work hand-in-hand. For example, the MPV advertised at the top of the post is sold as both a Daihatsu Xenia and a Toyota Avanza. Interestingly, the outgoing Toyota Yaris was put on sale in Europe as the Daihatsu Charade just this year… apparently the brand’s last “new” model before disappearing from its toehold in Europe.

Speaking of obligatory references, here’s Top Gear’s love song to Daihatsu’s Terios.

Though the Asian national disasters have not left it untouched, Daihatsu is one of the few Japanese makers to actually raise its profit outlook (pending damage reports from the Thai floods). And though its export models like the Terios are being hit by the Yen increases just like everyone else, joint ventures in China, Indonesia and elsewhere keep Daihatsu diversified. Besides, not being dependent on the American and European middle classes for sales is a good way to be weathering a “mature market” downturn (especially in contrast to its city-cousin, Scion). And that is reason enough to keep the funky, futuristic concept cars coming..

With a 35% import tax on new cars, Argentina is already a touch market for foreign brands seeking to bring cars into the country. But the Argentinean government has just made it  little bit harder by demanding that importers export an equal amount of Argentina-made goods for every car imported. As a result, Bloomberg reports that Porsche’s importer is exporting Malbec wines and olives, Mitsubishi’s importer is getting into the peanut export game, and Subaru’s representative is shipping chicken feed to Chile. BMW, which has had recent difficulties importing into Argentina, is focusing on its core business, exporting auto parts and upholstery… and a little processed rice to make up the difference. But why are these major manufacturers getting into all kinds of strange side businesses just because Argentina wants to improve its trade balance and foreign currency reserves? Simple: Argentina is South America’s second-largest economy, and it’s been growing at over 5% per year since 2007 (i.e. when other markets were shrinking). So if the government wants imports balanced with exports, well, Porsche’s importer is just going to have to get into the wine business, isn’t he?

One of the earliest iterations of the “Low Speed Vehicle Today, World EV Domination Tomorrow” business model to emerge at the dawn of the electric car era was ZAP. But after being exposed on numerous occasions for its poor product quality, vaporware hype and stock manipulation (most infamously in this Wired story), ZAP disappeared from the EV scene in the US (the company’s official (read: sanitized) history can be found here). Last we heard, ZAP was hyping a venture with the Korean optics firm Samyang, but it seems the firm has spending the last year or so putting down roots in the Chinese market. Having merged with Jonway, the Chinese maker of scooters, ATVs and a CUV that looks suspiciously like the Toyota RAV4, ZAP came back to the US for the Automotive X-Prize, which it contested in a ZAP Alias, the three-wheeled, $38k vehicle that has not been produced in volume although the company is still accepting deposits for it. The Alias failed to finish in the X-Prize, but ZAP says that revenue from Jonway is funding the vehicle’s continued development (including a four-wheeled version)… which was supposed to debut way back in 2009.

Now Consumer Reports says the firm is focusing on selling electric RAV4 knockoffs produced by Jonway as it continues to work on the Alias. But the firm seems to have burnt too many bridges in the US, as it says it will focus on selling the EVs in China and other world markets… despite the fact that developing market EV sales are going nowhere.  But ZAP has left something of a legacy in the US: Senator Mitch McConnell, a critic of government loans for Solyndra, apparently pushed for a quarter-billion dollar federal loan to ZAP, opening him to charges of hypocrisy. Now, as ever, ZAP remains a fascinating fixture at the margins of the EV scene. And though it’s an interesting company to watch, it’s best when viewed from a safe distance…

Designed to be the world’s cheapest car, the Tata Nano is supposed to compete with scooters and three-wheelers rather than full-priced, global-brand vehicles. But the Nano has already seen several price increases since the target MSRP of $2,500 was announced, and the price in India for a base-level Nano is now about $2,870. And when you talk about such low prices, even small increases can wreak havoc on expected volumes, and as a result the Nano is turning into something of a flop (helped along by its pyromania problem).

Apparently Year-To-Date sales of the Nano were just 29,377 units through September, down from last year’s 37,402 result over the same period. In order to make up for weak sales in India, Tata has begun planned exports to neighboring countries, but that effort is running into problems as well. Abdul Matlub Ahmad, director of Nitol Motors, the Nano’s Bangladeshi distributor tells the AFP

A lot of people came to us for booking at the fair. At least 23 people confirmed their interest. But we’ve deferred launch of Nano at the last moment as we’re seeking a re-look at the price, which some say is too high.

The price? $7,900 after a 132% tax on imported cars. No wonder Bangladesh’s auto market is dependent on some 30k annual imports of reconditioned cars. Meanwhile, the Nano’s promise of becoming “India’s Model T” seems to be fading fast. But at least Tata has done something Ford was never able to do: make money on Jaguar and Land Rover…

Carmakers don’t want to be caught napping when the “next China” is at stake. They are setting their sights on Southeast Asia. Currently en vogue: Indonesia. The country with a population of 237 million  has a bullet on the PowerPoints of most major carmakers. Toyota is already there and wants to double down.

Toyota wants to nearly double the capacity of an existing assembly plant in the suburbs of Jakarta  to 200,000 units a year. That’s a healthy number. According to The Nikkei [sub], the factory is “expected to assemble three subcompact models, including a low-priced strategic vehicle under development for that country.”

Toyota currently has 60 percent of the 750,000 units market which is expected to grow beyond 1 million units in the coming years. The competition is hot on their heels. Nissan and Suzuki are expanding. GM wants to build a plant here.

With a massively growing population, and no Chinese-style national one-child policy in place, sterilization campaigns in India’s provinces and municipalities are far from uncommon. But now, in the Rajasthani district of Jhunjhunu, officials in charge of sterilization campigns have found a new incentive to encourage Indians to undergo the procedure: the subcontinents growing obsession with automobiles. Britain’s The Independent was the first Western news outlet to report on the scheme, which offers those undergoing sterilization

a coupon for a forthcoming raffle, with prizes including a Tata Nano car, motorbikes and electric food blenders.

The prizes for the Jhunjhunu raffle were donated by a local university, and because compensation for sterilization is technically illegal in India, a Tata Motors spokesman tells the New York Times that

The Rajasthan initiative you are referring to — we are not sure whether it is a government or a private initiative – has got nothing to do with Tata Motors or its dealers. We have not been aware whether this is being shown as endorsed by the company.

Tata says it will “look into” the scheme, but with sales of “India’s Model T” flagging, even this questionable promotion might well be welcome. After all, many Rajasthanis seem to grasp the practical benefits of sterilization, but have a hard time finding the motivation to leave farms in order to receive the surgery. One woman, interviewed by The Independent, seemed to sum up the mood:

Ms Kumar explained how she had opted for the operation for purely practical reasons. But she admitted she was excited by the prospect of the raffle. She said: “If I am to win anything, I hope it is the car.”

In modern India, where booming sales of ultra-cheap cars conceal the reality that millions remain without mobility, it seems that the offer of even the cheapest car on the market is motivation enough to forgo having children.

Around the time of the founding of the United States, the Mexican state of Guanajuato became home to of the one of the biggest silver mines in the world, which produced as much as 2/3rds of the world’s supply of silver at its peak. Today it’s not precious metal that’s driving Guanajuato’s booming economy, but cars, as the world’s automakers flock to Central Mexico. Between 2005 and 2008, GM, Ford and Michelin dumped $1.8b into production in the state, and the expansion is still picking up steam. In the last year, Volkswagen invested $800m in engine production capacity in Silao, Pirelli built a $210m facility and Mazda just revealed it would build a new compact car plant there in June. Toyota is said to be the next to set up shop in Guanajuato, but for the moment Honda is the latest automaker to announce new operations in Guanajuato, as Automotive News [sub] reports the Japanese automaker will spend $800m on an assembly plant there. Honda, which is fleeing a strong yen which has battered Japanese exports, will start building 200k subcompacts per year in 2014. Clearly Guanajuato’s got it’s automotive mojo flowing… but are the days of new Japanese transplant factories in the US over? Is it only a matter of time before the coyotes start smuggling Detroiters into Silao, Celaya, and the Puerto Interior??

GM knows where the growth is: In the emerging markets, BRICs and beyond. GM announced today it will “invest $150 million in the reactivation of its Bekasi manufacturing facility in West Java, Indonesia.”

The plant will “begin production of a new line of people movers for Southeast Asia in 2013,” the statement says. GM’s presence in the 237 million country had languished. In 2008, GM’s Indonesian had “only a 0.56 percent share in the country’s new car market,” reported the Jakarta Globe in 2009, along with the news that any expansion would have to wait until GM found the money. Now, GM found the cash and is building an 11-hectare plant that will initially manufacture up to 40,000 vehicles per year.

GM will “introduce new vehicle manufacturing equipment and standard processes, including its Global Manufacturing System.”

No word on nameplate, design specifications and pricing. Last year, GM’s sales in Indonesia rose 72 percent to 4,500 units. In the first half of 2011, sales were up another 18 percent on an annual basis to 2,500 units. The new plant hopefully will make that grow. Just have a look at the picture.

From the Detroit News all the way to the Miami Herald, you will receive the good news that “China’s July auto sales are up 6.7 percent.” They are not. According to data released by the China Association of Automobile Manufacturers (CAAM), automobile production in China rose 1.26 percent in July to 1,306,100. Sales rose 2.18 percent to 1,275,300. In case you don’t read Chinese, China Daily provides a translation. The numerical crime was perpetrated again by the Associated Press. The AP is a repeat offender.

If I would have anything to say, I would revoke APs right to report on anything that has to do with car sales, especially in China. The AP did not accept our offer of a free remedial course in car counting. Instead of honing the fine art of copying correct counts from a press release, the AP continues to write what I should have a monopoly on, namely BS.  A grizzled editor once told me: “If you find that the other guys are consistently wrong about something you know – assume they are wrong with everything else also.”

(To AP’s credit, they write further down that “Total sales of commercial and passenger vehicles rose 2.2 percent from a year ago to 1.3 million units.” But that will slip past most readers whose eyes glazed over in the first paragraph – if they ever got that far. Distracted reading is a menace.)

Time and again, the AP (along with other less seasoned writers) falls into the trap of confusing “autos”, “vehicles”, “cars” and “passenger vehicles.” What was up 6.74 percent were the sales of “passenger vehicles” (as defined by the CAAM, let’s not even go THERE). Commercial vehicle production was down 9.26 percent to  255,700. Sales of commercial vehicles plummeted a whopping 19.36 percent to 263,500 in July.

In aggregate, and I strongly recommend to use the aggregate to transcend Chinese car numerology, by adding 2.18 percent to last year’s July, the market moved sideways with a slight upward bias. Last week, we predicted: “When Chinese new car sales will be announced next week on Wednesday, you probably will see a meek number.” There is your meek number. Your always no-cost advisors predicted: “Passenger vehicle sales grow. Commercial vehicle sales are down.”

Overall, the Chinese car market is alive and well. It went from a furious boil last year to a slow simmer, but it is still hot. From January to July, auto production (all types) rose 2.33 percent to 10,462,400. Sales  rose 3.22 percent to 10,601,800.  Last year, the market was insanely up. This year, it’s just up. In the remaining months of the year, sales are expected to increase slightly.  By the end of the year, China may break through the Mach 2 barrier of auto production and reach 20 million. Or it will end the year just shy of it.

One thing is clear: The bubble which was predicted (or prayed for) by many, including the alleged China expert and all-around moron Gordon G. Chang, is not happening.

Get used to it: China’s mass motorization has just begun. There are 73 “automobiles” per thousand people in China. There are approximately 47 passenger vehicles per thousand in China. Even a poor country like Poland already has 450 cars per thousand.  Even if China will never reach the exalted levels of Poland, there remains  a lot of room to grow. (When trying to prove me wrong, please stay away from thoroughly inebriated “sources” such as Nationmaster, which claims that  there are 765 cars per 100 people living in the U.S. – that’s 7.65 cars for each man, woman, child, convict and homeless.)

There is one thing you can trust: China’s car sales will continue to grow. Just don’t trust the numbers you read. Especially when they come from the Associated Depress.

Within the next ten years, the car industry will change more than in the past fifty years. At least at Volkswagen, says Audi Chief Rupert Stadler. Platforms are a thing of the last century. The future of the car industry is kit cars. Or make that cars designed and built using elements of a common kit architecture. Currently, there are two families of erector kits which can be assembled into all kinds of cars at Volkswagen. They have Teutonic names like “Modularer Querbaukasten” (MQB)  and “Modularer Längsbaukasten” (MLB). Porsche is developing a “MMB” (Modularer Mittelbaukasten) for Mittelmotor (mid-engined) cars. Or possibly a MSB (Modularer Standardbaukasten), which could be the Mutter of all Baukasten.

Audi is already working with the MLB architecture. This coming year, Volkswagen will start using the MQB. Says Automobilwoche [sub]:

“The Modulare Querbaukasten will provide at least 43 models of Volkswagen, Audi, Skoda and Seat with the same components: Underbody, axles, drivetrains. Europe’s largest automaker wants to become more flexible, wants to react faster to changing customer demands and wants to save 30 percent of costs. Michael Macht, chief of production, calls it a ‘milestone’.”

Success and failure of a car company will be decided in the emerging markets. This is where the growth is. But this is also where a lot of small cars change hands and the smaller the car, the bigger the need for creative cost control. VW chief Martin Winterkorn said: „In the car business, staying power is built on a better cost structure.“

The new kit architecture „is more than a new technology, it is a strategic weapon,” said Ulrich Hackenberg, chief of Volkswagen’s Research and Development. It also allows to build niche cars and to react to regional differences without reinventing the wheels. Audi alone will increase its model count from 38 today to 50 by 2020.

A new production engineering is inherent to the kit architecture. Volkswagen plants worldwide are being currently changed to accommodate the kit, and to become nodes in a larger production kit architecture.

If people think of badge engineering, then they are misguided, says Hackenberg:

“The creativity of engineers and designers of the different brands remains unencumbered. In the contrary. It is more welcome and more demanded than ever before.“

Toyota is working on a small car based on its emerging market platform that underpins the Indian Etios, and will release it in China by 2013 – if  The Nikkei [sub] is correctly informed. There is nobody working at Toyota on Thursdays and Fridays as a power saving measure, so there is nobody to ask. We expect no more than the usual “we cannot comment on future models” when people will be back to work on Saturday. With that in mind, let’s go down rumor lane.

Using the Etios platform for China would not come as a surprise. It is Toyota’s low cost car that had been developed with all emerging markets in mind. Toyota had launched it in India, because “if we are successful here, we will be successful in other emerging markets,” said Toyota’s Chief Engineer Yoshinori Noritake. The platform is built so that it can be adapted to the needs of the respective target market. It is a real car, not a sardine can on wheels.

A Brazilian derivative is in the works, a Russian derivative may be in the works. It would be a sin not to make a Chinese derivative. When we tested the Indian spec Etios on the Fuji Speedway a few weeks ago, Toyota folk mentioned that the Chinese market demands a lot of car for little money, so they obviously had done some homework, and may have already played around with more wheelbase on the CAD computer.

Having been overtaken by Nissan in Chinese volume, Toyota needs a low cost winner in China.

The Nikkei says that production of the car is planned at “two local factories” in China. Two factories maybe, but unlikely with two joint ventures as the Nikkei surmises. Toyota has a joint venture with FAW near the eastern port city of Tianjin. Toyota also has a joint venture with Guangzhou Automobile Group Co. in China’s south. It would be against all Chinese customs if two joint venture partners would get the same car. Toyota is busy expanding capacities at both, so let’s see who will get it.

China Daily reports today that Toyota is working on raising engine output capacity in China “by 30 percent to 1.3 million units a year in 2013.” This added capacity will be spread over both joint venture partners. According to China Daily, the “1300cc and 1500cc” engines will “power a low-cost, compact car planned for the world’s biggest market.”  The Indian Etios comes with a 1,500 cc engine, and the Etios Liva hatchback comes with a 1,200 cc engine.

After a lot of prototypes presented at Chinese car shows with hoods closed and long cables going to mock charging stations, EV development appears to get serious in China. Yesterday, Nissan announced that it is developing an EV for the Chinese market that will be sold under the Venucia brand by 2015. Daimler of all people could be further ahead.

A year ago, Daimler inked a joint venture agreement with BYD for the development of an all-electric car. Daimler’s main joint venture partner BAIC promptly raised objections. The JV appears to be alive and well nonetheless.  From the files of the Chinese patent bureau leaked finalized renderings of a fully electric car that appears to be based on Daimler’s B-Class. A whole array of pictures can be admired at Carnewschina. Word on the street is that the car will hit same by 2013.

Just like Nissan’s Chinese EV, the BYD-Daimler EV will be sold under a yet to be disclosed “Chinese” brand.

The car would probably sell better with the Mercedes star on it, especially to brand-conscious Chinese, but if the Chinese government insists on Chinese brands, then that’s what the government will get.

A chicken could become as unreachable as caviar in many poor countries, warns a study of the OECD and the United Nations. Chicken is projected to rise in price by 30 percent in the next ten years – inflation adjusted. Other staple foods such as corn, sugar or cooking oil are seen rising in price by twenty percent. Why? On one side of the ledger is higher demand, mainly from China and India. On the other side: „Increasingly, the crop doesn’t end up in the pot, but as fuel in the tanks of cars,“ says the German magazine Der Spiegel.

This trend is fueled, so to speak, by a shortage of water and higher energy costs. “Higher prices may be good for farmers, for people who spend a large share of their income on food, this is a catastrophe,“ says OECD General Secretary Angel Gurría.

In the coming week, agricultural ministers of the G20 will have a meeting in Paris to discuss the price increases. Aid organization Oxfam doesn’t expect any results from the meeting. The organization predicts that governments will not stop their ethanol subsidies. Oxfam warns:

“Huge numbers of people, especially in the world’s poorest countries, are cutting back on the quantity or quality of the food they eat because of rising food prices. World leaders – especially leaders of the powerful G20 countries – must act now to fix our broken food system. They must regulate the commodity markets and reform flawed biofuels policies to keep food prices in check.”

What seems to have more results are buyer strikes against ethanol, such as the one in Germany.

China’s Gasgoo says that “Dongfeng Nissan has already begun preparations for domestic production of the Nissan Leaf pure electric hatchback.” Domestic as in Made-in-China. They quote Dongfeng Nissan CEO Fumiaki Matsumoto, who allegedly said: “We have already finished preparatory work for the Leaf. We hope that we can cooperate with the government and suppliers to bring over the Leaf as soon as possible.” That of course piqued our interest. After some calls, we can say with certainty: Instead of millions of Leafs roaming the streets of China tomorrow, we have a case of Lost In Translation with a French-Japanese-Chinese cast.

At the Shanghai Motor Show, Carlos Ghosn had been asked by reporters when he would bring the Leaf to China. He answered that this depends on the Chinese government and when it would institute which policies. Ghosn has a way with words. You need to listen vigilantly, parse his sentences with care and resist the urge to fill in the voids.

Nissan’s China-chief Matsumoto simply reiterated Ghosn’s remarks. When he said “We have already finished preparatory work for the Leaf,” he didn’t say that the Nissan plant in Guangzhou is ready to produce Leafs. He meant that the Leaf is already developed, that it is being produced and sold. Which sets it apart from the many EVs in China that seem to run on hot air.

“Mr. Matsumoto intended to say that Nissan has already started to produce the Leaf in Japan,” explains Akihiro Nakanishi, spokesman of Dongfeng Nissan in Guangzhou. Production can be done elsewhere when the circumstances call for it, says Nakanishi. “However, the government policy has not been announced in China and we are waiting for it.”

Nissan is not alone. Whole China is waiting for a formal announcement of China’s EV policies. Many draft regulations are floating around. Some unnerved American senators, others raised the hope of Beijingers on a car without having to try your luck in the license plate lottery, and with a hefty subsidy on top. There will be policies on a central government level, and policies for each city. The devil is in the details, and the details are not clear until the policies become law and are on the books. Which they are not. The Beijing scuttlebutt expects passage some time this summer.

With more than a million cars sold in China last year, Nissan is already the largest Japanese brand in the middle kingdom. If they move decisively once the policies are finally law, the Leaf could become the EV leader in China while other manufacturers try to replace the hot air with something salable.

Just over one week ago, a Detroit News piece pointed me towards a letter written by Senators Carl Levin and Debbie Stabenow, which took China to task for considering draft legislation that might possibly require more technology transfers to Chinese companies as a precondition to market access. Having chased down both the letter and the US National Trade Estimate it was based on, as well as several reports on the draft legislation itself, I wrote a lengthy piece about how Senators Levin and Stabenow were rattling the saber about what appeared to be a complete non-issue. In that piece, I not only debunked the senators’ concerns, but I also pointed out that China’s local consumer EV subsidies were the far more worrying potential trade barrier, as we have been hearing that they require that all qualifying EVs be built in China and sold with Chinese brands (a condition at odds with at least the 2004 version of China’s Auto Industry Development Plan, which stated “local governments should encourage fair competition among motor vehicles made by different places on the local market. They are not allowed to carry out any discriminative policy or measure which may lead to discrimination against non-locally manufactured automobile products.”). And it turns out that my 2,000+ words didn’t put everyone to sleep, as a new DetNews piece re-reports the Stabenow/Levin letter with the inclusion of a new motivation never mentioned in their actual letter, to wit:

For electric or plug-in vehicles to qualify for incentives under the proposed rules, they must be produced in China — by a Chinese carmaker or in a joint venture with a Chinese company

Ignoring for a moment that this wasn’t explicitly mentioned in the letter, there’s another issue here: subsidies aside, building any car in China requires a joint-venture. More importantly, China need not establish any barriers to the sale of imported plug-in or hybrid cars for the simple fact that the Toyota Prius’s epically weak sales there prove that imported NEVs can’t compete in the market. Of course subsidies may change that, but even more important is the issue of registration limits: if China requires EVs to be locally-made in order to waive Beijing’s registration restrictions, that could create more of a barrier than any cash subsidy. Meanwhile, neither Daimler nor Toyota nor VW nor BMW seems to have a problem with building EVs locally under a JV (cost and supply chain make Chinese production the logical choice anyway, necessitating a JV). The DetNews (and presumably Senators Levin and Stabenow) are getting closer to understanding the problems with China’s New Energy Vehicle Plan, but it seems they may yet have some more TTAC reading to do.