The Biggest Auto Industry Stories of 2016
This begins with President-elect Donald Trump because why not? The election shock of the millennium already has business and industry anticipating huge shifts in the regulatory climate. If Hilary Clinton had won the election, automakers would now be continuing to lobby for relief on the 54.5 mpg federal 2025 Corporate Average Fuel Economy standards via the “mid-term review” included in the agreement with the Obama administration early in the decade. Instead, we can now pretty much figure automakers’ relief from the mid-term review is a given.
Still, because automakers have been working on new cars and trucks that hit the market years after the next presidential election, this won’t make too much difference in the kinds of vehicles and powertrains that automakers have been planning for the decade to come.
Here is what I figure are the biggest news stories in the auto industry in 2016 …
1. Trump elected president.
Whatever Trump does for (or against) the auto industry, it won’t be enough to put the brakes on fuel-efficiency improvements, hybrid development, and electrification of powerplants that American and foreign engineers have been developing all decade long. And no matter what Trump thinks of U.S. trade deals, automakers, even the small ones, are global players, and China is now said to have the most strict emissions standards in the world. Automakers must continue to play to the world’s biggest market. They’ll also continue to play to the California Air Resources Board, which, with 15 other Section 177 states, makes up a huge portion of the U.S. market, and which, with its zero emissions mandate, is responsible for the growth of battery electric vehicle development and marketing here.
What about the North American Free Trade Agreement (NAFTA) and those other pesky international trade deals? Automakers can’t afford to give up Mexican factories that allow for viable profit margins on cheap, small cars. If the Trump administration starts to impose huge tariffs on cars coming from south of the border, you may see subcompact/compact hatchbacks and sedans virtually disappear from our market, as slightly costlier crossover/utilities continue to grab market share anyway.
2. Silicon Valley cedes automaking to Detroit, Stuttgart, etc.
It’s not really news that Google’s autonomous car project (now WayGo) has no indicated interest in building its own cars, desiring only to provide the technology that would make a car autonomous instead. And I’m not surprised that Apple has apparently abandoned its Titan project (which it never fully confirmed). But a few years ago, economists, analysts, and pundits were declaring the automobile dead; young people were interested only in the latest smartphones and weren’t rushing to get driver’s licenses. Now, every “disrupter” in Silicon Valley wants to provide autonomous technology to the resurgent auto industry — about to finish its second U.S. 17.5 million unit year in a row — as a supplier and help move it closer to a car-sharing paradigm.
3. Autonomous cars get real.
A flood of hookups and announced testing programs in the past year pretty much ended the debate over whether autonomous cars are viable. Construction has begun on the American Center for Mobility—an autonomy test facility—at the old Willow Run World War II warplane factory in Ypsilanti, Michigan, while a new state law in Michigan allows testing on public roads. Ford Motor CEO Mark Fields says his company, which has hooked up with Velodyne and Microsoft for the technology, will offer a fully autonomous car by 2021. General Motors CEO Mary Barra says her company has taken advantage of such testing and will begin the assembly of autonomous car prototypes alongside standard production models at the Chevrolet Bolt EV plant.
Google has begun outfitting autonomous Chrysler Pacificas for testing, both Delphi and nuTonomy are testing autonomous cars on roughly 3.5 miles of urban streets in Singapore, and Uber has begun to offer rides in autonomous Volvo XC90s (with backup humans behind the wheels) in Pittsburgh and San Francisco. Next year, Volvo begins its pilot tests of XC90s owned by its customers, along 30-plus miles of highway in Gothenburg, Sweden, and GM, finally, offers its SuperCruise highway semi-autonomy in Cadillac CT6s.
4. The year in Elon Musk and Tesla Motors.
What set major automakers apart from Tesla, aside from Elon Musk’s cult of personality, is that the old economy guys can offset the losses of selling a mainstream EV by selling boatloads of compact crossovers and pickup trucks. Now, Tesla has another side of its business to end reliance on its EV margins, too, though this one isn’t helping with Tesla’s bottom line. Musk has asked the board of his Tesla Motors to acquire one of his other companies, home-panel-system maker SolarCity, for $ 2.6 billion.
When he announced his intentions early this year, Tesla Motors common stock took a rare plunge. Still, the deal is in the works, pushed in part by another rarity: a small third-quarter net profit for Tesla. I know news from Tesla could make up three or four separate items here; this also was the year that Teslas apparently operating under the Autopilot autonomous mode were involved in severe road accidents, including a fatality in Florida. Meanwhile, Musk promises production of his $ 35,000-plus Tesla Model 3 will begin in the second half of 2017 and that the automaker will add a compact pickup truck, a compact SUV, and a ride-sharing service some time after that.
5. EPA fines VW $ 14.7 billion in Dieselgate scandal.
Had this been a quieter non-election year, last year’s biggest automotive story easily could have been number one again. As part of the agreement, Volkswagen AG has a generous offer for its 482,000 diesel car owners, who have two years to return their cars for a partial refund. Many owners think they should get their full purchase price refunded, of course, even though these cars are as much as seven years old. As the emissions software-cheating scandal extends to Audis and even Porsches, VW finally is ready to sell its midsize three-row sport/utility vehicle, the Chattanooga, Tennessee-built Atlas.
After VW of America chief Michael Horn became another Dieselgate fatality when he was fired earlier this year with little more than two years in the job position, the company touted a new North American management scheme that reportedly gives more autonomy to VW of America leadership. We’re not convinced: At the Los Angeles Auto Show, the new VW of America CEO, Hinrich Woebcken, told reporters that VW TDI diesels wouldn’t be back in the U.S. market next year but held out the possibility that they could return a year or more after that. The following week, word came down from VW in Wolfsburg: no more TDIs in the U.S. market again, ever. So much for VW of America’s independence.
6. Fiat Chrysler’s Alfa Romeo plans stall.
Sergio Marchionne’s grand plans to recast Alfa Romeo as a BMW competitor made a lot of sense, especially after VW Group kept trying to take control of the spicy Italian brand. But internal problems with the engineering of a rear-wheel-drive platform set that would underpin the Alfas, as well as Dodge Challenger and Charger replacements, have become costly delays. It doesn’t help that all the profits being reinvested to pay for the Grand Alfa scheme are coming in from Fiat Chrysler’s Jeep and Ram brands. We’ll see this problem playing itself out in 2017 as CEO Marchionne becomes ever more desperate for a proper suitor for Fiat Chrysler before he retires.
7. Takata Airbag recall grows to 42 million vehicles.
The National Highway Traffic Safety Administration (NHTSA) is trying to speed up the recall of Takata airbags, which now has been extended to entail as many as 42 million cars and light trucks, up from 25 million. But even at an accelerated pace, NHTSA figures it will take until 2023 to complete, according to CNN/Money. Takata, a family-run company founded in 1933, lost $ 130 million last year; two other auto suppliers, Autolive Inc. and Key Safety Systems, are lead bidders to purchase the troubled company, Bloomberg says. A sale is expected early in 2017.
8. Ron Dennis out at McLaren.
Did Ron Dennis spar with majority investors over the rumored (and discredited) acquisition talks between McLaren Technology Group and Apple? We’ll never know the details of Dennis’ unceremonious departure from the second-most successful team in Formula 1, but whatever happened, a tie-up on Apple’s stillborn Titan autonomous car project, likely as a one-time partnership deal akin to Roush building autonomous prototypes for Google, would have been great business for McLaren.
Regardless, it’s disconcerting to watch an F1 race without Dennis, who joined the company in 1980. He lead the team with such drivers as Niki Lauda, Alain Prost, Ayrton Senna, Mika Häkkinen, and his hand-picked protégé, Lewis Hamilton.
9. Peugeot Citroen PSA ponders return to U.S.
PSA chief Carlos Tavares has outlined a plan to return one or more of the French brands — perhaps Citroen’s upscale Chinese-market subbrand, DS — as the third part of a three-part, 10-year return. First might be introduction in 2017 of Peugeot Citroen’s “mobility operator,” Bolloré, which makes batteries and builds electric cars, according to Automotive News. Next would be a car-sharing or leasing program. Then, finally, marketing one or more of the French brands in the U.S. Interesting that with all the major automakers preparing to fight for a piece of shared-economy personal transportation, Peugeot Citroen figures there’s room for additional brands in our market.
10. Toyota kills Scion.
Then-Toyota exec Chris Farley led the launch of Toyota’s Scion in 2003 with plans never to repeat a model in the sub-brand’s lineup. It was an easy investment for Toyota dealers, who were not required to build standalone facilities, but after the first-generation xA and xB, Toyota quickly ran out of Japanese domestic market models that could be adapted to the North American market. What’s more, there seems little evidence that young buyers traded in their Scions for Toyota Corollas, let alone Lexus LX models. In the end, Scion lasted 13 years, some five years longer than Chevrolet’s Geo subbrand (which sold rebadged Japanese models, including Toyota Corollas), though little more than half as long as GM’s equally product-starved Saturn division.