By Jeff Sanford
Toronto, Ontario — September 24, 2015 — A collection of interesting auto sector news bits from the week that was:
- The biggest story of the week, of course, is Deiselgate. VW admitted it had been programming its cars to cheat on emissions testing standards. The auto industry trade media has, collectively, lost its mind. Auto industry reporters have compared the scandal to everything from the Lehman Brothers collapse in 2008 to the moon shot. The fallout in terms of stock was immediate and rather shocking. The stock plunged more than 20 percent. The CEO in office during the entire time the illegal program was in place, Martin Winterkorn, has now stepped down. He may face criminal charges. The program seems seriously pre-meditated. What might some of the wider effects be? Some wonder if the traditional European reliance on diesel-powered cars may be threatened. Euro car-makers have long been keen on the dirty-burning fuel. The opening address to the Frankfurt car show last week included a piece about the importance of “clean diesel.” But some wonder if this incident does not reflect a basic fact: diesel is a dirtier fuel than gasoline. Could the European auto industry be about to make a one-time, epic shift away from diesel? Some say.
- Another interesting bit of musing on the future of the industry comes from the well-respected business paper, the Financial Times of London, England. According to a piece this week, the fact that a major car-maker gambled on the legal and brand-reputation consequences that follow on this kind of fraud is a sign of the desperation of an over-built auto industry. According to the FT article, “There are too many car manufacturers around, too many makes and too many models. And there is simply not enough demand.” According to the piece, the auto industry is in trouble. There’s just too much product on the market. The newspaper ran a chart comparing the general rise in consumer prices over the past 10 years with new vehicle prices. While prices in general have increased, the price of a new car has not been increasing at the same rate of inflation. As the article states, “Simply put, the industry has lost its pricing power.” There are too many cars being built for the amount of demand in the market. Car-makers like VW—a major national organization in Germany—are so desperate to keep the production lines running they’ve now resorted to outright fraud to keep the factories open. It will be interesting to see who knew what when about the decision to program the algorithm in question. But some think this could be the start of some bigger, deeper changes in terms of global auto production.
- German Chancellor Angela Merkel addressed the audience at the Frankfurt auto show last week before the news about VW broke (one wonders when she found out). She rolled out an interesting request to the crowd: The German Chancellor called on the auto industry to hire some of the refugees that have been pouring into the country. Germany, of course, has been the target destination for thousands of desperate refugees escaping war-torn, drought-ridden, Syria. Merkel challenged the auto sector to find ways to get these people into jobs. Could some of the Syrian refugees on their way to Canada provide relief to collision repair shops short on staff? It’s an interesting idea.
- Also in middle-east auto news: North American and European car companies must be licking their lips as they size up the coming business opportunities in Iran, as that market opens up to western firms. Some reports suggest there is a campaign to boycott "substandard and expensive" Iranian-made cars. Apparently there is a meme taking over social media in the Islamic republic: Iranians are turning to the Internet to vent “long-simmering dissatisfaction” with a domestic car industry dominated by locals makers, Khodro and Saipa. According to online complaints, the sanctions have allowed Iran's automakers to get lazy. Without any competition they "have put profit before their conscience,” according to one protestor. Many believe the companies have been producing substandard cars that have taken "the lives of many [as a result of] technical faults." Some in the country, the police among them, blame a high number of highway fatalities on shoddy, faulty cars produced by the national Iranian automakers. “The safety of these cars is not satisfactory,” one deputy police chief was quoted as saying. "This is because of a lack of competition and supervision in domestic manufacturing.” The supporters of the boycott have been accused of anti-revolutionary treason. Others suggest the stories could be part of a propaganda campaign on the part of the government to sell the sanction-lifting deal with Obama.
- Does your car audio system utilize diamonds in the speakers? No? You’re not on the bleeding edge of car audio then, are you? British company Bowers & Wilkins designed the new audio system for the BMW 7 Series. In what is apparently a first for the global auto industry, the system uses industrially-produced diamonds said to deliver a lighter weight and crystal clear sound. The speakers are designed to “accurately reproduce audio beyond the limits of human hearing,” which seems a bit unnecessary. The speaker grilles also feature acoustically-optimized patterns, which are mathematically-derived from so-called Fibonacci-patterns. This is said to allow more sound to pass through the grill. The system only has 16 speakers. It is an option available for over 4,000 UK pounds, or almost $9,000 Canadian dollars.
-An interesting news point that floated up in all the coverage of VW’s malfeasance: the auto industry in general has a problem with claims about emissions. One source suggests the gap “between manufacturer claims for MPG and the MPG achieved by company' tests has increased from 17 percent to 24 percent in the last four years." That is, the difference between the “very gentle laboratory test” and driving a car normally on the real road is widening. Could auto makers be fudging their MPH numbers to fit in government regulations? Could automakers be hitting limits in terms of what they can do for limiting emissions?
-There are fewer red cars on the road these days. Most consumers seem to favour basic grey and black in terms of colour. This is often thought to have something to do with popular perceptions around insurance costs and resale value—neutral colours like grey are easier to sell and come with lower insurance costs. Or so goes the urban myth. But a study out this week from website InsuranceRates.com suggests car colour “does not affect insurance rates.” According to the survey, 44 percent of Americans wrongly think that buying a red car will lead to higher insurance rates. Interestingly, most millennials, 53 percent, believe this myth. So do 45 percent of college graduates and 42 percent of Americans with an annual household income of $75,000 or more. The study found that just about half of Americans believe car insurance does not pay for repairs if you get into an accident that is your fault. Oddly, 1 in 5 Americans think that repairs are not covered by insurance even if the accident is not your fault. Thirty-four percent of Americans also incorrectly believe that car insurance replaces items stolen from a vehicle. Stolen property is protected by homeowners and renters insurance, even if the property is stolen from a car rather than a house or apartment.
- This is a great idea for dealing with congestion in downtown Toronto. Put the Gardiner over the railway tracks. Here is a proposal to do just that from a local engineering and design company.
- Ontario Provincial Police are worried about a spike in the number of people who are not dying in car accidents because they weren’t wearing a seatbelt. The force says the 42 people killed so far this year on OPP-patrolled roads were not wearing seatbelts—compared to 34 people in the same period last year.
- No wonder collision shop owners are reporting this year to be a strong one. There is more insurance money out there than ever. A survey finds the global market value of auto insurance premiums last year rose to US $669.7 billion and is expected to continue growing in most countries up to 2018.