It’s hardly an anniversary to celebrate (more like shudder), but it’s now a good two years since the globe was hit by the Covid-19 pandemic and all the chaos that lockdowns, mass hospitilisations, travel bans and various types of test brought to people, manufacturers and infrastructure. This week, our analysts looked at how the bug seemingly came out of nowhere in early 2020 and proceeded to impact our lives in so many ways. Along with lockdowns, it ushered in new ways of working and brought societal change. How did it impact the global automotive industry?, we asked. Probably the biggest impact reared its head in two significant ways – living with lower volume and supply chain fragility as companies were forced to manage their activities in unprecedented ways as Covid-19 shut sales markets and shuttered factories. Many are still on the learning curve in terms of understanding how to manage unexpected disruptions, but at least more are aware of where the business risks lie and the consequences of inaction.
Population lockdowns in 2020 shuttered factories and dealerships across major markets. It started in China (Wuhan, Hubei). Shuttered components factories there quickly hit Korean vehicle manufacturing operations. Then companies in Europe were impacted with ripple effects from stalled parts output in Asia. Before long, the public health crisis spread to Europe, starting with Italy. Pretty soon Covid-19 (quite literally) went viral and was everywhere. An industry such as automotive with its complex, elongated supply chains (20,000 parts in a typical vehicle) and international sourcing patterns was always bound to be heavily exposed. As Covid-19 infection rates surged, companies were faced with mandates to cease manufacturing operations and send workers home. Besides the immediate challenge of managing cash flow to pay workers when sales revenues were suddenly halted, there was a need also to understand how supply chains and factories worked. Besides suspending manufacturing activities for an unspecified period, there was also the knowledge that at some point – but no idea when – everything needed to be restarted again. Restarting factories was to prove challenging, too.
Covid-19 has hardly been kicked into touch, either, as UK media reports of rising hospitalisations (though most cases are less serious than in 2020) today reminded us. Take Tesla – a new Covid-19 lockdown in Shanghai resulted in a four day suspension of manufacturing at its factory there this week. The decision was in compliance with a city-wide lockdown order to prevent the spread of the pandemic announced at the weekend. Unlike many western nations that were slow to enact lockdown orders and quick to lift them, China has generally opted for swift and strict measures to aggressively clamp down on outbreaks. This meant that, over the course of 2020, China began operating a zero-Covid model which aimed to rapidly locate and isolate outbreaks before they spread. While this strategy held for some time, it began coming under pressure as more infective virus variants – first Delta in 2021, and now Omicron in 2022 – spread throughout its population. Now, China is seeing thousands of new infections per day, with an associated uptick in virus-related deaths. GlobalData’s Light Vehicle Production Disruption Tracker shows that, throughout 2021, Covid-19 related production losses across the Asian continent had previously been declining. Losses peaked at more than 290,000 units in Q2 2021, but then fell to 174,000 units in Q3, and then further down to 96,000 units in Q4 2021. Following this trajectory, it was hoped that Q1 2022’s figure would continue to show a decline but, with 90,000 currently tracked units of lost production, disruption seems to have levelled out, suggesting that upward pressure from increased infections is dampening the Asian recovery. Tesla’s newly announced four-day Shanghai shutdown is expected to cost the EV maker more than 8,000 units of lost production.
Will Panasonic increase production capacity in the US? we asked this week. Good question. New Panasonic battery making capacity in North America would primarily supply Tesla with 4680-format cylindrical cells. Panasonic, the leading supplier of Li-ion batteries to Tesla in the US, was said to be engaged in talks with the government over establishing a new battery production site in the US. The new manufacturing site would reportedly largely cater for the 4680 cell demand from Tesla and potentially other electric vehicles (EVs) manufacturers. There was no official confirmation from the battery supplier – yet – on the US plans and the latest announcement from Panasonic actually related to a 4680 prototype production line in Japan and mass production of the 4680 battery cell at Wakayama, Japan starting in April 2023. However, according to GlobalData analysts, there are substantial reasons to believe that a new facility in the US could be on the cards.
Explain? Well, Tesla’s new 4680 format cylindrical cell is promised to bring a multitude of benefits to its EVs and is key to the automaker’s US $25,000 affordable EV ambition. The larger form factor means fewer cells are needed for each battery pack, reducing production time, and less packaging material is needed for a given volume of active battery material, increasing pack-level energy density. But, since the format’s launch at Tesla’s Battery Day in September 2020, 4680s have yet to begin mass production. The OEM is taking a twin-pronged approach to 4680 supply – aiming to manufacture some cells in-house at its Kato Road battery facility in Fremont, California – with the remaining demand met by existing third-party suppliers, with the likes of Panasonic, LG Energy Solution and Samsung SDI all preparing sample cells in 2021. Tesla’s Chinese supplier CATL is not expected to be at the forefront of 4680 production because the company mainly makes prismatic-format cells. Also, Tesla’s in-house battery production plans at the upcoming ‘Gigafactory Texas’ in Austin will materialise only in the long-term given the high investments and manufacturing complexity, and procurement from third-party suppliers may remain the most immediately attainable option in the present. One to watch.
With its New Energy Vehicle (NEV, read as ‘electrified’) policy well set in stone, the Chinese government is stepping up its hydrogen drive with a new policy blueprint which calls for 50,000 fuel cell vehicles to be in use in the country by 2025, to help reduce the country’s dependence on energy imports. The National Development and Reform Commission this week released its development plan for the hydrogen energy sector to 2035 which also calls for the country to have “mastered” core hydrogen technology and manufacturing process by 2025. Worldwide sales of hydrogen fuel cell vehicles (HFCVs) amounted to around 17,000 units last year according to the China Association of Automobile Manufacturers, with China accounting for just 1,586 of these. The commission has set a hydrogen production target from renewable sources of between 100,000 and 200,000 tons annually by 2025 which it hopes will help attract investments in distribution and storage by companies and local government. The country currently produces around 33 million tons of hydrogen per year, mostly from fossil fuels.
Not long before the PSA takeover of its brands and its withdrawal from Europe, GM Europe’s Opel had been expanding its export markets, including a brief and largely unsuccessful foray into Australia. Now it’s returning to the Antipodes but, so far, only to the much smaller market of New Zealand, via current Stellantis distributor Auto Distributors NZ (ADNZ) which will take advantage of the government’s recently introduced Clean Car Programme. According to local media, ADNZ will launch Opel from July with a model range comprised entirely of rebate-qualifying cars. Rebates will vary from NZ$1,510, for an internal combustion engine (ICE) model to up to $8625 for plug-in variants eligible for Clean Car Discounts. The last Opel model sold in both Australia and NZ, until 2020, was the rebranded Insignia rebadged as Holden’s ZB series Commodore, built by Opel in Germany as a replacement for the Australian model of the same name, production of which ended when GM Holden ceased local manufacturing in October 2017.
This just in: remember Jaguar stylist Ian Callum who left the Tata Motors-owned automaker a while ago, after a long and successful career there, to set up his own design studio? We’ve just published a very interesting intervew with creative lead, Aleck Jones, who explained what the UK design house CALLUM can bring to a project such as a last-mile electric scooter for the Middle East and North Africa.
The Ssangyong bankruptcy/take over saga turned a new page this week after its external auditor rejected its latest annual financial report. Samjong KPMG said in a regulatory filing it had rejected the automaker’s 2021 financial report for a second consecutive year, stating: “We have doubt over Ssangyong Motor’s ability to continue its business.” The auditor said it could not be certain whether the automaker’s rehabilitation plan would be accepted by the bankruptcy court given its “low feasibility”. After the planned take over offer by EV makers Edison Motors faltered when a large payment was missed, Ssangbangwool (SBW), a local clothing manufacturer, expressed interest in taking over the debt-laden SUV maker. SWB sent a letter of intent to acquire Ssangyong on Thursday and was reported to have assembled a task force with a view to forming a consortium with affiliated companies including Kanglim Company, a manufacturer of heavy duty vehicles and equipment, to acquire Ssangyong.
Hyundai Motor Group (HMG) this week announced it had agreed to collaborate with Saudi Arabian Oil Company (Saudi Aramco) and King Abdullah University of Science and Technology to develop low emission automotive fuel. The three organisations would pool their respective expertise and resources over the next two years to develop ultra lean burn fuel for internal combustion engines (ICE), with the aim of reducing CO2 emissions. Hyundai said it was already carrying out various R&D activities in-house to minimise greenhouse gas emissions from ICE vehicles during its transition to battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs).
Magna said it was expanding its battery enclosures operations in Canada to support new business. The Canadian supplier is expanding current operations in St. Thomas (into Chatham) to support new business from Ford. The new 170,000 square foot facility is expected to create up to 150 new jobs and will produce battery enclosures for the F-150 Lightning electric pickup truck. Battery enclosures, which all electric vehicles require, house high-voltage batteries, electrical components, sensors and connectors, contributing to the structural and safety aspects of a vehicle frame and protecting critical components from potential impact, heat and water.
Perhaps with a recent fire on board a car transporter ship (the Mitsui OSK Lines owned and operated Felicity Ace sank subsequently) in mind, Hyundai Glovis said it had strengthened a customised response system on board in preparation for fires that may occur during sea transportation of completed vehicles. Hyundai Glovis said it would place special equipment for extinguishing fires in vehicles, such as a fire cover and water mist lance, on operating car carriers. The fire cover places a specially coated cloth on a burning vehicle to prevent oxygen inflow, extinguishing the fire and blocking heat and smoke. The auto supplier and logistics specialist claims the fire cover is effective in preventing the fire from being transferred to the next vehicle even if the vehicles on board are densely loaded. Let’s hope it’s not needed anytime soon.
Have a nice weekend.
Graeme Roberts, Deputy Editor, Just Auto