Georgia battery plant project awaits verdict

A supplier with one of the biggest industrial projects now underway in the U.S. auto industry — a $2.6 billion electric vehicle battery plant in north Georgia — expects a ruling from federal trade officials next week that could shut down construction.

The legal question could create dire complications for two closely watched vehicle programs: Ford Motor Co.’s planned F-150 electric pickup and Volkswagen’s upcoming global family of EVs.

The nub of the situation is whether the Georgia battery supplier, SK Innovation of South Korea, is using stolen intellectual property for the batteries it plans to make — a claim SK denies.

SK, a global producer of electronics, petrochemicals, energy and batteries, has been embroiled since last year in litigation with Korean competitor LG Chem, which claims SK’s batteries use proprietary LG Chem technology, obtained when SK hired away about 100 LG Chem employees.

The feud is now in the hands of the U.S. International Trade Commission, which is due to issue a final ruling Oct. 26.

SK officials have stated that the plant, under construction and preparing to begin hiring employees in Commerce, Ga., about 70 miles northeast of Atlanta, will go forward regardless of the ruling.

Sources familiar with SK’s situation say the company has a limited number of options if LG Chem’s allegations are upheld.

It can seek a special review by the Office of the U.S. Trade Representative on grounds that abandoning the Georgia project would cause undue hardship for the U.S. auto industry. That avenue ultimately would require the involvement of the U.S. president, just as a contentious election is taking place.

Another option would be for SK and LG Chem to negotiate a settlement — a common outcome in high-stakes legal impasses such as this. There has been speculation in the Korean press that such negotiations are already in progress.

Meanwhile, state officials have warned that the worst-case scenario of shutting down the project will hurt Georgia’s economy. The state is providing $300 million in incentives to support the battery plant.

The issue illustrates some new auto industry realities: The competition in EVs requires vast amounts of industrial investment to produce batteries. And despite the nature of EV batteries as seeming commodities, they are highly engineered components that cannot easily be re-sourced or redesigned.

This year, Ford weighed in on the SK-LG Chem standoff with a letter through its attorneys to the International Trade Commission. Ford is counting on the SK batteries for its electric F-150, and no other “EV battery supplier is able to provide EV battery cells that satisfy Ford’s technical or U.S. supply requirements for the fully electric F-150,” said the letter submitted by law firm Duane Morris. “EV batteries cannot simply be swapped like batteries in a flashlight.”

Meanwhile, SK has been rapidly adding manufacturing capacity around the world to capitalize on the industry’s growing plans for EVs. It has expanded its plans for the Georgia site, upping its investment by 30 percent to $2.6 billion and increasing the number of workers it expects to hire there from 2,000 to 2,600.

Good times come back in China as sales return

SHANGHAI — Visiting dealerships in China these days, you can’t help feeling a sense of euphoria.

Even as COVID cases in the United States rise again, China’s automotive retail market is showing every indication that it is returning to a pre-pandemic reality.

Take the cluster of dealerships on Wuzhong Road in southwest Shanghai.

In February, immediately after the coronavirus spread from Wuhan to the rest of China, dealership employees donned face masks, even though there was virtually no showroom traffic.

Now, eight months later, several salesmen at the row’s BMW dealership could be found last week out for an afternoon break, smoking and laughing — and most notably, not wearing face masks.

Salespeople at the nearby Toyota store could be seen chatting merrily. They had good reason. Because of robust sales, the dealership has run out of inventory, said Zhang Feng, a sales consultant.

“A customer has to wait for three months after placing an order for large crossovers like the RAV4, and about one month for other Toyota models,” he said.

The good old days appear to be back in the world’s largest vehicle market, mask-free and showing signs of growing sales.

It has been touch and go all year.

New-vehicle sales across China tumbled 42 percent in the first quarter of the year after the halt in production and distribution because of the pandemic. Although the market flickered back to lifein April, the mood of the industry remained pessimistic.

The China Association of Automobile Manufacturers predicted in May that the overall market would still shrink by 10 to 20 percent this year, citing weak overseas demand for China-made vehicles.

That pessimism eased with the release of September and third-quarter sales data.

Overall new-vehicle sales by automakers operating in China advanced 17 percent to nearly 2.6 million in September, with year-to-date volume down 6.9 percent to roughly 17.1 million.

Strong sales were recorded across the board last month.

Benefiting from a massive investment initiative by the national government to spend on domestic infrastructure projects, sales of new commercial vehicles including trucks and buses surged 40 percent to some 477,000.

Deliveries of new light vehicles, including sedans, crossovers, SUVs, multipurpose vehicles and minibuses, rose 8 percent in September to approach 2.1 million, according to CAAM.

Toyota was the best performer among global mass-market brands in China in September. Sales for the Japanese brand shot up 47 percent to nearly 166,000 on demand for products based on its new global architecture, which include the Avalon, Corolla and Levin sedans as well as RAV4 and Wildlander crossovers, according to numbers released by its joint ventures in China.

General Motors’ China deliveries kept recovering. After a 43 percent plunge in the first quarter and a 5.3 percent slide in the second quarter, its local sales gained 12 percent in the third quarter to top 771,400.

There was particular demand for the Cadillac brand, Buick-badged crossovers and SUVs, and no-frill light vehicles marketed under the Wuling brand, the Detroit automaker said last week. GM discloses only quarterly sales numbers.

Demand for luxury vehicles was also running strong. Most luxury brands posted double-digit sales growth for the third quarter. Cadillac deliveries jumped 28 percent to more than 65,000 in the period, while sales of BMW and Mini brands surged 31 percent to top 230,000.

With market recovery exceeding its expectation, CAAM last week revised its forecast and predicted the decline in China’s new-vehicle sales this year will be narrowed to around 4 percent.

The industry body attributed the faster-than-expected market recovery to the resumption of live auto shows, promotional events and favorable government policies, such as a vehicle scrappage program and subsidies for new-vehicle sales.

John Zeng, Asia director of LMC Automotive, said credit also goes to China’s government for taking action to stop the spread of the coronavirus.

Small outbreaks have sporadically surfaced in some Chinese cities, including Beijing. The outbreaks were quickly contained after local governments moved fast to lock down affected areas and ramp up tests.

Road hazards could be seen in a new light

After former Cleveland Browns defensive end Chris Smith’s girlfriend Petara Cordero died in a disabled vehicle accident in Ohio last year, he agreed to promote a new technology that could help prevent similar tragedies.

Startup company Emergency Safety Solutions, known as ESS, reached out to him about its emerging product being developed for automakers and that is under review by safety regulators.

Smith, 28, now with the Las Vegas Raiders in his seventh NFL season, has become a product spokesman for ESS.
“I wanted to team up with ESS to help save the world and have nobody go through what I went through,” Smith told Automotive News.

The stakes are high as the auto industry implements new technologies designed to improve safety and save the lives of passengers as well as pedestrians. But regulatory challenges loom.

One study by Impact Research found that more than 70,000 people are involved in crashes involving stationary and disabled vehicles each year in the U.S., including 566 fatalities. The study said fatalities can be avoided with enhanced lighting features on vehicles when they are pulled over or disabled.

ESS is moving ahead with R&D and regulatory steps for its Hazard Enhanced Lighting Package, or H.E.L.P.

Stephen Powers, COO and co- founder of ESS, said the proposed system features a flash pattern that is cost effective, easy to implement and doesn’t significantly alter the architecture of the vehicle.

“It’s all based on eliciting the best response,” he said.

Hazard light technology has not been updated since its inception in 1951, Powers said.

Today’s LEDs allow brighter and faster flashes — making the emergency state of a vehicle more prominent.

ESS says its system is more eye- catching with five flashes per second, while a digital alert is sent to nearby drivers to warn of the disabled vehicle ahead.

Powers said NHTSA is reviewing the request and that ESS believes there is full policy alignment and compliance with Federal Motor Vehicle Safety Standard No. 108, which pertains to lamps and reflective devices. He said the lights could be implemented as soon as next year or as late as three years from now.

Six automakers have expressed interest in the package, he said. As is typical with emerging automotive technologies, the supplier declined to identify the automakers.

ESS, in a submission to NHTSA, described the system this way:

  • It does not impair the effectiveness of required vehicle lighting.
  • It activates automatically after a significant crash.
  • The hazard lamps function at higher intensity to most effectively convey the presence of a hazardous or emergency situation.

Smith’s story wasn’t the only inspiration for bringing the product to market.

In 2014, ESS co-founder and CEO David Tucker was almost hit by a car while he was changing a tire on the side of the road.

Tucker is the former president of Canyon Offshore Inc., an energy industry contractor, and has more than 25 years of experience as an entrepreneur.

ESS, of Houston, was incorporated in 2018 and has a team of nearly 20 people. Its eight-member board of directors includes Andrew Coetzee, whose resume includes 30 years of product planning experience at Toyota Motor Corp. in North America and Japan.

ESS said it holds 46 patents for different aspects of the hazard lighting system, including a U.S. patent to enhance the communication system for vehicle hazard lights.

“Because we own our broad and growing patent portfolio and will be the technology licensor,” said an ESS spokeswoman, “this is how we will ensure consistency of deployment of the H.E.L.P. solution across all makes and models globally that choose to adopt it.”

The uncertain regulatory environment surrounding new safety measures makes it difficult for automakers to adopt technologies such as H.E.L.P.

NHTSA has been under growing criticism in Congress, which says it has not been moving quickly enough on safety measures in recent years — even for regulations already on the books.

Cathy Chase, president of Advocates for Highway and Auto Safety, said in a statement to Automotive News that her group does not endorse products but does value research that will help reduce motor vehicle crash injuries and fatalities.

“If it increases conspicuity and reduces collisions and the concomitant injuries and fatalities, it would be welcome news,” she said.

She said that along with the benefits of the technology come concerns. There is the possibility of other drivers confusing the lights with emergency vehicles, increased distractions and problems for those with photosensitive epilepsy.

“In the interim, while the NHTSA conducts its evaluation, it is an opportune time for the agency to require advanced driver-assistance systems, such as automatic emergency braking, in all vehicles, which could help prevent collisions from occurring in the first place,” she said.

Hyperloop testing blazes into West Virginia

Billionaire Richard Branson is hoping to give Tesla CEO Elon Musk some competition, not in electric vehicles but rather in the super high-speed travel systems known as hyperloops.

Branson’s Virgin Hyperloop last week picked West Virginia to host a $500 million certification center and test track for a system that would use magnets to whisk pods filled with passengers and cargo through vacuum tubes at more than 600 mph.

“Today we lay the foundation for commercial deployment and operations across the United States of America and beyond,” Virgin Hyperloop CEO Jay Walder told reporters, according to Reuters.

Construction is scheduled to begin in 2022 on the site of a former coal mine about a four-hour drive (or 18 minutes by hyperloop) west of Washington, D.C. The company said it expects to have safety certification by 2025 and to start commercial operations by 2030. Federal regulators plan to use the site to help establish regulatory and safety standards for hyperloops.

Musk has been discussing hyperloops for years, though his near-term focus has been transit systems zipping commuters through tunnels in electric cars. His Boring Co. has dug two tunnels under Las Vegas to transport visitors to the city’s convention center.

Inventory shrinks in September

New-vehicle inventories tightened further in September to just 2.11 million vehicles, a decline of about 150,000 vehicles from the previous month, as sales return while production struggles to keep up.

The inventory composite, compiled by Cox Automotive, is the lowest industry inventory level in nine years, according to the Automotive News Data Center, and represents more than 1 million fewer new vehicles available for sale than at the same point a year earlier, Cox said.

Most automakers no longer report monthly inventory levels. However, among those that do, Toyota was the only automaker whose days’ supply didn’t grow slightly month over month.

Cox estimates the industrywide inventory level at a 55-day supply.

Model-year turnover also has been slow because of delayed factory retooling, Cox said.

Suppliers and automakers are fighting an uphill battle to bring their production back up after COVID-19 forced factories to suspend operations.

Cox said inventory shortages are most acute in the midsize-pickup segment, with a 35-day supply, while full-size pickups had a below-average 50-day supply.

Top-dollar subbrands boost GMC over Cadillac

DETROIT — Detroit’s biggest seller of luxury vehicles isn’t Cadillac anymore. It’s GMC.

GMC’s high-end Denali and AT4 lines are outselling General Motors’ traditional luxury brand in the U.S. this year, according to figures from GM and the Automotive News Data Center. The automaker is building on Denali’s ability to command luxury prices by expanding the AT4 off-road subbrand and planning a pair of high-performance electric vehicles that will revive the Hummer name.

“People are coming in writing $80,000 to $90,000 checks for these trucks,” said Inder Dosanjh, dealer principal at Dublin Buick-GMC and Fremont Buick-GMC in the San Francisco Bay area. “There’s so much demand out there.”

In a year when U.S. auto sales are down 18 percent, most Denalis and AT4s arrive at Dosanjh’s dealerships already sold, and customers are willing to open their wallets during a recession to load them up with extra features.

“We can’t get enough of them,” said Will Churchill, dealer principal at Frank Kent Country in Corsicana, Texas.

Largely because of the success of Denali and AT4, GMC has contributed hefty profits to GM’s bottom line during the coronavirus pandemic and is positioned to generate a sizable portion of the cash cushion needed for the automaker’s $20 billion push into EVs and autonomous driving.

Denali and AT4 have accounted for 40 percent of GMC’s retail sales in 2020 so far and soon could generate as much as half of the brand’s volume, said Duncan Aldred, vice president of global Buick and GMC.

Together, the two subbrands drove GMC to its highest retail market share in the first half of the year since 2005, Aldred said, with an average transaction price 30 percent higher than the industry overall. Buyers paid an average of $57,218 for a Denali and $53,989 for an AT4 — topping BMW, Audi and Jaguar, he said.

“In its own right, [Denali] would be a very, very successful luxury brand,” Aldred told reporters last month. “We’re not doing this by discounting or trying to go to the lower end. We’re staying true to the vision of being the only premium brand that occupies this space.”

GMC, whose vehicles were often criticized in the era of Old GM as being just dressed-up Chevrolets, has grown in recent years into a “stealth luxury brand” that appeals to a wider swath of the market than the legacy competitors in that space, said Jeff Schuster, president of the Americas operation and global vehicle forecasting at LMC Automotive.

“Having the luxury features and content in a brand that isn’t necessarily thought of as luxury is appealing to some buyers,” Schuster said. “It’s addressing part of the market that wasn’t getting fully addressed previously. Consumers are gravitating toward these subbrands.”

GMC’s profile will rise further next year with the Hummer electric pickup, giving the clunky gas-guzzler of the 2000s new life as GM’s first electric pickup. GMC has confirmed plans for an SUV bearing the Hummer name as well, tapping into its subbrand savvy.

GM plans to unveil the Hummer pickup, which it’s calling “the world’s first all-electric supertruck,” during the TV broadcast of Game 1 of the World Series on Oct. 20.

GMC will complete its rollout of AT4 in 2021 by offering it on the Terrain compact crossover. AT4, which was introduced in 2018 on the Sierra full-size pickup and added to everything else except the Terrain this year, has become the brand’s fastest-turning trim.

Customers are so enthused about Denalis and AT4s that they’ll pay sticker price, Churchill said. The trouble is overcoming inventory shortages created by last year’s UAW strike and two months of production lost to the pandemic in the spring.

“It’s not even a question,” he said of buyers’ willingness to pay what GM is asking. “It’s a matter of who has them.”

In the first nine months of 2020, GMC’s U.S. sales fell 16 percent to 353,221, partly because of the inventory shortages and reduced fleet orders. But sales of the Sierra rose 6.8 percent, vs. an 8.8 percent decline for other full-size pickups. Meanwhile, sales fell 17 percent for Chevy and 25 percent for Buick and Cadillac.

In a market that’s become heavily tilted toward light trucks, GMC has an advantage over Cadillac, which only recently expanded its lineup from one crossover to three. Cadillac also doesn’t have the popular pickups that GMC has.

“Denali is on everything. They are in the hotter segment than where Cadillac is,” said Churchill, who also is a Cadillac dealer. But he added that Cadillac remains a stronger brand overall for GM, with pricing led by the Escalade SUV that stretches into six figures.

GMC Denalis and AT4s come at a hefty price for consumers and a high profit for GM. The 2021 Yukon, for example, starts at $51,995, while the four-wheel-drive Denali model starts at $72,695. The Yukon AT4 starts at $66,095.

Most of the nearly $21,000 spread between the base Yukon and the Yukon Denali goes directly to GM’s bottom line, said Paul Waatti, an analyst at AutoPacific.

“They add some more equipment, nicer trimmings. But from a cost standpoint, it’s all profit for them,” he said.

The Denali and AT4 enhancements are “incremental expenses for GM, but exponential profit.”

Denali and AT4 attract premium buyers, not the traditional customers who need a pickup for work, said California dealer Dosanjh. One customer bought an AT4 as his daily driver in Pebble Beach but has another pickup to use at his ranch, he said.

After the success of the Ford F-150 Raptor, Howard Drake, who owns Buick-GMC Sherman Oaks in the Los Angeles area, had no doubt about the value AT4 would add to GMC’s portfolio.

“We have yet to see a Yukon AT4, but sight unseen, we have several sold,” Drake said. “The look of this thing — it’s got home run written all over it.”