Tag Archives: AUTPT

Business

U.S. seeks Tesla driver-assist documents; company hikes capex forecast

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WASHINGTON, Jan 31 (Reuters) – Tesla Inc (TSLA.O) disclosed on Tuesday the U.S. Justice Department has sought documents related to its Full Self-Driving (FSD) and Autopilot driver-assistance systems as regulatory scrutiny intensifies.

The automaker said in a filing it “has received requests from the DOJ for documents related to Tesla’s Autopilot and FSD features.”

Reuters reported in October Tesla is under criminal investigation over claims that the company’s electric vehicles could drive themselves. Reuters said the U.S. Justice Department launched the probe in 2021 following more than a dozen crashes, some of them fatal, involving Autopilot.

Tesla did not respond to a request for comment.

Chief Executive Officer Elon Musk has championed the systems as innovations that will both improve road safety and position the company as a technology leader.

Regulators are examining if Autopilot’s design and claims about its capabilities provide users a false sense of security, leading to complacency behind the wheel with possibly fatal results.

Acting National Highway Traffic Safety Administration (NHTSA) chief Ann Carlson said this month the agency is “working really fast” on the Tesla Autopilot investigation it opened in August 2021 that she termed “very extensive.” In June, NHTSA upgraded to an engineering analysis its defect probe into 830,000 Tesla vehicles with Autopilot, a step that was necessary before the agency could demand a recall.

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Autopilot is designed to assist with steering, braking, speed and lane changes. The function currently requires active driver supervision and does not make the vehicle autonomous. Tesla separately sells the $15,000 full self-driving (FSD) software as an add-on that enables its vehicles to change lanes and park autonomously.

The automaker’s shares rose 2% in early trading.

The Wall Street Journal reported in October that the Securities and Exchange Commission is conducting a civil investigation into Tesla’s Autopilot statements, citing sources.

Tesla also forecast Tuesday capital expenditure between $7 billion and $9 billion in 2024 and 2025. The midpoint of that expectation is $1 billion higher than the $6.00 billion to $8.00 billion range provided for this year.

Reuters Graphics

Some of the spending will go toward a $3.6 billion expansion of its Nevada Gigafactory complex, where Tesla will mass produce its long-delayed Semi truck and build a plant for the 4680 cell that would be able to make enough batteries for 2 million light-duty vehicles annually.

Tesla said it recorded an impairment loss of $204 million on the bitcoin it holds, while booking a gain of $64 million from converting the token into fiat currency.

Cryptocurrencies such as bitcoin were hammered last year as rising interest rates and the collapse of major industry players such as crypto exchange FTX shook investor confidence.

Reporting by Akash Sriram in Bengaluru and David Shepardson; Editing by Sriraj Kalluvila and Bernadette Baum

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Business

Rheinmetall eyes boost in munitions output, HIMARS production in Germany

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DUESSELDORF, Jan 29 (Reuters) – German arms-maker Rheinmetall is ready to greatly boost the output of tank and artillery munitions to satisfy strong demand in Ukraine and the West, and may start producing HIMARS multiple rocket launchers in Germany, CEO Armin Papperger told Reuters.

He spoke days before Germany’s defence industry bosses are due to meet new defence minister Boris Pistorius for the first time, though the exact date has yet to be announced.

With the meeting, Pistorius aims to kick off talks on how to speed up weapons procurement and boost ammunitions supplies in the long term after almost a year of arms donations to Ukraine has depleted the German military’s stocks.

Rheinmetall (RHMG.DE) makes a range of defence products but is probably most famous for manufacturing the 120mm gun of the Leopard 2 tank.

“We can produce 240,000 rounds of tank ammunition (120mm) per year, which is more than the entire world needs,” Papperger said in an interview with Reuters.

The capacity for the production of 155mm artillery rounds can be ramped up to 450,000 to 500,000 per year, he added, which would make Rheinmetall the biggest producer for both kinds of ammunition.

In 2022, Rheinmetall made some 60,000 to 70,000 rounds each of tank and artillery shells, according to Papperger, who said production could be boosted immediately.

Demand for these munitions has soared since Russia’s invasion of Ukraine last February, not only due to their massive use on the battlefield but also as Western militaries backfill their own stocks, bracing for what they see as a heightened threat from Moscow.

Papperger said a new production line for medium calibre ammunition, used by German-built Gepard anti-aircraft tanks in Ukraine for example, would go live by mid-year.

Germany has been trying for months to find new munitions for the Gepard that its own military had decomissioned in 2010.

HIMARS PRODUCTION LINE IN GERMANY?

At the same time, Rheinmetall is in talks with Lockheed Martin(LMT.N), the U.S. company manufacturing the HIMARS (High Mobility Artillery Rocket System) multiple rocket launchers in heavy use with Ukrainian troops, Papperger said.

“At the Munich Security Conference, we aim to strike an agreement with Lockheed Martin to kick off a HIMARS production (in Germany),” he said, referring to an annual gathering of political and defence leaders in mid-February.

“We have the technology for the production of the warheads as well as for the rocket motors – and we have the trucks to mount the launchers upon,” Papperger said, adding a deal may prompt investments of several hundred million euros of which Rheinmetall would finance a major part.

Rheinmetall also eyes the operation of a new powder plant, possibly in the eastern German state of Saxony, but the investment of 700 to 800 million euros would have to be footed by the government in Berlin, he said.

“The state has to invest, and we contribute our technological know-how. In return, the state gets a share of the plant and the profits it makes,” Papperger suggested.

“This is an investment that is not feasible for the industry on its own. It is an investment into national security, and therefore we need the federal state,” he said.

The plant is needed as shortages in the production of special powders could turn out to be a bottleneck, hampering efforts to boost the output of tank and artillery shells, he noted.

A few days before the meeting with the new defence minister, Papperger pushed for an increase of Germany’s defence budget.

“The 51 billion euros in the defence budget will not suffice to purchase everything that is needed. And the money in the 100 billion euro special funds has already been earmarked – and partially been eaten up by inflation,” he said.

“100 billion euros sounds like a giant sum but we would actually need a 300 billion euro package to order everything that’s needed,” he added, noting that the 100 billion special fund does not include ammunitions purchases.

Even before Russia’s invasion of Ukraine, Germany was 20 billion euros short of reaching NATO’s target for ammunitions stockpiling, according to a defence source.

To plug the munitions gap alone, Papperger estimates the Bundeswehr (German armed forces) would need to invest three to four billion euros per year.

In the talks with the minister, the defence boss hopes for a turn towards a more sustainable long-term planning in German procurement, stretching several years into the future, as the industry needed to be able to make its arrangements in time.

“What we are doing at the moment is actually war stocking: Last year, we prefinanced 600 to 700 million euros for goods,” Papperger said. “We must move away from this crisis management – it is crisis management when you buy (raw materials and other things) without having a contract – and get into a regular routine.”

Reporting by Sabine Siebold, Editing by Angus MacSwan

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Business

Musk bullish on Tesla sales as price cuts boost demand

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Jan 25 (Reuters) – Tesla Inc’s (TSLA.O) aggressive price cuts have ignited demand for its electric vehicles, Chief Executive Elon Musk said on Wednesday, playing down concerns that a weak economy would throttle buyers’ interest.

The company slightly beat Wall Street targets for fourth-quarter revenue and profit earlier on Wednesday despite a sharp decline in vehicle profit margins, and it sought to reassure investors that it can cut costs to cope with recession and as competition intensifies in the year ahead.

Deep price cuts this month have positioned Tesla as the initiator of a price war, but its forecast of a 37% rise in car volume for the year, to 1.8 million vehicles, was down from 2022’s pace.

However, Musk, who has missed his own ambitious sales targets for Tesla in recent years, said 2023 deliveries could hit 2 million vehicles, absent external disruption.

Tesla’s sales prospects, as it confronts a weaker economy, are a key focus for investors. The company said it maintains a long-term target of a compounded 50% annual rise in sales.

Musk addressed the issue at the start of a call with investors and analysts.

“These price changes really make a difference for the average consumer,” he said, adding that vehicle orders were roughly double production in January, leading the automaker to make small price increases for the Model Y SUV.

He said he expected a “pretty difficult recession this year,” but demand for Tesla vehicles “will be good despite probably a contraction in the automotive market as a whole.”

Shares rose 5.3% in extended trading.

CYBERTRUCK

The company is relying on older products and Musk said its Cybertruck, its next new electric pickup truck, would not begin volume production until next year. Reuters in November reported that the highly anticipated model would not be produced in volume until late this year.

Tesla will detail plans for a “next-generation vehicle platform” at its investor day in March.

Tesla’s vehicles “are all in desperate need of updates beyond software,” said Jessica Caldwell, Edmunds’ executive director of insights. She said Tesla will largely depend on the cheaper unit as well as Model 3 and Model Y to bring EVs to the masses.

“It’s unlikely that the Cybertruck will attempt to achieve mass-market volumes like the Detroit competitors.”

Reuters Graphics

[1/5] A Tesla supercharging station is seen in the early morning sun, in Kettleman City, California, U.S., January 25, 2023. REUTERS/Mike Blake

Reuters Graphics

Analysts said Tesla’s goal is bullish given the macroeconomic uncertainties.

“I think that you’re going to see some severe demand destruction across consumer spending and I think cars are going to take a big hit,” Edward Moya, senior market analyst at OANDA, said.

Tesla said it does not expect meaningful near-term volume growth from China, since its Shanghai factory was running near full capacity, rebounding from production challenges last year.

“Even a small cooling of demand will have significant implications for the bottom line,” said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.

Tesla said that its automotive gross margins, which dropped to a two-year low of 25.9% in the reported quarter, were pressured by the costs of ramping up battery production and new factories in Berlin and Texas, as well as higher raw material, commodity, logistics and warranty costs.

Tesla expected its automotive gross margin to remain above 20%.

Margins generally are expected to be under further pressure from its aggressive price cuts. Tesla, which had made a series of price increases since early 2021, reversed course and offered discounts in December in the United States, followed by price cuts of as much as 20% this month.

Analysts had said Tesla’s profitability gave it room to cut prices and pressure rivals. The company’s $9,000 in net profit per vehicle in the past quarter was more than seven times the comparable figure for Toyota Motor Corp (7203.T) in the third quarter. But it was down from almost $9,700 in the third quarter.

“In severe recessions, cash is king, big time,” Musk said, adding that Tesla is well positioned to cope with an economic downturn because of its $20 billion of cash.

The company’s stock posted its worst drop last year, hit by demand worries and Musk’s acquisition of Twitter, which fueled investor concerns he would be distracted from running Tesla.

Musk dismissed surveys that suggest his political comments on Twitter are damaging the Tesla brand. “I might not be popular” with some, he said, “but for the vast majority of people, my follow count speaks for itself.” He has 127 million followers.

Revenue was $24.32 billion for the three months ended Dec. 31, compared with analysts’ average estimate of $24.16 billion, according to IBES data from Refinitiv.

Tesla’s full-year earnings were bolstered by $1.78 billion in regulatory credits, up 21% from a year earlier.

Adjusted earnings per share of $1.19 topped the Wall Street analyst average of $1.13.

It ended the fourth quarter with 13 days’ worth of vehicles in inventory, more than four times higher than the start of 2022, and a record $12.8 billion in value.

Reporting by Hyunjoo Jin in San Francisco and Akash Sriram in Bengaluru, Additinoal reporting by Joe White and Ben Klayman in Detroit and Kevin Krolicki in Singapore
Writing by Peter Henderson
Editing by Sriraj Kalluvila, Matthew Lewis, Sam Holmes and David Goodman

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Business

New suppliers race to plug in to electric car market

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WOKING, England, Jan 23 (Reuters) – The global auto industry has committed $1.2 trillion to developing electric vehicles (EVs), providing a golden opportunity for new suppliers to grab contracts providing everything from battery packs to motors and inverters.

Startups specialising in batteries and coatings to protect EV parts, and suppliers traditionally focused on niche motorsports or Formula One (F1) racing, have been chasing EV contracts. Carmakers design platforms to last a decade, so high-volume models can generate large revenues for years.

The next generation of EVs is due to hit around 2025 and many carmakers have sought help plugging gaps in their expertise, providing a window of opportunity for new suppliers.

“We’ve gone back to the days of Henry Ford where everyone is asking ‘how do you make these things work properly?’,” says Nick Fry, CEO of F1 engineering and technology firm McLaren Applied.

“That’s a huge opportunity for companies like us.”

Bought from McLaren by private equity firm Greybull Capital in 2021, McLaren Applied has adapted an efficient inverter developed for F1 racing for EVs. An inverter helps control the flow of electricity to and from the battery pack.

The silicon carbide IPG5 inverter weighs just 5.5 kg (12 lb) and can extend an EV’s range by over 7%. Fry says McLaren Applied is working with around 20 carmakers and suppliers, and the inverter will appear in high-volume luxury EV models starting January 2025.

Mass-market carmakers often prefer to develop EV components in-house and own the technology themselves. After years of pandemic-related parts shortages, they are wary of over-reliance on suppliers.

“We just can’t afford to be reliant on third parties making those investments for us,” said Tim Slatter, head of Ford (F.N) in Britain.

Traditional suppliers, such as German heavyweights Bosch and Continental (CONG.DE), are also investing heavily in EVs and other technologies to stay ahead in a fast-changing industry.

But smaller companies say there are still opportunities, particularly with low-volume manufacturers that cannot afford huge EV investments, or luxury and high-performance carmakers seeking an edge.

Croatia’s Rimac, an electric hypercar maker part-owned by Germany’s Porsche AG (P911_p.DE) that also supplies battery systems and powertrain components to other automakers, says an undisclosed German carmaker will use a Rimac battery system in a high-performance model – with annual production of around 40,000 units – starting this year, with more signed up.

“We need to be 20%, 30% better than what they can do and then they work with us,” CEO Mate Rimac says. “If they can make a 100-kilowatt hour battery pack, we must make a 130-kilowatt pack in the same dimensions for the same cost.”

NO TIME TO LOSE

Some suppliers like Cambridge, Massachusetts-based Actnano have had long relationships with EV pioneer Tesla (TSLA.O). Actnano has developed a coating that protects EV parts from condensation and its business has spread to advanced driver-assistance systems (ADAS), as well as other carmakers including Volvo (VOLCARb.ST), Ford, BMW (BMWG.DE) and Porsche.

California-based startup CelLink has developed an entirely automated, flat and easy-to-install “flex harness”, instead of a wire harness to group and guide cables in a vehicle. CEO Kevin Coakley would not identify customers but said CelLink’s harnesses had been installed in around a million EVs. Only Tesla has that scale.

Coakley said CelLink was working with U.S. and European carmakers, and with a European battery maker on battery wiring.

Others are focused on low-volume manufacturers, like UK startup Ionetic, which develops battery packs that would be too expensive for smaller companies to make themselves.

“Currently it costs just too much to electrify, which is why you see some manufacturers delaying their electrification launch,” CEO James Eaton said.

Since 1971, Swindon Powertrain has developed powerful motorsports engines. But it has now also developed battery packs, electric powertrains, e-axles and is working with around 20 customers, including carmakers and an electric vertical take-off and landing (eVTOL) aircraft maker.

“I realized if we don’t embrace this, we’re going to end up working for museums,” said managing director Raphael Caille.

But time may be running out.

Mate Rimac says major carmakers scrambled in the last three years to roll out EVs and now have strategies largely in place.

“For those who haven’t signed projects, I’m not sure how long the window of opportunity will remain open,” he said.

($1 = 0.8226 pounds)

Reporting by Nick Carey
Editing by Mark Potter

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Business

Tesla slashes prices in U.S., Europe to drive demand

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  • Tesla cuts prices in U.S., Europe by up to 20%
  • Move follows price cuts across Asia last week
  • Some models now qualify for U.S. tax credits
  • Model 3 price in Germany in line with Volkswagen’s ID.3

Jan 13 (Reuters) – Tesla (TSLA.O) has slashed prices on its electric vehicles in the United States and Europe by as much as 20%, extending a strategy of aggressive discounting after missing Wall Street estimates for 2022 deliveries.

The move, which prompted a 3.8% fall in Tesla’s shares in Frankfurt, came after CEO Elon Musk warned that the prospect of recession and higher interest rates meant it could lower vehicle pricing to sustain volume growth at the expense of profit.

The lower pricing across Tesla’s major markets marks a reversal from the strategy the automaker had pursued through much of 2021 and 2022 when orders for new vehicles exceeded supply. Musk acknowledged last year that prices had become “embarrassingly high” and could hurt demand.

The U.S. price cuts, announced late Thursday in U.S. time on the Model 3 sedan and Model Y crossover SUV, ranged between 6% and 20% compared with prices before the discount, according to Reuters calculations.

That is before an up to $7,500 federal tax credit that took effect for many electric vehicle models at the start of January.

Following is a table of the price cuts by model in Germany and the United States:

Reuters Graphics

Tesla also cut prices for its Model X luxury crossover SUV and Model S sedan in the United States.

In Germany, it cut prices on the Model 3 and the Model Y – its global top-sellers – by between about 1% and almost 17% depending on the configuration. It also cut prices in Austria, Switzerland and France.

For a U.S. buyer of the long-range Model Y, the new Tesla price combined with the U.S. subsidy that took effect this month amounts to a discount of 31%. In addition, the Tesla move broadened the vehicles in its line-up eligible for the Biden administration tax credit.

Before the price cut, the five-seat version of the Model Y had been ineligible for that credit, a designation Musk had called “messed up”. After the price cut, the long-range version of the Model Y will qualify for the $7,500 federal credit.

“This should really boost 2023 (Tesla) volumes,” Gary Black, a Tesla investor who has remained bullish on the company and its prospects through the recent, sharp share price decline, said in a tweet. “It’s the right move.”

Still, some users on Tesla fan forums online complained the price cuts disadvantaged customers who had recently bought their vehicle, leaving them with a lower-valued item on the second-hand car market.

“I’m not very pleased with these huge price sways. Just reducing 10,000 euros like that – definitely makes you feel that you just paid far too much,” one user wrote on a ‘Tesla Drivers and Friends’ forum on Friday.

In China, where Tesla cut prices last week by 6-13.5%, owners protested at delivery centres across the country, pressing Tesla for compensation.

Before the price cut, Tesla inventory in the United States, as tracked by the models its website shows as immediately available, had been trending higher. Prices on used Tesla models had also been declining, increasing the pressure on it to adjust new-car sticker prices.

For 2021, the United States and China combined had accounted for about 75% of Tesla sales, although the automaker has been growing sales in Europe, where its Berlin factory has been ramping up production.

Reuters Graphics

NEW SALES LEADERSHIP

The shift is the first major move by Tesla since appointing its lead executive for China and Asia, Tom Zhu, to oversee U.S. output and sales.

Tesla cut prices in China and other Asian markets last week. Along with previous price cuts announced in October and recent incentives, the Chinese price for a Model 3 or Model Y was down 13% to 24% from September after the recent move, Reuters calculations showed.

Tesla has also cut prices in South Korea, Japan, Australia and Singapore.

Analysts had said the Chinese price cuts would boost demand and increase pressure on its rivals there, including BYD (002594.SZ), to follow suit in what could become a price war in the largest single market for electric vehicles.

That pressure could be building in Europe as well.

Tesla’s Model 3 was the best-selling electric vehicle in Germany last month, followed by the Model Y, beating Volkswagen’s (VOWG_p.DE) all-electric ID.4. Volkswagen recently raised the price of its entry-level ID.3, putting it at parity with the now-discounted Model 3.

Tesla missed Wall Street estimates for fourth quarter deliveries. Full year growth in deliveries was 40% – also short of Musk’s own forecast of 50%.

Tesla shares under pressure

Reporting by Zhang Yan in Shanghai, Hyunjoo Jin in Seoul, Victoria Waldersee in Berlin; Writing by Kevin Krolicki in Singapore; Editing by Lincoln Feast, Kenneth Maxwell, Mark Potter and Alexander Smith

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Business

GM reclaims U.S. auto sales crown from Toyota

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Jan 4 (Reuters) – General Motors Co (GM.N) reclaimed the top spot in U.S. auto sales from rival Toyota Motor Corp (7203.T) in 2022 as it was able to better meet strong demand for cars and trucks despite industry-wide supply disruptions.

Shares of GM rose 2.7% in afternoon trade on Wednesday to $34.75, after the company posted a 2.5% rise in 2022 sales to 2,274,088 vehicles, higher than Toyota’s 2,108,458 units, in a closely watched race.

Inventory shortages stemming from surging material costs and a persistent chip crunch had hobbled production at many automakers, keeping car and truck prices elevated. Asian brands were hit hardest.

“Toyota is still among the tightest when it comes to inventory,” Cox Automotive senior economist Charlie Chesbrough said.

The Japanese automaker cut its full-year production target in November. Sales of its SUVs, a key segment, fell 8.6% in 2022, data on Wednesday showed.

However, Toyota executives said there were some positive signs emerging, and the rate of inventory buildup was slow but steady.

“We’re optimistic our inventory levels will continue to improve in the first quarter and for the remainder of the year,” said Andrew Gillel, senior vice president of automotive operations at Toyota.

Reuters Graphics

Other brands such as Hyundai Motor America, Kia Motors America, Mazda North American Operations and American Honda all posted a drop in sales on Wednesday.

Industry-wide, last year’s U.S. auto sales are forecast to be about 13.9 million units, down 8% from 2021 and 20% from the peak in 2016, according to industry consultant Cox Automotive.

Some analysts are also concerned that price hikes by automakers to blunt inflationary pressures and rising interest rates will take a toll on new vehicle sales in 2023.

Affordability is a “very real issue,” Toyota executive David Christ said. Nonetheless, the company expects demand to be robust this year.

Automakers will need to begin incentivising buyers, a trend that was paused during the pandemic, automotive marketplace TrueCar said.

Reporting by Aishwarya Nair, Nathan Gomes and Abhijith Ganapavaram in Bengaluru; Editing by Shilpi Majumdar and Devika Syamnath

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World

German car giants and Asian battery kings: a match made in Hungary

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  • German, Chinese and S.Koreans head to Hungary
  • They dominate auto investment and subsidies
  • Orban’s Hungary keen to court foreign business

BERLIN/BUDAPEST, Dec 13 (Reuters) – German automakers and Asian battery suppliers are getting together in Hungary in a multi-billion-dollar marriage of convenience to drive their electric ambitions.

The companies are flocking to central Europe, where Viktor Orban’s government is defying Western wariness of China and offering generous benefits to host foreign operations and stake Hungary’s claim as a global centre for electric vehicles (EVs).

Investment in the Hungarian auto industry is being dominated by three countries – Germany, a champion carmaker, plus China and South Korea, EV battery leaders way ahead of European rivals.

Companies from those three countries have accounted for 29 out of the 31 cash subsidies handed out by Hungary for major investments in its auto and battery sector over the past decade, according to a Reuters analysis of government data that shows the scale of German, Chinese and Korean convergence there.

“Cathodes, anodes, separators, assembly lines, the full battery supply chain is here,” said Dirk Woelfer of the German-Hungarian Chamber of Commerce in Budapest. “This is a foot in the door to Europe.”

Recipients of such subsidies included the likes of German automakers BMW (BMWG.DE) and Mercedes-Benz (MBGn.DE), and battery makers such as China’s BYD and Korean rival Samsung SDI (006400.KS). The median subsidy level has been 15% of investment.

In total, Hungary has received over 14 billion euros ($15 billion) in foreign direct investment into its battery sector alone in the past six years, according to government figures.

Major investments are broadly classed as those worth over 5-10 million euros, varying with factors such as jobs created.

State incentives and the opportunity for automakers and battery suppliers to work next door to each other is proving a strong pull, according to interviews with about 20 industry players and consultants in Germany, Hungary, China and South Korea.

China’s CATL (300750.SZ), the world’s No. 1 EV battery maker, and Korean battery giants SK Innovation (096770.KS) and Samsung SDI, all told Reuters that the planned proximity to German carmakers was a key factor in their decisions to invest in Hungary, as well as being able to source separators and other components there.

CATL is investing $7.6 billion to build Europe’s largest battery plant in Hungary. This plant and the $2.1 billion BMW factory will both be sited in the city of Debrecen, which is attracting an ecosystem of suppliers, ranging from makers of brakes and battery cathodes to industrial machinery.

Mercedes-Benz is converting its factory in Kecskemet to produce electric cars, while Volkswagen’s (VOWG_p.DE) Audi is making cars and electric motors in Gyor.

Such big business could present a boon for Prime Minister Orban’s government as the country faces its toughest economic environment in more than a decade, with inflation running above 20%, the economy slowing and EU funds in limbo.

Yet the Hungarian EVs project also faces stiff obstacles, according to many of the industry insiders.

One key concern is the huge demands that massive battery plants will place on the electricity grid, which needs to shift away from fossil fuels towards renewables to meet the net-zero emissions targets of much of the auto industry, the people said.

A lack of specialised workers in Hungary to work in battery cell manufacturing could also drag on capacity, they added.

HIPA, the Hungarian Foreign Ministry agency responsible for attracting investments in areas ranging from batteries and cars to logistics, did not respond to Reuters queries about the EV industry.

‘CHINA’S MADE GOOD STEPS’

Hungary’s welcome to Asian battery makers might jar with concerns expressed by Brussels and Berlin about the perils of Europe becoming too dependent on China and other foreign powers, particularly in technologies central to the green transition.

Still, for now, the need to ramp up EV output leaves the European auto industry little choice but to source from Asian players, said Csaba Kilian of Hungary’s automotive association.

“I absolutely agree that European manufacturers should have their own sources … but it’s a competition, and China has made good steps,” he added. “There is a learning curve.”

Europe should have a EV battery manufacturing capacity of 1,200 gigawatt hours (GWh) by 2031 if current plans come to fruition, outstripping expected demand of 875 GWh, Benchmark Mineral Intelligence (BMI) estimates. But of that 1,200 GWh, 44% will be provided by Asian companies with factories in Europe, ahead of homegrown firms on 43% and U.S. pioneer Tesla (TSLA.O) with 13%, according to a Reuters calculation based on BMI data.

The prospects for developing a battery sector in Germany have been set back by record energy there as a result of the loss of Russian gas, according to autos consultants at Boston Consulting Group and Berylls Strategy Advisors.

Hungary offers a comparatively stable energy system bolstered by nuclear energy, as well as high subsidies and Europe’s lowest corporate tax rate of 9%.

The entire battery supply chain has come to the country, said Ilka von Dalwigk, policy manager at the European Battery Alliance, launched by the European Union in 2017 to kick-start a homegrown industry.

“Everything is located there. When we look at the forecast for 2025 and 2030, it looks like it will have one of the largest production capacities in Europe,” she added.

“It might very well be that Hungary is in fact the next big battery production cluster in Europe.”

Asked about concerns about reliance on Asia for technology, an EU official said the bloc – which must approve member state subsidies to investors – had a system in place to cooperate and exchange information on investments from non-EU countries that may affect security.

The European Commission is currently in talks with Hungary over the size of the subsidy the country will offer to CATL for building the Debrecen plant, the official added.

‘SENDING THE WRONG SIGNAL’

For some Western companies, setting up shop in Hungary is a tough decision.

German autos supplier Schaeffler said it was on the verge of setting up its primary electric motor plant in Hungary rather than Germany in August because of the appeal of Hungary’s incentives, but decided on Germany for fear of sending “the wrong signal” to Germans who fear a loss of jobs to overseas.

Other industry players expressed a range of concerns over potential pitfalls for the burgeoning Hungarian auto industry as factories ramped up, including the power grid issue.

Batteries, in particular, are highly energy-intensive parts of EVs to produce, requiring high amounts of power for the drying the materials and machine operation.

Hungary’s sources of energy in 2021 comprised 80% fossil fuels, 14.5% nuclear and 3.6% solar, according to a Reuters calculation of data from the BP Statistical Review of World Energy.

The mix spells trouble for carmakers who will soon need to showcase carbon-free credentials across their supply chains under new German and European legislation.

Hungarian Foreign Minister Peter Szijjarto met senior executives from BMW and auto suppliers including Schaeffler and Knorr-Bremse in Munich last month, ahead of the German carmaker announcing it was beefing up its investment in the country.

Topics discussed included plans to improve logistics infrastructure in Hungary and increasing the amount of renewables energy used for the power grid, according to one of the companies that attended.

When BMW first announced its plan to build its Debrecen plant, in 2018, the government committed to spending around 135 billion forints on improving local infrastructure, according to calculations by the German-Hungarian Chamber of Commerce.

On the battery side, CATL told Reuters it was considering developing solar power with local partners in Hungary.

Despite the risks, Alexander Timmer, a partner at Munich-based consultants Berylls Strategy Advisors who has worked on several autos and battery projects in Hungary, said the country presented an appealing package.

“The combination of cost advantages, state subsidies, and closeness to automakers’ plants makes Hungary increasingly attractive to battery producers, he added.

($1 = 397.54 forints; $1 = 0.9483 euros)

Reporting by Victoria Waldersee in Berlin, Gergely Szakacs in Budapest; Additional reporting by Heekyong Yang, Zhang Yan; Editing by Pravin Char

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US

North Korea fires two ballistic missiles in seventh of recent launches

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TOKYO, Oct 9 (Reuters) – North Korea fired two ballistic missiles early on Sunday, authorities in neighbouring countries said, the seventh such launch by Pyongyang in recent days that added to widespread alarm in Washington and its allies in Tokyo and Seoul.

Officials in the South Korean capital have said the uptick in the North’s missile launches could signal it is closer than ever to resuming nuclear testing for the first time since 2017, with preparations observed at its test site for months.

Both of Sunday’s missiles reached an altitude of 100 km (60 miles) and covered 350 km (218 miles), Japan’s state minister of defence, Toshiro Ino, told reporters.

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The first was fired at about 1:47 a.m. (1647 GMT) and the second some six minutes later.

They fell outside Japan’s exclusive economic zone, and authorities were looking into what type they were, including the possibility that they were submarine-launched ballistic missiles, he added.

The U.S. military said it was consulting closely with allies and partners following the launches, which it said highlighted the “destabilizing impact” of the North Korean nuclear arms and ballistic missile programs.

Still, the United States assessed that the latest launches did not pose a threat to U.S. personnel or American allies.

“The U.S. commitments to the defence of the Republic of Korea and Japan remain ironclad,” the Hawaii-based U.S. Indo-Pacific Command said in a statement.

The latest missile launches from the Muncheon area on North Korea’s east coast are a “serious provocation” that harms peace, South Korean authorities said.

On Tuesday, North Korea test-fired a ballistic missile farther than ever before, sending it soaring over Japan for the first time in five years and prompting a warning to residents there to take cover.

Ino said Tokyo would not tolerate the repeated actions by North Korea. The incident was the seventh such launch since Sept. 25.

Japan’s foreign ministry said the nuclear envoys of the United States, South Korea and Japan held a telephone call and shared the view that the North’s ballistic missile launches threatened the peace and security of the region and the international community, besides posing a civil aviation risk.

North Korea, which has pursued missile and nuclear tests in defiance of U.N. sanctions, said on Saturday its missile tests were for self-defence against direct U.S. military threats and had not harmed the safety of neighbours.

“Our missile tests are a normal, planned self-defence measure to protect our country’s security and regional peace from direct U.S. military threats,” said state media KCNA, citing an aviation administration spokesperson.

South Korea and the United States held joint maritime exercises on Friday, a day after Seoul scrambled fighter jets in reaction to an apparent North Korean bombing drill.

The United States also announced new sanctions on Friday in response to North Korea’s latest missile launches.

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Reporting by Nobuhiro Kubo and David Dolan in Tokyo, Phil Stewart in Washington; Additional reporting by Daniel Leussink; Editing by Leslie Adler and Clarence Fernandez

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Ford stock has biggest daily drop since 2011 after inflation warning

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The Ford logo is pictured at the 2019 Frankfurt Motor Show (IAA) in Frankfurt, Germany. REUTERS/Wolfgang Rattay

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Sept 20 (Reuters) – Ford Motor Co’s (F.N) stock tumbled over 12% on Tuesday in its deepest one-day decline in over a decade after the automaker said inflation-related costs would be $1 billion more than expected in the current quarter and that parts shortages had delayed deliveries.

The stock ended at $13.09, making its percentage decline for the session its largest since January 2011.

Ford’s preliminary third-quarter results, released late on Monday, sent shares of rival General Motors Co (GM.N)down 5.6% as analysts said it might take more time for automakers to recover from chip shortages.

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“It appears that across the industry, chip and components shortages may be improving at a slower pace than anticipated,” Deutsche Bank analyst Emmanuel Rosner said.

In July, Ford said it expected commodity costs to rise $4 billion for the year. read more

The greater Detroit manufacturer’s warning comes less than a week after delivery company FedEx Corp (FDX.N) withdrew its financial forecast due to slowing global demand. read more

Ford’s inflation troubles and FedEx’s weak demand highlight the bind the Federal Reserve finds itself in ahead of the U.S. central bank’s policy-making meeting on Wednesday.

The Fed is widely expected to hike rates by 75 basis points in its battle against decades-high inflation. Its aggressive monetary policy campaign has battered the U.S. stock market in recent weeks, with investors worried the Fed’s measures could hobble the economy.

Ford also estimated it would have 40,000 to 45,000 vehicles in inventory lacking parts.

Ford, which is set to report third-quarter results on Oct. 26, affirmed 2022 adjusted earnings before interest and taxes forecast of $11.5 billion to $12.5 billion.

It was unclear if chip and parts supply will normalize by the end of the year, Deutsche Bank’s Rosner said.

Ford’s shares are down 37% in 2022, well over the S&P 500’s (.SPX) 19% decrease.

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Reporting by Kannaki Deka in Bengaluru and Noel Randewich in Oakland, Calif.; Editing by Shounak Dasgupta, Richard Chang and David Gregorio

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Business

Honda Motor, LG Energy to build $4.4 bln U.S. EV battery plant

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TOKYO/WASHINGTON, Aug 29 (Reuters) – Japan’s Honda Motor Co (7267.T) will build a new $4.4 billion lithium-ion battery plant for electric vehicles in the United States with Korean battery supplier LG Energy Solution Ltd (373220.KS), the two companies said on Monday.

Battery makers are looking to increase production in the U.S. where a shift toward electric vehicles (EV) could increase as the country implements stricter regulation and tightens tax credit eligibility.

The location of the plant has not been finalised, the companies said, but two people briefed on the matter confirmed reports Honda is seriously considering Ohio, where Honda’s main U.S. factory is located.

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The companies aim for annual production capacity of approximately 40 GWh with the batteries supplied exclusively to Honda facilities in North America to power Honda and Acura EV models.

The pair are expected to establish a joint venture before building the plant, with the start of construction planned for early 2023 and mass-production by the end of 2025.

Ohio Governor Mike DeWine said his administration is working with Honda and LG “to ensure that they choose Ohio for this new electric battery plant.” The sources briefed on the matter said an announcement on the location could come in weeks.

The U.S. government has been pushing policies designed to bring more battery and EV manufacturing into the country.

President Joe Biden signed a $430 billion climate, health care and tax bill this month that would render electric vehicles assembled outside North America ineligible for tax credits. read more

The Honda Motor logo is pictured at the 43rd Bangkok International Motor Show, in Bangkok, Thailand, March 22, 2022. REUTERS/Athit Perawongmetha

White House Deputy National Climate Advisor Ali Zaidi praised the Honda LG “massive investment” that he said was catalyzed by climate and infrastructure legislation.

U.S. Energy Secretary Jennifer Granholm said the administration was bringing “back the domestic manufacturing of batteries to provide Americans with good-paying jobs that will power the EV revolution.”

California announced a plan last week requiring all new vehicles sold in the state by 2035 to be either electric or plug-in electric hybrids. read more

The two companies said a combination of strong local electric vehicle production and the timely supply of batteries would put them “in the best position to target the rapidly-growing North American EV market.”

LG Energy Solution, which is mainly engaged in the development of lithium-ion battery materials and next-generation batteries, also supplies EV batteries and has signed joint-venture agreements with General Motors (GM.N), Hyundai Motor Co (005380.KS) and Stellantis (STLA.MI). read more

In July, Panasonic Energy Co, a unit of tech conglomerate Panasonic Holdings Corp (6752.T) and a major Tesla Inc (TSLA.O) supplier, said it had selected Kansas as the site for a new battery plant with investment of up to $4 billion. read more

Earlier this year, Honda laid out a target to roll out 30 EV models globally and produce about 2 million EVs a year by 2030. read more

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Reporting by Satoshi Sugiyama and Heekyong Yang in Seoul and David Shepardson in Washington; Editing by Rashmi Aich Krishna Chandra Eluri, Kirsten Donovan and Chris Reese

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