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VW may move production because of Russia's cutoff of natural gas

Volkswagen AG is exploring ways to counter a shortage in natural gas, including shifting production around its network of global facilities, signaling how the energy crisis unleashed by Russia’s invasion of Ukraine threatens to upend EuropeÂ’s industrial landscape. Volkswagen, EuropeÂ’s biggest carmaker, said Thursday that reallocating some of its production was one of the options available in the medium term if gas shortages last much beyond this winter. The company has major factories in Germany, the Czech Republic and Slovakia, which are among European countries most reliant on Russian gas, as well as facilities in southern Europe that source energy from elsewhere. “As mid-term alternatives, we are focusing on greater localization, relocation of manufacturing capacity, or technical alternatives, similar to what is already common practice in the context of challenges related to semiconductor shortages and other recent supply chain disruptions,” Geng Wu, VolkswagenÂ’s head of purchasing, said in a statement.  RussiaÂ’s decision to throttle gas supplies to Europe has raised concerns that Germany might be forced to ration its fuel. Recent news that gas storage levels hit 90% ahead of schedule has soothed fears of acute shortages this winter, but Germany faces a challenge in replenishing depleted reserves next summer without contributions from Russia. Southwestern Europe or coastal zones of northern Europe, both of which have better access to seaborne liquefied natural gas cargoes, could be the beneficiaries of any production shift, a Volkswagen spokesman said by phone. The Volkswagen group already operates car factories in Portugal, Spain and Belgium, countries that host LNG terminals. Labor hurdles To be sure, any major production shift away from EuropeÂ’s biggest economy would face significant hurdles. VW has some 295,000 employees in Germany and worker representatives account for around half the companyÂ’s 20-member supervisory board. Any shift in production would likely involve a limited number of vehicles rather than wholesale factory shutdowns. While gas supplies for VWÂ’s plants are currently secured, the company has identified potential savings at its European sites to cut gas consumption by a “mid-double-digit percentage,” said Michael Heinemann, managing director of VWÂ’s power-plant unit. Still, the carmaker said it was concerned about the effect high gas prices could have on its suppliers.

Average new-vehicle transaction price hits a whopping new peak in December

Elevated prices for products and higher borrowing rates led to record high transaction prices for new vehicles in December, with the average cost in the U.S. rising to a record $49,507, according to data from Kelley Blue Book released today. The report notes that ATPs — average transaction prices — have climbed above suggested retail prices — MSRPs — for more than a year. Sales volumes were up in December on a year-over-year basis by more than 5%, a situation Kelley attributed to improved supply. Overall sales for 2022, however, were off 8% year over year. “The transaction data from December clearly indicates overall prices showed no signs of coming down as we headed into year-end,” said Rebecca Rydzewski, research manager of economic and industry insights for Cox Automotive. “Luxury prices fell slightly in December, but non-luxury transaction prices were up. Truck sales were particularly strong last month, and with many trucks selling for more than $60,000, a new record was all but inevitable.” Industry analysts claim the most obvious headwinds in the new car market are generated by higher interest rates, forced by the Federal Reserve's rate hikes intended to tame inflation, and by generally limited inventory. A recent report from J.D. Power showed that the average monthly payment for a new vehicle loan in December was $718, up $47 from a year ago. But 16% of consumers in December took out loans with monthly payments of over $1,000. Consumers think vehicles, and electric vehicles especially, are way too expensive. Fortunately, manufacturersÂ’ incentives, all but extinct in the past two years, are returning, especially in the electric-vehicle and luxury market, the Kelley data suggest. Plus, "With the new tax credits on the way, electric vehicle ATPs will drop lower for qualifying vehicles,” Rydzewski said. Non-luxury brands, such as Honda and Kia, showed particularly strong performance in December, with the average price paid at $45,578 — a record high and an increase of $994 month over month. Meanwhile, the average luxury buyer paid $66,660 for a new vehicle last month. Mercedes-Benz and Land Rover showed the most price strength in the luxury market, transacting between 2.6% to 6.5% over sticker price. But luxury brands Audi, BMW, Infiniti, Lexus, Lincoln, and Volvo showed the least price strength with some discounting in effect, selling 1% or more below MSRP in December, according to the survey.

The real reason Audi races

The world has watched Audi have its way with endurance racing since 1998. What started as an intriguing race winner in 2000 that could be rebuilt so quickly that the ACO oversight organization changed the rules to slow Audi mechanics down, slowly morphed into a unique assassin, employing novel engineering methods to achieve series domination with its R18 E-Tron Quattro. Until recently. It's strange, then, that for all these years we didn't fully comprehend Audi's stated approach to motorsport. And so we sat down with Dr. Wolfgang Ulrich, head of Audi Motorsport, and Chris Reinke, head of Le Mans Prototype development while in Austin, TX, for the Lone Star Le Mans and World Endurance Championship race for answers. BMW, Corvette, Porsche, and Ferrari have healthy reputations, lucrative option sheets, and supported a robust trade in special editions by winning races. They have standalone racing divisions and they transfer the entire sheen of their racing endeavors to their road cars, a healthy part of what their customers buy into. Even though we know they improve their road cars with lessons learned racing, the belief is that they race because that's just what they do; those brand names mean racing. "Not one single euro is spent on a separate motorsports program." Yet Reinke said that for Audi, "Not one single euro is spent on a separate motorsports program. We [Audi Motorsport] are part of the Technical Department [of the road car company]. We are a pre-development lab for road-relevant technology." As in, Audi isn't racing out of core philosophy, it's racing only to improve its road cars. That helps explain why Audi's entire road car lineup doesn't bask in the same racing aura as those other brands even though Audi has been racing since it was called Horch. It's not a racing brand, it's a technology brand. Said Ulrich, "Instead of components, look at technologies – not lights, but lighting technologies, not engines, but engine technologies, like injection pressure technology is the same from the race car to the road car." That's nowhere near as exciting as, "Win on Sunday, sell on Monday," but it is arguably much more practical. Quattro is the most obvious example of racing tech for the street. For a less obvious one, Reinke said, "Audi Motorsport developed codes for computational fluid dynamics, and then we'd run the calculations on the Technical Department computers at night.