It is no secret that automakers are facing a generational shift in how they operate. But over the past week, we have learned that this transition will be even more expensive than the industry has expected.
Volkswagen AG has been the boldest in its ambitions, stating last year that it would invest €30 billion through 2024 on electric mobility. Last week, it raised this sum to €33 billion as part of an overall €60 billion commitment to future technologies. It also significantly raised the proportion of total spending that will go toward these areas.
To achieve the model-range overhaul that Volkswagen believes it needs will require several years of financial pain. The company cut its revenue and profit forecasts for 2020 and said it would "apply systematic cost discipline" to meet its goals.
Rival automaker Daimler AG last week revealed its own cost-cutting plans. The company will make €1.4 billion of savings from staff cuts, including about 10% of management. It aims to introduce more than 20 Mercedes-Benz-branded hybrid and EVs by 2020 but warned that there would be a negative impact on its earnings in 2020 and 2021.
Funding and enacting these changes is a monumental task at the best of times. But stagnant auto sales, weakness in the major China market and trade tensions add to the challenge. An S&P Global Ratings report on the automotive sector this week rather glumly summed up the malaise: "Due to weakened market momentum and no signs of an upturn, the rating outlook for the global automotive sector (both OEMs and suppliers) is turning increasingly negative."
Consumer Edge is a weekly collection of critical developments across the automotive; retail; and food, beverage, and tobacco industries. Drawing on exclusive analysis and value-added content from the Consumer News team at S&P Global Market Intelligence, it is published every Thursday. Click here to subscribe.
Chart of the week
New Calif. lawsuit targets White House effort to block state's clean car rules
California was joined by 23 other states on Nov. 15 in launching a new lawsuit targeting the Trump administration's effort to block California from setting its own strict greenhouse gas emission standards for cars and light-duty trucks.
Analysts: Pending UAW contract could cost Ford more than GM; FCA impact unclear
Ford's union-represented workers have until Nov. 15 to ratify a proposed contract, while Fiat Chrysler will head to the bargaining table beginning the week of Nov. 18.
Daimler CEO confident EV demand will rise as EU emissions clampdown looms
The German automaker is cutting costs across the company as it seeks to ramp up its range of hybrid and battery-electric vehicles.
Volkswagen CEO expects to meet new EU CO2 limit, says fines could total €30B
CEO Herbert Diess estimated that the auto industry as a whole would be liable for fines of as much as €30 billion unless it acted to meet or get closer to the EU's stipulated CO2 emissions limits.
November retail market: Sales rebound ahead of holiday season
Industry watchers say the rise is a step in the right direction ahead of an anticipated busy holiday season.
JD.com eyes more private-label products to boost growth in lower-tier cities
The online retailer boosted its full-year net income outlook, citing strong revenue growth driven by new users in less-developed Chinese cities.
Amazon could roll expanded healthcare plans, services into Prime, say experts
The company has made aggressive moves in the healthcare space over the past year and could link further expansion into the sector with its own system, experts say.
GSK CEO says consumer JV to spin out within 3 years, optimistic on China growth
GSK's Emma Walmsley said the drugmaker's consumer joint venture with Pfizer will become a separate business within the next three years, allaying investor concerns that the creation of the world's largest consumer health group could take up to five years.
Food, Beverage & Tobacco
Tyson withholds FY'20 guidance on African swine fever uncertainty
The meat processor still expects the outbreak in China to raise prices and demand for U.S. exports, but gauging the magnitude of the increases poses a challenge for 2020, President and CEO Noel White said Nov. 12.
Dining Out: US restaurant sales growth outpaces retail again in October
U.S. restaurant sales growth outpaced overall retail spending gains in October, while most of the top 15 publicly traded restaurant companies saw their stocks decline in the month ended Nov. 15.
S&P 500 Consumer Staples and Discretionary indices