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China tax relief may end for US carmakers; Renault offers to buy rest of Avtovaz

TOP NEWS

* China's pledge to slash tariffs on imported cars came into effect July 1, but the carmakers that export to China from the U.S. may not be able to reap the benefit for long as Beijing is set to announce an additional 25% tariff on U.S. auto imports July 6. Ford Motor Co., Tesla Inc., Bayerische Motoren Werke AG and Daimler AG's Mercedes-Benz, which build premium vehicles in the U.S. and ship them to China, could suffer most from China's retaliation to the auto tariffs proposed by the Trump administration, The Wall Street Journal reported.

* Renault SA's majority-owned Russian unit Alliance Rostec Auto BV launched a mandatory offer to buy out the remaining shareholders in Russian automaker Avtovaz, in which it already holds an 83.5% stake. Renault's offer for the remaining shares in the owner of the Lada car brand is priced at 12.40 rubles per share for common shares and 12.20 rubles each for preferential shares and will close Sept. 10.

CARMAKERS

* German automaker Volkswagen AG said it would invest €1 billion in India, primarily between 2019 and 2021, to expand its business in the South Asian country. Volkswagen recently gave its Czech subsidiary, Škoda, responsibility for the Indian market. Škoda, which is targeting a market share of 5% by 2025, will set up an engineering center and develop the MQB A0 platform. Škoda and Volkswagen will build a mid-size SUV by 2020 as the first among several products it plans to develop based on the MQB A0 platform.

* Hyundai Motor Co.'s unionized workers in South Korea voted to strike over stalled wage talks, Reuters reported. The union, which has voted to strike each year for the past six years, said it has "taken into account" the U.S.-China trade war and U.S. protectionist tariff policy when proposing the wages. The union walked out of negotiations in late June after the company proposed wage increases and bonuses that the union said fell short of expectations.

ELECTRIC AND AUTONOMOUS VEHICLES

* Shares in Tesla Inc. closed down 2.3% at $335.07 on July 2 despite hitting a key Model 3 production goal. CFRA analyst Efraim Levy cut his rating on Tesla stock to sell from hold, saying, "In the interim, we do not see this production rate as operationally or financially sustainable." UBS analyst Colin Langan said that while Tesla meeting the goal is some relief, the second-quarter vehicle deliveries of 40,740 missed his expectation for 51,000 and the consensus estimate of 49,000, Reuters reported. Separately, Tesla said Doug Field, its senior vice president of engineering, has left the company, effective June 27.

* Hyundai Motor Co. said it has invested in Autotalks, an Israel-based technology company specializing in vehicle-to-everything, or V2X, communications. They plan to jointly develop a chipset for direct communications with connected vehicles in a bid to increase road safety amid a global push for autonomous driving.

* Chinese online retailer JD.com Inc. introduced a fleet of "dozens" of hydrogen energy delivery trucks to Greater Shanghai. The trucks, which take only three minutes to refuel, can travel for about 185 miles per tank while carrying up to 3.5 tons of cargo, with purified water as the only emission, the company said.

* South Korea's Ministry of Land, Infrastructure and Transport granted Hyundai Motor a temporary permit to test self-driving trucks on public roads, making it the first carmaker in South Korea to receive such a permit, The Korea Herald reported. Hyundai's self-driving trucks will mostly run on local highways serving Incheon port.

REGULATIONS AND SAFETY

* Investors watching the re-negotiation of the North American Free Trade Agreement have bet that Canadian auto manufacturers will emerge the relative winners. Since the future of the bloc was cast into doubt when President Trump took office in January 2017, Canadian large- and mid-cap auto sector stocks have jumped nearly 83%, while their U.S. counterparts rose 19.7% and Mexican peers 7.5%, according to S&P Dow Jones Indices. The S&P 500 Index gained 23% in that time.

AUTO PARTS AND EQUIPMENT

* Volkswagen AG said its components development and manufacturing business would become an independent entity within the group from January 2019, alongside the German auto giant's Passenger Cars and Volkswagen Commercial Vehicles businesses, in a bid to prepare for the company's electrification goals.

* Power generation products manufacturer Cummins Inc. said it would acquire Efficient Drivetrains Inc., or EDI, a developer of powertrain systems for plug-in hybrid electric vehicles for an undisclosed amount. Cummins expects the addition of EDI's fully electric and four-mode hybrid technology to broaden its electrification expertise and products.

AUTOMOTIVE RETAIL

* New-car registrations in France rose by 9.2% year over year in June to 252,222, led by Volkswagen's Seat, Fiat Chrysler Automobiles NV's Fiat, Peugeot SA's DS brand and Kia Motors Corp., which all reported monthly sales gains of more than 30% compared to the previous year, French industry group CCFA reported.

* Hyundai Motor said its global sales grew 15.4% year over year in June to 414,222 vehicles, fueled by demand for Santa Fe and Kona SUVs. Sales outside South Korea grew 19.4% to 354,728 vehicles, but local sales dropped 3.8% to 59,494 vehicles. Hyundai affiliate Kia Motors recorded global sales of 251,216 vehicles in June, an increase of 5.9% year over year.

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The day ahead

Early morning futures indicators pointed to a higher opening for the U.S. market.

In Asia, Hang Seng fell 1.41% to 28,545.57, while the Nikkei 225 dropped 0.12% to 21,785.54.

In Europe, around midday, the FTSE 100 climbed 0.58% to 7,591.56, and the Euronext 100 gained 0.93% to 1,045.47.

On the macro front

The motor vehicle sales report, the Redbook Index for retail sales, and the factory orders report are due out today.

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