Automotive News - June 1, 2020 - 34

34 * JUNE 1, 2020

HAAH

Sales face multiple
hurdles in China
continued from Page 4

The market declined further in 2019,
and Zotye faced new regulatory challenges. China's coastal provinces adopted tougher vehicle emission standards, equal to Europe's stringent Euro 6 requirements. With limited technology capability, Zotye had difficulty
upgrading its products accordingly,
which made it unable to sell in those
provinces.
As a result, Zotye sales plunged 50
percent to some 117,000 last year,
and the company recorded a loss of
more than 6 billion yuan ($840 million), compared with a net profit of
about $112 million in 2018.
The coronavirus, which emerged in
China late last year, delivered yet another blow. As sales further contract-

ed, it lost the equivalent of $58.3 million in the first quarter of this year,
Zotye said last month in regulatory filings. The company hasn't disclosed its
sales for the period.
"Zotye took an enormously big hit
in China," Hale said in explaining his
California company's decision.
"They have to focus on home and get
that turned around."
HAAH could revive its U.S. plans
with Zotye in the future, perhaps in
two or three years, Hale added.
"We still are good friends of Zotye,"
he said. "We're still working with
them. We're going to work with them
in Central America. And we have a
long-term agreement with Zotye to
bring their vehicles to the U.S. market - when it makes sense to do so."
Certifying Zotye vehicles for U.S.
sale right now would require millions of dollars of investment, he
said.
"To tell them that we're going to
spend 'X' amount of dollars to ho-

mologate the first and second vehicles - in their current situation -
does not make a lot of sense," Hale
said. "Hopefully, that starts to turn
around."

Chery option
Hale will turn his attention to
HAAH's other proposal, to market
vehicles created by Chery and manufactured in the United States.
Chery is a much big player in China. The state-owned company was
established in 1997 in east China's
Anhui province and was the largest
domestic Chinese light-vehicle manufacturer from 2001 to 2011, churning out inexpensive sedans, crossovers and multipurpose vehicles under multiple brands.
During that period, Chinese media
often touted Chery as a national
champion in the domestic manufacturing sector, and its vehicles were often showcased on festive occasions as
a symbol of national pride.

ZOOX

'Disconnect closing' in
wholesale, retail prices
continued from Page 8

average decrease of 17 percent.
Laura Wehunt, Black Book's vice president of
automotive valuations, pointed to the vehicles
expected from rental companies, repossessions and deferred lease returns. "These things
are going to come together for another fall in
values," Wehunt said, "and then I think we'll

WABCO

ZF seeks to expand
autonomous systems
continued from Page 8

15,000 jobs, or around 10 percent, by 2025 because of slumping demand, Reuters reported.
Still, ZF's acquisition makes sense, said
Calum MacRae, director of automotive product development at GlobalData.
"As we're seeing, there's still a need to freight
goods. Wabco's share price, apart from one dip,
is where it was at the time of the deal, so there's
less risk to ZF's balance sheet," MacRae said.

Chery remains the largest vehicle
exporter among China's domestic
automakers. In the first four months

search note issued last week. Purpose-built delivery vehicles help fill in a middle ground.

Amazon's autonomous ambitions have been
apparent since 2016, when the company made
its first parcel delivery via unmanned drone. In
January 2019, it showcased its six-wheeled
Scout delivery robot. One month later, it made
an investment in Aurora Innovation, the
self-driving technology company formed by
former Google, Tesla and Uber executives.
start to right-size ourselves."
In the interim, wholesale prices have been
closing a gap with retail values, which haven't
declined as sharply since the crisis started.
At Manheim, the average wholesale price for
2017 model year vehicles rose 1.6 percent the
week of May 18, while retail prices declined 0.1
percent.
"We're seeing the big disconnect closing,"
Cox Automotive Chief Economist Jonathan
Smoke said last week.
Wholesale prices have improved as the glut
of used vehicles on the market comes down -
at least for now. The rolling, seven-day supply

of retail used vehicles in inventory peaked
April 8 at 115 days supply, Smoke said. Normal
supply is about 45 days. Supply had dropped to
36 days as of May 23. Wholesale supply peaked
at 149 days on April 9, compared with normal
supply of 23 days, and had dropped to 41 days
as of May 23.
According to J.D. Power, auction prices overall during the third week of May improved for a
fifth consecutive week, rising 2.3 percent and
down just 2 percent from the firm's pre-virus
forecast. That compared with a 16 percent drop
in mid-April.
At the same time, used-vehicle retail prices

were down less than one percentage point for the
week ending May 24, J.D. Power said. More than
91,000 vehicles sold at auctions that same week,
just 11 percent below the pre-virus forecast.
Since the crisis began in mid-March, auction
volume is down by 609,000 vehicles vs. the same
period in 2019 and 500,000 vehicles lower than
J.D. Power's pre-virus expectations for the period.
One potential upshot for dealers in the
months ahead? "It's going to be more of a buyer's market again as this inventory's released
into the market" said KAR's Kontos. "Hopefully, we can match that with growth in retail
sales." a

"But if one stood back for a bit, you'd have to
be wearing very rose-tinted spectacles to see
such a deal being initiated now," he added.
ZF announced its plans to purchase Wabco
in March 2019, saying the combination would
accelerate the development of new technologies to enable autonomous commercial vehicles and make "ZF less dependent on the economic cycle of the passenger-car industry."
Wabco, based in Bern, Switzerland, supplies
integrated braking systems and stability control, air suspension systems and transmission
automation controls, as well as aerodynamics,
telematics and fleet management solutions for
commercial vehicles, including trucks, buses
and trailers. In 2018, the company opened its

Americas headquarters in Auburn Hills, Mich.,
not far from several other major automotive
suppliers in suburban Detroit.
Wabco will operate as an independent division, Commercial Vehicle Control Systems,
working with ZF's existing commercial-vehicle
technology division, aftermarket division and
global development team.
As part of the transaction, Wabco CEO
Jacques Esculier has retired from his role. The
division is now headed by newly appointed
Fredrik Staedtler.
The Wabco deal is just one future-oriented
move by ZF. The company has pledged to invest more than $13.6 billion into electric vehicles and automated driving.

In 2014, ZF acquired TRW Automotive in a
$13.5 billion deal to expand into the self-driving car market. ZF also announced in March its
partnership with self-driving truck company
TuSimple for development and commercialization of its autonomous systems.
"We are closing this acquisition in an unprecedented social and economic situation,"
ZF CEO Wolf-Henning Scheider said in a statement. "We are currently focusing our efforts on
protecting our employees, ramping up production and securing our company's liquidity.
In the long term, this thoroughly prepared acquisition will make us even stronger for the future once we have overcome the immediate effects of the pandemic." a

continued from Page 4

USED

Export efforts

of this year, it shipped 30,008 vehicles from China to other emerging
economies including Russia and
countries in Latin America and
North Africa, surging 68 percent
from a year earlier
Local demand remains low, and its
overall sales for the period slipped 26
percent to below 128,000, according to
the China Passenger Car Alliance.
Chery has attempted to export to
mature markets before. In 2007,
Chrysler negotiated to sell a compact
Chery sedan in the U.S. as a Dodge,
but dropped the plan.
In 2017, Chery unveiled a compact
crossover known as the Exceed TX at
the Frankfurt auto show with the goal
of distributing it in Western Europe.
That goal has not been realized.
Hale said U.S. dealers who signed
up to sell Zotye vehicles in the U.S.
will be able to keep their franchises
while adding the Chery-based Vantas brand franchise at no additional
cost. m

At roughly the same time, Amazon led a $700
million investment round in electric vehicle
startup Rivian, and it has since ordered 100,000
of the company's delivery vans, slated to hit the
road by 2024.
Exactly how a Zoox acquisition would complement or compete with Rivian's EV platform
remains unknown. Amazon could utilize
Zoox's self-driving system on Rivian's electric
vans, but there's also value in the bidirectional
capabilities of the Zoox prototype, particularly
in congested urban environments. Bidirectional means the vehicle can reverse directions
without turning around.
A mashup of Zoox and Rivian technologies
and business plans, Abuelsamid says, might be
a win-win for the two companies.
"I could see Amazon taking the Zoox vehicle
to Rivian and saying, 'OK, build this one for us
too,' " he said. "Now Rivian is using more of
their production capacity. You could adapt
Rivian's batteries, motors and electronics, and
now they have extra scale. It helps their economics, and Amazon could use both types of
vehicles."
From utilizing automated robots in its warehouses to its growing fleet of Boeing 767 aircraft, Amazon has assembled many pieces in
an end-to-end transportation infrastructure
that could realize cost savings of as much as
$20 billion, according to a Morgan Stanley re-

Amazon may have eye
on growing delivery
wise decision. Anyone who succeeds in this will
use vehicles specifically designed for robotaxi
service. From a business perspective, it's a
challenge."
Whether Amazon or other prospective suitors would be interested in running that robotaxi business - or using Zoox's bespoke electric vehicle platform at all - are intriguing
questions.
While some observers have surmised an Amazon acquisition suggests the retail giant
would seek to compete with the likes of Uber
and Lyft, Abuelsamid and Asad Hussain, mobility analyst at PitchBook, see the potential
match more as a chance for Amazon to add to a
burgeoning logistics empire that competes
with UPS Inc. and FedEx.
"First and foremost, this is about expanding
delivery capability and middle-mile, last-mile
delivery capabilities," Hussain said.
"Zoox's modular electric platform enables
that. And Amazon has clearly been very interested in the autonomous future. Right now,
this is them being opportunistic and taking ad-

Years of rapid expansion stretched
its capital resources. After peaking at
705,000 sales in 2006, Chery's annual
sales declined. Despite annual production capacity of 900,000 vehicles,
sales fell short of 640,000 in 2019.
Due to the low factory utilization,
Chery has been bleeding losses for
years. In 2019, the state-owned company opened its financial books in a
bid to attract potential investors,
showing it lost 1.37 billion yuan
($191.6 million) in the first half of the
year, with 62.3 billion yuan ($8.71
billion) in accrued debt as of June 30.
Chery is now majority-owned by a
domestic investment fund and is focused on producing compact and
subcompact sedans and crossovers
that sell for the equivalent of $7,000
to $21,800.

BLOOMBERG

Prospective suitors might consider using
Zoox's EV platform for a robotaxi business.

vantage of market conditions favorable to buyers."

Other EV interests

Expanding reach
It's not just about transportation.
Over time, a Zoox acquisition could result in
further service enhancements for Amazon
Prime customers in the form of discounted
grocery deliveries from Amazon-owned Whole
Foods or cheaper fares in a ride-hailing network, should Amazon decide to pursue that
route.
Right to the doorstep, via Amazon-owned
Ring, the company could ostensibly vertically
integrate the journeys of people and goods.
"All these aspects of their business point to
them wanting to control everything from top to
bottom," Abuelsamid said. "You can almost
think of it as the same concept behind the original Ford Rouge plant. Raw materials went in
one side and a finished Model A came out the
other side."
Other suitors for Zoox may exist. Hussain
posits there are reasons Apple, Intel, Nvidia
and Toyota could all be potential bidders for an
autonomous startup viewed favorably
throughout the industry. But Amazon may
have the war chest to outbid competitors.
"It's a question as to how they'd use that technology," he said, noting the investments in Rivian and Aurora. "It's a lot of opportunity." c

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Automotive News - June 1, 2020

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