Trade War Casts Shadow Over Auto Climate Message: Show Update

(Bloomberg) -- Trade tensions risk muddling with carmakers’ message on electric cars and fighting climate change at the Frankfurt auto show.

Volkswagen AG and other carmakers said the global economy was at risk of a recession, as the U.S.-China standoff on trade continues. The geopolitical volatility adds another layer of uncertainty to an industry in the midst of a radical overhaul as the end of combustion-engine era looms.

Early visitors to the show on Tuesday were greeted by protesters placing a giant black CO2 balloon on the ground, spouting from a huge pair of exhausts. More demonstrations are expected later in the day, after VW Chief Executive Officer Herbert Diess sat down Monday for an abrasive face-off with activist Tina Velo from ‘Sand im Getriebe,’ a group that’s calling for carmakers to quit making vehicles altogether.

Last night, VW unveiled the electric ID.3 alongside a new logo, after last week showing off the battery Porsche Taycan. BMW AG revealed to the public the electric Mini, and Daimler AG has a glitzy emissions-free S-Class sibling prototype in store. Still, the big bucks are with sport utility vehicles. VW’s Chairman Hans Dieter Poetsch said the group will need “patience” until the ID.3 brings significant profit “joy.”

Here’s a rundown on what’s happening at the show:

Brexit Angst (1:32 p.m.)

BMW AG Chief Financial Officer Nicolas Peter warned the camaker would reduce output at its plant in Oxford by eliminating a work shift should the U.K. opt for a hard Brexit.

“We’d have to increase prices, and we have to curtail production to react to such a development,” he said about BMW’s contingency plan should the U.K. drop out of the EU without an agreement. “The plans are in the drawer.”

The German carmaker would completely halt production on the Oct. 31 deadline when Britain is expected to leave the European Union, as well as on Nov. 1, he said, a further indication that the U.K.’s political quagmire is fraught for the auto industry, which depends on the movement of vehicles and components across borders for manufacturing.

Trade Concern

VW is warning the trade-war gloom is getting scary.

“We come now into a situation where this trade war is really influencing the mood of the customers, and it has the chance to really disrupt the world economy,” VW’s Diess said in an interview with Bloomberg TV. “China is basically a healthy market, but because of the trade war, the car market is basically in a recession. So that’s a new situation. That’s scary for us.”

Defender Reborn

The new Land Rover Defender made its debut, three years after stricter emissions and safety standards consigned its predecessor to the history books. The new car has retained many of the design features and rugged elements of its ancestor, though with modern twists like a plug-in electric hybrid. Prices start at 35,000 pounds ($43,000) for the update of a boxy, no-frills favorite of farmers, explorers and royals including Queen Elizabeth II.

Jaguar Land Rover could use a hit. It’s struggling with fallout from slumping U.K. diesel-vehicle sales, the Brexit vote and weak sales in China. The car, built for rugged terrain, will need to satisfy the die-hard enthusiasm of Land Rover purists.

No Tesla

The Piech-Porsche ownership clan that controls Volkswagen rarely speaks to the media. On Monday, the family’s high-ranking important member, Hans Michel Piech, told reporters the family is fully behind VW’s electrification push.

VW needs “courageous” decisions, Piech, who is deputy chairman of Porsche Automobil Holding SE, said in his first public remarks since the death of his brother Ferdinand Piech, the company’s former chairman.

Queried by reporters, Piech pooh-poohed the idea of buying Tesla Inc. He pointed it out that Elon Musk’s electric-car company is too expensive for its size. Besides, he said, “we don’t need Tesla.”

BMW’s Spark (10:30 a.m.)

Showcasing the tough spot carmakers are in, BMW’s stand features a revamped version of the coupe-style X6 SUV, placing the gas-guzzling profit maker alongside the electric Mini. The battery car is stuck halfway between between the past and present: a retooled Mini based on the popular combustion-fueled Cooper SE but with the technical underpinnings of the all-electric BMW i3.

New CEO Oliver Zipse, under pressure to put BMW on the front foot, picked up where Diess left off on the climate message, honing in on BMW’s commitment to fight global warming -- if consumers can be convinced to join the electric bandwagon. Unlike VW, the Munich-based manufacturer isn’t putting all its eggs in the battery-electric basket and also presented the BMW i Hydrogen NEXT concept car.

Carbon-Neutral (10 a.m.)

Mercedes is promising to cut significantly more than 30% of CO2 emissions in the making of batteries. The carmaker said it’s is starting a sustainability partnership with China’s Farasis Energy that includes cells made with renewable energy as well as addressing recycling and battery materials production.

The same is planned for production sites in Germany and the U.S. Farasis is planning cell-making in Germany to supply 100,000 electric cars annually.

Quitting Coal

Diess’s effort on Monday night to reframe VW’s image wasn’t subtle. Plaintive slogans (“How can we save the world for our children?”), vegan sliders and thyme-garnished mocktails graced the hall, alongside throaty Audi sports cars and VW SUVs.

From his speech, it would be easy to mistake Diess for a climate campaigner, rather than the head of a company that four years ago was caught gaming diesel emissions rules. He singled out the transportation industry, including cars, for creating 14% of global CO2 emissions.

He also called for an end to the use of coal to produce energy, and an “acceleration and simplification” of the charging infrastructure. Diess also wants government subsidies for the e-cars VW intends to produce, arguing that will make them affordable to people at lower incomes.

To contact the reporters on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net;Oliver Sachgau in Frankfurt at osachgau@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Elisabeth Behrmann, Tara Patel

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