Volkswagen's Final Dieselgate Reckoning Is Coming Soon

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Dieselgate might finally be winding down, there’s more turnover at Tesla, Elon Musk used a legal recreational substance, and Mercedes is being cautious with its new EQC. All of this and more in The Morning Shift for Friday.


1st Gear: The Trial for a Massive Dieselgate Lawsuit Against VW Starts Next Week

It’s a test case, meaning that, should the plaintiffs win, it could open up VW to up to $10.7 billion in damages from hundreds of other claims. The lawsuit was brought by shareholding investment fund which said that VW wasn’t honest with it about the scope of the scandal ahead of a notice of violation issued by the EPA and a subsequent 37 percent drop in VW’s share price.

VW has admitted to emissions cheating and has paid some 27.4 billion euros in related fines and penalties as a result. The trial will start Monday in a court in Braunschweig, Germany, near Wolfsburg, where VW is based.

Here’s The Wall Street Journal:

A decision in favor of investors, including some of the largest investment funds in the world, is far from certain. In addition to the complex technical issues to be resolved, German courts rarely grant large awards for damages in civil litigation cases.

“It will be difficult to prove that management deliberately misinformed the market in order to manipulate the share price,” Mr. Ellinghorst said.

Because Germany doesn’t allow U.S.-style class-action lawsuits, the case being heard in Braunschweig is a test case, brought by Deka Investment GmbH, one of the biggest investment funds in Germany.

The outcome of Deka’s lawsuit would inform the rulings on approximately 1,668 additional pending lawsuits that seek as much as €9.2 billion ($10.7 billion) in damages from Volkswagen.

The WSJ also says that this is the “most significant outstanding legal challenge” to VW over Dieselgate, meaning that Dieselgate might yet come to an end.

2nd Gear: Tesla’s Chief Accounting Officer Is Gone After Just a Month

Dave Morton started with Tesla on August 6. A day later, Elon tweeted, and chaos ensued:


Morton was formerly the CFO of Seagate, which makes computer drives.

Also leaving is Tesla’s top HR executive, who had been on a leave of absence. In part because of the departures, Tesla’s stock is approaching the lowest it’s been for months, or around $257 a share.


From Bloomberg:

“Since I joined Tesla on August 6th, the level of public attention placed on the company, as well as the pace within the company, have exceeded my expectations,” Morton said in a regulatory filing. “This caused me to reconsider my future. I want to be clear that I believe strongly in Tesla, its mission, and its future prospects, and I have no disagreements with Tesla’s leadership or its financial reporting.”

Tesla shares plunged and extended their decline after Gabrielle Toledano, the company’s chief people officer, told Bloomberg News that she won’t rejoin the company after taking a leave of absence.

The stock dropped as much as 8.5 percent to $257 before the start of regular trading. Its 5.3 percent bonds dropped 1.75 cents to 84 cents on the dollar, a record low, according to Trace bond price data. That gives the notes, which are senior unsecured and due in 2025, an effective yield of about 8.4 percent.


Let’s check in with the man who’s ultimately responsible for Tesla’s success, CEO Elon Musk, who showed up last night on Joe Rogan’s podcast to drink whiskey, smoke a joint, and talk about electric planes.


3rd Gear: Mercedes Is Easing Into EQC Production in Part to Avoid High Warranty Costs

Mercedes wants to get it right mostly because the 80kWh lithium ion batteries are costly to fix. The EQC debuted a couple days ago in Stockholm, and early reviews of the styling in particular have been strong, though its 200-mile range is disappointing. It’s understandable that Mercedes will want to get it right, and they seem to know enough to know that it may not go smoothly.


From Automotive News:

“We want to be sure we deliver Mercedes quality from day one in all aspects, and we have to watch the warranty side for customers as well,” Schaefer told reporters on the sidelines of the vehicle’s official debut in Sweden on Wednesday. “We don’t want customers ending up at the mechanic later.”

“Slowing down the ramp-up is a tool to make sure we do it right, to address all the unknowns that an electric car brings,” he said.

Production of the Mercedes EQC will begin early next year in Germany, then in China later in the first half. The first deliveries are expected by the middle of next year.


4th Gear: Nissan Will Focus on Premium Cars in India

Maruti Suzuki has dominated the market for years, but its still growing rapidly, and other automakers have long sought to get a piece of the puzzle. Nissan said Thursday its strategy will hinge on going upmarket.


From Reuters:

Nissan will upgrade its manufacturing facility, double the number of car dealerships over the next three years from about 270 today and hire more people, Peyman Kargar, senior vice president at the Japanese carmaker, told reporters in New Delhi.

“India is one of the most important markets for us. We are not at the level we want today. That is why we have identified a very comprehensive plan,” Kargar said.

Several global automakers including Nissan, Renault SA (RENA.PA) and General Motors (GM.N) have launched budget cars to win over India’s cost conscious buyers but the segment has remained dominated by Maruti Suzuki.


As part of its new strategy Nissan, which sells cars including the Micra hatchback and Sunny sedan in India, will launch more sport-utility vehicles (SUVs) under its brand, starting with the Kicks SUV in 2019. It also plans to sell electric vehicles.


Speaking of...

5th Gear: Suzuki’s Done in China to Focus on India

It was only four years ago when Suzuki sold over a quarter million cars in China. A quarter million cars! But those sales have since been more than cut in half, and the company confirmed Tuesday that they would pull out of the market altogether, as China’s local manufacturers improve quality and, increasingly, push out foreign competition for the bargain, small-car market.


Chinese customers are also increasingly preferring SUVs over Suzuki’s line of small cars like the Suzuki Alto.

From The Wall Street Journal:

“Approximately 25 years ago, we launched the Alto in China, and since then we have made efforts in cultivating the Chinese market,” said company chairman Osamu Suzuki in a statement confirming the sale of Suzuki’s 50% stake in its Chinese joint venture to its partner, state-run Chongqing Chang’an Automobile Co.

“However, due partly to shifting of Chinese market to larger vehicles, we have decided to transfer all equity to Chang’an Automobile,” Mr. Suzuki said.

Suzuki sold more than 266,000 cars in China in 2014, according to LMC Automotive, but last year sales dwindled to around 119,000 vehicles, as market conditions in China – the world’s largest auto market – grew increasingly tough for weaker foreign brands.

“Suzuki was too slow to meet customers’ demands for model updates,” said Jeff Cai, general manager of vehicle quality at JD Power China. “There were no new models launched while competitors, especially domestic brands, launched several.”


You’ll still be able to get a Suzuki in China if you really want to, since the company has licensed its name to the state run Chongqing Chang’an Automobile Co.

Well, it’ll have the Suzuki badge at least.

Reverse: Car Wins Race


Neutral: How Much Range Does an Electric Car Truly Need?

I think 100 miles might be good for most people. You should see someone about your range anxiety!


Correction, 6:40 p.m.: Dave Morton was Tesla’s chief accounting officer, not CFO.



I was gonna take Tesla private, but then I got hiiiiiigh

I like to talk like a pirate when I got hiiiiigh

And now my stock is tankin and I know whyyyyyyyyyyy

Because I got high, because I got high, because I got high