With the European car market facing a decline in 2012, the focus is set to swing to that hoary old chestnut, excess production capacity. In a rising market, capacity utilisation may be going up and that can swing things so that vulnerable plants are kept in production. The 'rising tide' makes them look better than they really are and companies may feel that they can do without the distraction of shutting a plant and all the fuss it generates. But when the market is going down and capacity utilisation is deteriorating, it's less easy to put the issue to one side and carry on as normal.

Sergio Marchionne has been pretty vocal in lambasting the industry in Europe for not addressing overcapacity. And he is not at all happy about the pricing situation in Europe, either. Others are at fault, naturally.

GOLDING’S TAKE: Marchionne tells rival car makers to behave

But there was this news today regarding the NedCar plant in the Netherlands. That was one that was always likely to go, but I wonder how much more capacity reduction we'll see in (Western) Europe this year. It's an issue – supply and demand and where that leaves the market – that won't go away.

JAPAN: Mitsubishi closing Netherlands assembly plant in 2013

I'm expecting to see LMC's Western Europe January numbers round-up later today, but indications are that January has been a tough month in the market. And the extreme winter weather now gripping much of the continent won't be helping the February sales figures either.

FRANCE/ITALY: January car sales sharply down in France and Italy

And you can hear more about the European market later this week (on Thursday)

Just how do the average CO2 rules and targets in the EU apply to car manufacturers?

The people at cleangreencars.co.uk have a helpful guide.

In 2012, only the lowest polluting 65% of each manufacturer’s range have to meet the official target of 130g/km. Full compliance is not due until 2015. The EU is fond of quoting “130g/km of CO2 by 2012”, but this is simply not the case, they point out. Many will miss the target this year, but the range of loopholes means that fines are unlikely.

Car manufacturers who make heavy cars have a higher target. Take the example of Mercedes: with an average weight of 1661 KG, its current target is 143g/km of CO2, not 130g/km of CO2.

Manufacturers who sell less than 300,000 cars in the EU do not have to meet the target anyway. So, a company that sells fewer than that can continue producing an average of, say 160g/km of CO2, without fear. The only restriction for these companies is that their CO2 has to be 25% lower than it was in 2007 – but that is largely academic. Market forces mean that any mainstream manufacturer that was producing cars with over 200g/km of CO2 in 2007 has had to cut by more than 25% anyway (the average measure is sales weighted).

There is some useful info on the cleangreencars website, including sales weighted CO2 by make and model. The handout PDF on this page is worth a look in terms of how the fines work out in practice.

The War Horse and Vauxhall's 'Prince Henry'

I caught the Steven Spielberg directed epic 'War Horse' last night at the flicks.

General Motors' UK PR people kindly invited me (thank you Denis Chick and Uta Deutsch, enjoyed the pre-movie tapas!), along with a few others, on the grounds that Vauxhall had provided some vintage cars for the movie. 

The 1911 Vauxhall C-Type “Prince Henry” ( named after Prince Henry of Prussia who sponsored early reliability trials) and 1918 Vauxhall D Type Army Staff Car both feature. The film trailer features the Prince Henry racing against the War Horse across Dartmoor. Watch the trailer here.

Denis Chick, Vauxhall Motors’ Director of Communications said: “Steven Spielberg loved the C-Type Prince Henry but due to its non-conventional controls, an expert was on hand to drive on set to master the centre-mounted throttle and outside gear changes.  Mechanics were also around 24/7 to ensure the car was always operational so that valuable filming time was not lost.  It’s great that these two cars from Vauxhall’s own museum, representing the company’s rich automotive heritage, are starring alongside such notable actors.”

The 1918 Vauxhall D-Type Army Staff Car is a development of the Prince Henry and Vauxhall built nearly 2,000 for the War Office costing GBP500 each. The D-Type was manufactured in Luton.

The movie itself? Well worth seeing. Captivating tale and it's clearly a big-budget job that is slickly executed. Great cast, great attention to period detail, wonderfully directed – as you would expect from Spielberg. The war scenes are suitably horrific (but without being very graphic). The stuff shot on Dartmoor makes that part of England look pretty beautiful and is also very well done. Is the film a little bit, well, sentimental, very obviously pressing the standard emotional buttons that Spielberg is known for adeptly doing (ET springs to mind)? Yes, but that treatment works with a story like War Horse. It isn't meant to be a docu-drama about the Great War. It's a fictional tale and ultimately a nice story (albeit with some pretty dark meanderings along the way), set in the most terrible of circumstances. It's basically right up Spielberg's creative street.

Oh, and the vintage cars played their parts very well. And so, I might add, did the horses.

There is something oddly fascinating about Citroen's 'cinemagraphs', still images but with one moving element inside them.

We reported on this before when Citroen issued some of these images to help promote the DS5.

Some more of these subtly animated images have been released that include actions by football players (from Arsenal). Wasn't there an episode of Star Trek in which time apparently stood still, but some people were on a different scale, whizzing around at normal pace...as I say, curiously fascinating. 

It certainly is interesting to hear Sergio Marchionne again speaking about the primacy of industrial scale economies, of big automotive alliances and of his preference for Fiat-Chrysler to add a third partner.

PSA is being talked about as a possible suitor yet again. But the big difficulty there is that the gains would require capacity rationalisation in Europe that looks politically troublesome, especially when economies are in a weak phase. Both Fiat and PSA are relatively reliant on the weak European market, share plenty of model/segments overlap. Could be tricky to get the consolidation benefits that look good on paper. 

Perhaps adding a strategic partner with a strong position in another world region would make sense? Suzuki on the rebound from VW?

Come to think of it, wasn't the diesel engine deal in which Fiat supplied Suzuki's Indian operation one of the things that put strain on VW-Suzuki's ill-fated alliance?

It has been quite a recovery for Bentley to get back to where it is after the crash to its sales in the recession of 2009. And the latest V8 engine certainly comes with some interesting sounding technical refinements to get performance and economy. What does the Bentley brand lack though? An SUV? There's more talk of Bentley getting the go-ahead from the masters in Wolfsburg for such a project on the back of its global sales uplift.

Press conference, Detroit 2012

Nissan's Leaf has just had its first birthday. Yes, really. Time flies.

In the US, some animated and tuneful electric sockets have struck up the traditional song. Quite a well executed commercial, though not exactly hugely informative. 

Nissan will no doubt be hoping the car will have attained a much bigger place in the public's consciousness by the time it reaches its second birthday.    

We all know that EVs come with pricing issues due to the high costs of battery technology, especially to start with. The great hope throughout the industry is that supply and demand will conspire to bring prices down in the long-run. Battery technology gets steadily better (eg range for a given battery mass goes up) and cheaper, prices drift down, demand goes up and unit prices fall still further as scale economies continue to grow.

How quickly this all happens can be impacted by other variables - what happens to the price of oil, developments in ICE/hybrids technology and the position of government subsidies and other incentives to encourage take-up in the early days.

China is seen as a vast automotive market that could be potentially pivotal to the sector. The thinking also is that the Chinese government actively wants China to get a lead in EV tech in order to promote China's international industrial competitiveness and reduce oil imports. And there are some potentially huge scale economies, plus China has large densely populated urban areas (good critical mass for charging infrastructure/vehicle networking). 

Just how quickly are we moving in the direction of the EV finding a mass-market niche? As the article at the below link points out with respect to China, there's a danger that initially very high vehicle purchase prices establish EVs as, by default almost, luxury goods. If that's actually an intentional marketing strategy to begin with from some OEMs, it's one to think about because high prices can only hold back the sector's move to much larger industry volumes and lower unit prices - which ought to benefit all participants, OEMs and suppliers, eventually.

Chicken and egg perhaps. Sell cars at a loss? That is inevitably the case at this stage in the cycle, but how big a loss and for how long before we see 'market traction', the possibility of profits? You can well imagine that people at Renault-Nissan will want a return on all that EV investment on a reasonable timescale. But what is that timescale? And who can blame GM for wanting Volt/Ampera to do a bit of a halo thing after all that money has been invested?

Toyota sunk an awful lot of money in developing gasoline-electric hybrid technology. You can be looking at decade long timescales to amortise these kinds of huge investments in R&D and NPD. That's fine if you believe it is helping your brand, that it is actually unavoidable if you want to be standing in ten years' time, that there are spin-off benefits that can be exploited more quickly, that you make money in other areas so that annual profit/loss isn't blown totally off course...

Or as an OEM, you can opt to stay out of the fray, avoid that large R&D spend, watch others make costly mistakes, try to jump in when the industry has passed critical mass and costs have become much lower, key technology leaders and tech suppliers identified (don't be surprised though if the guys who did the heavy lifting in the early days are defensive/protective). You can decide to buy-in and pay the royalties. Or you can collaborate with others to share technology development costs, which we are also seeing more of. What strategy minimises risk, maximises potential return?

But how quickly the industry and market moves will largely determine which strategies prove best. The stakes are high for some and the struggle to make money in EVs could be a long one, perhaps longer than some people have bargained for. 

An email from Honda alerted me to its 'design site'. It has been updated post-Tokyo Show and includes some insights from Honda's designers on the design of some of the Honda concepts there.

That is quite interesting, but I got to searching around the site and came across some even more interesting stuff.

The India-made Honda Brio is a small car designed for India and other emerging markets in Asia. How do you give a small car's interior a spacious feel? The designers speak. And the Brio's exterior design? That's all about 'Double Triangle Form'. Fascinating.

Honda designers talk: Brio interior

Honda designers talk: Brio exterior

Here's a curious one. A state organisation in China has been pilloried for buying 'luxury cars' for the use of its officials. 

Interesting that PetroChina is apparently being singled out like this. The media report is also interesting for the detail on the case for the defence with respect to a vehicle claimed to have been purchased in 2001 that wasn't actually introduced to China until 2003. So PetroChina then says it was purchased in 2005. 'I hit a 1 on my keyboard when I should have hit the 5, but the keys are close together. My bad!'.