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U.S. tariff threat hits European automakers' stocks

FRANKFURT, Germany — A U.S. warning that it may introduce tariffs on foreign auto imports hit shares in German carmakers BMW, Daimler and Volkswagen on Thursday, which together have a more than 90 percent share of North America's premium car market. Washington said on Wednesday it had launched an investigation into whether car and truck imports are a national security issue due to signs they had damaged the U.S. auto industry. That could lead to new U.S. tariffs — up to 25 percent — similar to those imposed on imported steel and aluminum in March. BMW and Daimler shares fell as much as 3.1 percent in early Thursday trading, while Volkswagen's dropped as much as 2.5 percent. "(U.S. President) Donald Trump is obviously not thinking about how to prevent a trade war. Import duties on cars would be a nightmare for the German auto industry and would lead to a massive sales impact," said Thomas Altmann at Frankfurt-based asset manager QC Partners. BMW on Thursday condemned the move to consider tariffs. "The BMW Group is committed to free trade worldwide. Barrier-free access to markets is therefore a key factor not only for our business model, but also for growth welfare and employment throughout the global economy," it said. Daimler, which makes Mercedes-Benz cars, and Volkswagen, which makes upmarket Audis and Porsches, were not immediately available for comment. German carmakers produced 804,000 cars at local factories in the United States and exported 657,000 German-made cars into North America last year, according to German auto industry association VDA. China took pains on Thursday to welcome German firms and investments, with Premier Li Keqiang talking up relations after a meeting with German Chancellor Angela Merkel. BMW and Mercedes have expanded production capacity in the United States, but BMW, Audi, Volkswagen and Daimler have also invested billions to build new factories in Mexico in the hope of selling locally produced cars into the United States. German carmakers hiked vehicle production in Mexico by 46 percent to 620,000 cars last year, while production levels inside the United States fell by 6 percent to 804,000 cars because of a shift to Mexico, according to the VDA. BMW has its biggest factory worldwide in Spartanburg, South Carolina, and is the largest vehicle exporter among all the carmakers in the United States measured by value of goods exported. More than 70 percent of BMW's U.S.-made cars are exported.

EPA message to automakers: You're on notice

With top administrator Gina McCarthy speaking about the "moral obligation for climate action" on Friday, the Environmental Protection Agency announced it would ramp up its oversight of the auto industry in the wake of Volkswagen's emissions cheating. In a letter sent to manufacturers Friday, the agency said it would begin examining cars to see whether they contained defeat devices "in addition to the standard emissions test cycles." "We are putting vehicle manufacturers on notice." Exactly how the agency plans to test for these devices – which are not devices per se, but algorithms contained in millions of lines of software code that govern vehicle functions – remains unclear. Christopher Grundler, the director of the EPA Office of Transportation and Air Quality, divulged few details in how the agency would uncover so-called defeat devices used by cheaters. "Not today – or actually ever – I'm not going to be describing what new ways we'll be using to detect these defeat devices." Later, he said engineers will have to "come up with some clever ways to do this." The only insight he offered was that the EPA, California Air Resources Board, and Environment Canada would partner on testing more cars for emissions and anomalies. Grundler also said the EPA would diversify its testing fleet. In addition to relying on vehicles provided by manufacturers, the federal agency will now also borrow cars from "private citizens" and utilize rental cars for tests. "We are putting vehicle manufacturers on notice," he said. Joint investigations between EPA and CARB have "been very successful in protecting human health and the environment," said Janet McCabe, the agency's acting administrator in the Office of Air and Radiation. "But we also know, and the Volkswagen violations before us now make it clear, we need to adapt and step up our oversight." That may include an increase in on-road testing in addition to the five emissions tests now more relied upon. The EPA owns and maintains 23 portable emissions-monitoring systems like the one used by West Virginia University researchers who first detected elevated levels of nitrogen oxide emissions from two Volkswagen diesel vehicles. Right now, they're almost exclusively deployed to monitor emission from heavy-duty vehicles, whose NOx emissions "dwarf" the amount produced by light-duty vehicles, which produce less than 2 percent of the total, according to the agency's figures.

Will VW's rumored 186-mile EV battery be enough?

Just as there continues to be a horsepower war in the realm of performance cars, there's an ongoing battle over driving range among electric vehicles. Both the Tesla Model 3 and Chevrolet Bolt are promising around 200 miles for a relatively affordable price in or around 2017. Plus, Nissan is reportedly nearing a 250-mile Leaf for about the same time and Ford might be joining the game, too. Volkswagen might be the latest potential challenger with some extra distance possible from its future EVs. According to Hybrid Cars, Volkswagen Chairman Martin Winterkorn tells Bild in Germany that the company is developing a new generation of battery tech with major gains, and it could reportedly provide a range of around 186 miles. That's more than double the current 83-mile EPA certified range for the e-Golf but falls short of the projections from competitors. Winterkorn didn't indicate exactly when this innovation would be ready for production, though. Especially in recent months, the German automaker is making serious moves towards big advancements in battery tech, and the company's platforms are largely already prepped to become EVs. The entire VW Group is reportedly considering moving to a single, unified lithium-ion cell design, and that switch could cut component costs by as much as 66 percent. In late 2014, the German automotive giant also bought five percent of the US-based startup QuantumScape. That business has claimed a staggering 430-mile range from its fireproof, solid-state lithium batteries, but the proof will need to be seen on the road – and in whatever the competition is able to accomplish whenever a car is finally available.