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Volvo will build first EV in China for export, sources say

Volvo will build its first full-electric car in China, sources told Automotive News Europe ahead of an official announcement planned for the Shanghai auto show next week.

The battery-powered vehicle will debut in 2019 and will be exported globally. It will be based on the compact modular architecture (CMA) that Volvo co-developed with Zhejiang Geely Holding sister brand Lynk & CO, the sources said.

The electric car will be made at Volvo's plant in Luqiao, southeast China, alongside CMA-based models such as the all-new XC40 compact SUV, which launches later this year, and Lynk & CO's first model, the 01 crossover.

The sources said Volvo's first full-electric car would be an all-new model but declined to say what body type will be used.

The sources also confirmed that Volvo is still simultaneously developing full-electric cars that will be underpinned by its larger scalable product architecture (SPA) architecture.

Those models will be a key to helping Volvo reach its aim of having a 1 million electrified cars on the road by 2025.

That figure includes plug-in hybrid versions of every future model in the automaker's lineup. Currently, 14 percent of the XC90s that Volvo sells globally are plug-in hybrids. Volvo expects about 15 percent of customers for its new second-generation XC60 to pick the powertrain.

China push

Deciding to make its first full-electric car in China reconfirms Volvo's commitment to establishing the country as a global manufacturing and export hub.

The automaker recently moved production of the S90 to China from Sweden. Volvo will export its flagship sedan to global markets including Europe and the U.S. from its factory in Daqing.

In 2015, Volvo became the first Western automaker to export a China-made premium car outside the country when shipments of the long-wheelbase S60 Inscription started to the U.S.

Along with its plants in Daqing and Luqiao, Volvo's current and new-generation 60-series midsize models will be built at a factory in Chengdu, central China.

The massive increase in Volvo’s presence in China -- seven years ago it had no production in the world’s largest auto market -- is part of the automaker’s $11 billion revival under Chinese owner Zhejiang Geely, which bought the company from Ford Motor Co. in 2010.

“With three plants -- and the designation of one car line for each plant -- Volvo creates an efficient production structure ensuring future capacity for growth,” CEO Hakan Samuelsson said at an event in Shangahi last November.

Volvo needs the additional output in China to reach two key goals: increasing its sales in its largest-single market to 200,000 by 2020 from 90,930 last year and boosting global vehicle sales to 800,000 by the same year from 534,332 last year. The large majority of those half-million units were made at Volvo’s plants in Torslanda, near Gothenburg, Sweden, and Ghent, Belgium.

Volvo declined to provide production figures for its China plants, but Samuelsson has said he wants about one-third of the 800,000 units it plans to sell in 2020 to be made in China.
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Early veto reshaped Chevy's new Equinox

Three years ago, General Motors showed drawings of a new design for the Chevrolet Equinox, its top-selling crossover, to consumer focus groups. They weren't impressed.

Too bulky. Odd styling. Not compelling enough.

With the compact crossover segment heating up fast, the poor feedback stung. Development work was in the early stages, but major changes at that point can still blow the budget for a vehicle program and risk delaying the launch. That could have been especially troublesome for the Equinox, given the importance of the segment and with recessionary spending cuts already having forced GM to stretch the current generation's life span well beyond the industry norm.

"Back in the day, we would have probably just kept going," said Mark Cieslak, who had been named chief engineer of the Equinox just four weeks before that. "What we had on paper we felt was not going to win."

Instead, GM -- eager to prove itself as genuinely reborn after bankruptcy and under the leadership of newly minted CEO Mary Barra and product boss Mark Reuss -- decided to change course. The company already was scrambling to fix a botched redesign of the Chevy Malibu amid weak sales and bad reviews, and the Equinox was more important to get right, even though sales of the aging vehicle had continued to be strong.

In contrast to the bean counters' influence on such decisions at old GM, Cieslak said the edict to those on the Equinox team was refreshingly simple: "We're in this to win -- go get it done." They did, and without falling off schedule.
Critical launch

The 2018 Equinox, which began reaching dealerships this month, represents the first redesign for the nameplate in eight years. Sales of compact crossovers have more than doubled over that span, as the segment rose from 10 percent of the market in 2009 to 15 percent last year.

Thus, the stakes for the third-generation Equinox are exponentially greater than the last time around, making its launch among the biggest for GM in years.

Its success is crucial as GM works to bolster Chevy's image and draw in younger buyers who seek the utility and fuel economy that small crossovers offer and are more open to switching brands than their parents were.

"These are the new family station wagons of America," said Michelle Krebs, a senior analyst with Autotrader. "The segment is huge, and we don't see any slowdown. There's definitely room for sales volume growth for Chevrolet. If they can make some inroads with it, that should do well for the entire brand."

To support the anticipated sales increase, GM plans to make the Equinox at three North American plants, including one in Ontario that's currently building only the 1.5-liter engine version. GM officials declined to identify the other two plants, but they are expected to be in Mexico, where the company has said it will move production of the GMC Terrain, which shares underpinnings with the Equinox.

At 242,195 units in 2016, the Equinox accounted for 8 percent of GM's U.S. sales, second to only the Chevy Silverado. But the need for a significant update is clear: It fell from third in its segment as recently as 2013 to fifth place last year, outsold by rivals from Honda, Toyota, Nissan and Ford.
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Lincoln's bet on China SUV underscores growth potential
With the future of Ford Motor Co.’s lagging luxury line riding on China, the automaker will expand its bet on the market by building a new Lincoln SUV in the country in late 2019.
The still-unnamed SUV would expand Ford’s foothold in one of the hottest segments in China, a country CEO Mark Fields has said could be Lincoln’s largest market by the end of the decade. It will be produced with joint-venture partner Changan Automobile Group in the city of Chongqing.
Ford has been pouring $2.5 billion into overhauling Lincoln with new models such as the Continental flagship sedan, which helped boost sales in the U.S. by 10 percent last year following decades of decline.
But its salvation may lay outside North America. Ford has said its research shows the Lincoln name -- dogged in the U.S. by years of work as an airport shuttle -- holds enough cachet in China to rival local leaders such as Audi.
“China is incredibly important to Lincoln,” said Michelle Krebs, a senior analyst with car-shopping website Autotrader.com. “They have shown they can do fairly well there and that it holds great potential.”
Lincoln entered the Chinese market just two years ago. By the end of 2016, it had 65 dealerships and sales tripled to 32,558 cars and SUVs, almost one third of the brand’s U.S. sales total.
Import relief
By building in China, Lincoln will avoid 25 percent in customs taxes the country imposes on imported vehicles. The duties drive up the cost of models such as the Navigator SUV, which starts at 988,800 yuan ($143,000), more than twice its U.S. price. A redesigned version of the Navigator, Lincoln’s most recognizable nameplate in China, will be introduced at the New York auto show next month and arrive in showrooms this year.
A Ford spokeswoman declined to comment on plans for more Lincoln models to be built in China, or on how much the company will invest to produce the brand locally.
Ford is joining the ranks of luxury carmakers including BMW AG, Daimler AG’s Mercedes-Benz and Volkswagen AG’s Audi that are already manufacturing models in China. Among premium auto brands, the only major ones not producing in China are Toyota Motor Corp.’s Lexus and Hyundai Motor Co.’s Genesis.
“Makers of entry-level luxury cars have to localize production otherwise they couldn’t compete with rivals that have done so,” said Yale Zhang, managing director at researcher Autoforesight Shanghai Co. “It is only natural for Lincoln to start production in China after several years of stable growth.”
Ford will continue to import Lincoln vehicles from North America, including the Continental sedan introduced last year, the company said.
SUV demand
By choosing an SUV as its first locally produced model, Lincoln is banking on China’s love affair with spacious vehicles. Annual sales of 30,000 to 50,000 vehicles is commonly regarded as the threshold for local production in China, according to Zhang at Autoforesight.
Nissan Motor Co. started producing its upscale Infiniti marque in the country in November 2014. Sales rose to a record 41,590 units last year. General Motors' Cadillac brand topped 100,000 units for the first time in 2016, after beginning production in 2006.
Hyundai has said it’s deciding on options and timing to build its fledgling Genesis cars in China. Toyota remains a holdout among global automakers in terms of manufacturing the Lexus in China, citing quality concerns.
Demand shifts
Chinese consumers are expected to buy more SUVs and minivans than sedans this year for the first time, according to projections from the China Passenger Car Association, as the combination of rising incomes, lower oil prices and policies allowing more children triggers a fundamental shift in the world’s biggest market.
Sales of SUVs surged 45 percent last year in China, outpacing the 15 percent gain for overall passenger vehicle deliveries, according to China Association of Automobile Manufacturers data. Demand for utility vehicles continued to outpace that of the broader market, with sales gaining 22 percent, or more than triple the pace of growth for the industry.
“The Lincoln product and ownership in China is resonating with Chinese customers even beyond our expectations,” Kumar Galhotra, president of Lincoln, said in a statement. “We are now taking Lincoln to the next level by building a new SUV in China to join a dynamic lineup of imported cars and SUVs.”
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Refugee who rose in Detroit is troubled by automakers' silence

Majed Moughni has lived the American dream: He climbed the ladder from impoverished refugee, to hotel dishwasher, to parking cars for Ford Motor Co. royalty. Today he’s a lawyer, sitting at a chair and desk in an office that all once belonged to a Ford chief executive officer whose Lincoln Continental he used to park.

Moughni sees the business case for Ford’s senior executives to aggressively court Donald Trump after the president spent months criticizing automakers for making cars in Mexico. Their silence so far on Trump’s order halting immigration from seven Middle Eastern countries is another matter, and he can’t hide his disappointment.

“I’m a product of what Trump is trying to ban,” Moughni said. “It’s careless. This is a country of immigrants.”

Automakers are walking a tightrope as they court Trump, whose policies on clean-air standards, corporate taxes and trade will affect their fortunes. They have to balance that against other considerations closer to home: The traditional three U.S. automakers are based in Michigan, which backed Trump’s surprise victory but also has a substantial Middle Eastern population troubled by his executive order on immigration.

Ford’s hometown of Dearborn has been referred to as America’s Muslim Capital, with more than 30 percent of the population of Arab descent. From 2005 to 2015, the state accepted 19,545 refugees from Iraq and Syria -- two of the seven countries affected by Trump’s ban.

Automakers’ responses

Trump took special aim at Ford during the campaign and the automaker has worked to get back in his good graces. Executive Chairman Bill Ford, a great-grandson of the founder Henry, has said he can always get a hold of Trump, or the president calls him. CEO Mark Fields visited the White House on back-to-back days last week to discuss jobs, fuel-economy standards and even Oval Office decor.

Still, Ford and its auto-industry peers in the Detroit area have been largely silent on the immigration order. Christin Baker, a Ford spokeswoman, declined to comment. Representatives for General Motors, Fiat Chrysler Automobiles, Toyota Motor Corp., Nissan Motor Co., Hyundai Motor Co. and Honda Motor Co. also passed.

Tesla Motors Inc.’s Elon Musk, one of a dozen CEOs who met with Trump on Monday to discuss manufacturing, said a blanket entry ban “is not the best way to address the country’s challenges.”

On Sunday, Musk asked his 6.89 million Twitter followers to read the order and suggest amendments, which he will then take to Trump’s CEO advisory council to develop a consensus and present to the president.

Entwined history

Moughni’s is one of countless stories that show the entwined relationship of the auto industry to the region’s immigrant population.

Hundreds of protesters gathered Sunday in Hamtramck, a 2-square-mile city within the borders of Detroit whose longstanding ties to the auto industry include a GM factory that makes sedans and the Volt plug-in hybrid. A Polish enclave for most of the last century, Hamtramck now has a vast Muslim population because of immigration from Bangladesh, Yemen, and to a lesser degree, Bosnia.

“This is what immigration looks like!” was one frequent chant.

Hamtramck has the nation’s first Muslim-majority city council, and the panel’s top vote-getters in the last two elections descend from Yemen -- another of the nations affected by the decree. Automakers are afraid of Trump, Councilman Saad Almasmari said in an interview at the rally: “That’s why they keep silent.”

A refugee story

It was in Hamtramck that Moughni’s father -- newly arrived in America ahead of his family -- landed a job on the assembly line at a Chrysler plant. The father saved up enough to buy plane tickets for his family, including his eight kids, and eventually managed to afford a Chrysler LeBaron. Moughni was 6 when he and his family moved to America in 1977 to escape civil war in Lebanon.

The Chrysler gig lasted only about two years, until Moughni’s father joined the thousands of autoworkers swept from the industry after an oil shock. The father worked as a cashier at a convenience store, while Moughni did his part to make ends meet.

“It wasn’t much of a life growing up with your dad not having the financial means to raise eight kids,” Moughni says. At 12, he started mowing lawns and picking weeds for neighbors. By 15, he delivered Domino’s pizzas. At 18, he was hired at the newly opened Ritz-Carlton hotel in Dearborn -- first as a dishwasher, and later as a parking valet.

‘Meant to be’

It was the Ritz job that helped Moughni pay his way through undergraduate school at the University of Michigan at Dearborn. It also introduced him to Bill Ford, Edsel Ford II and Harold “Red” Poling, the CEO who steered Ford through the early-1990s recession. Moughni got to know Poling by name.

When Poling died in 2012 and the office Ford rented for the retired CEO -- right across from the Ritz -- came up for lease, Mougnni seized on the opportunity. The late Poling’s former space, complete with the red leather chair and mahogany desk, has been home to Majed A. Moughni Law Offices for about three years.

“It was meant to be,” Moughni says.

Moughni sees common ground with Trump, and in fact made an unsuccessful run for Congress about six years ago as a Republican with a motto to keep jobs and production in America. But for companies like Ford, which he notes has many engineers from India, he doesn’t understand why CEO Fields hasn’t spoken out on the immigration issue.

“As far as Ford and Mark Fields and Bill Ford cozying up to Trump, I don’t think that’s a bad thing” for the company, Moughni said. That said, “they should be outraged as well that this policy may trickle over to other parts of the world.” Fields, he said, “should speak out.”
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