Author: CNBC Online news

A new kind of auto insurance can lead to lower premiums, but it tracks your every move

Auto insurance companies are experimenting with charging drivers based on their actual driving rather than the typical bevy of statistics like driving history, location and age.

Rather than filling out the form, submitting your driver's license — andbeing confused about all the other factors that may be used in generating an insurance quote beyond your actual driving history — you simply let the insurance company watch you drive for a little bit and come up with a quote based on that actual recent driving history.

Root Insurance
The Root Insurance usage-based app tracks a driver for a trial period before offering an auto insurance premium quote.

The technology is called usage-based insurance. One company at the forefront is Ohio-based start-up Root Insurance, which recently raised $100 million in Series D funding, pushing Root's valuation closer to a $1 billion valuation. Root Insurance operates in 20 states around the country, with plans to expand service to all 50 states by 2019.

Auto insurance incumbents are also experimenting with usage-based insurance, fuelled by the ubiquity of smartphones and availability of telematics devices. Progressive Insurance, for instance, offers its customers discounts based on their driving through its “Snapshot” program. James Haas, business leader of usage-based insurance at Progressive, said it uses an app that tracks your driving and offers discounts and rewards for safe driving.

“The benefit for the consumer is both the encouragement of safer driving — and the opportunity to earn discounts for that safer driving — all in the way they want (either with the dongle or the mobile app),” Haas wrote in an email to CNBC.

In effect, the concept gamifies driving, and discounts are earned over time as a way to encourage drivers to keep the app running, which requires having location tracking turned on.

According to Progressive's “Snapshot” privacy statement, the collected data is also used to calculate an insurance quote or the rate the driver will pay when a policy renews. Users of Progressive's “Snapshot” app will receive a first-term discount and a personalized insurance premium afterwards based on their driving habits, according to the “Snapshot” terms and conditions.

Root Insurance has a similar approach. Download their app onto your smartphone, turn on location tracking, upload a picture of your license, and off you go. No need to log trips, sign on, or open the app while driving, or at all. The app runs quietly in the background, passively absorbing all sorts of data about your driving skills. Where it differs from Progressive is in the financial incentive. Root doesn't offer discounts over time as it gather a driver's history, or use the history for renewal quotes. After a two-week initial trial period, out pops an insurance premium, and then the user no longer needs to keep the app running.

But there's a catch. To build a profile, the app continuously sits in the background watching you.

The persistent monitoring is necessary to build a complete profile of a user, said Dan Manges, chief technology officer of Root Insurance. The company says it tries to be as upfront as possible that the app will monitor you at all times and can't be switched off without disrupting the trial period. Users can also manually disable its tracking features once the trial period ends, and while an untouched app will continue to gather data, Manges says it is used only to further refine their algorithm rather than re-rate an individual customer's premiums.

Location tracking can be a dealbreaker

The model, like many in the technology sector, creates a data-based bargain for the consumer — but with the added price of privacy concerns.

Privacy experts already have uncovered consumer fears. In 2016, the Pew Research Center conducted a study on how Americans approach privacy, asking if Americans were willing to allow insurers to monitor driving habits and, importantly, location, in exchange for a discount. Pew found that many Americans are willing to “share personal information in exchange for tangible benefits,” for instance, a discount on insurance, but Pew found that location was an important, and deeply personal, part of people's lives.

Forty-five percent deemed the tradeoff unacceptable, with only 37 percent of respondents finding it acceptable. An additional 16 percent said it would depend on the circumstances. “For some people, knowing their location was a deal breaker,” and wasn't worth sacrificing for potential insurance savings or discounts, said Lee Rainie of the Pew Research Center.

“Location data seems especially precious in the age of the smartphone,” the Pew team wrote in summarizing its findings. “Some of the most strongly negative reactions came in response to scenarios involving the sharing of personal location data.”

Other experts reached similar conclusions. “Geolocation is one of the more sensitive data points, said Lauren Smith, policy counsel at the nonprofit advocacy group Future of Privacy Forum. “It reveals what stores, clinics, religious destinations you go to.”

According to Root Insurance's privacy policy, the company says it will not sell or rent collected information “to anyone.” The company also says it will not use data from the device “to resolve any claims you or another driver of your vehicle may make with us” unless the insured makes a specific request to Root in writing.

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There are doubts about whether a phone is accurate or reliable enough to collect data to assess insurance premiums, said automotive services expert Colin Bird, senior analyst at IHS Markit. Root Insurance and other telematics-based apps use the sensors already on most smartphones to generate a profile of a user's driving habits. It uses the accelerometer, gyroscope, global navigation systems (like GPS and GLONASS), and compass to help build a profile of each user.

Root Insurance says this is a daunting challenge. “The sensor data [from phones] is very noisy,” Manges said. “We build models to take into consideration the sensor data is noisy.”

A phone would also ultimately be unable to tell if the user is a driver or passenger.

Root's persistent monitoring of drivers has led to user complaints. Get in a taxi and it might start logging your Uber driver's crazy drifting, dinging your score accordingly. Take a cross-country flight and the app will record your supercar-like acceleration.

“I did the test drive, however, it said seemed like it calculated every time I moved at a decent speed including while on the commuter train,” wrote a user named Derek Haber in the user feedback section on Root's Android App Store page.

“The app begins crunching the numbers when: 1. I run on a treadmill 2. The airplane is taxiing before takeoff and after landing 3. I ride in an Uber / Lyft 4. I am in the passenger seat when my friend is driving,” wrote a user named Venkat Raghavan.

Bird said most insurance carriers that use a smartphone to gather data work around this limitation by logging trips only when the customer's phone is connected to the car's bluetooth radio. (Root Insurance does not use this method.) Others, like Progressive Insurance's “Snapshot” program, allow users to categorize past trips if they weren't the driver. In addition to the smartphone app, Snapshot also gives users the option to use a separate dongle that plugs directly into the diagnostics port of most modern cars, capturing data like braking and use of safety systems directly from the vehicle.

In fact, component suppliers like ST make many different grades of accelerometers, including two separate categories for automotive applications and for consumer gadgets.

Higher premiums versus privacy

There is also a bleaker underside to usage-based insurance.

“The early adopters think they're safe, they're happy saving money,” Rainie of the Pew Research Center said. “But at some point, as the market progresses, people become worried about not participating.”

If usage-based insurance becomes common, customers outside of the pool of users could face increasingly high premiums for not giving up their privacy.

Root Insurance says its customers can get rates up to 52 percent lower than their previous insurers. The company says Root customers report average savings of $1,187 per year on car insurance policies compared to their previous rates with other providers, although the company notes this average includes policies with more than one driver and a younger user base that tends to be charged higher rates.

Haas said Progressive's Snapshot program has handed out over $700 million in discounts, with individual drivers saving an average o..

Shares of Chinese electric car maker Nio rally after Tesla investor takes stake

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Shares of Chinese electric car maker Nio surged more than 13 percent in Wednesday's premarket following reports that Tesla investor Baillie Gifford has acquired an 11.4 percent stake in the company.

Reports of the investment had send shares up 22 percent on Tuesday.

The U.K. investment management firm owns 85.3 million Nio shares, the company said Tuesday in a filing with the Securities and Exchange Commission.

The Baillie Gifford management firm is Tesla's largest outside shareholder, with a 9 percent stake. Tesla's largest investor is CEO Elon Musk, who owns about 20 percent of shares.

Nio's stock closed up 22 percent Tuesday at $7.39. Since Nio shares began trading on Sept. 12, the stock has traded as high as $13.80 and as low as $5.35. When it listed its shares on the New York Stock Exchange last month, the company said it plans to make cars for the Chinese market initially, but it also has ambitions to expand into Europe and the U.S.

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Ford releases new Territory mid-size SUV in China to boost sales

Ford
The Ford Territory, a mid-sized SUV Ford unveiled in China on Monday

Ford released an all-new mid-sized sport utility vehicle in China on Monday, as the automaker contends with an aging product line and flagging sales in the world's biggest car market.

The Ford Territory is aimed at mid-sized SUV customers in small but fast growing cities across China, which Ford said is the country's fastest growing market. The vehicle was developed with Ford's local partner, Jiangling Motors.

“Our onslaught of new vehicles has begun,” said Peter Fleet, president, Asia Pacific and chairman & CEO, Ford China. “We are taking the best of how we've brought Territory to market — deeply listening to customers in China and delivering what they want in style, comfort, safety and new in-vehicle infotainment options — and applying it across the business. Territory is just the beginning of more great things to come.”

The vehicle is custom-designed for Chinese customers, Ford said. Between 2015 and 2017, sales of midsize SUVs increased 102 percent among Chinese consumers.

The vehicle comes with some high-tech features popular with Chinese consumers. For example, it offers intuitive Mandarin voice recognition, which understands dozens of regional accents, Ford sald.

The announcement comes days after the second-largest U.S. automaker posted September sales in China that declined 43 percent over the same month last year.

“Ford's performance is certainly nothing shy of ugly in China,” said Jeff Schuster, president of global forecasting for LMC automotive, a firm that tracks the auto industry. “While they are struggling as a group in China, the overall light vehicle market is now expected to post the first annual decline since we have been tracking vehicle demand in China (at least 20 years). Sluggish sales reflect weakening consumer confidence, amid the escalating US-China trade conflict, falling stock prices and the decelerating property market. With inventory rising, the Chinese Automobile Dealers Association is urging the government to take policy measures to boost demand, such as a tax cut.”

Schuster expects 2018 auto sales in China to be down 0.6 percent to 28.4 million units, he said.

“Ford will not fare well though not as bad as September,” he added. “For 2018, we expect Ford sales to be down 33% to around 680,000.”

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Ford sales in China dropped 43 percent in September

JOHANNES EISELE | AFP | Getty Images
The Ford Mustang is displayed during the 17th Shanghai International Automobile Industry Exhibition in Shanghai.

Ford's sales in China dropped 43 percent in September from the same month a year earlier, a sign that sales are slowing in the world's largest car market.

This is the third straight month of declining auto sales in China.

The second-largest U.S. automaker has been hit by the ongoing trade war between the U.S. and China, despite the fact that Ford sells cars in China through partnerships with local firms.

Ford shares are down nearly 30 percent since the beginning of the year. The stock hit a 52-week low of $8.57 in trading Friday.

“We are intensely focused on our sales turnaround plan in China, which includes an aggressive cadence of product introductions to meet the needs of our Chinese customers, including the launch of the highly anticipated all-new Ford Focus,” said Peter Fleet, president of Ford Asia Pacific and chairman & CEO of Ford China, in a statement. “We believe the new products, which have been custom-designed and developed with Chinese customers in mind, will help us to regain momentum in the world's largest auto market.”

Auto sales are down across the board in China, said Michael Dunne, president of ZoZo Go, an investment advisory firm that follows Chinese autonomous and electrified vehicle companies. This is the first sustained downturn Dunne has seen since the Asian financial crisis in the late 1990s, he said.

There are three major factors driving this decline in demand. The first is a crackdown on certain types of peer-to-peer lending practices in China, a feature of the Chinese financial system that has typically allowed less wealthy Chinese to borrow money at rates better than what banks are offering.

The second is a general cautiousness among Chinese consumers that has emerged recently.

“When times are good, the Chinese are really bullish and bold,” he said. “But when times are uncertain they become exceptionally conservative.”

There is a particular mentality that can take hold among Chinese consumers that is more pronounced than the lack of consumer confidence seen in the United States, for example. “And it is contagious,” he added.

Finally, there is the trade war with the U.S., which has exacerbated the uncertainty many Chinese feel from the overall economic slowdown.

Ford has unique problems in China, Dunne said. The automaker has not brought new products to market for more than a year, and Chinese consumers have sought cars elsewhere. Ford is expected to bring new products to China in the next few months, he said.

Ford was not immediately available for comment.

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European environment ministers agree 35 percent car emission cut by 2030

Patrick T. Fallon | Bloomberg | Getty Images
Hoses connect laboratory emission testing equipment to a red 2016 Volkswagen AG Golf TDI inside the California Air Resources Board Haagen-Smit Laboratory in El Monte, California.

European Union lawmakers have hammered out a deal to cut vehicle emissions by 35 percent by 2030, offering a further boon to the development of electric and hybrid cars.

Germany, which had insisted on a maximum 30 percent cut, relented after winning a concession to carry out an interim review of the rules. Germany's stance had been backed by other car producing nations including Bulgaria, the Czech Republic, Hungary, Poland and Slovakia.

The group of environment ministers said the 35 percent reduction of carbon dioxide gas emitted must be from recorded levels in 2020. It also should include an intermediate target of a 15 percent reduction by 2025.

Last week, the European parliament voted for a more ambitious 40 percent reduction by 2030.

Ministers from the 28 nations will meet Wednesday onward with representatives from the European Parliament to work towards translating the recommendation into law.

One global forecast on energy has predicted that almost all new sales of cars across Europe to be electric or hybrid within 20 years. The report, titled the Energy Transition Outlook, says for the United States, a similar situation will be in place by the 2040s.

Automakers in Europe have been less effusive about a rapid transition away from traditional combustion engines. In September, the European Automobile Manufacturers' Association (ACEA) said fewer workers will be required to build or repair all-electric vehicles.

“Overly stringent CO2 targets, as well as unrealistic sales quotas for battery electric vehicles, could lead to serious structural problems across the EU,” ACEA said.

Porsche denies speculation that it’s planning to go public

Getty Images
Porsche 918 Spyder

The German luxury carmaker Porsche has denied speculation that it's planning to pursue an initial public offering (IPO).

On Friday, the company's chief financial officer suggested to reporters gathered at the firm's development center that such a listing could easily top the success of Ferrari's foray into public ownership. The Italian supercar maker has an estimated value of around $22 billion.

In comments not denied by Porsche to CNBC, Lutz Meschke said a listed car company led by Porsche and including Bentley, Bugatti and Lamborghini could merit a valuation worth more than three times that of Ferrari. Bentley, Bugatti and Lamborghini form part of the Volkswagen Group, alongside Porsche.

“A valuation of 60 billion to 70 billion euros certainly doesn't sound like a stretch,” he was reported as saying, before adding that analysts would value such a firm on the same metrics as a luxury stock.

Meschke is further quoted as saying: “Every company needs to think about whether it makes sense to create competitive divisions.”

In an emailed response to CNBC on Monday, Porsche flatly denied any suggestion it was moving toward public ownership.

“Porsche does not currently have any plans to pursue a (partial) initial public offering (IPO). The Stuttgart-based sports car manufacturer denies all reports to the contrary that claim an IPO is in progress,” it said.

Porsche also said Meschke's comments simply reflected on how the Ferrari listing was “a positive example of how an IPO can be a beneficial move during the automotive sector's current period of transformation.”

The German car maker further highlighted that during his presentation Meschke had said he had no authority on any Porsche IPO, with that decision ultimately resting with executives at the company's parent owner, Volkswagen.

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Tesla produced 7,400 Model 3 sedans in the first two weeks of the quarter, report says

David Paul Morris | Bloomberg | Getty Images
Tesla vehicles are transported on a truck after leaving the company's manufacturing facility in Fremont, California, on Wednesday, June 20, 2018.

Tesla has produced 7,400 Model 3 mid-sized sedans in the first two weeks of the quarter, according to a report in Electrek, citing unnamed people.

That would mean Tesla has so far produced 3,700 Model 3's per week, short of the goal of 5,000 cars per week Tesla has been aiming for and occasionally hit. The report attributes this to an anticipated production slowdown early in the quarter.

Overall, the automaker is has made 11,500 cars total in the first weeks of the quarter, Electrek said.

Tesla has struggled with production on the Model 3 in the past. It had originally aimed to make 5,000 cars in a week at the end of the 2017, but did not reach that goal until the end of the second quarter this year. However the company did deliver more vehicles in the third quarter than analysts expected. At the time, the automaker said production had stabilized.

Tesla declined to comment.

Read the full story at Electrek

Ferrari stock target raised by nearly 40 percent as SocGen says firm now has a better plan

CNBC

Ferrari's renewed focus on high-end clients is a “game changer” for its valuation said Societe Generale on Wednesday, as the French bank raised its price target for the stock by almost 40 percent.

Italy's most famous supercar maker first listed on the New York Stock exchange in October 2015 with an Initial Public Offering (IPO) price of $52. At Tuesday's close the stock was worth $128.95.

After long questioning the stock's value, the bank said they have now changed their mind, upping their price target for the luxury car manufacturer of $130 from $94 and shifting their recommendation from “Sell” to “Hold”.

“The facts have changed and so we have changed our mind on Ferrari,” read the note penned by equity analyst Stephen Reitman.

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Reitman argued that Ferrari's initial plan to reach its 2022 sales target by turning to the SUV market would be difficult because of widespread competition. He added that any “dash for growth” could risk damaging the brand's exclusivity.

That strategy was put in place by former CEO Sergio Marchionne who died in July this year following surgery. His successor, Louis Camilleri, updated markets in September with a new earnings target range for 2022 of between 1.8 and 2 billion euros ($2.1 -2.3bn).

That represented a slight pull back from Marchionne's 2-billion-euro figure, but Reitman said that while the target numbers were largely unaltered, the company strategy has now changed.

“The new mid-term plan broadly repeats the key financial objectives laid out in February, but the way Ferrari plans to achieve them appears to have fundamentally altered,” he said.

Ferrari unveiled two new car models on September 18 2018. They are titled the Monza SP1 and Monza SP2.

The analyst said Ferrari has doubled-down on high end customers after it debuted two brand new road cars, the Ferrari Monza SP1 and SP2 last month.

Ferrari have said that the latest models are part of a limited series called “Icona.” The name has been chosen to reference the firms famous racing cars of the 1950's. The cars will retail at a starting price of 1.6 million euros.

Ferrari said the limited edition would run to a maximum of 499 cars but that there will be further model releases as part of the Icona range.

On plans for an SUV release, Ferrari have now pushed back the release date by two years to 2022. Reitman described the change of strategy as a “game-changer” for the firm.

Societe Generale added that Ferrrai's fundamentals ought now to be valued somewhere between the weighted average of the European luxury goods sector and the French high fashion luxury goods manufacturer, Hermes.

VW taps top Audi executive to run US operations

David Paul Morris | Bloomberg | Getty Images
Scott Keogh, in San Francisco, California, Sept. 18, 2018.

Volkswagen is hoping to replicate the success it has seen at Audi of America with the appointment of a new CEO at Volkswagen Group of America.

Scott Keogh, who has served as president of Audi's U.S. division since June of 2012, will become CEO of the Volkswagen Group of America starting Nov. 1. He will replace Hinrich Woebcken, who has overseen VW's North American operations for the last two and a half years.

For Volkswagen, the move is the latest effort to grow a brand that has struggled in the U.S. for a variety of reasons over the last 20 years. Between 2000 and 2014, the German automaker lagged in the U.S. due to a lack of sport utility and crossover models, which became more popular with American buyers. Sales plunged after 2014 when the company admitted to rigging the emissions on diesel vehicles.

The low point for the brand came in September 2015 when Volkswagen of America President Michael Horn took the stage at an event in New York and addressed the scandal saying, “We totally screwed up.” By early 2016, Horn had resigned and Woebcken replaced him as head of VW in the U.S.. While he and Volkswagen have stabilized the brand, it has a less than 2 percent market share in the U.S.

For Keogh, the challenge is pushing the German brand to do more in the world's second largest auto market. VW's U.S. sales were up 5.2 percent last year while the market overall was down 1.8 percent.

The brand is starting to roll out SUVs and crossovers, which should help sales, but Keogh knows VW can go further. Under his leadership, Audi's U.S. sales climbed 62 percent.

“Scott Keogh, who led Audi to excellence in the U.S., will build upon the momentum and implement the next stage in the growth strategy as we continue to develop Volkswagen into a more relevant player in North America,” said Dr. Herbert Diess, CEO of Volkswagen AG.

Woebcken will remain with Volkswagen as a consultant. Meanwhile, Mark Del Rosso, president and CEO of Bentley Motors, Inc. Americas will move into Keogh's position running Audi of America.