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Is Germany experiencing an electric car hangover?

Is Germany experiencing an electric car hangover?
Is Germany experiencing an electric car hangover?
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High costs, almost no demand for electric cars, unsuccessful changes in the transition to a new drive, the onset of Chinese competition. All of this raises a number of questions for the German automotive industry, which is a key sector of the entire German economy and at the same time a driver of Czech-German trade exchange. Uncertainty regarding further developments is plaguing all car manufacturers today, including jewels such as BMW, Mercedes and VW, and is spreading among a wide network of subcontractors.

As recently as last year, the heads of the largest German car companies could rub their hands in their headquarters. Thanks to the government’s generous subsidy of almost €5,000 for the purchase of an electric car, for the first time in history more electric cars were sold in the Federal Republic than diesel cars. But then came the sudden end – literally overnight, the federal government in Berlin cut the generous contribution from 1 January 2024 as part of austerity measures, which brought the electric car boom down hard. According to various estimates, there are now 50-100 thousand electric cars left in production parking lots, waiting for their buyers. Almost immediately there was also a price war, as it is every manufacturer’s nightmare to have full warehouses of unsold goods. VW promptly offered discounts of up to €7,700 on its ID.4 and ID.5 models, low cost the price tag of the Renault Dacia brand in Germany dropped by €10,000. The American company Tesla also significantly added fuel to the price battle, which with its ambitious discount policy put pressure on the representatives of the so-called Big Three, i.e. Mercedes, BMW and Audi (from the VW concern).

Paradoxically, even this price frenzy does not lead to any increased interest in electric cars. Exactly opposite. The German consumer is traditionally highly conservative when it comes to choosing a car, and everyone trouble is very sensitive to the ubiquitous advertising of electromobility. An anecdotal legend in this regard is the story that happened to the first mayor of the Hanseatic city of Hamburg, Peter Tschentscher (SPÖ), who had his luxury Mercedes EQE 500 electric limousine replaced at a price of €120,000 as part of the lease because its electric motor could not handle the trip from Hamburg during the winter. to Berlin and back in one go. The mayor eventually returned to a plug-in hybrid of a different brand.

However, there are no reasons to smile. It is true that if the metaphorical hangover from electric cars is a problem for the global automotive industry, then for the German one it is literally a horror drama. The doctrine adopted in the EU about the end of the production of internal combustion engines by 2035 is forcing the family silver of German industry to make changes that have no parallel in its century-long history. It is true that the entire Big Three has been engaged in research and development of electric cars for about a decade, but on the other hand, it is still true that 9 out of 10 cars sold from their production run on gasoline or diesel. Last year, the Big Three all earned hefty bonuses, but their distribution was only possible thanks to the profits that Mercedes BMW and VW earned thanks to very decent sales of cars with internal combustion engines.

Current statistics also confirm the overwhelming superiority of the German “petrolheads” over electric car enthusiasts. For example, the latest survey of a consulting company Deloitte shows that under the current situation, less than 13% of Germans would choose an electric car as their next car. In contrast, a car with the smell of petrol or diesel would be preferred by everyone else. The rest, following the example of the Hamburg mayor, would choose a hybrid. However, the conservative approach is not only about emotions, it is also confirmed by the accounting results. A strategic consulting company Oliver Wyman in the mentioned context, thus confirms the open secret of the German car industry that electric cars can hardly be made at “such a one” profit, on the other hand, “incinerators” have been generating profits like never before in the last few years. And this despite the fact that European legislation imposes more and more stringent conditions on them. As early as next year, car manufacturers will have to reduce the amount of CO in newly produced cars2 from an average of 116g to 94g in terms of emissions produced per km. At the end of this decade, they should even reach the number 49 g. The aim of the said draconian standards is to force car manufacturers to sell electric cars.

However, it is not only a measure of a regulatory nature, but also global competition. Well, here arose Germany’s No. 1 scarecrow – China. In “Middle Kingdom” because electromobility has become a mainstream issue. In 2023, 5.6 million electric cars were sold here, an increase of more than 38% compared to the previous period. If previously the three-pointed star or the symbol of a spinning air propeller were a sign of the high social status of their Chinese owner, today the situation is completely opposite. Electric cars of German production occupy a sweaty 5% of the Chinese market. The masters of the market are domestic car industry aces such as BYD, Great Wall, Xpeng and Tesla. Apart from the last-named brand, the car-savvy European’s ear has hardly ever heard of the three previous companies. Nevertheless, it may soon be different, as the largest Chinese electric car company BYD announced in Singapore the beginning of its product offensive for Europe and immediately dispatched from this strategic coastal state a virgin series of 5,449 electric cars, which are already waiting in the port of Bremen. The fact that Germany plays second fiddle to China in electromobility is only confirmed by the following facts: Mercedes has completely left the development of the electric platform of its subsidiary company Smart (production of minicars) to another Chinese giant, Geely, and for a few years it has been purchasing electric batteries for its Mini cars from Munich’s BMW from Great Wall , BYD in turn supplies the same goods to Mercedes.

Again, we quote from the survey results Oliver Wyman: “In order for German automakers to become competitive with Czech producers, they must reduce their production costs for electric cars by €3,000-5,000. To achieve this goal, the number of jobs must be reduced”. This has already happened, for example, at the Mercedes-Benz company, when the chairman of the board of directors, Ergun Lümali, announced that in the years 2029-2035, the company will eliminate most of the 115,000 jobs in Germany. The days when grandfather, father and grandson worked side by side in Stuttgart are irretrievably gone.

And it will get worse, one could say again on the basis of statistical results. Due to sluggish production of electric cars, the German car industry as a whole is losing importance. For example, as recently as 2019, 5.7 million new cars from German car production were delivered to their customers. Last year it was only 4.1 million. Head of the VW Group Dr. Thomas Schäfer speaks directly about the fact that the German car industry is sick. No wonder. The area of ​​production areas at VW is the same, if not larger, than the area of ​​the Principality of Monaco. Will it continue to produce world-famous cars, or will the factory in Wolfsburg (and alongside it also competition from Mercedes and BMW) suffer the fate of once iconic European brands such as Grundig, Nokia or Telefunken as a result of the Chinese expansion?

The further direction of electromobility, which is also essential for a number of Czech suppliers, will be the topic of a number of this year’s trade fairs in this field. Among the most important are:

eMOBILITY WORLD 202420.-24.03.2024, Friedrichshafen,

https://www.ibo-messe.de/

Power2Drive Europe19.-21.06.2024, Munich

https://www.powertodrive.de/home

eMove360° Europe 202415-17 October 2024, Munich

https://www.emove360.com/de/events/fachmessen/europe-2024/ – /shop/pricelist/097f8e08-c822-ed11-b83d-000d3a2d2028https://www.emove360.com/de/events/fachmessen/ europe-2024/#/shop/pricelist/097f8e08-c822-ed11-b83d-000d3a2d2028

Author: Jaroslav Knot, economic diplomat, Embassy of the Czech Republic in Berlin

The article is in Czech

Tags: Germany experiencing electric car hangover

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