The auto industry has been at the cutting edge of driving innovation and growth for decades now. However the industry is undergoing rapid change right now, a feat that has proved to be an existential threat for many traditional auto manufacturers.
The car industry is at the edge of unprecedented change. Germany, the birthplace of the automobile is well renown the world over for their prowess in making the combustion engine, however does the world still need them? Traditional Automakers have been reluctant to make the shift to electric autonomous mobility, a mistake that may prove to be a grave mistake.
The Tesla factor
The American company Tesla has grown from being a startup to a formidable player in the electric car space. Tesla has bet big on electric autonomous mobility. Its Gigafactory in the USA is currently the world’s biggest building by footprint and the second biggest by volume. It currently produces about 3.5 million battery cells per day. Tesla has gone on to build a gigafactory in China, with works currently ongoing on another gigafactory in Germany in the traditional automakers’ backyard, perhaps sending a message that going forth it is not going to be business as usual. And they are just getting into their stride.
Government policies and political will
China, the world’s biggest auto market is powering an electric car revolution, and is building the cars it needs by itself. In Norway, 65% of all cars sold in 2019 were either fully electric or hybrid models. In Germany, that figure is just 7%. In the current leading car markets, the rate of adoption and electrification is directly boosted by government policies and strong political will. In Norway the government sees climate protection as an opportunity for its economy and not a threat. Drivers here enjoy tax exemption, free parking and use of bus lanes.
Electric mobility pioneer Tesla has made massive strides in the electric car industry. The USA government has been a key player in the success of Tesla. Tax incentives have made the electric car affordable to many Americans. Improvements in electric mobility has seen Tesla shares skyrocket to astronomical heights that in early 2020 Tesla was valued as the largest automaker in America, larger than traditional automakers Ford and General Motors.
“I think Germany has a 50.50 chance of survival in this war of the worlds. On the whole with its auto manufacturers, industry and political backing it grew too comfortable to notice the changes and draw the right conclusions.” Prof. Stefan Bratzel. Germany’s Center of Automotive Management.
The Japanese automakers also have little to show in the autonomous mobility space. For instance a large part of Toyota’s portfolio still constitutes of combustion engine powered cars.
The traditional automakers are yet to produce a solid plan for the future. It can’t have escaped anyone’s notice that the changes were happening. The traditional automakers failed to get in the driver’s seat and chart a path ahead for others to follow. No one can beat Germany in terms of combustion engine cars, it has over 130 years of experience, however when it comes to electric mobility, everyone is taking off from the same starting line.
China has struggled with smog that has suffocated the country due to its industrialization, and has caused many other problems. By 2025, China wants about 25% of cars sold to be either fully electric or plug in hybrid. 25% of the Chinese market is the combined total of cars sold in France, Germany and Britain. It’s a giant piece of the pie that the traditional automakers risk sharing with new players or losing out on altogether. It is such policies that have attracted global electric car manufacturers to China. Tesla has set up one of its gigafactories in China, a first of its kind since it is fully owned by Tesla. These policies have also seen many startups spring up in China. German manufacturing expertise, lots of cash and unlimited government backing, the ingredients China is using to power ahead in the electric mobility space. It has the highest concentration of electric mobility startups in the world.
“Things happen at lightning speed in China, it is a gigantic market with about thirty million new cars sold each year. There’s tons of capital investments in China, and the issue has strong government backing. If the government says more electric cars are the goal and a decision is made to install fifty thousand charging stations, the next month they are in place. If I look at the European democratic structures, then I see how we spend about a decade discussing new ideas and we are left with 10% of the original idea. We need to realize that if we maintain that pace of decision making and realization, we wont keep abreast with global development.” Carsten Breitfeld, former BMW Executive who was key in development of BMW i8, is now in China and took half his development team with him.
“I would have liked to fully electrify Opel, because when the dieselgate emission scandal hit, I realized that it was just not enough to adhere to the rules. You need to develop anew mindset, and the mindset I would have liked for Opel would have enabled a full switch to full electric production by 2030. Then we would have gone to the lawmakers and said hey we need a framework. We both need to ensure this happens. Jobs will be lost, but new ones will be created. Where is this being discussed in Germany? Or in Europe?” Karl Thomas Neumann, another high profile German who was on the Volkswagen Group Board, Former CEO of Continental and Former CEO of Opel.
“If nothing changes, we will protect the auto industry to death. We are currently endangering the jobs we currently have because we are protecting something that has no chance of survival. The world around us is different. People and numerous countries have long since made the decision to phase out combustion engines. If we don’t play along we will lose crucial export markets and we will be sitting on technologies no one needs anymore.” Prof. Andreas Knie, a German Transport Researcher.
Even though full autonomy vehicles are yet to be realized and still a few years off, a huge effort has gone into research and development of both autonomous cars and the technological infrastructure around it. We are confident that we are making huge strides in the right direction and the future is electric.