Combustion Off 2035
Auto industry before the ultimate test
By Helmut Becker
06/26/2022, 11:59 am
War in Ukraine, corona lockdowns in China, supply chain problems, shortage of semiconductors: the auto industry is struggling with several external disruptive factors. In addition, politicians are accelerating the structural change towards electromobility. A radical caesura is imminent.
The age of fossil fuel combustion in car engines is coming to an end. According to the will of the EU Commission and most recently also the EU Parliament, the sale of new cars with petrol or diesel engines will be banned in the EU from 2035 for reasons of climate protection. The fleet limits for the CO2 emissions of new cars are to be reduced to zero according to EU specifications. Instead of the climate-damaging combustion engines, battery-powered electric cars are to be used without exception. Climate-friendly technical alternatives, such as hybrid cars with combustion engines and electric motors or refueling via eco-fuel (e-fuel), are also prohibited. If a new car emits CO2, it will be banned, the old stock will be spared. Politics would not have survived a ban.
The ban law has not yet been passed, the EU countries still have to agree before it can come into force. But the legal process has been set in motion – the outcome is uncertain!
Germany particularly affected
If the ban actually comes into force, everyone will be affected, car buyers as well as car manufacturers: EU consumers, for example, because they will lose their purchasing sovereignty and there will be strict political dictates as to what type of car they have to drive. Of all EU countries, Germany and the German car manufacturers would be hit the hardest. To this day, the business model of the automotive industry is based almost exclusively on the development, production and global sale of combustion cars – a lucrative business up to now.
More than 10 percent of the German gross domestic product is generated directly by the automotive industry, 70 percent of which was exported and has so far reliably ensured the high trade balance surpluses. These were necessary to finance energy and raw material imports. Over 800,000 people are employed in car factories across the country. All in all, every seventh job in Germany depends on the automotive industry and thus on the combustion engine.
For the auto industry, a ban on combustion engines would be a “turning point with boom,” a radical turning point. After all, its more than 100-year success story is based exclusively on the invention, development and construction of high-quality and efficient petrol and diesel engines, encased in well-styled, comfortable and high-quality bodies. If the combustion engine ban comes, it will be an unprecedented cut for the German auto industry, a blow to the roots of its business model. Comparable with the replacement of the hand loom by the mechanical loom in the early days of industrialization. Gerhard Hauptmann vividly described the social consequences in his drama “Die Weber”.
The political goal is to reduce CO2 emissions from traffic. That is absolutely correct and without contradiction. Only the chosen path to the goal, exclusively through a ban on combustion engines, is wrong: on the one hand, because the goal cannot actually be achieved in this way; on the other hand, because there are alternative ways that are also climate-friendly, but cause lower social costs.
It was clear from the start that the construction of electric cars as a replacement for the discontinuation of combustion engine production, as politicians had come up with, would never be able to compensate for the loss of added value and jobs. The construction of e-cars is less complicated, is also done by people from outside the industry (Elon Musk) and only requires 60 percent of the added value of a combustion car. Mathematically, two out of five jobs will be lost. In addition, almost half of the added value of an electric car is in the electronics and the storage battery. Both are only produced to a small extent domestically and, along with rare raw materials and precious metals, have to be imported mainly from Asia and Russia.
That may be different by 2035, the EU wants to invest heavily in electronics and battery production. However, the necessary chips and, above all, raw materials still have to be imported from areas characterized by growing supply risks.
Positive reactions – and the reality
The reaction of the car manufacturers to the Brussels ban plans was unexpectedly positive than was generally expected. The majority of car manufacturers want to do without the combustion engine even before 2035. So where is the industry headed in the future? According to industry insiders, the following seems realistic:
The German car manufacturers accepted the EU ban on combustion engines without a murmur, hoping that the force of the facts would sooner or later force politicians to correct and override the rigid political path of the ban on combustion engines. In any case, no manufacturer is known to have stopped developing petrol or diesel engines.
The more the growing global production of e-storage batteries strains the world’s resources geographically, politically and in terms of price, the faster the understanding could grow in politics that an old stock of 350 million combustion cars in Europe – around 1.6 billion globally – practically impossible to replace by new electric cars to be produced.
Industry experts consider an electric car market share of the order of a maximum of 25 percent to be possible. This is unlikely to change much by 2035 – unless solid-state batteries provide new rules of the game
Even if Europe bans combustion cars and, despite the lack of resources, manages to replace 15 million newly registered combustion engines in Europe with electric cars every year, only about a fifth of the world market would be affected. As of today, the rest of the world will still be driving with combustion engines in 2035.
German manufacturers produce 16 million combustion cars worldwide every year, of which around 4 million are sold in the EU; A large number of these are likely to be replaced by electric cars made in Germany. With a 50 percent market share, German manufacturers are leaders in the electric car market in Europe.
exit open
With a view to the world market, the volume losses of the German car industry due to an EU ban on combustion engines should therefore be limited, according to the calculations of the manufacturers. Also because the production of electric cars made in Germany is growing.
In any case, in view of the galloping technical progress in battery technology at all levels, it is difficult to estimate which drive technology will be driving new cars in Europe in 2035. Whether green electricity or green fuel – the crystal ball does not yet allow a clear view!