Electrical supremacy from China
This is how German car manufacturers fight against the total crash
By Diana Dittmer
7/25/2023 5:43 p.m
VW, Mercedes and BMW are under pressure. For years they have been unsuccessfully chasing after the e-car manufacturers from China. The car world of the future will be different. It’s about nothing less than survival.
Top with combustion engines, flop with electric drives: No matter what promising plans the German car manufacturers once had in the drawers, the competition in China was faster, the cars cheaper – and even cooler. The design and equipment meet the taste of the broad clientele. The former lead of the German car manufacturers on the global car market has been pulverized. While the Chinese electronics market is exploding, the traditional manufacturers VW, Mercedes and BMW are just wallflowers in the market for electric cars. The hip newcomers today are called BYD, Nio, Wuling, Xpeng and Zeekr.
It’s as if the tectonic plates in the car world were shifting: Above all, high-flyers BYD (“Build your Dream”, translated: Build your dream) is no longer an unknown name, even outside of China. Last year it was already the second largest electric car manufacturer after Tesla. In February, he pushed Volkswagen off the throne in China when it came to new car sales. BMW and Mercedes were no longer represented at all in the top ten of the largest suppliers in China.
It’s a nightmare for German automakers. And the really bad awakening could be yet to come. Because if BYD expands abroad as planned, the company could become the largest car manufacturer in the world, according to the forecasts. Not only VW, the world number two, but also the number one, the Japanese carmaker Toyota, has to tremble before the newcomers from China.
BYD instead of VW: The electric boom cannot be stopped
Could the next Volkswagen be a BYD? “Yes, definitely,” says car expert Ferdinand Dudenhöffer from the CAR Future Institute ntv.de. “But also the new Toyota, Nissan, GM and the new Ford. This is not a German phenomenon.” The biggest fallacy of the Germans was to believe that they could seamlessly continue the success story of their combustion engines with e-mobility. This misjudgment cost the group leaders in Wolfsburg, Stuttgart and Munich their most important individual market.
The electric boom cannot be stopped. To the extent that e-cars are on the rise, combustion engines will be pushed out of the market. According to the International Energy Agency, global sales of e-cars will break another sales record this year with an estimated 14 million e-cars, which would be an increase of 35 percent compared to last year. The share of e-cars in the global car market will then be almost one-fifth. And the biggest market will be China.
There is a lot at stake for the big automakers when the newcomers from China start exporting their models to the West on a large scale. German auto suppliers have made dire forecasts that five to seven million Chinese e-cars could be registered in the EU and Great Britain by 2027. “I’m even counting on eight million,” the “Handelsblatt” quoted a manager from a large German supplier as saying. It would also have consequences for the labor market: “Eight million Chinese electric cars mean that European manufacturers have about ten plants too many in Europe.”
Hopes now rest on partners in China
Industry experts view the developments with concern: The auditing and consulting group PwC expects that the Chinese manufacturers will definitely import e-cars to Europe successfully. Harder times are coming for Mercedes, BMW and Audi, warns PwC car expert Felix Kuhnert. Stefan Bratzel, head of the Center of Automotive Management, advises German car manufacturers to adopt a more aggressive mentality. Frustrated, he comments: “They have the power, but they don’t put it on the road like the others.” There are also concerns at the group headquarters: VW board member Ralf Brandstätter describes the development as an “avalanche” and speaks of “disruption” of the old business model.
So what to do? The insight of the hour is: Escape to the front. In order to escape the German nightmare, local car suppliers want to increasingly use their components in China instead of at Audi or Mercedes. Apparently, the car manufacturers are no longer relying on themselves, but are relying on their successful partners in China. The Volkswagen subsidiary Audi, for example, is negotiating with the Chinese joint venture partner SAIC about a joint “accelerated” development of electric cars.
More money should also be used to catch up. VW is investing billions in local development. Mercedes boss Ola Källenius also wants to increase his previously planned 40 billion euros for the drive turnaround. In China, the Stuttgart company sold just 6,900 electric cars from January to May. Orders are also falling in Germany.
Price war, cancellation of e-funding, backlog of orders
There is no sign of capitulation among the German car manufacturers, even if critics complain that the German initiatives come far too late. The crash and impact can now only be slowed down, it is said. There are a few reasons for this. One is the price war launched by Tesla in China. CEO Elon Musk has announced that, despite the economically turbulent times, he will even add a briquette here. “Telsa’s war chest is well stocked,” warns Dudenhöffer.
The sales figures have not yet reached the valley of tears. The current sales figures in Germany are not as good as they appear at first glance. The market for electric cars in Germany is still growing. But at the latest when the backlog of orders from the previous year has been cleared, the lull threatens, observers agree. There is also a headwind from the government: from September, commercial customers will no longer be subsidized when buying purely electric cars. The so-called fleet market growth will collapse in on itself. “We assume that the BEV growth in the fleet will shrink from 63 percent in the first half of the year to just two percent in the second half of the year,” quotes the “Automobilwoche” Dataforce analyst Benjamin Kibies.
In addition, the Chinese government is putting together a package of economic stimulus measures and boosting demand for electric cars with subsidies worth billions. Even if Economics Minister Robert Habeck has increased the budget for the state environmental bonus for private individuals, which can be claimed when buying an electric car, it will be difficult for German car manufacturers to catch up.
“The car world is reorganizing itself”
However, Dudenhöffer does not consider the fight to be hopeless. In the short and medium term it will be difficult for German car manufacturers, but in the long term they have chances of stabilizing. However, the old supremacy of traditional German car manufacturers will once and for all no longer exist in the new car world. “When you open yourself up and recognize a new world and stop harping on your old principles, that’s the best way to reconnect,” says Dudenhöffer. Play along, that’s all there is to it.
“The car world is reorganizing itself,” states Dudenhöffer. BMW already has its largest development location with around 3,200 engineers outside of Germany in China, not in the USA. “Where will the strengths of the German car manufacturers be? The strengths of the German car manufacturers will lie in the fact that cars that are also Internet-enabled are built in highly intelligent cooperation.” The development departments of VW, BMW and Mercedes are currently working flat out on the second generation of electric models. With or without a Chinese partner: success is a must, mistakes are no longer allowed.