German Car Makers Struggle With Problems – But Mainly With Themselves

If you talk to German automotive engineers or just read German media, then you can easily conclude that Tesla is already dead, considering the problems with the Model 3 production and the crashes with cars on Autopilot. Waymo, according to them, is “way too hesitant” with developing their autonomous driving technology and “has troubles finding partners,” which they supposedly “urgently need,” “because Waymo is certainly never going to build their own cars, right?” And Uber is just a profit driven company, where fatalities are part of the process when developing self-driving cars.

Those are the kind of headlines and expert opinions. And partly they are right, but deducing from those arguments that German car makers are still leading is plain wrong. Too many headlines and news have sprung up the past weeks that painfully show how far behind the German automotive industry is technology and business model-wise, and with how many problems they are struggling with. And those problems are now starting to hit hard, because solutions and changes have been pushed out for too long.

Sales Stop

A dramatic development is the news that Porsche had to suspend sales in Europe. The company is currently unable to sell cars, because all their models are unable to fulfill the new emission standards. The problem has been underestimated, and no, we are not talking about Diesel, but gasoline engines.

Sales Records

Even when German car makers are selling cars, a new entrant lets them smell smoke – that is: if the new entrant even had an exhaust pipe with smoke coming out. I am talking about Tesla that managed to top the ranking in market share in the U.S., ahead of Mercedes C-class, Audi A4, and BMW 3-series. And that is wit Tesla not even having ramped up production to full capacity, due to presumed ‘production problems.’ That of course as resulted so far in Schadenfreude. But now competitors are starting to realize that their worst fears are coming true. And just wait until the Model 3 is going available in Europe.

Billion Dollar Fine

Daimler-CEO Zetsche had to come for a hearing to German Traffic minister Andreas Scheuer, regarding the newly uncovered Diesel manipulation. Up to 900,000 cars may be affected and fines of 3.75 billion Euro are possible.

Also BMW is heavily involved in this kerfuffle with supposedly ‘mistakenly’ installed software. We don’t need to mention Volkswagen in this mess, as they are the ones having started the whole Dieselskandal.

Diesel Ban

Hamburg became now the first German cities to ban Diesel cars from certain roads. And Munich and Stuttgart are considering a similar ban.

But not only Diesel ban in cities is talk of the town. The first Diesel cars lost their operation permits because the owners did not follow an order to have their cars fixed.

Price Advantages

A German engineering service company disassembled a Model 3 and did a bill of materials with cost estimates.  Well, and as it turns out, the Model 3 is profitable, and not just cost-neutral as was expected by competitors and industry experts. That comes as a shock for German car makers, as they had expected the Model 3 to be only on par with the material and production costs and the base price of the car. They had thought that Tesla is only making money with the Model 3, as long as customers buy higher priced Model 3 versions.

But that was not the only secret that this analysis revealed.

Technological Gap

Analyzing the battery revealed that Tesla has pulled off a technological breakthrough. The amount of the rare and pricey Cobalt used in their batteries was reduced by two thirds. With that feat Tesla not only has batteries of higher quality than competitors, but can also produce at much lower costs.

Battery Factory

While German car makers are still discussing, whether they need a battery factory or not, and think that having suppliers delivering that key technology, Tesla announced plans for building a new Gigafactory in China. Even with the Gigafactory 1 Tesla has almost doubled the annual global production of battery cells. Compare that to Daimler’s cell battery factory in Kamenz that even at the targeted end stage in 2020 only produces a tenth of Tesla’s factory, and even then Daimler is not making cells – which are being supplied from Asia – but just putting them together in battery packs.

Jobs

Slowly but surely most start understanding that those disruptions will change the job market. Even the powerful labor unions and worker councils cannot dismiss the fact anymore that a lot of jobs will be affected. At a top meeting of labor union representatives the minimum number of jobs lost due to switch to electric vehicles was factored at 75,000. And that is a conservative estimate.

Technological Gap II

All that is not much of a concern for a company like Waymo that is developing self-driving car technology. The company just announced that it has reached 7 million miles in autonomous mode. And the company is doubling down on that. The company ordered 20,000 autonomous Jaguars and 62,000 autonomous minivans. And that is fundamentally changing the industry and what it means to own a car.

And just to compare how “good” German car technology is in that aspect: read the Disengagement Report 2017. Waymo cars have to hand back control to a safety driver every 5,800 miles, Daimler cars every 1.27 miles.

Opinion

All those signals don’t seem to change the opinions of German automotive managers. The majority still thinks that electric mobility will fail.

Conclusion

The last two years the German automotive industry was mainly dominated by two types of news: record sales on the one hand, Diesel scandal on the other. But now the problems are multiplying and accelerating. The gaps in technology development, infrastructure, knowledge and skills, securing resources, and the understanding of the changes in mobility are becoming dramatically obvious.

The collapse of the German automotive industry is in full swing. My checkliste and Death Watch (in German) is giving an indication.

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What’s the meaning of the title picture? Well, that is the Volswagen graveyard of all Diesel cars that VW had to buy back from their owners in the US. And those cars have to be scrapped and cannot be resold.

This article has also been published in German.