Two years ago the German version of my book “The Last Driver’s License Holder Has Already Been Born” was published (the English version came out just four weeks ago), and on the book cover page I had written the provocative statement “The German automotive industry has already lost the battle, they just don’t know it yet“. Surely, I meant that in a cheeky way, but with the belief that they would at least go into battle. But the more I follow the news, the less I believe that we seem willing to go into a battle at all. And that is a great consternation to me.
Let’s take BMW. They had the foresight to build the very innovative i3, but they withdrew its support like to a stepchild. It never sold as well as they had thought or hoped, and internally this confirmed the expectations that electric cars have no future. Even in 2019, when it became clear – thanks to Tesla – that electric mobility is coming, BMW is unconvinced. “Electric mobility is a hype,” was the quote from BMW’s Head of Development Klaus Fröhlich in front of the team that is to develop electric mobility at BMW. Total motivation! And what BMW is presenting, is, to say the least, underwhelming. “Hats on” to the electric Mini from BMW. Even the BMW electric cars announced for 2021(!) are only impressive on paper.
In general, BMW’s strategy resembles a yo-yo. The i3 is said to be discontinued, and then again continued, and then discontinued again. New electric BMWs are announced, butt then again the powerful SUVs such as X7 and X8 and X312, each with a bigger combustion engine than ever before, are what BMW presents. BMW breeds the better and better horse.
And the founder’s family Klatten/Quandt seems to be powerless to convince the management from the right things. In a rare joint interview that the two siblings gave to the German Manager Magazin in June, the frustration that the two experience at BMW comes through between the lines, while passion comes out of their own projects and companies.
Making fun of Opel is somehow unfair because the company has become the owner’s pawn. First at GM, now at the PSA Group. Even with a boss flirting with electric mobility like Karl-Thomas Neumann, who was CEO from 2013 to 2017, the company was unable to make the required change. After leaving the company, Neumann did whatt he had to do: he bought a Tesla Model S and became part of the management team of the Californian electric car company Canoo.
So if PSA doesn’t bring any of the future mobility technologies and programs to the table, then Opel’s future is just as uncertain, with Opel having no power to decide.
While Opel and BMW are most likely to become history, VW currently paints a completely different future for ittself. After years of bad news from and about Volkswagen – keywords: diesel scandal, internal quarrels, prostitutes – the company seems to be getting its act together. The new CEO Herbert Diess seems to have the support of the owner family and the other shareholders to switch the company uncompromisingly to electric mobility. The first pure electric car factory in Zwickau has just been inaugurated and has started production of ID.3, and more is to follow.
And with the Porsche Taycan, the in-house technology pioneer has presented a vehicle that not only challenges all other German manufacturers, but also shows that it is possible to produce a good electric car in Germany. I have already philosophized about the importance of the Taycan.
That doesn’t mean that VW has solved all problems. As soon as one understands in-house that a third of all employees become superfluous when switching to complete electric car production, they will be in for a big surprise. With a works council always ready to rumble, this won’t happen without friction. And even with the Taycan or ID.3 you still have a lot to do, because electric cars alone are not enough. Autonomous driving, digital transformation, or superchargers are missing. In fact, I came up with at least eight factors that you have to prove yourself against today in order to become a viable competitor for someone like Tesla. But today they can’t even on par with one of those factors.
But let’s get to the real hero of this article, Daimler. This company has a new CEO, Ola Källenius, who is considered to be the bearer of hope. In spring, he succeeded Dieter Zetsche, the 13-year-long Daimler veteran and CEO. While Zetsche navigated the company through difficult times like the financial crisis of 2008, he failed in (at least) two places: the half-hearted initiatives in autonomous and in electric driving. He ignored this for so long that it seems too late today.
With electric cars he was so uninspired that Daimler not only came too late with their own vehicle on the market, they are also far from being “the best or nothing” as they claim in their ads. The Mercedes EQC, presented with much pomp, has so many weaknesses and half-hearted things that it is not surprising that it had to be recalled immediately after launch because of defects. At the most important leading trade fairs for the automobile of the future such as the CES and (less than leading trade fair, than an automotive dinosaur) IAA, no electric cars were presented, but new combustion engine(!) vehicles.
Even though Mercedes hasn’t been very glamorous when it comes to autonomous driving so far – if you look at the ranking in the Disengagement Report from California – there was still hope for Daimler that they wouldn’t give up without at least a fight. It lasted only until this week, when Ola Källenius destroyed this hope. In a press conference he spoke of a “reality check” on robotaxis and the “earning potential”. And the new Daimler boss sees this as so uncertain that Daimler would rather invest “in the right amount” – bluntly understood as “we are withdrawing and throwing our hands up in the air”. Daimler wants to focus primarily on robotrucks.
Attentive observers of the scene can only interpret this either as an admission of Daimler’s bankruptcy or as a considerable misjudgement of where the automotive industry is heading. Above all because Waymo – the Google sister, already valued at up to 250 billion dollars – showed at almost the exact same time that the driverless future had begun with their latest demonstrations of the completely driverless robotic taxi service. And the valuation of the so far almost revenueless company shows the revenue potential expected by investors. And this is where the phenomenon shown by the German-American venture capitalist Peter Thiel in his book “From Zero To One” applies, in which a company can almost monopolize a newly created market thanks to digital technology and thus make unlimited profits.
Brad Templeton, former consultant and developer at Google’s self-propelled technology group, euphemistically calls this week’s announcement by Källenius a “risky bet“. Daimler/Mercedes risks to perish as a brand in the passenger car sector if they do not develop this technology themselves. And so far a lot has been done to hinder the efforts even within the company. There are the following possibilities that I see for the passenger car division at Daimler:
- Daimler itself is developing a Mercedes robotic taxi service and will stay as a brand.
- Daimler sells its vehicles to a robotaxi service provider like Waymo, thus becoming a Tier 1 supplier and disappearing as a brand.
- Daimler buys self-driving technology from others and no longer has them under control and thus becomes a faceless brand.
- Daimler withdraws completely from the passenger car market and with some luck will remain a player in the truck market.
The news about layoffs at Daimler and German suppliers, which are already being drastically affected by the changes, fit in well with this. One billion Euro is to be saved by the layoffs of one thousand managers at Daimler in order to guarantee a profit margin of four to six percent. Let this melt on your tongue: the margin is to be saved. It’s like the house is on fire, and you’re worried whether the bookshelves are hanging straight. But what can you expect from a board member whose bonus is linked to shareholder value, which can be increased in the short term through cost savings? In the long run, that’s exactly the death blow for the company because it hasn’t invested in any future technologies.
Waymo, for example, has been developing technology for autonomous cars since 2009 and has spent a rumored four to five billion dollars on it since then, without having generated almost any revenue from their efforts. In the same period, Volkswagen already had three CEOs. But at Waymo, this patience and long-term planning now seems to be paying off enormously.
The savings and layoffs at Daimler come at a time when in the same week Tesla-CEO Elon Musk announced a new car factory – the Gigafactory 4 – in Berlin-Brandenburg, while he was receiving the Golden Steering Wheel award of the Bild/Autobild for the Model 3 as the best car of the year, and while at the same time Tesla surpassed with their market capitalization (63.48 billion dollars) Daimler (59.75 billion dollars), and having been far ahead of BMW (53.21 billion dollars).
For us, the question should be what Daimler is still living for today? Is it for margin today, or the automotive future – and thus an important role for Daimler – tomorrow? I would like to quote the great contemporary philosopher John Rambo:
Live for nothing, or die for something! – Rambo
Even if Daimler were to perish, they would at least have tried it. But if you don’t want to try it at all, we’ll probably leave it at that. And I would find that a great pity.
What are you living for, Daimler?
This article was also published in German.