The First Automotive Tipping Point Has Been Reached With Electric Mobility. What’s Next?

September 2020 will become known as the month in which it became clear to even the last denier that the transition to electric mobility and the death of gasoline and diesel vehicles has become inevitable.

The 1st Tipping Point: Electric Driving

So what has happened to whom so far?

Volkswagen

First there was the start of delivery of Volkswagen’s first ID.3, designed entirely as an electric car, followed by the presentation of Volkswagen’s second electric car, the ID.4. After months of delays due to the unexpectedly difficult completion of the VW OS, the company’s own operating system, the first ID.3s are now in customer hands.

Nikola

Then fuel cell truck manufacturer Nikola imploded after analyst firm Hindenburg Research accused the company and its CEO, Trevor Milton, of deceiving investors with non-existent technology. The company, which had first announced a partnership with Bosch and GM and went public through SPARC, planned to compete with Tesla with a fuel cell truck. This has put a further damper on fuel cell technology.

In fact, the voices that consider hydrogen as an energy carrier for vehicles to be too expensive are accumulating, the Energy Return on Investment (EROI) as simply too bad.

Elon Musk Visit in Germany

The visit of Tesla boss Elon Musk to Germany caused some excitement and enthusiasm. He visited the construction progress of the new Tesla factory in Grünheide in Berlin-Brandenburg and made a detour to Wolfsburg before his return flight, where VW boss Herbert Diess personally let him take a test drive in ID.4 and ID.4 in the evening.

While Musk was still in Germany, the chairman of IG Metall, Jörg Hofmann, let out his anger and frustration, as well as hurt pride on Elon Musk and Tesla like a bully. “Tesla does not have to show us how electric cars work,” Hofmann said. “While Tesla is highly subsidized and is only just building its factory in Brandenburg, e-mobility is already being produced 200 kilometers to the south at the VW plant in Zwickau, in significantly higher quantities. Tesla is no longer talking “only” about 10,000 jobs, but rather about 40,000 jobs to be created in Grünheide.

And he added: “The interesting question is: under what conditions will Tesla produce,” Hofmann asked: “As we know it in Germany, or does democracy end at the factory gate – because no co-determination and no collective agreements are tolerated, because people work under precarious conditions, are bought in Poland and Romania?

Lay Offs

No wonder IG Metall is nervous. On the one hand, the union is having a hard time negotiating and exerting its own influence at all with Tesla because of collective agreements (Tesla pays via collective agreement), on the other hand, German manufacturers and suppliers have announced job cuts of more than 100,000 jobs this year alone.

30,000 Daimler
30,000 Conti
4,400 Schaeffler
15,000 ZF
9,500 MAN
6,000 BMW
1,850 Bosch
8,000 Mahle
Insolvent: Moll, Finoba, Weberit Werke Dräbing
Total: 104,850 plus bankruptcies

One must not forget external and temporary workers, who were probably no longer needed right at the beginning of the COVID lockdown. With this, the industry will probably get another 100.000 jobs cut.

The situation with a pure electric car production at all manufacturers would be even worse. Even if the manufacturers were to change everything over and produce the same number of cars as today, some estimates suggest that they would need a third fewer employees because instead of complex combustion engines, electric motors would now be made relatively easily with far fewer employees and highly automated battery cell production would be made.

And that is the positive scenario. If they do not make the changeover or do so too late and lose market share, then we are talking about many more lost jobs. However, studies with contrary estimates are now appearing, such as this one from the Boston Consulting Group, which estimates that jobs will remain the same due to the changed and labor-intensive vehicle frame production.

IG Metall Fallback Solution

The IG Metall union is now proposing a fallback solution to save faltering small suppliers in the automotive industry from ruin. Many small suppliers that rely on the combustion engine do not have the strength and resources to switch to electric mobility.

But this is only a delay of a dying industry. It was similar in other sectors of the economy, where rescue solutions and subsidies did not help, but were actually much more expensive for the taxpayers than the benefits were. In 1989, direct and indirect payments in the mining industry amounted to about 17.5 billion DM. However, only 139,000 people were still working in the mining-so that every single job was subsidized with 125,899 D-Mark per year. This was far more than a miner carried home. And in the end, there was nothing left of mining in Germany.

Then as now, you would be throwing good money at a dying and polluting industry. But it is quite clear why the IG Metall demands this: the trade unionists shit themselves. On the one hand, they are losing tens of thousands of members and thus influence through job cuts, and on the other hand, they are not succeeding in persuading Tesla employees to join. Fed up and fat, the trade unionists were content with their power. They saw no reason to even look into the future. In all the years in which business delegations from the German-speaking countries were received in Silicon Valley, I never met a union representative or works council. I myself come from a social-democratic and trade-union background, and I know about the achievements and necessity of such an organization. But with such behavior, unions have lost their right to exist.

Daimler and BMW

In the mess in which Daimler, for example, finds itself, it is now clear to everyone that the much-praised former CEO Dieter Zetsche played a major role. Electric mobility simply did not interest him and did not prepare the Group for it. The result: a two billion loss in the last quarter, no competitive electric car in the portfolio (the EQC is not just a joke, it is also shunned by customers like holy water from the devil). So last week’s announcement that Zetsche will not be taking up the Supervisory Board position at Daimler that was originally agreed upon is hardly surprising. He stands for the old guard that led Germany’s oldest and most prestigious automotive company into the current predicament.

Meanwhile, Winfried Kretschmann, the father of the state of Baden-Württemberg, tries to calm down and avoid panic, although he knows better. Two years ago, he saw with his own eyes the progress in electric mobility and autonomous driving during a Silicon Valley delegation trip, where I also met him and gave a lecture on the disruptions in the automotive industry, but he has to do a multiple balancing act to reassure everyone and yet convey the urgency. He became very aware that there was a very real chance that his state would lose the automotive industry.

BMW is also far from playing a serious role in Tipping Point. While the company was ahead of its time with its own unloved stepchild i3, the first electric vehicles are not expected until 2021. In the meantime, the electric Mini is being launched, which already more than disappointed a year ago with its performance data, and is now actually even worse as a production vehicle. My article on the subject of Hats on to BMW’s electric Mini has lost nothing of its validity.

New Vehicles in the Tesla-Class

But the competition is not to be put off either. Lucid Motors, located not far from the Tesla factory, presented its first electric car in the Tesla class, the Lucid Air, with impressive performance data. And at Volvo’s new Polestar brand, delivery began and is winning hearts with its design, build quality and performance data.

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In Norway, the most electric car-friendly country in the world, more than 50 percent of new registrations in August 2020 were battery electric, and 17.4 percent were plug-in hybrids. Pure gasoline and diesel are dying out at 21 percent.

And Porsche’s sales figures showed the popularity of electric cars. The Taycan, Porsche’s first all-electric car of modern times, sold best of all Porsche models in August 2020. In fact, Audi employees had to be pulled out to help with production in order to satisfy demand.

Battery Day

The probably most underestimated hammer came with the long postponed Battery Day from Tesla. While many missed the presentation of the battery itself and were disappointed that Tesla would not launch an electric car for $25,000 in three years, non-engineers missed the quantity and depth of the individual innovations that Elon Musk and his head of development presented. The capacity increase, the price reduction and the changes in the production process and the many small innovations and improvements add up tou a gigantic lead.

One saw here the first-principle thinking in its full force. It wasn’t just about a better electrolyte or less cobalt, Tesla questioned the entire production process and removed entire steps that are time, cost, energy and space intensive. It removed the tabs on the batteries and introduced a new concept that allows fast charging at higher battery volumes without significant heat gain. The number of small but in total enormous improvements is thus neither made by other manufacturers nor by the battery cell producers. Nor do I want to mention that Tesla has secured so many raw material resources that it could electrify the entire US fleet of 300 million cars.

For years, Tesla has created a supremacy in battery cells and a price advantage that other manufacturers can only compete at a loss in the same segments. At the same time, Musk has announced production capacities of 20-30 million cars per year by 2030, with more than a hundred times the battery production capacity. Since 2013, Tesla has managed to increase its vehicle production by about 50 percent each year. No other automaker has ever succeeded in doing so.

Ash Clouds and Combustion Engine ban

The urgency of the changeover to sustainable mobility has become apparent in recent weeks on the west coast of the USA. I myself saw with my own eyes the ash clouds and the orange-covered sky as the ash clouds from countless forest fires plunged California into this dystopian fog. California Governor Gavin Newsom did the right thing and announced a ban on new sales of diesel and gasoline vehicles throughout California starting in 2035.

By the way, the cover picture of this article is a photo taken by me showing my Tesla in the orange ash cloud in Mountain View.

New Countries

And then I saw a news report this month, which I did not see coming like this. The Indonesian Minister for Maritime and Economic Investments, Luhut Binsar Pandjaitan, spoke of his country’s plans to establish its own electric car production. So far Indonesia does not have its own automobile industry and imports 96 percent of all cars from Japan. With its own lithium deposits and less complex electric cars, even a country without a history of automobile production sees an opportunity for itself to enter this industry as a producer.

If these ambitions prove to be true, we could see the automotive industry migrate to low-wage countries, as is already the case in other industries such as textiles and electronics. At the time, nobody believed this either, until it simply happened.

The 2nd Tipping Point: Autonomous Driving

The electrification of cars and the decline of internal combustion engines has thus become clear to everyone. But this is the first tipping point of three. Because the next one is already following, which most people today consider to be a distant, if not impossible or unnecessary one. This is autonomous driving, Tipping Point #2.

While BMW and Daimler have actually already dropped out of the electric car race and only VW is still in the running, VW’s future for the autonomous car looks bleak. It lags far behind the leading companies, and they don’t want to believe in it completely, as they did with electric mobility.

Oliver Cameron, founder and CEO of the self-driving technology start-up Voyage, summed it up aptly these days:

Today, the transition to electric for most vehicles feels absolutely inevitable.

This wasn’t always the case!

The same will be true of autonomy. We’ll go through a time of doubt on whether it can be done, and then boom, the world will embrace the hell out of it.

— Oliver Cameron (@olivercameron) September 27, 2020

There is no taking a breather. Electric mobility has arrived, now comes autonomous driving, and there is no stopping it. Many cockpits of the future from manufacturers such as Nio, Byton, Tesla and Co. already point to autonomous driving. And the technology is far, as these pictures of completely driverless Waymo Ones show.

As soon as autonomous cars arrive, the business model changes and the third tipping point becomes possible. Sharing in the form of electric robot cabs.

The 3rd Tipping Point: Sharing

Sharing means a significantly reduced number of cars on the roads, instead of private vehicles, robot cabs drive around and the prices per driven kilometer drop drastically. Emotions about cars, brand loyalty, brands, physical workmanship and so on become less important, but digital luxury comes to the fore. And that’s where traditional manufacturers have had trouble understanding what this is all about.

Quintessence

The first of the three tipping points is reached with the arrival of electric mobility. Even the biggest skeptics of electric mobility have now understood this. But it does not end here: it was the impetus for the coming tipping points in autonomous and shared driving, and these will throw the last pillars of the old automotive industry overboard.

So if you want to take a closer look at the disruptions that are currently taking place, you need to focus on these two technologies and business models and act accordingly to stay ahead of the game. And do so quickly. After all, the pace of change is already accelerating in the field of electric mobility – not least thanks to COVID.

This article was also published in German.