While we talk a lot about car emissions and the benefits to go to electric; oft we fail to look at the bigger picture? Would a paradigm shift to electric vehicles mean the End of the oft revered German engineering?

The German Automobile is currently a beast in itself. It is rightly the backbone of German’s economy. With home to major brands like Mercedes, BMW, Volkswagen, Audi etc. it is indeed the bastion of innovation but the problem lies there that the innovation isn’t in the electric vehicle segment.

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The German Automobile Industry is a beast. With an Annual Industry turnover of over Eur 400 billion, the value of which is more than most economies out there. Every one car out of 5 sold across the globe is a German one. It directly employs over 8,00,000 people. Its sheer size is expected to cause its doom. The German Automotive Industry is known for making Combustible engine vehicles. Out of the roughly 11 million vehicles sold by Volkswagen, only 80,000 were electric. Major German brands like Audi and BMW produce very expensive hybrid electric cars. There is no mass-market electric car as such produced by them.

Currently, there is an on-going Electric Vehicle boom going on with year on year sales rising by approximately 50%. Countries like Norway and China are leading the race. In Norway around 70% of cars are sold are electric and it is expected that in the next 5 years the figure would rise to 100%. There are almost 350,000 electric vehicles or hybrid cars out there. China and India two of the biggest market places have announced their plans to go electric.

 

Other Governments

 

The Indian government in its recent budget announced deductions for an electric vehicle buyer. In fact, China is even financially incentivising manufacturers to produce electric vehicles. This has led to an entry of a number of Chinese Startups. This can be ratified by the fact that in the top 5 electric vehicles there are 3 Chinese manufacturers who are focussing on mass-market cars. China is doing its best to take a leaf out of the German government’s strategy way back in the 1950s when this 500 billion industry was an infant. Chinese Startups Byton and Byd, have been giving tough competition to Musk’s Tesla.

Why isn’t the German Automotive Industry going Electric?

The major reason for this can be attributed to the fact that it employs over 8 lakh workers. If it went electric, it would have to simply layoff a lot of workers which would lead to widespread protests as producing electric vehicles require different skill sets.

An electric vehicle typically requires around 200 parts to the 1800 parts in the traditional cars. Even if they went ahead with the plan without laying off anyone it would be infeasible proposition due to high costs involved. The Fortune and Wood Mackenzie have made the following prediction-

Who wins and loses globally in the auto industry’s pivot to an electric-car future will depend largely on who triumphs China. The country, home to notoriously polluted urban skies and a population gaga for SUVs, has become, in just the past few years, by far the biggest electric-car market in the world. Owing to a potent mix of government subsidies and mandates—policies driven both by local environmental concerns and by an intent to dominate a burgeoning global technology—China accounted for 54% of the world’s sales of plug-in-hybrid and full-electric cars in the year ended June 30

The Current Global slow down in car sales has the German government very worried. From the current situation its looks very unlikely that a German company would triumph China. Even if things went smooth, the German government’s Institute for Employment Research predicts that if electric vehicles were to account for just 23% of all new cars sold by 2035, the country would lose €20 billion ($22.4 billion) in output, or 0.6 percentage point of GDP, and 13% of its current auto-industry workforce.

Originally Published at LinkedIn by Hemant Agarwal.

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