In a recent issue of German magazine Der Spiegel, author Simon Hage holds up a metaphorical mirror (spiegel means “mirror” in German) to the German auto industry and sees a very disturbing picture of the future. In fact, he raises the possibility that Mercedes, BMW, Volkswagen, et al. may soon succumb to competition from the US and China.
Through The Looking Glass, Darkly
In support of his dark vision, Hage relates an anecdote about Research In Motion, the Canada-based company that brought the BlackBerry mobile phone to the world. When Apple introduced the iPhone to the world a decade ago, one of the strange new creations got passed around the executive suite at RIM.
Managers allegedly shook their heads and pronounced the iPhone dead on arrival. Its digital screen was too large and its battery too small. Clearly, it was little more than a curiosity that would never enjoy widespread commercial success. (In related news, see: iPhones (& Teslas) Could Never Go Mainstream)
Something similar is happening with electric cars. Everyone knows today’s batteries aren’t powerful enough to provide the kind or range customers want. They take too long to recharge and there are nowhere near enough charging stations to meet the demand.
All true, but still the example of the iPhone is a cautionary tale about the dangers of ignoring disruptive technology. According to legend, at the end of the 19th century, Charles H. Duell, head of the US Patent Office made the following pronouncement: “Everything that can be invented has now been invented.” While the quote may or may not be accurate, its lesson is real.
A Closer Look At The German Auto Industry
Karl-Thomas Neumann was once the head of Opel, a minor player in the German auto industry. He looked down the road, metaphorically speaking, and foresaw the end of the internal combustion engine rapidly approaching. His vision was to make Opel the first European automaker to transition its entire lineup to electric cars. But then General Motors sold Opel to PSA Group, which makes Peugeots and Citroens. Suddenly, Neumann was out of a job.
He still holds onto his vision, though. He fears the superstars of the German auto industry — Mercedes, BMW, and Volkswagen — still do not understand the nature of the transformation going on around them and run “the risk of being outpaced by new competitors from China and the United States.”
In 2016, BMW, Mercedes, and Volkswagen reported sales of $552 billion and earned profits of more than $30 billion by building larger, faster, more luxurious cars with gasoline and diesel engines. Clearly, they don’t want to see the gravy train come to an end.
The auto industry accounts for 14% of Germany’s gross domestic product. The government wants to rein in carbon emissions, but not at the expense of crashing the economy. The prophetic words of “Engine Charlie” Wilson, the head of General Motors who once told Congress, “What’s good for General Motors is good for the country.” German politicians understand Wilson’s message only too well.
The German auto industry needs “a clean break,” says Neumann. It has to “accept that diesel is gradually going extinct.” While the internal combustion engine will still be around for a number of years, things need to change. “It’s time to reduce complexity — that is, develop a much smaller number of different engines,” he says, and use the money saved to invest in electric vehicles.
Neumann points to Tesla as the principal reason why the German auto industry needs to adjust its thinking. The California-based upstart has done what no one thought possible — make electric cars that people actually want to buy. Before Tesla, everyone thought of electric cars as little more than a way to meet the irrational demands of the California Air Resources Board (CARB).
But now, country after country is talking about banning fossil fuel vehicles sooner rather than later. China in particular is pushing hard for regulations requiring manufacturers to build electric cars.
Does BMW Get It?
In an interview with Der Spiegel, Klaus Fröhlich, head of development at BMW, talks openly about the Tesla challenge and the effect China will have on the marketplace. He wants to talk about his company’s plan to build more electric cars, but in doing so, he reveals the fatal flaw at the core of that plan.
BMW flirted with electric cars at the beginning of this decade. It created a separate division dedicated exclusively to making electric cars, but sales of its i3 and i8 have reportedly been disappointing. In response, it has de-emphasized its i division and is now designing cars that can be powered by conventional engines, hybrid power, plug-in hybrid powertrains, fuel cells, or whatever other new technology becomes available.
With its latest strategy, BMW thinks it will be able to simply flip a switch at its factories and start spitting out whatever kind of cars the market wants at any particular time. That thinking misses the point entirely.
Building A Proper Electric Car
A bona fide electric car — one that people will want to buy — must be designed from the ground up to run on a battery. The bulky, heavy battery must be mounted as low as possible in the chassis and close to the centerline of the car. Otherwise, its mass destroys the handling characteristics of the finished product. Trying to fudge the formula to create “one size fits all” cars is a recipe for disaster.
If you know that and I know that, why doesn’t Klaus Fröhlich know that? Instead of building proper electric cars, Fröhlich says BMW will concentrate on “emotionalizing” its electric cars in the future with wider tires and more dynamic designs. Oh, my…..
The Lingering Effect Of Diesel Cheating
Closer cooperation between the major players in the German auto industry could lead to faster development of electric cars, but the leftover stench of the Volkswagen diesel emissions cheating scandal is making them wary of working with each other. Der Spiegel published an exposé in July that showed all the big manufacturers colluded with each other and with suppliers to find a way around diesel emission standards.
BMW says it had nothing to do with the scandal. Nevertheless, it has a team of 18 lawyers combing through its corporate records to make sure it doesn’t have any skeletons in its closet. “From now on, there will always be a lawyer present at any meeting with a competitor, no matter how harmless,” an auto company representative tells Der Spiegel. Instead of a collective spirit of optimism and cooperation within the industry, a feeling of mutual mistrust reigns.
Charging Infrastructure Plan Going Nowhere Fast
One indication of how weak the spirit of cooperation is can be found in the plan put together by Ford, Mercedes, BMW, and Volkswagen to build a European superfast-charging network. The project was scheduled to begin in 2017 with about 400 locations across Europe planned for the first phase. Nine months later, the total number of charging facilities is precisely zero, although the first one (at new Porsche headquarters in Berlin) is scheduled to be open later this year.
The group says its charging technology will be superior to Tesla’s. That may (or may not) be so, but Tesla has already put 6,300 of its Superchargers (plus nearly 20,000 destination chargers) into service around the world and expects that number to climb to 10,000 by the end of 2017.
Smaller, More Efficient Cars
Foot dragging and half-hearted commitments to new technology have been the order of the day for the German auto industry for decades. (The problem is even worse among traditional American car companies.) In 1991, a Volkswagen executive by the name of Daniel Goeudevert wanted to introducing smaller, more fuel efficient cars. He was also proposed a carsharing arrangement with Deutsche Bahn, the German national railroad. Both ideas fell flat in the boardroom.
Note: Elon Musk may be a certified genius, but timing is still critical to success in the marketplace. General Motors CEO Roger Smith also had plans for smaller, more fuel efficient cars about the same time as Goeudevert. His vision resulted in the formation of a new division called Saturn, which enjoyed initial success before foundering on the rocks of boardroom intrigue.
Volkswagen eventually grew tired of Goeudevert and showed him to the door, telling him in his final moments with the company, “You will be amazed at all the things we can still get out of diesel.” Such prophetic words. The diesel cheating scandal was still decades away, but its seeds were already firmly planted in Volkswagen’s corporate culture.
Now 75, Goeudevert looks back on his vision with the unerring clarity of hindsight. “Because of its great successes, the [German] auto industry has become blind to the true needs of customers,” he says. “For much too long, Volkswagen and the others were only interested in speed and luxury.”
Back To The Future?
Volkswagen now claims it is rushing headlong into the electric car future. It promises to have 50 electric cars in its new car lineup by 2025. One of them will be the I.D. Buzz, an electric reinterpretation of the iconic VW Microbus that was the vehicle of choice for the Woodstock Generation.
But the Buzz has been under development for 5 years already and is still 5 years away from production. All by itself, it seems to symbolize the problems faced by one of the world’s largest car companies as it continues to admire itself in the warm glow of the rearview mirror.
Source: Der Spiegel
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