German Automaker Paradigms

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As a German engineer, I occasionally have the opportunity to talk to senior managers of the automotive industry. When we exchange thoughts and discuss opinions, I am more often than wished for stunned about their replies, reactions, and statements.

Stunned because the more I think about these conversations, the more I find them revealing and enlightening about the status of the key industry in my home country — but also, and more importantly, their future.

“German engineering” has had a top-notch reputation for good reason for a long time, and it’s a reputation well deserved. The question I have is, how is it possible that this experienced industry that has dominated important segments of the auto market for such a long time, with all its resources, could fail so miserably in developing competitive fully electric vehicles (BEVs)?

In various articles, I tried to explain my version of the truth by discussing technology, economics, disruption, culture, people, innovation, and change, but today I want to give you the opportunity to listen to what some of the senior German automotive executives and managers told me face to face about BEVs. Their questions and answers revealed a surprising thought process that is in my opinion the root cause of the situation we are in.

I will give three examples of those statements for the purpose of illustration, but many more came across and confirmed my assumption that the true issue the German auto industry is in is not necessarily inability to innovate, but not knowing what needs to be innovated.

To be clear, I never asked anybody in the German auto industry directly or indirectly for a conversation. I have been asked for them to my surprise by them instead. My expectations for those conversations have been very modest, since I do not hide my belief that the German auto industry is still doing more wrong than right, and everybody who has ever read just one of my articles knows that.

To my surprise, the interest level talking to me has been high and everybody I have been in touch with agreed that at least parts of my criticism were justified. About 50% of them are desperate and frustrated with the inability of their organizations to change. In order to protect my sources, I ask for your understanding that I am not providing any names from people or organizations.

Editor’s note: The images in this article have been inserted by the editors and do not necessarily link up with the companies/issues Alex references.

The first example is the claim that the electric motor of a BEV does not allow for huge differentiation of models and brands because their technical specifications are about the same. A similar point has been made to me by two senior automotive managers with global responsibility. Oliver Blume, Porsche’s CEO, often named as a candidate for the CEO role of the Volkswagen Group, also discussed this in an interview in 2019.

That electric motors don’t allow brand differentiation sounds reasonable because they are indeed quite similar in many aspects, and although differences exist, they are small compared to internal combustion engines. Interestingly, though, everyone who has driven electric vehicles from different manufacturers will testify that the driving experience was very different indeed. So, why does this sound like a contradiction?

It is true that an electric motor alone does not allow a huge amount of differentiation, but a powerdrive train is the combination of the battery, the electric motor, and braking system. If you add these systems together and compare BEVs again, they differ a lot.

As an example of different driving experiences, take the Renault Zoe and the Porsche Taycan, or the Nissan Leaf and the performance trims of a Tesla. No one will seriously ever argue that they drive the same and provide a similar experience. While in the internal combustion engine (ICE) industry the engine and gearbox is a key element to create a unique driving experience, in the BEV world the same applies for batteries together with the electric motor and recuperation as well as the braking system. Since the battery is considered from many automakers to be the “BEV gas tank,” they underestimate that a battery is doing much more than just storing energy.

The physics between the two drivetrain concepts are so different that to take one element out of the entire system and compare it with the other is an oranges to apples comparison, but that’s what many German automakers make.

The second example is about software, which is a technology German automakers are known to be not famous for, with the latest examples of that in particular coming from within Volkswagen Group. If you consider a car display an input and output device of an IT system, it looks like the design of German car displays is telling us there is not a lot to input and to output.

The software issues and challenges, including vehicle recalls, started with ICE cars and continue without exception with all BEV models the German automakers have ever produced, be it the e-Golf, Taycan, e-tron, i3, or EQC and with many ICE vehicles too. The history of software errors, failures, and challenges is a never-ending story that continues into the future with the ID.3, and the recall and production stop of the new Golf 8 confirms it.

When a warning pops up in the display of your e-tron that an oil change is due (as we have seen lately), the warning should go directly to the Audi board of directors, communicating that what really needs to be changed is the IT organization, software, and their responsibilities.

Automakers are used to sourcing everything, and love to plug it in without any effort. It’s plug and play that they love to do. That allows them to concentrate on marketing and sales. But they underestimate that software is an integrated part of the entire vehicle and not a supplied piece that you plug in like hardware.

The so called “digitalization” of vehicles has for years been a big marketing topic of the German auto industry, but the fundamental basic requirements to engineer a vehicle operating system are still unavailable. They are required to develop into a software company instead of remaining a hardware organization, because the value creation today is in the software of the vehicle rather than in the hardware. The place where the profits (the real money) are made is from now on in the software. For that reason, the software department should have the power and influence it needs to maximize profits, but it doesn’t.

To illustrate how severe the issue is, I give you a few quotes I did document from department heads at large German automakers in recent months.

“If we don’t get the charging breakups under control, the launch of the car should be stopped, because it will otherwise result in a disaster.”

“The fundamental issues of the operating system are so severe that the entire launch is at risk, but if we delay, we have to pay billions in fines.”

BMW, Daimler, as well as the entire Volkswagen Group are today, in the year 2020, searching for a solution for how to develop operating software for their future BEVs, but still have no answer. To develop software was so far a supplier task for sub-systems in the car, never a strategic business. It had to work as a part of a part, but not as a differentiation criteria that defines the entire vehicle value across all systems.

To be responsible for the gearbox or motor injection system received the highest recognition and appreciation, but software was considered of less importance and therefore outsourced. Does anybody really believe within Tesla, with the largest vertical integration in the industry, there was ever a discussion to outsource the software to a supplier?

Is it then a wonder that today there are no good software engineers found any more within the large German automakers?

Is it surprising that the software organization is a rather powerless part with no influence that gets all the pressure?!

Even if they try to get the brightest brains in house today, the glimmer and reputation to start at Tesla Gigafactory Berlin instead is hard to compete with. The wanted bright, smart, and innovative software engineers would rather burn themselves out working for Tesla for a few years before they start with an incumbent German auto company.

A third often repeated argument is that the electric vehicle use case is for short distance and it’s not even required to have a large range. That’s been said from BMW about the i3, Volkswagen about the e-Golf, and even from Porsche about the Taycan, besides many others. It is actually a point that is not only made by automotive managers but repeated by the media as well as politicians, but is it true?

A quote from a German senior automotive manager to me: “We actually did not intend to develop a BEV with a range of a Tesla. It’s not been our first priority.”

It is rare that I don’t find the words to respond in a proper way, but this very moment was one of them. Not having the ambition to develop a BEV with long range means declaring defeat or accepting going out of business.

There is no question that the average commute is just 30–40 kilometers in many countries. Therefore, you may believe a short-range, small-battery BEV or a hybrid with a 30 km range will be good enough and sufficient. If that is true, why is the first question people ask me about my Model 3 usually the range?

It does not matter that the average commute is small, because the consumer does not like behavior change and in a perfect world wants the same he had with his ICE car, but better, cheaper, and cleaner.

To feel range anxiety is a negative behavior change, and you will feel it right away if you go for a weekend trip, holiday, or business meeting in another city.

Personally, I do not know a single person or family who has a car for just the daily commute to work and another one for the rest of life. (Although, they certainly exist.) Cars are expensive and most people can afford just one, a second or third is a luxury. When I bought my electric vehicle, my base requirement has been not to be worse but better off.

That includes filling the car easily and fast, a famous driving experience with regard to acceleration and top speed, as well as short-term and long-term trip convenience. Not a single consumer wants to think about whether his or her BEV allows him/her to drive from point A to B, even if it’s a few thousand of kilometers away. This very minute I could jump in my Tesla without wasting a single thought about how to charge and get to my destination.

Life is complicated enough — why should any consumer make it more complicated with a BEV that has short range? Simplify your life!

Everybody can have an opinion, and that’s of course true for all executives in the German auto industry as well, but from a top businessman I expect well supported facts and thoroughly thought-through conclusion. Unfortunately, I did not find that anywhere in my conversations with most German auto managers, but instead a repeat of false narratives mixed with educated guesses and topped with unproven claims. That may happen one time in a conversation, but it made me wonder when it continued to happen. Are Germans just that badly informed, or is there more behind it?

I wrote a lot in the past about why the German auto industry missed the ship with regards of BEVs, but I myself may have missed that they may not know what the challenge really is.

What if the questions they ask themselves are all the time the wrong questions, and as a result they solve a challenge that is not relevant for success?

If that is the issue of the German auto industry, then we all should not be surprised that we have not seen a German BEV that can challenge the 2012 Tesla Model S.

Even worse, without solving their self-inflicted problems, I do predict that in 2025 we will not see a crossover that can challenge the 2020 Tesla Model Y.

I hope to be wrong.

Top image: Porsche auto museum in Stuttgart, Germany, by Kyle Field/CleanTechnica.