I just can’t resist writing a few lines about the VW tragedy that is currently unfolding in Germany. Just briefly: VW is on the ropes because sales of its core brand have collapsed.
The Greens believe it’s because VW has failed with electric vehicles and hasn’t developed affordable electric cars quickly enough.
The conservatives believe it is due to the EU’s ban on combustion engines, because this completely undermines the economic basis of the German automotive industry.
Both sides are probably right and wrong.
Because the Greens don’t seem to see that other parts of the VW Group – namely Škoda and SEAT/Cupra – are very successful with electromobility.
The conservatives seem to forget that VW still offers a rich and gigantic portfolio of combustion engines that has hardly changed as a result of electromobility. The proportion of electric vehicles in the portfolio is less than 8%.
Many industry experts see the real reason for this in the way VW is set up as a company. On the one hand, there is the semi-state nature (keyword VW law: the state of Lower Saxony has a blocking minority of 20% in important decisions) and, on the other, the great influence of the trade unions. Both components have ensured that the parent brand produces quite ineffectively. In other words, it takes almost three times as many people to build a car as Tesla, for example. This eats away at the return on investment, which is quite low.
Since hardly anything will change here in the short and medium term, state aid will be unavoidable because VW doesn’t want to lose its core voters in Lower Saxony, most of whom vote social democratic.
Oh dear. Now I’ve written about the tragedy.
Back to the topic
August registrations of electric vehicles fell by -68.8%, while sales of passenger cars “only” fell by -27.8%. This suggests that the electric vehicle market in Germany is currently in a really bad way. But the chart is deceptive because last year, August was an upward outlier due to the decision by the traffic light government, in particular Economics Minister Habeck, to cut subsidies for electric company cars, rental cars, and the like from September 2023. If this had been factored out of the figures, it would have resulted in a smaller loss of sales at best.
Electric car companies under pressure
OEMs that have focused exclusively on electromobility, such as Polestar, Smart, Tesla & Co., are actually struggling with significant declines that cannot be compensated for by sales of combustion engines.
Paradoxically, the current models are really competitive for the first time. They charge quickly, the charging infrastructure is better than its reputation and, thanks to ever larger batteries, the ranges of mid-range and luxury-class vehicles are leveling off at distances that even dispel the range anxieties of hysterical normal drivers.
Premium electric cars are now no more expensive than their combustion counterparts, even in Germany.
The regulars still have air superiority
Nevertheless, the business with electric cars has become more difficult, especially in Germany. The regulars’ table, which had become more cautious in recent years due to the initial success of electromobility, has regained its air sovereignty over electromobility. The EU’s ban on combustion engines is seen as a gigantic mistake and electromobility is dismissed as a niche technology that is hardly seen as sustainable.
This is a typical German attitude, as the combustion engine car was famously “invented” in Germany and developed to absolute excellence. Many people are reluctant to give up this lead. Perhaps rightly so.
Which brings us back to VW
The German car market is a special market. The rejection of a speed limit on the autobahn is just one facet of this. Germans identify with their car industry, and anyone who tries to damage it faces a strong headwind. No wonder, because the industry directly employs 770,000 people.
VW has a special position here. Once the world’s largest car manufacturer (group), the company demonstrated the superiority of German engineering. However, this is dwindling as digitalization, electrical engineering, and battery technologies are increasingly important. These new requirements, which are particularly important in the world’s largest car market, China, still do not seem to have been recognized on the Germans’ radar.
Yet electromobility has proven to be the future in countries such as China and Norway. Admittedly, the framework conditions there have been set far more cleverly than here in Germany. And that is the real problem, but that’s a topic for another column.
