Published on February 10th, 2019 | by Alex Voigt
February 10th, 2019 by Alex Voigt
As a German engineer, I am today more concerned than ever about the ability of our auto industry to survive and prosper.
You may remember having read the very same sentence last year. I know, I sound like a broken record, but it actually is on repeat, not broken. Today we are indeed on the record, because what we are experiencing these days is true history and will be remembered and talked about in the future. Mark this day in your calendar, mark it in your diary, because this day is the beginning of an ending and the start of a beginning.
Today, while I write this sentence, the Model 3 from Tesla, an affordable fully electric vehicle that works in the ordinary life of a human, was delivered in the thousands to waiting customers in Europe. I am not talking about just a few hundred per country or a few thousand, but a bigger picture — future annual deliveries in the hundreds of thousands in Europe alone. That has never happened before, and your kids or their kids will ask you when you are old, ugly, and everything hurts how it felt, so it’s my advice that you better remember it.
Some of the European customers have been waiting for years, some just ordered a month ago. Thousands of people who drive a German car today are waiting impatiently for their first American car (the first American car they’ve ever bought in their life). It is both a first American car and a first electric car for most of them, and both of those qualities separately have previously been very convincing reasons to make sure you do not order. Today, everything is different, the world has changed.
I published an article last year starting with the first sentence of this article, which to my surprise drove quite some unexpected attention. Usually, I try to avoid attention, and let’s face it, I am a German auto enthusiast in Germany and live in the midst of German auto enthusiasts — for good reasons, if you are in that situation, it’s better to think twice before you express an unpopular opinion.
If you stand in the middle of a crowd, think carefully before you raise your voice to express a thought you instantaneously know is not one of all others around you. Anybody who was ever in a football arena and by accident ended up in “the wrong corner” of the opposing fan group knows exactly what I am talking about. You just don’t want to be there cheering on your team when your neighbors are looking weirdly at you. Don’t try that — it may hurt!
I live in Germany in a town of one of the 4 largest German premium automakers and can happily testify that after my article was published a few months ago, people did not burn my house down, I still have my job, and I still have my citizenship. The last time I left the country, at least, my passport was still valid. I am still a German — for now.
In fact, and to my surprise, quite the opposite happened compared to what I expected. People called me a patriot to have written what I wrote, and to be honest, it feels like being a patriot. It feels good. It feels like to have done the right thing.
What I wrote in September and what I write today is intended to help accelerate the transformation of the German auto industry into a sustainable future to prosper for the next century. In that respect, I believe simply that I have a duty as a German to ring the bell once again and to help wake the German auto industry up.
Not that I believe for one second that anybody is listening to me and my small bell, but there are moments in life where what has to be said … just has to be said. You can’t escape yourself.
It’s fair to mention at this point that though a lot has happened since last year. Many new electric vehicles have been announced from German automakers, heavy billion-dollar budgets have been allocated to R&D, production, and purchasing. EV announcements are happening almost daily now. PR, marketing, and advertisements are running on television, the radio, and at the Super Bowl. Movie stars at the Berlinale silently move to the red carpet in a fully electric vehicle from German soil on German soil. That’s quite something, isn’t it? So, why so negative? Why complaining? Why this article?
I hear quite often that I am not fair to all of those popular and famous global corporations that were repeatedly declared dead decades ago but always came back to succeed and be on top in the end. They have the people, they have the facilities, they have plenty of resources, and if they really want, they will win. They did in the past what they were required to do. They have not always been the first ones, but they have been ahead of the pack in the end.
All of those claims are correct, but one important item is always overlooked here. We are not talking about cars with internal combustion engines (ICE) anymore. These are electric vehicles, and in an electric vehicle world, everything is different. Nothing from the drivetrain or engine is the same. Nothing from the software is the same. And if you look at the interior, the additional space allows you to design it completely new without the limits you had before. It feels different driving, behaving, and listening to an EV. It does not talk like a duck. It does not walk like a duck. It is no duck!
This is very important to comprehend, because to build an electric vehicle, if you have ICE tools, ICE experience, and ICE people, it is very hard. It is harder than most believe because it looks so similar from the outside — despite so much difference inside. We have seen the results from German automakers building EVs. Some of them are actually ICE vehicles with a battery and electric powertrain instead. Others are quite ugly. Some are nice to look at but fall behind in all specifications Tesla has proven possible today.
Let’s look at some facts to illustrate the point I’m trying to make, the point that consumers make while voting with their hard-earned money for a car. Remember, the customer is always right and never wrong, because they paid for what they want. Millions of consumers buying cars every year are usually reliable guidance about what they want and what they do not want. We all should better listen to them.
What is the status of Tesla today?
Some extracted facts out of a long list:
This list could be continued with notes about the largest charging network, largest driving range, quickest vehicles, best margin vehicles, over-the-air software updates, and many other superlatives — first, best, fastest, and so on. If you claim that all this does not make people buy an electric vehicle, then ask yourself why +90% of all Tesla owners say they will buy a Tesla again.
What is the status of German electric vehicles (BEVs) today?
Some extracted facts out of a long list:
- BMW sold 34,829 BEVs globally in 2018 (14% of Tesla and shrinking).
- VW sold around 33,000 BEVs in 2018 (13% of Tesla).
- Audi sold almost no BEVs in 2018.
- Mercedes-Benz sold no BEVs in 2018.
- Porsche sold no BEVs in 2018.
- BMW sales did grow 1.8% overall, but its BEV sales decreased.
- VW grew 0.2%, with about 0.5% of its total vehicles being BEVs.
- Audi shrank (3.5%), with no BEV sales.
- Daimler grow 2.4%, just a small number of Smart BEVs produced and sold.
This is the true and sad reality we Germans are facing today. This is the reality we are living in today. This is not acceptable. And this is just sad.
To all of those now explaining that growth rate for a still small company like Tesla is a perception trick compared to growth rate of a large producer, I would respond that comparing just the growth rate of all the automakers’ BEVs makes Tesla look even better and them worse, even if you add PHEVs and hybrids. You also could use units instead of the percent and it does not change the picture.
Besides this really sad information, all of those incumbent automakers try to influence the public opinion with what they call “electrified vehicles,” which are in fact cars with combustion engines and carbon emissions. They are able to drive a few miles on electricity and then drive on gas or diesel.
Those cars should not be called electrified vehicles at all because they have combustion engines, drive with gas or diesel, and pollute the air we are all breathing. They are very similar to every other ICE car. Those cars should not appear in electric vehicle statistics, in my opinion, because they are not electric vehicles as long as emissions are exhausted.
German automakers release blended sales numbers as if hybrids are comparable to the vehicles Tesla sells, lumping them all together under the “electrified” label and often declining to give transparency to consumers because they know they won’t look good.
BMW, with shrinking fully electric vehicle sales, claims victory in global electrified sales. VW claims 60% growth but does not give numbers for pure electrics. Audi does not give any numbers at all for electric vehicles or electrified vehicles. All of them know exactly why they don’t share more specific numbers. If they told us the truth, it would not be received well. It would be ugly. They essentially cheat consumers again with blended data as they did before with dieselgate. They did not hesitate one second to deceive customers again.
All those German automakers do not want to talk about the past or the present but just about the future beyond 2021. In the future, they explain to us, they will be leading with electric cars. However, we should remember what has been said in the past about what we will have now in 2019? Nothing that has been promised to us with regards to BEVs from those companies came about. Why should I believe the promises they make now to be let down again and again?
Something is wrong in the state of Germany. Even the last laggard politician in my country understands this now. Many suggestions and proposals are made, but none of those self-declared auto experts are able to explain what went wrong in the past. Finger pointing is popular these days and explanations are quickly given and selected based on the audience listening, be it in a TV roundtable, in an interview, or in a meeting room of VW at the top floor.
A true root cause analysis is something different, and although usually not pleasant, it is often the first step to being better. To be better is what I ask everybody working for those still successful ICE companies — be better than this. Be better not only because you want to secure your job for the future. Be better for the good of your department. Be better because you are loyal to your company. And be better to assure that your kids will still find enough money in our pension system to live their life with dignity when they are old.
Be better with innovation but not just that. Elon Musk commented on my article last year by stating, “Pace of innovation is all that matters.” Be better with innovation but make sure you accelerate that enough, because you don’t have much time left. You have the wrong pace. The clock is ticking. If you are faster than your competition in innovation, you will win, but if you are slower, you will lose and will fall further behind. Today, every day that passes by, is a day that hinders you in your ability to invest, innovate, and determine your own future and destiny. While Tesla continues with a very high rate of innovation, all German automakers continue a slow rate of innovation. If the situation today remains, they won’t succeed in the end.
Let’s be specific and select a large premium and highly recognized German automaker who has been said to be the most advanced with electro-mobility and has the best chance of competing successfully with Tesla. Let’s look at the company that said in a press release last week that it is the leading company in Europe with 145,000 electrified vehicles sold. This is a company that is located in Bavaria, Germany — Bavaria, if we talk about the strength and size of the economy for Germany, is what California is for the United States. That’s right — let’s talk about BMW.
Every 15th job in Bavaria depends on the automotive industry and 30% of all economic value generation in Bavaria is dependent on it. Most of that is due to BMW, a heavyweight with 2 million cars delivered in 2018. Even worse, 60% of all economic growth in Germany depends on the automotive sector and everyone living here depends on it one way or another.
BMW announced the i4 and i7, with promising ranges and price tags, for the years 2021 and 2022, which is about 3–4 years from now if everything happens as planned. BMW has just one full but old electric vehicle available for sale today, the i3, which had about 35,000 sales in 2018 (shrinking year over year). I ask myself what BMW intends to sell in the next 3–4 years. The answer, I hear, is hybrids and PHEVs, which is a fair assumption if consumers want to buy them.
Let’s look at a market where the Model 3 was selling in 2018 while one of the most popular hybrids, the Toyota Prius, was also for sale. The Prius was the #1 traded in the car for a Tesla Model 3 in the US last we heard. No other car — be it an ICE, PHEV, BEV, fuel cell vehicle, or you name — was more often given to Tesla to get a Model 3. That is a fact and I must ask myself now why BMW still believes selling more hybrids in the next 3–4 years is a good idea, especially knowing that as I write this thousands of Model 3s are being delivered to Europe. The customer has a choice now, which she or he did not have before.
To produce and sell hybrids is not a good position to be in if the Model 3 comes to your market. Knowing that hybrids are not a strategy against the Model 3 and BMW’s ICE cars lost market share against Tesla in the US too (heavily), I have to assume that the years 2019, 2020, 2021, and maybe 2022 will be negative years for BMW in Europe, Asia, and the US. Once BMW is ready with its i4, Tesla will have the Model Y delivering, a car that is supposed to have a larger market and impact than even the Model 3.
Tesla now has about 3+ years to win European customers from BMW and keep them, an exercise it has proven to be very good at. Remember the +90% rate of Tesla owners who want to buy a Tesla again? What if 90% of all new Tesla owners previously buying BMW do not return to them even if the i4 or i7 are great BEVs?
The exact same argument could be used for VW, Audi, or Daimler as an example. We can conservatively expect that tesla will have a significant impact on the 30% value generation in Bavaria and the 60% in Germany in the next 4 years. It will, be it direct or indirect, have an impact on all of us 83 million citizens in my beautiful country.
The backbone of Germany is about to bend.
About the Author
Alex Voigt Alex Voigt has been a supporter of the mission to transform the world to sustainable carbon free energy for 40 years. As an engineer, he is fascinated with the ability of humankind to develop a better future via the use of technology. With 30 years of experience in the stock market, he is invested in Tesla [TSLA], as well as some other tech companies, for the long term.