Germany’s auto industry must defend itself in move to EVs

Germany has been a leader in well-engineered internal combustion engines for decades. We are now facing a tipping point year for maintaining dominance in the era of electric vehicles.

Europe, Europe’s largest economy, is under pressure to reorganize dozens of fossil-fuel-era factories employing tens of thousands of workers, competing with the United States and China for clean-tech leadership. I’m here.

The Volkswagen Group, Mercedes-Benz and BMW will roll out several new battery-powered models in the coming months. This is crucial to proving that the gap between his two clear leaders in EV sales, Tesla and his BYD in China, can finally start to close.

At stake is Germany’s future as a global industrial powerhouse.

The task looks more complicated than ever. The war in Ukraine caused German energy prices to rise and Germany had to turn around its Russia-dependent energy policy.

China, which is coming out of lockdown, has built a sizable lead in processing the raw materials that power the EV revolution. The domestic automaker, which receives huge amounts of state support, is now expanding its operations in Europe.

The latest threat originated in the United States. President Joe Biden is providing his EVs his suppliers with his $370 billion worth of clean his tech subsidies in the Inflation Reduction Act.

UBS analysts said last year that the U.S. could become the world’s most profitable place for manufacturing because the tax credits that encourage the assembly of battery cells and packs are so generous.

Calls for Germany and the European Union to do the same are growing louder by the day.

The threat posed by the IRA was a recurring topic during talks at the World Economic Forum’s annual meeting in Davos this week, with several European leaders calling for more aggressive subsidies at home.

They are unhappy with the American approach, which they say favors American companies and puts EU rivals at a disadvantage.

Interestingly, Chancellor Olaf Scholz doesn’t complain much, even though he has more to lose than anyone else.

The automotive industry employs about 786,000 people in Germany and is Germany’s largest in terms of investment, sales and exports. A setback in the domestic car makers and their suppliers would have repercussions for the entire German economy.

In a recent interview with Bloomberg, Scholz struck a conciliatory tone, saying that his government appreciates and broadly supports what Biden is trying to achieve, and is working very hard to “avoid a trade war.” I am working in ,” he said.

Given Germany’s dependence on exports, it makes sense. But the consequences of failure remain. Just ask Britain, reeling from the collapse of the British Bolt, which the government hoped would make it a major domestic battery player.

Berlin last week pledged another €1 billion ($1.1 billion) for battery projects as part of a larger European aid package, but that’s less than what the US is offering.

BloombergNEF tracks nearly $28 billion in new electric mobility investment announcements in North America since the IRA was passed in August.

Sweden’s Northvolt is postponing plans for a major battery plant in Germany, instead considering expanding first in North America.

Germany never misses completely. China, the world’s largest manufacturer of EV batteries, has started production at Europe’s first cell factory in the eastern German city of Erfurt.

VW is building a battery plant in Salzgitter that will be able to produce 40 gigawatt hours of cells per year, enough for about 500,000 EVs.

But the country’s automakers still have ways to convince drivers to embrace the EV shift.

Tesla made big price cuts in the US and Europe last week, following two price cuts in China.

These show that CEO Elon Musk is willing to act aggressively to keep the company growing.

Musk’s erratic behavior in recent months may present an opportunity for mass-producers like VW, but the German giant needs to fix a software problem that has been alienating buyers in recent days. .

Both BMW and Mercedes have caused havoc recently with attempts to pressure owners for more money to unlock software-enabled features.

All three manufacturers need to resolve supply chain issues that are causing declining sales.

Germany and Europe “risk falling behind” in the global race for clean mobility, said Hildegard Müller, head of Germany’s auto lobby, after German automakers met with Scholz at the Chancellery last week. .

“Berlin and Brussels must ensure European competitiveness as soon as possible.”

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