Are electric cars slowly pushing Germany into a recession?

sramanat · 27th February 2020, 10:39

Let me preface by saying I am not a fan of Elon Musk and Tesla's valuation doesn't reflect reality. Its multiples are not at all comparable to other auto makers.

Right around when Tesla was gaining traction, BMW and Mercedes hit an inflection point when China became their largest market. EV sales in China surpasses the US. Given that, I'd expect more trouble for them once the impact due to corona virus settles down.

That said, around this time two years back, I had a road trip with a motorhead/music enthusiast colleague of mine to Bonn, Stuttgart, Munich, Salzburg etc. EVs on road in Germany were minimal despite what one would assume of the tree-hugging Europeans. The BMW museum in Munich had plenty of prime exhibits on how BMW saw the future of mobility (EVs!). Either that was just a lip service or they underestimated the market. I assume it is the latter and they have issues translating that vision/mission to production. We will see a pivot to EVs sooner.

An anecdote - Around the time when fiat took over chrysler, I happened to attend a symposium by the late Sergio Marchionne. When someone asked him about something he had told a newspaper, he started his reply by saying that he doesn't read his own interviews/quotes because that'd inflate his own estimation of him.

I think at some level BMW and Mercedes have fallen into that trap where what the market thinks about them is molding their own impression of themselves. (There are many stories of how the Chrysler guys were shot down because the Daimler guys wouldn't share platforms/parts with them, negating the hypothetical synergies they wanted to achieve with the merger. For instance, rather start with a chrysler sedan, they insisted on creating new car from the scratch - result was the disastrous A-class). They seem to think EVs will not give their customers the driving experience that their storied IC cars give. Tesla does not have that baggage.

GeeTee TSI · 27th February 2020, 17:08

The impressive aspect of Tesla's dominance is that it has come due to a superior product (the car) complimented by a superior experience (superchargers) and not helped in anyway due to a closed or protectionist market nor unrealistic subsidies

In a brand obsessed premium car market, the newbie (at one time) surged ahead under the very eyes of the established competition. Did the Germans (although applicable for any country's manufacturer) take cue and follow Tesla's path atleast? Not till very recently, from what I recall from various global auto shows

sagarpadaki · 27th February 2020, 17:18

Is the German economy predominantly dependent on VAG and other car manufacturers that a shift towards electric cars is pushing the whole economy into recession? I find it hard to digest this!

Dieselritzer · 27th February 2020, 18:07

This is a classic Nokia case. Their ego and unwillingness to accept and react to change will cost them big money. Not just money, it will have far reaching social impact via reducing employment, market growth and poor investment flowing in the country.

Nokia also denied acceptance to change. Kept blabbering that Symbian is the future whereas we the customers saw Android and IOS as the future. Similarly, if ICE based car manufacturers continue to blabber and push aside the growing acceptance to alternative source of energy and technology to drive vehicles, they'll soon be a name in history.

Many a times, a company and its products are absolutely brilliant. But at times, the competition comes up with something that completely sweeps the market. CDs did this to floppys, touchpads did this to keypads, Tesla might do this to VW.

They HAVE to adapt and do it fast. The word FAST is more important for VW group because SCALE, is an animal. When you do good, that animal will help you and protect you like a faithful dog. But when you slowdown and off-take reduces yoy, that same SCALE will become a wild animal willing to consume you with ever increasing losses, inventory pile ups and a dark red balance sheet.

speedmiester · 27th February 2020, 19:39

Quote:

Originally Posted by sagarpadaki

Is the German economy predominantly dependent on VAG and other car manufacturers that a shift towards electric cars is pushing the whole economy into recession? I find it hard to digest this!

It is not just the legacy manufacturers. With EVs, the components required for a car also reduces which will have a direct impact of auto component manufacturers.
Plus the reliability and minimal service intervention of EVs also makes it tough for standalone garages and other associated services.

CarJunki · 27th February 2020, 22:21

Not sure how much of Tesla effect is hitting German economy.

One thing is sure, Tesla is hitting the higher margin aspiration product. The German brands have been found sleeping at steering. Tesla is taking the fight to well entrenched players and that too with all the negativity projected by media around them.

For all well entrenched players, media becomes an echo chamber and by the time market data becomes significant enough to clearly indicate ground shift it is too late.

landcruiser123 · 28th February 2020, 03:05

I wouldn't believe the articles stating Tesla caused a recession in Germany. I think most large auto makers were not taking Tesla seriously for the first 5 years after the launch of the Model S. That being said, EVs will result in huge Supply Chain disruptions- especially in countries like Germany, Japan, and Korea.

Europeans are generally more environmentally conscious. That could be a reason why the big 3 in Germany are worried.

tsk1979 · 28th February 2020, 05:39

Germany has always been at the forefront of Environmental regulation, with sweeping changes to laws etc., to give benefits to the electric and clean energy vehicles, and yet, it totally ignored the elephant in its backyard, the car companies. I am so shocked that Germany, with all its talent and Auto infrastructure, could not come out with a viable world beating electric transportation automobile company!

I guess, this only proves, that sometimes, your strength is your biggest weakness.

sagarpadaki · 28th February 2020, 09:43

Quote:

Originally Posted by speedmiester

It is not just the legacy manufacturers. With EVs, the components required for a car also reduces which will have a direct impact of auto component manufacturers.
Plus the reliability and minimal service intervention of EVs also makes it tough for standalone garages and other associated services.

So, if i understand correctly, the economy of Germany is driven predominantly by Auto manufacturers and its ancillary component manufacturers.

Thermodynamics · 9th March 2020, 10:24

Germans are not far behind, might very well be in the lead

According to McKinsey's Electric Vehicle Index 2020 (source 1) (source 2) Germany could become the world market leader – slightly ahead of China – as early as 2021. Germans will increase share of global EV production to 29% by 2024 from 18% in 2019, when global EV sales totaled 2.3 million units.

The report has ignored Tesla's impact though. Corona outbreak could also play a caveat. However, it seems that German car makers are not far behind.

Quote:

Originally Posted by GTO

They have ample time to catch up & many have already rolled out their first round of EVs (Audi e-Tron, Porsche Taycan)

Quote:

Originally Posted by tsk1979

I am so shocked that Germany, with all its talent and Auto infrastructure, could not come out with a viable world beating electric transportation automobile company!

“McKinsey’s prognosis shows that contrary to what some critics say, the German automotive industry has by no means missed the boat when it comes to electric vehicles,” says Stefan Di Bitonto, automotive expert at Germany Trade & Invest (GTAI). “On the contrary, German carmakers indeed seem poised to overtake their Chinese competitors in terms of overall volume of EV production in the near future.”
Source

bugatti · 10th March 2020, 17:20

There's an article in the Nytimes today about Tesla's success in Europe.

Until recently European auto executives regarded Tesla with something like bemusement. The electric car upstart from California was burning cash, struggling with production problems, and hedge funds were betting it would fail.

The car executives are not laughing anymore. Almost overnight, the Tesla Model 3 has become one of the best-selling cars in Europe. In December, only the Volkswagen Golf and Renault Clio sold more, according to data...

The success of the Model 3, only months after it went on sale in Europe, has come as a shock to industry executives who only months ago were ready to write Tesla off. The company was building cars in a tent, for goodness’ sake.....

One of the Model 3’s big selling points is its autonomous driving software, which can be updated on the fly. The software, and a huge digital display on the dashboard, seems to be more important to buyers than the Model 3’s workmanship.

27th February 2020, 10:39	#31
sramanat BHPian Join Date: Dec 2014 Location: Bangalore Posts: 290 Thanked: 674 Times	Re: Are electric cars slowly pushing Germany into a recession? Let me preface by saying I am not a fan of Elon Musk and Tesla's valuation doesn't reflect reality. Its multiples are not at all comparable to other auto makers. Right around when Tesla was gaining traction, BMW and Mercedes hit an inflection point when China became their largest market. EV sales in China surpasses the US. Given that, I'd expect more trouble for them once the impact due to corona virus settles down. That said, around this time two years back, I had a road trip with a motorhead/music enthusiast colleague of mine to Bonn, Stuttgart, Munich, Salzburg etc. EVs on road in Germany were minimal despite what one would assume of the tree-hugging Europeans. The BMW museum in Munich had plenty of prime exhibits on how BMW saw the future of mobility (EVs!). Either that was just a lip service or they underestimated the market. I assume it is the latter and they have issues translating that vision/mission to production. We will see a pivot to EVs sooner. An anecdote - Around the time when fiat took over chrysler, I happened to attend a symposium by the late Sergio Marchionne. When someone asked him about something he had told a newspaper, he started his reply by saying that he doesn't read his own interviews/quotes because that'd inflate his own estimation of him. I think at some level BMW and Mercedes have fallen into that trap where what the market thinks about them is molding their own impression of themselves. (There are many stories of how the Chrysler guys were shot down because the Daimler guys wouldn't share platforms/parts with them, negating the hypothetical synergies they wanted to achieve with the merger. For instance, rather start with a chrysler sedan, they insisted on creating new car from the scratch - result was the disastrous A-class). They seem to think EVs will not give their customers the driving experience that their storied IC cars give. Tesla does not have that baggage.
	(1) Thanks

27th February 2020, 17:08	#32
GeeTee TSI Senior - BHPian Join Date: Jun 2015 Location: KA01 Posts: 1,246 Thanked: 2,729 Times View My Garage	Re: Are electric cars slowly pushing Germany into a recession? The impressive aspect of Tesla's dominance is that it has come due to a superior product (the car) complimented by a superior experience (superchargers) and not helped in anyway due to a closed or protectionist market nor unrealistic subsidies In a brand obsessed premium car market, the newbie (at one time) surged ahead under the very eyes of the established competition. Did the Germans (although applicable for any country's manufacturer) take cue and follow Tesla's path atleast? Not till very recently, from what I recall from various global auto shows
	(1) Thanks

27th February 2020, 17:18	#33
sagarpadaki Distinguished - BHPian Join Date: May 2010 Location: Bengaluru Posts: 4,213 Thanked: 5,881 Times	Re: Are electric cars slowly pushing Germany into a recession? Is the German economy predominantly dependent on VAG and other car manufacturers that a shift towards electric cars is pushing the whole economy into recession? I find it hard to digest this!
	() Thanks

27th February 2020, 18:07	#34
Dieselritzer BHPian Join Date: Jul 2012 Location: Mumbai Posts: 583 Thanked: 1,416 Times	Re: Are electric cars slowly pushing Germany into a recession? This is a classic Nokia case. Their ego and unwillingness to accept and react to change will cost them big money. Not just money, it will have far reaching social impact via reducing employment, market growth and poor investment flowing in the country. Nokia also denied acceptance to change. Kept blabbering that Symbian is the future whereas we the customers saw Android and IOS as the future. Similarly, if ICE based car manufacturers continue to blabber and push aside the growing acceptance to alternative source of energy and technology to drive vehicles, they'll soon be a name in history. Many a times, a company and its products are absolutely brilliant. But at times, the competition comes up with something that completely sweeps the market. CDs did this to floppys, touchpads did this to keypads, Tesla might do this to VW. They HAVE to adapt and do it fast. The word FAST is more important for VW group because SCALE, is an animal. When you do good, that animal will help you and protect you like a faithful dog. But when you slowdown and off-take reduces yoy, that same SCALE will become a wild animal willing to consume you with ever increasing losses, inventory pile ups and a dark red balance sheet.
	(1) Thanks

27th February 2020, 22:21	#36
CarJunki BHPian Join Date: Oct 2007 Location: Bangalore Posts: 238 Thanked: 347 Times	Re: Are electric cars slowly pushing Germany into a recession? Not sure how much of Tesla effect is hitting German economy. One thing is sure, Tesla is hitting the higher margin aspiration product. The German brands have been found sleeping at steering. Tesla is taking the fight to well entrenched players and that too with all the negativity projected by media around them. For all well entrenched players, media becomes an echo chamber and by the time market data becomes significant enough to clearly indicate ground shift it is too late.
	() Thanks

28th February 2020, 03:05	#37
landcruiser123 Senior - BHPian Join Date: Jun 2015 Location: Chicagoland Posts: 2,986 Thanked: 6,859 Times	Re: Are electric cars slowly pushing Germany into a recession? I wouldn't believe the articles stating Tesla caused a recession in Germany. I think most large auto makers were not taking Tesla seriously for the first 5 years after the launch of the Model S. That being said, EVs will result in huge Supply Chain disruptions- especially in countries like Germany, Japan, and Korea. Europeans are generally more environmentally conscious. That could be a reason why the big 3 in Germany are worried. Last edited by landcruiser123 : 28th February 2020 at 03:06.
	() Thanks

28th February 2020, 05:39	#38
tsk1979 Team-BHP Support Join Date: Feb 2005 Location: San Jose, CA Posts: 23,717 Thanked: 22,825 Times View My Garage	Re: Are electric cars slowly pushing Germany into a recession? Germany has always been at the forefront of Environmental regulation, with sweeping changes to laws etc., to give benefits to the electric and clean energy vehicles, and yet, it totally ignored the elephant in its backyard, the car companies. I am so shocked that Germany, with all its talent and Auto infrastructure, could not come out with a viable world beating electric transportation automobile company! I guess, this only proves, that sometimes, your strength is your biggest weakness.
	(3) Thanks

10th March 2020, 17:20	#41
bugatti BHPian Join Date: Dec 2005 Location: bangalore Posts: 99 Thanked: 84 Times	Re: Are electric cars slowly pushing Germany into a recession? There's an article in the Nytimes today about Tesla's success in Europe. Until recently European auto executives regarded Tesla with something like bemusement. The electric car upstart from California was burning cash, struggling with production problems, and hedge funds were betting it would fail. The car executives are not laughing anymore. Almost overnight, the Tesla Model 3 has become one of the best-selling cars in Europe. In December, only the Volkswagen Golf and Renault Clio sold more, according to data... The success of the Model 3, only months after it went on sale in Europe, has come as a shock to industry executives who only months ago were ready to write Tesla off. The company was building cars in a tent, for goodness’ sake..... One of the Model 3’s big selling points is its autonomous driving software, which can be updated on the fly. The software, and a huge digital display on the dashboard, seems to be more important to buyers than the Model 3’s workmanship.
	() Thanks