{"id":40936,"date":"2023-01-22T12:03:42","date_gmt":"2023-01-22T17:03:42","guid":{"rendered":"https:\/\/autosector.com\/?p=40936"},"modified":"2023-01-22T12:03:42","modified_gmt":"2023-01-22T17:03:42","slug":"german-car-industry","status":"publish","type":"post","link":"http:\/\/autosector.com\/?p=40936","title":{"rendered":"Germany\u2019s make-or-break moment to defend its auto industry is here"},"content":{"rendered":"

Germany for decades led on well-engineered\u00a0combustion\u00a0cars. It\u2019s now facing a watershed year in the quest to retain an edge in the age of electric vehicles<\/a>.<\/p>\n

Europe\u2019s biggest economy is under growing pressure to retool dozens of fossil fuel-era factories employing tens of thousands of workers in a race for clean-technology leadership with the\u00a0US and China<\/a>. Volkswagen<\/a>, Mercedes-Benz<\/a> and BMW<\/a> are rolling<\/a> out several new battery-powered models in the coming months that will be pivotal to\u00a0proving\u00a0they can finally start to narrow the gap to Tesla<\/a> and China\u2019s BYD, the two clear leaders in EV sales. At stake is nothing less than Germany\u2019s future as a global industrial powerhouse.<\/p>\n

The task looks more complicated than ever. The war in Ukraine has whipsawed energy prices in Germany, which had to turn its Russia-reliant energy policy on a dime. China, which is emerging from lockdowns, has built a sizable lead\u00a0processing the raw materials underpinning the EV revolution. Its homegrown carmakers \u2014\u00a0propped up\u00a0with huge sums of\u00a0state support \u2014\u00a0are now\u00a0expanding in\u00a0Europe.<\/p>\n

The latest threat\u00a0has cropped up in the US, where\u00a0President Joe Biden<\/a> is luring EV suppliers with $370 billion worth of clean-technology subsidies in\u00a0the Inflation Reduction Act.\u00a0Tax credits incentivizing the assembly of\u00a0battery<\/a> cells and packs are so generous that\u00a0the US has the potential to become the\u00a0most\u00a0profitable location in the world for production, UBS analysts said last year.<\/p>\n

Calls on Germany and the European Union to respond in kind are getting louder by the day. The threat posed by the IRA has been a\u00a0recurring topic\u00a0in talks at the World Economic Forum\u2019s annual gathering in Davos this week, with several European leaders demanding\u00a0more aggressive subsidies at home. They\u2019re unhappy about the US\u2019s approach,\u00a0which they say favors American firms and puts their EU rivals at a disadvantage.<\/p>\n

Interestingly, Chancellor Olaf Scholz hasn\u2019t complained much, despite having as much\u00a0to lose as anyone.\u00a0The automotive industry employs around 786,000 people in Germany and is the country’s biggest in terms of investments, sales and exports. Any setbacks for the nation\u2019s carmakers and their suppliers would reverberate throughout the wider German economy.<\/p>\n

In an interview with\u00a0Bloomberg News<\/em> Editor-in-Chief\u00a0John Micklethwait this week, Scholz struck a conciliatory tone, saying his government appreciates and broadly supports what Biden is trying to achieve, and is \u201cworking very hard to avoid\u201d a trade war. That\u2019s understandable, given Germany\u2019s reliance on\u00a0exports. But the consequences of missteps remain \u2014 just ask the UK, which is reeling from the\u00a0collapse of Britishvolt, a company the government was counting on becoming a big domestic battery player.<\/p>\n

Berlin last week pledged an additional \u20ac1 billion\u00a0($1.1 billion)\u00a0for battery projects as part of a larger European aid package, but that\u2019s dwarfed by what the US is offering.\u00a0BloombergNEF has tracked almost\u00a0$28 billion\u00a0in new electric mobility-related investment announcements in North America since the IRA passed in August.\u00a0Europe\u2019s best hope for a homegrown battery startup, Sweden\u2019s Northvolt, is considering delaying\u00a0plans for\u00a0a major cell factory in Germany, and instead expanding first in North America.<\/p>\n

Germany won\u2019t completely miss out.\u00a0China\u2019s\u00a0CATL, the world\u2019s biggest maker of EV\u00a0batteries, has started production\u00a0at its first European cell plant\u00a0in the eastern German city of Erfurt. Volkswagen is building a battery factory in Salzgitter\u00a0that will be able to produce 40 gigawatt-hours of cells per year, enough for roughly 500,000 EVs.<\/p>\n

But the country\u2019s carmakers still have a ways to go in\u00a0convincing\u00a0drivers to buy into\u00a0their EV shift. Tesla\u00a0last week made\u00a0deep price cuts\u00a0in the US and Europe, on the heels of\u00a0two rounds of reductions in China. Those are\u00a0signs Chief Executive Officer Elon Musk<\/a> is willing to act aggressively to keep the company growing.<\/p>\n

Musk\u2019s erratic behavior in recent months may\u00a0create\u00a0an opening for mass manufacturers like Volkswagen, but the German giant needs to fix software issues that have recently put off buyers.\u00a0Both BMW and Mercedes<\/a> have made messes\u00a0recently with their attempts to squeeze owners for more money to unlock\u00a0software-enabled features. All three manufacturers need to sort out\u00a0supply chain issues\u00a0that have contributed to declining sales.<\/p>\n

Germany and Europe \u201crisk falling behind\u201d in the global race for clean mobility, Hildegard M\u00fcller, who heads Germany\u2019s VDA auto lobby, said last week, after the country\u2019s carmakers met with Scholz in the chancellery. \u201cBerlin and Brussels must ensure Europe’s competitiveness as quickly as possible.\u201d<\/p>\n

Related video:<\/strong><\/p>\n