The Chinese aim to boost sales of electric vehicles. The news is a warning shot – and possibly the death knell – for German carmakers, who have relied on the Chinese market for sales of luxury gas guzzlers made in Germany. Craig Morris explains.
A few years back, China announced its 12th Five-Year Plan, which included some interesting commitments to solar energy (PDF). Today, we see the result: Chinese firms dominate cell and panel production – using, it should be added, production lines largely from Germany. This outcome should not have surprised anyone. Solar panels are hardly more high tech than radios, and Germany is not exactly a major manufacturer of such devices today. China is. Germany remains a maker of heavy equipment requiring great engineering expertise. So German firms generally serve other companies (business-to-business or B2B), not retail customers (B2C).
The biggest chunk of metal most people are likely to buy today is a car. Cars are also among the smallest things most of us are likely to buy from Germany. The sector is therefore crucial to the German economy – probably the most important of all. And it’s about to get its clock cleaned.
When China announced plans this summer to boost sales of EVs, it drew a lot of attention – and American commentators viewed the move as a reaction to Tesla’s success. The German reaction is a bit different; let’s face it, no German carmaker is a real EV player. So the Germans are worried about losing their biggest market for luxury gas guzzlers.
German industry minister Sigmar Gabriel says the plans aim directly at shutting out German carmakers, but he doesn’t have a leg to stand on: the German bonus for EVs only applies for cars costing less than 60,000 euros, thereby shutting out Tesla.
Starting in 2018, “credit points” will be tallied for EVs and hybrids. The details are unclear, but it is likely that an EV will get two points for each point a hybrid gets. The goal is for the credits points to make up 8 percent of all car sales in 2018, rising to twelve percent in 2020. VW currently sells three million vehicles in China (compared to 700,000 in Germany), so it would need to produce some 60,000 EVs or 120,000 hybrids to have 10 percent EVs – or purchase credits from other companies if it still only sells gas guzzlers. The policy is quite clever; the old firms might end up subsidizing the new ones.
Suddeutsche Zeitung puts these numbers in context (report in German): BMW (the German EV leader) sold 380,000 cars in China in the first three quarters of this year. Ten percent would be 38,000 EVs – but the firm only sold 1,800 (600 of which were hybrids and would only count half). So BMW would have to increase the share of EVs it sells some 20 fold – starting 14 months from now.
Chinese cities are also starting to “auction” new car sales to reduce the growth of vehicles in urban areas. Those who buy an EV don’t need to take part in the auctions.
Recently, I wrote about how German carmakers are likely to get a wake-up call from Tesla and others if they do not move quickly towards EVs. Even if Germany does not ban cars running on gas and diesel, other governments might, and German car firms could be left selling a technology – the internal combustion engine (ICE) – consumers no longer want. German politicians also fail to grasp the urgency of the matter. The recent news about German parliament wanting to ban ICEs by 2030 was a canard; the print edition of German news weekly Der Spiegel has even followed up with a story about how the parliamentarians did not even know what they were signing when they adopted the call for a ban on ICEs.
Increasingly, it seems that German experts – policymakers and businesspeople – are failing to read the writing on the wall. It reads: the era of ICEs is over. And with some 800,000 jobs in the German automotive sector, the country can’t afford to lose all these companies.
Yet, if China’s transition to EVs looks anything like its commitment to solar manufacturing did, Germany is about to lose the centerpiece of its industrial powerhouse. We may soon be driving EVs made in China – possibly by robots built and designed in Germany, just as is happening now with solar.