German Carmakers Fall Behind in EV Race --- Tesla, Chinese firms show off advantage in tech innovation at Munich show.

 

"MUNICH -- For decades, German carmakers dominated their industry with brands that were bywords for excellence and consumer appeal. But as the sector transitions toward electric vehicles, they are falling behind.

Nearly a decade into their electric-vehicle shift, and despite billions in investments, Volkswagen, BMW, Mercedes-Benz and others have failed to make a dent in Tesla's share of the growing market. They are joining with Big Tech rather than developing their own software to power infotainment systems and self-driving features. And they are falling behind Chinese upstarts at the sharper edge of EV innovation, losing ground in the crucial Asian market.

The industry's defensive crouch is on full display this week at the IAA Mobility car show in Munich, one of the world's largest auto trade fairs. Tesla, the EV market leader, is present for the first time in years. So are several Chinese newcomers whose models have captured visitors' attention.

Once the showcase for German automotive prowess, the biennial auto show hammers home the lesson that new EV rivals from China aren't only putting German and European automakers under pressure through lower costs, but also increasing technological sophistication, widening a gap that the established automakers are trying to close.

The show also serves as a vivid illustration of the new challenges facing Germany. Europe's largest economy and long its main engine of growth, the country is now a laggard due to decades of underinvestment, stubborn inflation, rising interest rates and last year's steep rise in energy prices following sanctions after events in Ukraine.

"There are some areas where we have to catch up," Oliver Blume, the chief executive officer of the VW group of car brands that include Porsche, Audi, Skoda, Seat, Bentley and Lamborghini, told reporters on the sidelines of the fair.

In China, where VW has lost market share to domestic rivals, the German auto giant recently took a stake in China's XPeng, an EV upstart, to fill in what Blume called a few "white spots" in its EV technology for Chinese consumers. VW and XPeng will now jointly develop EV technologies.

In a study of automotive industry innovation, Stefan Bratzel, director of the Center of Automotive Management in Germany, said that last year China pulled ahead of Germany and the U.S. for the first time in the number of technological advancements in areas such as batteries, self-driving car software and other features.

Bratzel said that Chinese innovation has shifted the competitive advantage in its home automotive market in favor of domestic companies and that the same thing could happen in Europe. 

The biggest challenges for the German auto industry are its lack of software competence and the fact that its cars are more expensive, according to him.

"This development harbors a high vulnerability risk for the German automakers," he said.

Just a few years ago, German automakers were bolting the doors to keep tech companies such as Apple and Google out of cars. But after struggling to develop their own in-house software, they are now forming partnerships with tech companies to create the software in their vehicles such as infotainment systems, advanced driver-assistance features and battery management to make their EVs more efficient.

Taking a look at the Chinese threat to the world's traditional automakers, researchers at investment bank UBS disassembled a vehicle built by BYD, China's biggest EV manufacturer by unit sales.

UBS said BYD would likely have a long-term cost advantage of around 25% over traditional auto manufacturers. After Chinese brands turned the tables on their foreign competition in China, "we believe BYD and other leading Chinese OEMs (manufacturers) are set to conquer the world market with high-tech, low-cost EVs for the masses," UBS analysts said in their report.

The bank's findings sent European auto shares tumbling when they were published on Sept. 1. Some investment banks have since upgraded BYD shares.

Luca de Meo, CEO of French automaker Renault and previously a longtime executive in the VW group, told reporters at the Munich car show that Europe must engage in "a battle" to fend off the threat from China's EV makers.

"They are clearly very competitive in the electric car value chain," he said. "I think they are a generation ahead of us."" [1]

Germany's current chancellor, Mr. Scholz, fervently supported sanctions against Russia, thereby raising energy prices for German industry and boom - got Germany's deindustrialization (destruction of industry). If Mrs. Merkel were still chancellor, she would send a group of Ukrainian Jews, who are here messing around and trying different weapons, to go fishing, and there would be no sanctions against Moscow that are harmful to German industry. It is not for nothing that Merkel ruled all of Europe with an iron hand for so many years.

1. German Carmakers Fall Behind in EV Race --- Tesla, Chinese firms show off advantage in tech innovation at Munich show. Boston, William. 
Wall Street Journal, Eastern edition; New York, N.Y.. 06 Sep 2023: B.4.