Terrifying vs. frightening Do not fear China's automotive industry!

China's car market is the largest in the world - and it continues to grow. Now, the Middle Kingdom has made it its mission to propel e-mobility to victory. Can this succeed and leave the German automotive industry behind?

"Man errs as long as he strives." This Faust quote fits perfectly as an assessment of the reports in the automotive daily and trade press surrounding the Shanghai Auto Show in the spring. Phrases like "full-on attack" were mentioned, as well as the idea that "to be successful worldwide, one must shine here." So, is China the new fountain of youth in the automotive world, from which the visions and volume of the automotive future are bubbling? In China, the car of tomorrow is supposed to be reinvented - no longer in Germany. Karl Benz and Gottfried Daimler, the inventors and innovators, are outdated. Is China changing the world?

Ten Giga-Factories Needed

According to estimates from university automotive institutes, by 2025 in China, ten million so-called New Energy Vehicles (NEVs) such as battery-powered cars or plug-in hybrids are expected to be sold annually. If we also consider the sales plans of Tesla, VW, Audi, BMW, Daimler, and other German and US manufacturers in a cautious estimate, the global sales volume of electric cars is expected to reach around 28 to 30 million by 2025. As an economist, one might ask: How and where will these be produced? To power 30 million electric cars with batteries, the world needs about ten Giga-Factories of the scale that Elon Musk is currently building in Nevada.

From Water to Wine

And where will the silicon raw materials and energy come from to build the battery cells and operate the global electric car fleet? I know, some economists are bad people, always pouring water into the wine of the beautiful, perfect world. The fact is: the future of automotive volume and employment lies in China. 25 million new car buyers annually, one-third of the world market, cannot be wrong! China has long become the largest and most dynamic sales market for VW and Audi, BMW and Daimler. There, real growth is still happening, not just meeting replacement demand. No doubt: The Shanghai Auto Show has become the most significant trade fair globally in just 17 years. It is on its way to surpassing the Frankfurt International Motor Show (IAA). While the exhibition space in Shanghai is expanding with double-digit growth rates, the VDA has already received a dozen cancellations from well-known car manufacturers and suppliers for this year's IAA.

Where Is the Entrepreneurial Spirit?

The German automotive press is impressed. In the past, it had become a habit to accuse the German automotive industry of being sluggish in e-mobility and emissions fraud, with no visions of future mobility. While the Auto China show was full of optimism and entrepreneurial spirit, with entirely new car companies sprouting up like shiitake mushrooms at the Shanghai Auto Show, such as Nio or Lynk, the IAA 2017 in Frankfurt was marked by timidity and gloom. Just a few months before the start, nine manufacturers had canceled: Alfa Romeo, Fiat, Jeep, Peugeot, DS, Nissan, Infiniti, Mitsubishi, and Volvo. In contrast, the auto show in Shanghai featured 2000 manufacturers and 1500 exhibited models. This is painful for the VDA, but manageable, as behind all the cancellations lies not only cost savings but also the admission that in saturated Western markets, there is nothing new to offer to the pampered audience. Different in China. The truth is: the Chinese auto industry may have the market with 1.3 billion people, but it has even fewer visions than the much-criticized German manufacturers at the upcoming IAA. Just two examples of Chinese startups Lynk and Nio and their highly praised touch of Chinese entrepreneurial spirit serve as evidence: Lynk is the Chinese sister brand of Volvo, both owned by the Chinese automotive giant Geely. The 03 Concept Car presented by Lynk in Shanghai, with electric drive and state-of-the-art connectivity, is aimed at the European market - and is a technology and design blueprint for the upcoming Volvo S40. It is based on the same CMA platform on which the next Volvo S40 and V40 will also stand. Good old Swedish or European engineering craftsmanship. Still more striking is the contradiction between appearance and reality with the newcomer Nio: Nio presented eleven models in Shanghai. In addition to the Formula E race car, Nio also showcased the EP9, which they claim to be the fastest electric car on the Nürburgring. Only ten units of the super sports car will be produced. Unit price: 1.4 million euros. The Nio ES8 is slightly less exclusive.

No Visions? Not at All

While the SUV is still a concept, the seven-seater is expected to hit the market in 2019 with all-wheel drive and an aluminum chassis. The over five-meter-long ES8 is powered by two electric motors. Nio has not yet revealed the performance data or the price. Also, at Nio, the cars are designed and developed by an internationally assembled crew. So much for Chinese visions. The visions for technical developments and design all come from abroad, the USA, and Europe, while the capital and the factory come from China. And what about the majority of over 200 Chinese no-name car manufacturers in Shanghai? They offer inexpensive cars mostly for rural areas with electric drive, whose acquisition will be highly subsidized by the state until 2020 and are by no means suitable for the global market. The design is such that even the German automotive press has refrained from showing the images to their readers. What does this teach us? The German automotive industry does have visions; the manufacturers, especially the German suppliers, are overflowing with them! According to an Ifo study, German manufacturers and suppliers are technological leaders in alternative drives internationally. One-third of patents in the field of electromobility and hybrid drives come from Germany! However: German automakers have 130 years of automotive experience; they know the laws of physics, mechanics, and chemistry very well and are therefore realists - albeit now without ties and in sneakers. Should the automotive industry fear China for its visions? No! On the contrary, Chinese cars are the ones to be feared.