How a German key industry ignores the paradigm shift
The phenomenon of a paradigm shift, a phase in which fundamental things change significantly, resulting in profound changes for certain areas of society, is often only properly recognized retrospectively. Sometimes, however, early signs can already be noticed, yet they are often ignored.
Recurring and omnipresent
Examples of a paradigm shift in the economic environment include the watch industry, where Swiss companies missed out on their own invention, the quartz drive, or the rise of renewable energies, which are currently disrupting the business of major energy producers like RWE, EON & Co., and are now being fought through lobbying.
Currently, we can observe such a phenomenon very closely and directly in the automotive industry, and the responsible individuals within the German industry giants still seem to not even remotely grasp the seriousness of the situation.
The topic has been more or less present in the media in recent weeks. Since the Dieselgate scandal at Volkswagen, which was uncovered by US environmental authorities, the question about the future of the German automotive industry has been more clearly and loudly discussed. However, the important issues do not seem to be consistently addressed. Other manufacturers are now also involved, and even the traditional and always meticulous company Bosch, as a supplier of engine control systems, is under scrutiny by US authorities.
The ongoing change is not new!
My first job after completing my Ph.D. led me to Daimler, where I underwent expert training as a Kaizen trainer and Lean expert. The spirit of Kaizen is known to involve constantly questioning oneself and one's actions. I did this by discussing topics like electromobility as an important aspect for the future of an automotive company back in 2007 and 2008. I argued that a company like Daimler, traditionally a pioneer in automotive innovations, needed to take action in electromobility and networking. However, my ideas were not taken seriously, and were even ridiculed. The excuses back then were the same as they are today, claiming that electromobility lacked range, batteries were expensive and heavy, and infrastructure was lacking. Additionally, it was considered a topic for "eco-fanatics," and electric cars were not seen as real cars.
Ignorance and arrogance – still prevailing
The term "eco-fanatics" has largely disappeared since Tesla has proven that electric cars can be cool and sexy. However, the rest remains the same. After the exposure of the VW fraud, the former CEO of Volkswagen, Martin Winterkorn, resigned, but his successor carries the same mindset. Matthias Müller, former Porsche chief and Winterkorn's confidant, took over and in 2015 referred to autonomous driving as a "hype" that would soon pass. During the Dieselgate scandal, he resorted to relativizing in a radio interview at the Detroit Auto Show in 2016, falsely claiming that Volkswagen had not lied. And as it has been known since early November, Volkswagen has no intention of compensating customers in Europe, as no regulations were violated in Europe, and the harmful effects of NOx emissions are being questioned.
The other German automakers are also great at making announcements about their plans. However, concrete actions are missing. Instead, billions are currently being allocated for the development of the next generation of combustion engines.
BMW may be the only German car manufacturer that has taken electric mobility somewhat seriously and has at least one real electric car in its lineup. However, looking at the price and marketing strategy, it seems that BMW does not really want to sell the i3. The price for such a small vehicle with limited range is very high, ranging from 40,000 to 50,000 euros, depending on the equipment. For just 20,000 euros more, you can already get a full-fledged 4-door car with over 300 kilometers of range, including a fast-charging network from Tesla. Both Nissan and Renault offer cars of similar size at a much better price and with greater range. It is no coincidence that the entire i-development team at BMW was poached by the Chinese startup Future Mobility, which includes the iPhone producer Foxconn. Electromobility seems to be more of an alibi event. Instead, the focus remains on the old and still profitable technology.
The auto industry - The welfare of German jobs?
The astonishing thing is that both German auto managers with their lobbying association VDA and German politicians are doing everything to finally destroy jobs in Germany, despite claiming the opposite. Clear measures to counteract the ignorance of recent years are completely missing.
- Driving bans for dirty diesel vehicles are not being enforced.
- The Federal Motor Transport Authority is either not acting or acting very hesitantly in the context of the Dieselgate and fraud scandal.
- Authorities still do not have the right to conduct road tests under real conditions, which must also be part of the approval process.
- Mandatory new regulations at the EU level, requiring consumption and emission values to be reported to at least approximate reality, are being blocked by German representatives. The same goes for the urgently needed tightening of emission limits.
- The idea of not allowing combustion engines after 2025, as Norway has already decided, is off the table.
- Germany still refuses to consider implementing a long-overdue speed limit.
The promises made by Wolfsburg, Ingolstadt, Stuttgart, and Munich so far are just announcements. Trade shows showcase studies and models, but no real, orderable products. The competition already offers much more. What competitors like Tesla, Nissan, Renault, and others can do today, German manufacturers will only make available between 2018 and 2020 at the earliest. Tesla already has a comprehensive charging infrastructure in place.
Do the executives in Germany really believe that competitors will do nothing until 2018 or 2020 and wait for German manufacturers to catch up? The naivety with which they view the topic despite the clearly visible situation is extremely alarming. The German market is almost insignificant worldwide, and the protective actions of VDA, auto managers, and parts of the government are futile because changes are already happening and will continue - with or without German involvement.
It gets even worse
In Europe, when discussing electromobility, many mention Tesla, Renault, and at best Nissan. In addition to the aforementioned startup Future Mobility in China, there is the battery manufacturer "Build Your Dreams," or BYD, which has been building electric cars for several years. The Indian manufacturer Tata is also very active in this field. These manufacturers are not yet visible in Europe and therefore hardly in focus, but they are extremely present in key markets in East Asia. Toyota and Hyundai are leading in fuel cell technology, and Tesla is no longer just an automaker but a mobility service provider with integrated power generation and battery production.
What we are currently experiencing is an extreme paradigm shift, a disruption of the automotive industry that could hardly be more evident. Disruptive effects have occurred repeatedly in the automotive industry, and the culture of Silicon Valley has always focused on and promoted this willingness to change - with all its advantages and disadvantages. Companies must learn to deal with disruptive effects and recognize and shape them, even at the risk of misjudgment. Automakers cannot afford to be mere product manufacturers of vehicles, as they have been for the past decades. They must think and act in a connected and service-oriented manner. The automobile as a status symbol and individual mobility are playing an increasingly smaller role.
One inevitably gets the impression that German automakers and their lobbying association VDA are doing everything to keep their outdated technology alive for as long as possible because they are familiar with it and still make money from it. At the same time, doubts against this approach are increasing. These voices are not only coming from environmental organizations but now even from the IG Metall union, which is demanding a clear departure from gasoline and diesel cars.
Blaming others is always the easy way out
When the Volkswagen fraud scandal was uncovered, many accused US authorities of protectionism. While these assumptions may be possible but unlikely, it was Volkswagen that provided the evidence. The quota for electric cars in China, including emission certificates, would put German manufacturers at a significant disadvantage in the Chinese market. This action is also heavily criticized by German representatives and interpreted as protectionism. These objections are more than unjustified, even if protectionist intentions are behind them. It is always easy to blame others for one's own failures, but it does not help. Instead, one must recognize and learn from their own mistakes in the hope that it is not too late.
In the FAZ, it was reported that VW's HR chief Karlheinz Blessing expects five-digit job losses due to electromobility. This could indeed happen, and there could be even more, as large parts of the supply industry will no longer be needed in today's form of electromobility. If this were to happen, it is not due to "evil" electromobility. It is due to the failure of the responsible managers in the automotive industry of today and the past years. They could have listened to and seen the warnings and taken new paths but completely ignored them because their incentive systems would not have rewarded disruptive approaches and strategies. They are managers, not entrepreneurs. And now it might be too late.
