By on March 8, 2010

A couple of weeks ago, TTAC reported how Dieter Zetsche was re-elected as CEO of Daimler for another 3 years. In that article we mentioned the many challenges that face him. Mainly, how to make Daimler sustainably profitable. Size matters in the auto business. An unattached Daimler has a hard time achieving the economies of scale someone like say Audi or Lexus can. So unless Daimler fancies being taken over (and we all know Daimler likes to be on top in any tie-up) it’ll have to form partnerships and joint ventures to get those cost savings Daimler needs. The big arranged wedding between BMW and Daimler isn’t going anywhere. Instead, Daimler announced that it had formed a partnership with Renault to produce the new generation Smart car. Then, Daimler announced it had formed a partnership with BYD to develop an electric car for the Chinese market. Now Daimler is trying to form a new partnership to achieve massive cost savings: A partnership with the tax payer.

Germany’s Handelsblatt reports that Dieter Zetsche is urging the EU Commission and the German government to provide financial assistance for the development of electric cars. “To support the development of alternative engines, we need positive conditions,” said Zetsche, who is also head of the European Automobile Manufacturers’ Association (ACEA). “At the same time it’s necessary to build the appropriate infrastructure.” Zetsche went on to say that establishing new technology is expensive and that only help from the EU, for a limited time, can bring this technology to market. Herr Zetsche wasn’t the only CEO from a German car company calling for this “partnership”.

“We would welcome in the beginning phase government support for the acquisition of electric vehicles, which will be significantly more expensive than other vehicles,” begs BMW boss Norbert Reithofer, another company in dire need of economies of scale. “The EU Commission should also clarify how it plans to support electric autos.” As reported by The Local, Martin Winterkorn, CEO of Volkswagen, also would not turn down government money. “Compared to what neighbouring country France has invested in similar programmes, the amount is relatively low.”

Ah, the ol’ “if the Frenchies get it, so should we” ruse.

Not only is Germany way behind the curve when it comes to the electrification of cars, Handelsblatt says Germany is lagging behind other countries in helping electric cars to market. The United States is giving a tax break of nearly $8000 per vehicle, the UK are offering up to $7500 per vehicle, in China, customers will get $9000 per electrified vehicle. Germany has pledged $680m to get one million electric cars on the roads by 2020. That works out to a pittance of $680 per vehicle. You know what? The German Auto industry should be grateful if they even get that.

The Local also reported that Germany’s budget is a train wreck about to happen. Total government spending is forecast to reach €319.5 billion. Trouble is, tax revenue is only expected to collect €211.9 billion. In fact, after financial wrangling in the centre right coalition, the deficit could be, at best, €80.2 billion (imagine that showing as your overdraft). Which means cuts will have to be made and, I’m guessing, they’ll be savage ones. So, does the German auto industry really think they have a shot at getting these extra subsidies? Especially, when you take an honest look at what electric cars really give you.

According to Wikipedia, the efficiency of a fossil fuel power station is poor. To quote “Typical thermal efficiency for electrical generators in the electricity industry is around 33 percent for coal and oil-fired plants and up to 50 percent for combined-cycle gas-fired plants” (Thermal energy which is converted into mechanical energy which is subsequently turned into electrical energy). Also, don’t forget, the emissions of a fossil fuel plants aren’t fresh air and water; it’s greenhouse gases, and plenty of them. So the efficiency of electric cars is really called into question here. Does the fact that an electric car, which produces no emissions in itself, make up for the increased emissions which fossil fuel power stations will emit? And Germany has a lot of fossil fuel power stations. In fact, our friend Wikipedia says that Germany’s main source of electricity is still coal and that they plan to build 26 new coal plants. 22 percent of Germany’s energy comes from natural gas, which comes from Russia. Russia has shown a tendency towards turning off the gas when someone looks at them askew. So Germany, and the rest of Europe, wants to wean itself from what comes out of Russian pipes. Building nuclear plants is considered an impure thought in Germany, ever since the then red/green regime had decided in 2000 to stop building new nuclear plants, and to phase existing ones out until 2020. Coal Germany has in abandon. Wikipedia figures that peak coal would be reached in 400 years in Germany. Or in 900 years. Nobody knows for sure. But coal stinks.

So to recap, the German Auto Industry has asked for more subsidies, at a time when the German government needs to be more prudent, subsidies for a “green” technology that is dependent on smokestacks. Blimey. How can the German government refuse an offer like that?

There is however one saving grace for the German Auto Industry. The Germans are next door to France. Now France has a different energy policy. Their electricity infrastructure is based heavily on nuclear and hydro-electric. Two sources which are carbon friendly (though in the case of nuclear, it produces waste which is far more harmful, but work with me here). Now given that Daimler is forging closer ties with Renault to build cars in France, could the rest of the German Auto Industry try to ingratiate themselves to the French government (which is quite pro-electric cars) for those subsidies which the German government will almost certainly refuse? The French like to look after their own (not that looking after your own is a bad thing, I’m not casting judgement here), but when those people who knock at your door are outsiders, bringing possibilities of extra jobs and money to your country, maybe you should put the kettle on and be a bit more welcoming?

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5 Comments on “Deutsche Auto Elektrifizierung: Gotta Pay To Play...”

  • avatar
    Tricky Dicky

    Cammy – the scenario of the German auto companies making a tactical bet to sidle up to the French gov’t to somehow accelerate the introduction of EV infrastructure, seems to me to be about as likely as that “Professor” Gilbert chap uncovering the root cause of the Toyota UA problem.

    I make no comments about the German energy policy, but what I do see for the likes of Damiler and BMW is that they are both suffering from a lack of clarity about what future powertrain types will prevail. Last year BMW abandoned research for hydrogen combustion engines, but to date, Mercedes are developing in parallel all powertrain possibilities, leading to huge and unfocused CapEx.

    I think the Germans would probably prefer to see Hydrogen Fuel Cell vehicles coming to the fore, but full BEVs seem to be capturing the imagination of those deciding government incentives and they can’t take the risk of betting against this.

  • avatar

    The problem with government trying to pick technology winners is that government has just about as many chances as any other lottery ticket buyer.

    The chances of the $8,000 US taxpayer subsidy resulting in a healthy and growing electric car market in the U.S. by 2020 are rather slim.

    The Germans will do better by continuing to sell their advanced diesel technology, and perhaps dabble a bit in hybrid, even though the hybrid market seems to be stalled right now.

  • avatar

    The value of govt subsidies for alt fuels and alt fuel vehicles is to help resolve the old chicken and egg problem, i.e. mfrs won’t make elec cars until the public will buy them, the public won’t buy elec vehicles until the infrastructure is in place, and the utilities won’t put the infrastructure in place until the demand is there. And even tho the current system will simply move the carbon outputs from one source to another, centralizing the carbon source creates an better opportunity to mitigate (sequestration, feedstock for algae farms, etc.), and moving the demand from fossil fuel to elec will stimulate production of elec from alt sources. The point isn’t that we get an immediate solution to pollution problems, but that we get the ball rolling towards a sustainable system down the road.

  • avatar
    A is A

    For the record: Vattenfall is the Swedish power company we owe to the development of the seat belt in the 1950s.

    Thank you, Vattenfall.

  • avatar

    Regarding government subsidies of promising technologies, it might be time to add awards for actual working product as an alternative to subsidies for mucking about. Dava Sobel’s Longitude described how accurate marine chronometers came to be. Nothing up front, but a whopping big reward offered by the British for a workable prototype. Faced with success, HM’s government then tried to weasel out of the award, but eventually did pay the prize.

    As to nuke power, the more sensible Greens see it as a part of the solution. Storage at Yucca, for example, would have worked. The biggest worry is the first half century when the waste is thermally hot – which leads to a higher rate of containment corrosion. We need a solution for 100 years; by then our descendants will find a better alternative.

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