Deutsche Auto Elektrifizierung: Gotta Pay To Play
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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