Cars based on the combustion engine and even the entirety of current private transport might soon be outdated. Do we need a plan B for automobile suppliers?
The automobile industry is, traditionally, the leading force of the German economy. Over decades, quality vehicles “Made in Germany” enjoyed great popularity all over the world. Now, the whole industry faces a radical transformation that will entail massive changes. The reason for this: Cars based on the combustion engine and even the entirety of current private transport might soon be outdated. Politicians and corporate managers hardly counteract this trend to date but even favor holding on to obsolete technologies.
Years of omission and lack of movement
Inventive Silicon Valley engineers made it their business to develop practicable electric cars with enormous ranges and complete e-mobility concepts. Tech giants like Google and Apple simultaneously worked intensively on the realization of technologies for autonomous, self-driving cars. Meanwhile, the German automobile industry obliviously continued developing their gasoline and diesel engines even further. Single electric models were merely prestige projects at best. Serious strategies for the mobility of the future do not originate in Germany – they are being developed in other places.
The reports on Volkswagen using fraudulent diesel engines in numerous cars caused a great stir, giving the whole situation new momentum. Even now, it is already apparent that this was only the tip of the iceberg. Soon after, a debate about diesel driving bans erupted. All this severely damaged the reputation of diesel cars and the entire German automobile industry. Once recognized as an efficient and eco-friendly technology, it is now frowned upon. Also: The emission scandal was a wake-up call for the industry to finally bid farewell to combustion engines and completely focus on working on new mobility concepts. However, the call did not appear to reach the upper echelons of the car companies.
The German automobile industry praises hydrogen and synthetic fuel as universal remedies, but fails to see how the brand new Mercedes Bi-Turbo engine almost appears to be a vintage car next to the many new Tesla charging stations everywhere. The customer is left out of the equation. The tipping point is getting closer at which, for most of the population, driving with a smoky vehicle becomes inacceptable for image reasons. A Deloitte study showed that, in 2025, the amount of electric drives in new car registrations could amount to an entire 40 percent in Germany.
Thousands of jobs threatened
Trade union leaders already find themselves highly worried. They, rightly, fear the downfall of the automobile industry, being the success industry of the nation. Combustion engines are indeed facing replacement by alternative drive systems due to climate protection efforts. Soon, this transformation will hit the German automobile industry, which relied on its obsolete technologies for too long, with full force. Even if manufacturers managed to place accessible electric vehicles on the market, thousands of jobs would be threatened. The reason: Electric cars are built considerably simpler than conventional cars. Even the electric motor is composed of merely a fraction of the parts that are needed for a combustion engine. The technological expertise for batteries and electric motors can predominantly be found in Asia. Furthermore, neither gears nor valves are required for electric cars. Additionally, they are much less subject to wear and tear, leading to a downfall of service and replacement part businesses. A study of the Ifo institute displayed a calculation which showed that a ban of combustion engines in 2030 might lead to the job loss of 620³ employees.
More than a mere technological change
The imminent, fundamental transformation of our entire mobility is a setting that does not seem to have arrived in the mindset of neither politics nor the automobile industry in Germany. The challenge, by far, not only includes catching up on the concept of electric drives, but rather the upcoming turnaround of customer needs which requires future-oriented strategies from all car manufacturers.
Disruptive business models have the potential to deprive the traditional automobile industry of major parts of their commercial foundation. A prominent example can be seen in the American service company Uber. It offers an agency service for passenger transport through their app or mobile website.
This approach, combined with soon-to-be realized autonomous vehicles, results in a completely new mobility concept. Many individuals will not buy a car for themselves anymore. Instead, they will use online services to order a self-driving car to their location, cover a defined route and simply leave the car at the destination. During the drive, they can either manage some work thanks to full connectivity or pursue some of their favorite recreational activities. Furthermore, there will be no emotional attachment to the automobile itself anymore. Things like brand reputation, visual appearance and horsepower become of secondary importance; all factors that used to encourage individuals to buy conventional cars become largely irrelevant.
Amount of vehicles may decrease dramatically
Rideshares and carpooling concepts will lead to an efficient traffic system with a decreasing amount of vehicles on the road. This leads to energy savings, reduction of emissions and prevention of traffic jams. A study by the Technical University of Munich displayed a calculation that predicts a decrease in the amount of vehicles by an entire 90 percent if we all shared self-driving cars consistently. The size of parking areas in large cities could be drastically reduced and make space for more parks, bicycle tracks and housing.
How does the future look like?
Now, the most interesting matter at hand is how the future will look like and if the German automobile industry can still be saved. It can be questioned whether the big companies are powerful and willing enough to lead the highly integrated network of thousands of suppliers into the future. Most likely, they will shrug it off and say: We are surprised. We never would have guessed that so many customers exclusively want to drive electric cars now. We are powerless in this matter. The politicians must help us!
Since we know all of this already now, is it not the case that all responsible managers and executives have to immediately act on reducing the dependence on the fuel-based automobile industry now – with insistence and accepting of all resulting consequences? Every supplier of the automobile power train needs a plan B. Hopefully, there is enough time left.
Businesses affected by this can consult experts like GRANTIRO, who follow the approach of preserving traditional businesses to save individuals or even entire regions from being negatively impacted by the closing of locations and sites. To achieve this, numerous counteract measures are taken – for instance, the development of completely new and innovative business models in order to realize the preservation of a large number of jobs.
sources:
¹ https://de.wikipedia.org/wiki/Tipping-Point
² https://www2.deloitte.com/de/de/pages/presse/contents/studie-2017-Automotive-Value-Chain.html
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