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Interesting post. When Chinese EV & battery industry try to...

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teiris

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29/08/24

09:37

Post #: 75428707
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Originally posted by Coolhawk: ↑

Also an interesting story in an online magazin in germany "Wirtschaftswoche":

VW, BMW und Co.: Wie Autokonzerne absichtlich ihre E-Autos ausbremsen (wiwo.de)

Nearby the translation with Deepl.com:

Electric cars are not selling as hoped. New data shows that this is exactly what car manufacturers such as VW want: because they are short of cash, they prefer to sell high-yield combustion engines.

The plan of politicians and the car industry seemed unmistakable: the electric car should conquer the market as quickly as possible. In some regions of the world, the transformation would be faster than in others, but basically the battery car should only go in one direction: upwards.

However, where the transformation is actually taking place, in car dealerships, things have often been moving in the opposite direction since the beginning of the year. ‘A decline in the market share of e-cars can currently be observed in numerous EU countries - progress in electromobility is stalling,’ observed Axel Preiss, automotive expert at management consultancy EY, in July. In Germany, 20 per cent fewer purely electric cars were sold in the first seven months than in the same period last year.

Car managers are contrite, calling - like VW boss Oliver Blume - for temporary purchase bonuses or tax breaks to get sales moving again.

On closer inspection, however, it turns out that the slump in electric car sales is not as dramatic for manufacturers as it appears. What's more, the slump is not just fate, it is also following a script - written by the manufacturers.

The story goes like this: The car companies achieve the EU's CO2 targets with the mix of combustion and electric cars they currently sell. This means they do not need to sell more e-cars for the time being. In recent months, they have therefore turned their attention to another goal that they consider to be at least as important: Making a profit. Many high-volume manufacturers are finding it very difficult to achieve their announced profit targets. So they are using low prices to boost sales of petrol and diesel cars because they earn significantly more money with them than with electric cars. And climate protection? Comes later. Only when the EU's CO2 target values fall further in the coming years will manufacturers actually be forced to sell significantly more electric cars.

Insiders from the car industry openly admit that this is not just crude speculation. In the coming months and years, as a senior VW manager explains, the traditional car companies with their combustion engine portfolio will have one last chance to improve their returns, especially with petrol cars. Even if the range of e-models continues to be ramped up in parallel, the pragmatic decision will probably be made for a while yet: in favour of cash, against climate protection.

Returns are currently the central issue at Volkswagen, as research by Handelsblatt also shows. According to the Handelsblatt, the VW brand is two to three billion euros short of achieving its annual targets. When presenting the half-year figures, Group CEO Blume said that everything at VW was currently ‘all about costs, costs, costs’.

More room for less climate protection

The car manufacturers' room for manoeuvre has resulted from the fact that they have been able to sell more purely electric cars in recent years than originally assumed by Brussels. Because e-cars can be set at zero CO2 emissions under EU law, they reduce a manufacturer's average greenhouse gas emissions enormously. According to a study by the environmental organisation ICCT, the average CO2 emissions of all manufacturers' cars sold in the EU in 2023 were therefore below the legal limit. The situation is likely to be similar this year. Stricter upper limits will only apply from 2025.

Even then, however, manufacturers will have a number of alternative options, as the example of Volkswagen shows. Last year, 12 per cent of the Wolfsburg-based company's sales in the EU were purely electric. According to the European environmental organisation Transport & Environment (T&E), it would have to be around 24 percent to meet the 2025 target. Only Ford and Mercedes are similarly far away from the 2025 target in Europe.

Nevertheless, Volkswagen is by no means forced to double its sales of e-cars from now on. The Group could do what its competitor Toyota has been doing for years: pooling with manufacturers that have particularly low CO2 emissions. In the case of pooling with Volvo, VW's share of e-cars would only have to rise to 19 per cent, and to just 15 per cent in the case of a deal with Tesla. According to T&E's calculations, Ford and Mercedes could also achieve their targets more easily through pooling.

Fill your pockets first

Now that the EU's CO2 limits have temporarily lost their terror, manufacturers can turn their attention to the topic of profit optimisation. It is noticeable here: The further away manufacturers are from their profit targets, the more they promote sales of combustion engines.

With a return on sales of 9.6 per cent in the first half of the year, BMW is at the upper end of the promised corridor (8 to 10 per cent), while Mercedes' 10.2 per cent is also in line (10 to 11 per cent). Both manufacturers are trying to get their e-cars on the road with comparatively low prices, as the Centre Automotive Research (CAR) in Bochum found out. ‘It is striking that the German premium car manufacturers, above all BMW, tend to keep the price range between the electric car and the combustion engine rather small,’ according to a recent CAR study.

For the study, the actual sales prices of 20 electric cars were compared with the actual sales prices of comparable combustion engines. On average, the e-cars were 21 per cent more expensive. However, the figures for the individual manufacturers vary widely. BMW was content with an increase of 6 per cent for the iX1 e-model and 8 per cent for the i4 compared to the equivalent models from the combustion engine world. Accordingly, BMW is currently also successful in terms of e-car sales. At Mercedes, the differences were between 7 and 15 per cent.

The picture is completely different for volume manufacturers such as Volkswagen or Stellantis. The VW ID.3, for example, is a whopping 40 per cent more expensive than the comparable VW Golf, and the gap between the ID.5 and VW Passat is just as large. The electric Opel Corsa and the electric version of the Peugeot 208 (both Stellantis) even shock with an average price premium of 79 per cent compared to their combustion engine siblings.

The reason for the pricing is obvious: VW and Stellantis urgently need to earn money - and therefore do not want to sell e-cars that do not have a high, perhaps even a negative return. The VW brand's return on sales fell to 2.3 per cent in the first half of the year - but Group CEO Oliver Blume's target is 6.5 per cent. Returns are also falling at Stellantis, but not the targets: CEO Carlos Tavares has promised a ‘definitely double-digit’ return on sales for 2024, although the Group is currently struggling to even defend the 10 per cent mark.

According to T&E, car manufacturers will have to sell more e-vehicles from 2025 in order to fulfil the statutory CO2 requirements, but - very importantly - ‘not before’. Until 2025, manufacturers are therefore pursuing the goal of ‘maximising profits with combustion engines’. And if they want to sell e-cars at all, then often only in the most expensive equipment variant, according to T&E. It is primarily these ‘factors that are slowing down the sale of electric vehicles’.

The car manufacturers' tactics are not without danger. In retrospect, they may well be annoyed that others have divided the market among themselves. However, the fact that the sales crisis is partly of their own making also gives hope: that sales will pick up again if the manufacturers - at some point - want them to.Unfortunately, this shows all too clearly that talking publicly and doing things are still two different things. The need for climate protection is preached to the public like a prayer wheel, but you yourself try to keep your sheep in the dry.

This is even more precarious in another area. The price difference between China and the western world is now being covered up with tariffs. This takes the pressure off Western car manufacturers to start competing with China for the first time. China is no longer just the workshop and the sales market, unfortunately for many, they now also offer competitive products themselves and at lower prices. Attempts are being made to postpone this confrontation, but whether this is the right strategy remains to be seen.

We can be curious...

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Interesting post. When Chinese EV & battery industry try to dominate others with low price chicken game, western countries stand with increasing tariff & restriction. Thus, there will be not much room for Chinese's monopoly ambition. Nice post.

PLS Price at posting: $3.00 Sentiment: Hold Disclosure: Held
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