Don’t mention the Diesel!

August 24, 2017
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Holger G. Weiss

The media (and even the German chancellor Angela Merkel) are predicting the decline of the German automobile industry. Everyone knows that Germany’s flagship industry will not survive in its present form. But perhaps it doesn’t have to.

First and foremost, let’s be clear that the German automotive industry did things to damage their reputation unforgivably. That goes without saying. The recent discussion about diesel fuel is not about a moral failing, it’s about the whole industry. But should it be doomed because it stubbornly supported outdated technology? Did it miss an opportunity to take the right turn in the past to push innovation? 

It’s not about moral

What the Diesel controversy revealed is that a lot of self-proclaimed experts suddenly started speaking up about the future of the automotive industry. The same people usually praising Prime Now as a digital revolution (driving one USB cable or two bottles of wine to the other end of the city in a van). Many of them agreed in the common term – carmakers are bad, they are polluting the air we are breathing and anyway, they will disappear having failed to adapt to the modern world.

The same ‘experts’ also named Tesla as the big winner of the future. I also believe that Tesla is currently setting the pace in certain areas of the industry. I even wrote an article two years ago, claiming that Germany needs an Elon Musk. But – that’s two years ago. Many things have changed in that time, and it’s worth to have a clear look at the state of play today.

Real solutions need time

Let’s face it, it’s obvious that electrical power is the fuel of the future – the new gasoline. In certain areas of the world (Silicon Valley, Norway etc.) we see it is already being adopted on a big scale. However, driving an ‘e-vehicle’ today is not a rational decision, it’s a statement. It says, “hey, I am an early mover, I am an innovator, I’m setting trends.” 

Also from an environmental point of view, an ‘e-vehicle’ doesn’t seem to be a smartest way to save the planet. I am not an expert, but it seems that taking the battery production as well as the electrical power production into account, the CO2 balance of an ‘e-vehicle’ isn’t ideal. That will change and we will see a lot of innovation and improvement here. But it will take time. So, if people believe that switching to electric mobility will deliver better air tomorrow, they will be disappointed.

It needs pioneers

Now let’s talk about the industry. Yes, they are powerful, yes, they have a huge responsibility for many people and in some specific cases like Germany, they have power over the economy in general. However, these are above all commercial institutions aiming to optimize their profit and applying the common mix of innovation, production and marketing to achieve this goal. 

This poses the question: Which entrepreneur would give up 80% of intellectual property (which in the case of the car industry is the combustion engine and the powertrain), to switch to a product that customers don’t really want currently, because it’s not ready for the mass market?

Some innovation need to be pushed by pioneers. When Carl Benz invented the modern car, the transportation market was dominated by coaches drawn by horses. I would seriously doubt that any of them would had been able to introduce the combustion engine. It needed Elon Musk to build the first long haul electrical car. The case against the car makers was that Mr Musk and Tesla weren’t taken seriously. It was only after Tesla started selling more high-end cars that other established players in the industry woke up. 

Automotive industry will survive

Coming back to the current discussion in Germany. Modern combustion engines are amongst the most advanced technical machines ever developed. It’s at the very highest level and there won’t be much in terms of improvement possible in the future. Therefore, it’s clear that combustion engines will come to an end in the near future. The ‘e-vehicle’ will dominate over time. However, It will take a least a decade before we will see ar products in the mass market though.

There is absolutely no reason why traditional car makers can’t be successful in future if they are fast enough to adopt. The transition will affect their core knowledge, and they must replace it with new intellectual property. This makes sense for European as well as US and Asian manufacturers. The rules will change in the future, and they are about to change very soon. But believing that there will not be very successful players amongst the brands and leaders of today, is simply irrational.

In a nutshell

  • Driving an e-vehicle today is not a rational decision, it’s a statement
  • ’E-vehicles’ are not a smart decision today: its CO² balance isn’t going to save the environment 
  • Regardless, modern combustion engines will come to an end in the near future
  • ’E-vehicles’ will come to dominate the market over time
  • Traditional car makers will be successful in the future if they replace their core know how with new intellectual property

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