Late to the party, German carmakers join race against Tesla

After years watching Tesla's electric cars speed ahead while they have been on the defensive over an industry-wide diesel emissions scandal, German high-end manufacturers have finally unveiled their first challengers to the Californian upstart.

Late to the party, German carmakers join race against Tesla
Mercedes presents its EQC model in Stockholm. Photo: DPA

Mercedes-Benz maker Daimler, BMW and Volkswagen's Audi and Porsche subsidiaries between them control some 80 percent of the worldwide premium car market.

But until recently they offered little battery-powered, zero-emission competition to Tesla and its bombastic chief executive Elon Musk.

That changed this month, with all three groups unveiling their first all-electric SUVs slated for release over the next two years.

Audi rolled out its “E-Tron”, BMW its “iNext” and Mercedes its “EQC”, while Porsche presented an electric coupe, the “Mission E”.

In total, German carmakers have vowed a total of almost 40 billion euros
of investment in battery-powered vehicles in the coming three years, industry association VDA says.

With a market share of around eight percent in Germany — compared with Tesla's 0.1 percent — Audi hopes electric cars will account for around one in three sales by 2025.

“Finally, it's getting started!” auto industry expert Ferdinand Dudenhöffer told AFP.

Time is pressing, as sales of engines powered by automakers' longtime growth driver diesel have plummeted in the face of plans by many large cities to ban them to bring down air pollution.

The entrance of the three German behemoths into the electric race is far more consequential for Tesla than smaller fish like Britain's Jaguar, whose “I-PACE” is already on sale in the UK.

And the US tech firm faces major hurdles of its own, struggling to stem losses that have been going on for years while trying to reassure investors and customers of its chief executive's mental health, amid increasingly erratic public behaviour by Musk.

In August, the CEO revealed he was suffering from intense stress and fatigue in an interview with the New York Times.

On Tuesday, Tesla confirmed that the US Department of Justice was investigating the company over Musk's tweet announcing a plan to remove its shares from the stock market.

Also on Twitter, the South African entrepreneur admitted Tuesday that after months spent overcoming “production hell” on the firm's mass-market Model 3, it was now in “delivery logistics hell” struggling to get cars to buyers — while promising “rapid progress”.

For expert Dudenhöffer, “Tesla is the market leader and has great strength in innovation, but the coming six to nine months will be a decisive test” for its chief executive.

“If he doesn't manage to stabilise the Model 3 and make the firm profitable, it will get very complicated for him, including with regard to his investors.”

The German government hopes to see one million fully electric and hybrid vehicles on the road by 2022, up from fewer than 100,000 at the start of this year.

But the spread of the technology is constrained by a number of factors, including a limited range of models for sale, slow expansion of charging infrastructure and limited capacity for building new batteries.

A government commission on electric mobility recently found Germany would need to increase the number of charging points available more than five-fold to serve a million drivers.

And while they are perfecting electric motors and other electric-drive components, German carmakers have so far balked at direct investment in costly battery production, aware that they would have to catch up on a head start enjoyed by Asian industry leaders and unwilling to gamble on an adventure in the unfamiliar territory of cell chemistry.

European Commissioner Maros Sefcovic said recently that the EU should be open to state aid for a long-hoped-for “Airbus of batteries”, while business daily Handelsblatt reported the German economy ministry is cobbling together a consortium of companies and research institutes.

For now the most conspicuous progress comes from China's CATL.

The challenger for global battery leadership against the alliance of Japanese Panasonic and Tesla announced in July a mammoth new factory in central Germany to supply European customers.

READ ALSO: Expert: German cars will be driving themselves in 5 years 

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Germany: Further Mercedes recalls likely as ‘Dieselgate’ scandal continues

German authorities will "likely" discover software rigging the level of diesel emissions in Mercedes-Benz cars other than those already sanctioned, the Daimler group warned on Friday.

Germany: Further Mercedes recalls likely as 'Dieselgate' scandal continues
Photo: DPA

Daimler stands accused of hiding the fact that it was using illegal software in diesel cars to cheat emissions tests.

“It is likely that in the course of the ongoing and/or further investigations KBA (Federal Motor Transport Authority) will issue additional administrative orders holding that other Mercedes-Benz diesel vehicles are also equipped with impermissible defeat devices,” the manufacturer wrote in its annual report.

KBA has already ordered the recall of nearly a million Mercedes cars.

The manufacturer disputes the illegality of the “engine management functions” under the spotlight but at the end of September agreed to pay a fine of 870 million euros ($944 million) for selling non-compliant vehicles.

Faced with the threat of new recalls, the manufacturer has suspended the sale of certain models “as a precaution”.

Total charges of 5.5 billion euros from dieselgate, which began with Volkswagen in 2015, and a mass recall of vehicles fitted with faulty airbags from supplier Takata contributed to net earnings slumping by 64 percent to 2.7 billion euros ($2.9 billion) last year.

According to its annual report, the group more than doubled its provisions for “governmental and legal proceedings and measures” with 4.9 billion euros ($5.32 billion) entered on the balance sheet for 2019 against 2.1 billion at the end of 2018.

It also increased its provision for possible related costs at 8.7 billion euros, as opposed to 7 billion at the end of 2018.

“The increase relates to ongoing governmental and legal proceedings and measures taken with regard to Mercedes-Benz diesel vehicles in several regions and markets, as well as an updated risk assessment for an extended recall of Takata airbags,” wrote Daimler.

Like the entire sector, Daimler is engaged in a race to reduce the level of CO2 emissions from its cars and comply with strict standards in force this year in the EU, under penalty of heavy sanctions.

“The ambitious statutory requirements will be difficult to fulfil in some countries,” it admitted.

Daimler chairman Ola Kallenius has, on several occasions, said that the new standards were a great challenge for the manufacturer. While he is hopeful of meeting standards “in the next few years”, that is “not guaranteed” for 2020 and 2021, he said last week.

Daimler also said that the coronavirus epidemic, centred on China, may have a negative effect on sales and lead to “major disruptions in production, purchasing markets and the supply chain”.