Racing towards the unknown, but in an electric car | Business| Economy and finance news from a German perspective | DW | 06.03.2019
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Racing towards the unknown, but in an electric car

In view of tougher emissions' standards, carmakers across the world are racing to bring more electric vehicle to our roads. At the Geneva Motor Show Janelle Dumalaon has found the industry ahead of a transformative year.

As far as tone is concerned, carmakers at the Geneva International Motor Show have a difficult balance to strike.

Every unveiling is an expensive, stage-managed affair, accompanied by soundtracks of overpowering bass. The show is meant to be a display of strength from the industry, promoting its ability to combine engineering might with top-level tech, all encased in innovative design.

But the first industry-wide gathering in Europe for 2019 is also an opportunity for carmakers to present a united front in the face of perceived threats to the sector: from trade issues to other shifting political developments that could cripple their ability to move forward.

An electric, and eclectic, mix

This year's Geneva Motor Show has the strongest, most varied line-up of close-to-market-ready electrified vehicles in its history. 

Although the $2.2-million (€1.95 million) Pininfarina Battista Electric Hypercar grabbed instant headlines as the fastest car as well as being electric, it's the mass market electric models that automakers hope gain most traction. And that's not only to compete with Tesla's (now cheaper) Model 3.

Watch video 02:29

Carmakers focus on electric at Geneva Motor Show

Stricter European regulations forcing carmakers to reduce carbon dioxide emissions to an average of 95 kilograms are set to take effect next year. Tougher emission standards in China are also to be applied by mid-2020. That, as well as the on-going clean-up effort for the diesel emissions cheating scandal discovered almost four years ago, makes 2019 the year for carmakers to get as many e-cars up and running as they can. 

But whether customers will now start buying them remains the question. Sales of electric vehicles still only make up a fraction of global market share. Range anxiety — the fear of running out of battery before the car has arrived at its destination — combined with electric cars' often prohibitive pricing, has kept sales down.

Tipping point

Nevertheless, the philosophy at the Geneva Motor Show seems to be: make them and they shall be bought. German premium automaker Audi, for one, brought an all-electrified line-up to Switzerland, with three new models — the Audi Q4 e-tron, Audi e-tron GT and the e-tron fastback unveiled at the show. Its CEO, Bram Schot, is confident.

"Markets will be accepting electrification a little bit sooner than expected," Schot told DW. "We just want to send a signal. Audi is going green. For the next 24 months, we have 12 electrified vehicles, five are fully electric, seven are PHEVS (plug-in hybrid electric vehicles)."

Of course, the more electric cars there are on the market, the faster the price will decline, potentially precipitating the much-awaited tipping point where electric vehicles make it into the mainstream.

Watch video 01:36

Brexit, tariffs overshadow Geneva Motor Show

The push towards electrification represents a big bet from industry, and is far from a foolproof strategy. But at least it's one borne out of the clear necessity to comply with regulations defined in key automotive markets, with a set timeline.

A new terrain of tariffs to navigate

That's not the case with the threat posed by US import tariffs on European cars. Last month the US Commerce Department called car imports into the country a security threat, laying the groundwork for possible duties.

Another round of trade talks between Brussels and Washington is taking place this week, with the EU's goal to have a trade deal in place before the end of the year far from a definite prospect.

Then there's Brexit. A no-deal exit from the EU would not only disrupt supply chains dependent on just-in-time manufacturing, it would also trigger tariffs on cars imported into the UK, as WTO rules would replace the existing regime.

UK lawmakers are set to vote on Prime Minister Theresa May's deal with the EU on March 12, with the door open to a delayed exit from the EU or another referendum. However, like with the issue of US relations, the future is far from certain.

The wheels of resolution turn slowly

As such, the processes that would clarify the matter of US/UK import duties for carmakers are inching by. Peter Fuss, a senior analyst at EY, points out that it's not even the tariffs themselves that are the biggest issue.

Audi Q4 e-tron concept (Audi AG)

Audi brought an all-electrified line-up to Switzerland, with its e-tron (pictured) range central to its offering

"Tariffs are always a challenge for any industry, but they're not new for carmakers. We've had tariffs for decades, in Russia, Brazil, Japan and India," he told DW. "What's new, is the suddenness. There are ways to deal with a changed tariff regime, just not quickly.  The supply chains are very complex, you can't change things overnight."

German carmakers with production facilities in the US, like BMW, which has its biggest plant in North Carolina, would almost certainly look into enlarging its footprint there to avoid tariffs and having to pass on costs to the customer, Fuss said. Those without a manufacturing presence, like Audi, would probably consider getting one.

Riding out of Germany?

"This could mean fewer cars are manufactured in and exported from Germany. That will have an impact on the jobs, on profit margins, as change is very expensive," Fuss said.

A no-deal Brexit could push carmakers in the other direction, transferring their production away from England. The priority would be to ensure supply chains remain as efficient as possible.

Watch video 02:57

Audi CEO to speed up electromobility drive

"You have to plan for volatility," BMW CEO Harald Krueger told DW. BMW produces the Mini at its Cowley Plant near Oxford. "We have a flexible production system, we can react to changing demands. We'll have to see what the politicians come up with, but flexibility is our key answer."

Political headwinds like Brexit and the EU-US trade conflict are hard for carmakers to plan around. Making predictions for the future is even harder.

"Assuming that these issues will be resolved constructively, we expect that in 2019 the global passenger car market will more or less equal last year's level (+1 percent to 84.9 million units)," said Bernhard Mattes, President of the German Association of the Automotive Industry (VDA).

There was a time when flat growth in the sector that makes the world's most traded product would have been a cause for major alarm. But 2019 is shaping up to be a tumultuous year. A repeat of the previous year's results would mean the worst was avoided.

Carmakers may just take that and run with it.

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