Sometimes disruption happens very quickly. In China, the share of “new energy vehicles”, i.e. pure electric cars and plug-in hybrids, has shot up from six to 50 percent in just four years. Not only because electric cars are cheaper, run on cheaper electricity and are quicker to get. But also because the vehicles from BYD & Co. are comparably good, significantly more digital and are now simply perceived as “cooler” than VW or BMW. Accordingly, Tesla is the only foreign manufacturer among the top 10 best-selling electric cars in China. Things are hardly better for the established players in the plug-in hybrid segment: all ten top positions are occupied by cars from China, including nine BYD models.
With the acceleration of the transformation to digital electric cars, the market shares of traditional providers such as GM, VW, Mercedes, BMW, Toyota and Stellantis have collapsed from a total of 57 percent in 2020 to 38 percent today because they are only relevant in the shrinking combustion engine segment. Since the Chinese market is currently barely growing, there is a cut-throat competition that is increasingly dominated by domestic providers.
For strategists in Wolfsburg, Detroit and Tokyo, after many years as a guarantor of buoyant profits, China has quickly become a painful symbol of the “miscoached” transformation towards electromobility and digitalization. The hope of being able to bridge the transformation with combustion engine sales has evaporated, at least in China, as the market is changing faster than expected.
In Germany, however, manufacturers are continuing this strategy undeterred, although the balance sheet for electric cars looks little better. In July, sales of VW electric cars fell by 47 percent (ID.3) and 68 percent (ID4./ID.5) compared to the previous year, while Mercedes models do not even appear in the ranking of the top 15 electric cars. In order to buy themselves more time, manufacturers are now putting more effort into lobbying to postpone the “end of combustion engines”. Politicians are also trying to keep competition from China at bay with tariffs.
The plan could at least provide some breathing room in the short term: The share of electric vehicles in new registrations in Germany has recently fallen again, and imports from China have also declined. According to a study by Dataforce, the number of new electric vehicles registered in the EU by Chinese car manufacturers such as BYD and SAIC’s MG brand last month fell by 45 percent compared to June. The tariffs, which make imported cars up to 48 percent more expensive, at least had an effect in July.
But the strategies in Wolfsburg, Stuttgart and Munich to pursue two tracks for as long as possible could prove short-sighted as more and more car markets transform. In addition to China, the USA could soon play an important role. While the Democratic presidential candidate Kamala Harris is already in favor of the change to electromobility, her rival Donald Trump is now also striking an unexpectedly conciliatory tone. “You make a great product,” Trump said in a conversation with Tesla boss Elon Musk. “That doesn’t mean that everyone should have an electric car, but these are small things … Your product is incredible.” Before his conversation with Musk, the former president had claimed that the production of electric vehicles and sustainable energy sources were bad for the economy. He wanted to repeal the Biden-Harris administration’s sustainable energy policy in favor of domestic oil production “on day one.”
Meanwhile, at least the Volkswagen Group is getting “tutoring” from its digital competitors. VW has invested a lot of money in the US provider Rivian and the Chinese manufacturer XPeng in order to benefit from their digital expertise. According to media reports, Audi will equip its vehicles in China with an intelligent driving system from Huawei in order to become competitive again.
