- Apr. 17, 2022 -
As a traditional car company, how will Germany enter the "new energy era".
At 9 a.m. German time on March 22, Tesla's second overseas "Giga Factory" (Giga Factory) - Berlin factory was officially put into operation. The production of this factory is of great significance to Tesla, the Shanghai Gigafactory now bears more than half of Tesla's delivery volume, and if the Berlin factory can also successfully reach the planned production capacity, it will further help Tesla consolidate its position as the world's leading new energy vehicle company.
As a major automobile country in Europe and even the world, what is the new energy vehicle market in Germany? Why is there such a rapid development? What is the competitive landscape? What is the future development trend of the country's new energy vehicle market? Today, let's find out.
Overview of the German new energy vehicle market
The German new energy vehicle market is in rapid development. According to market research agency INSIDEEVs, in 2021, Germany is the world's largest new energy vehicle market outside of China, ranking first in Europe with sales of 690,100 units, an increase of 72.7% year-on-year. At the same time, the penetration rate of new cars in Germany is 26.32%, an increase of about 100% year-on-year, which is the highest in the world except for the four countries in Northern Europe. In contrast, the other three largest economies in Europe, the United Kingdom and France, have less than 20% penetration of new energy vehicles, while Italy has only 9.62%.
Source: Publicly available
Below, let's take a look at the competitive landscape and major players in the German new energy vehicle market.
Source: KBA (German Federal Motor Vehicle Traffic Authority)
First of all, it is the "leading big brother" Volkswagen Group. From the sales statistics of 2021, the Volkswagen Group will firmly rank first in 2020 and 2021, with a year-on-year increase of about 56% in 2021. Volkswagen's strategic plan is the most electrified of the three german groups (the other two being BMW and Daimler-Benz).
Tesla, which ranks second, has seen rapid sales growth in 2021, with sales doubling compared to 2020. In one fell swoop, the sales runner-up of Renault Automobile Group exceeded 2020. With the Berlin Gigafactory in place, Tesla's sales in Germany and even Europe are expected to grow by more than 100% again in 2022.
Renault electric vehicles, which retreated to third place, grew very weakly in the German market in 2021, growing by only 4% year-on-year. This is related to Renault's own preparation of model iterations, as well as the encroachment of the Volkswagen ID.3 in the market.
In addition, Hyundai surpassed Smart (Mercedes-Benz brand), while Opel (Opel Motors, a Subsidiary of General Motors in the United States) surpassed BMW.
If we are specific to the model, what are the best-selling new energy models in Germany in 2021?
In fact, german consumers' car preferences differ markedly from those of the United States. American consumers prefer spacious and bright large models, but Germany due to the relatively narrow roads, many old buildings, small parking lots, coupled with the short traffic mileage in the city, so consumers generally prefer compact and practical, energy-saving and environmentally friendly vehicles, the price does not need to be so expensive.
Source: KDA (German Federal Motor Vehicle Traffic Authority)
According to KDA statistics, Tesla's Model 3 is the highest-selling new energy model in Germany in 2021. Volkswagen Group's ID.3 and UP followed. These two models are also an important cornerstone to support Volkswagen's new energy vehicle sales in 2021. Renault's ZOE series has been the best-selling model in Europe for four consecutive years (2017-2020), and in 2021 it ranked fourth in Sales in Germany. In addition, it is worth mentioning that in the ranking of KDA, the top ten models except Tesla are basically mini cars with a price of 20,000-30,000 euros.
Overall, the pattern of the German new energy electric vehicle market can be summarized as: Tesla + traditional mainstream car companies. However, the new forces of German car manufacturing have not yet formed a climate. Specifically, although the country also has ElectricBrands (the product is Xbus, new energy pickup), fox e-mobility AG, etc., but whether it is international popularity or production capacity, it is far inferior to Tesla, Rivian, or China's "Wei Xiaoli".
The reason is that the fierce competition in the automobile manufacturing industry, but also because of the complexity of manufacturing, the complicated supply chain, the high cost of capital and other factors, resulting in a high industry threshold, coupled with Germany's own high labor costs, strict requirements for environmental protection, it is difficult for new players who lack experience and financial strength to break out of the sky.
Why is the German new energy vehicle market growing rapidly?
1. The most direct driver - the EU's strict emissions bill
Long before the Paris Climate Agreement was signed in the summer of 2013, the 27 EU member states at the time had already defined medium-term plans to significantly reduce vehicle emissions in the first half of the century.
In April 2019, the plan was officially implemented, and the European Commission set a target of reducing the average carbon emissions of vehicles by 37.5% by 2030. Specific to the passenger car field, it is actually a core indicator: 95 g / km. (i.e., the average CO2 emissions per kilometer of passenger cars must not be higher than 95 grams, while light commercial vehicles must not be higher than 147 grams.) If the new car test fails to meet the standard, you will face a huge fine.
When this standard is announced in 2019, it can be called "radical", because almost no European car companies can meet the standard when it is implemented in 2020. According to the market research agency PA Consulting at the time, European car companies had to pay a total of 14.5 billion euros in fines, and the three major German groups (Volkswagen, BMW, Daimler) paid a total of more than 7 billion euros, of which Volkswagen had to pay about 4.5 billion euros.
Although this strict standard has been modified a lot later, such as vehicles with emissions within 5% can not be counted, etc., it has greatly promoted the transformation of traditional car companies and vigorously developed pure new energy vehicles.
2. German government stimulus on the consumer side
In order to promote the development of new energy vehicles, the German government mainly stimulates consumption through the following three ways. First, car purchase subsidies/tax exemptions: subsidies to individuals or automobile companies according to different price segments; second, reduce the cost of use: such as exempting taxes and fees generated by the use of vehicles (road taxes, emission taxes, etc.), exempting public parking fees, exempting tolls, and reducing electricity prices; third, building infrastructure such as public charging piles to ensure the availability of new energy vehicles.
First of all, the German new energy vehicle subsidies are as follows:
For cars with a net price of less than 40,000 euros, the all-electric subsidy is 9,000 euros and the plug-in subsidy is 6,750 euros.
For cars with a net price of 40,000 to 65,000 euros, the all-electric subsidy is 7,500 euros and the plug-in subsidy is 5,625 euros.
Although the policies of other European countries are different, the general subsidy is up to 6,000 euros. As a result, Germany's subsidies are relatively large in Europe.
In addition, in order to reduce the cost of use, Germany has exempted new energy vehicles from car taxes for 10 years. According to a research report by Deutsche Bank Research, for compact vehicles such as the Volkswagen ID.3 and Volkswagen golf life, net price of around 30,000 euros, the cost of use is reduced by at least 15,000 euros, and for mid-to-high-end vehicles (such as the Audi E-Tron 50 quattro and SQ5, the net price is about 59,000 euros), the cost of use is reduced by at least 20,000 euros.
Consumers of low- and medium-grade new energy vehicles often value the cost performance of the car. Therefore, Germany's subsidies can fully cover the price gap between low- and medium-grade fuel vehicles and new energy vehicles, thereby better stimulating the consumer side. The German government hopes that by 2030, there will be 7-10 million new energy vehicles in Germany.
However, in terms of building a network of public charging systems, Germany still has a lot of room for improvement. First of all, according to the data of October 2021, compared with other european countries, the number of charging piles in Germany has not effectively increased with the popularity of new energy vehicles.
Source: ICCT report
Secondly, German public charging piles are managed by different operators, which leads to different charging pile prices are not uniform, and even payment methods are completely different. Consumers often need to carry multiple corresponding recharge cards to ensure that they can use public charging piles.
However, Germany has enacted amendments to the Charging Pile Act: starting from 1 July 2023, charging pile operators must ensure that their charging piles can be paid with ordinary debit and credit cards, such as Master, Girocard and Visa. At the same time, you must support at least one contactless payment, such as NFC or mobile app.
3. The grasp of the development of new energy vehicles in Germany - a giant of traditional car companies
No matter how stimulating the regulatory level is, it is fundamental to be able to create usable new energy vehicles. The government cannot build cars itself, but also rely on enterprises.
From this perspective, Germany's traditional car giants are the main force in the new energy vehicle market. Among them, the three top automobile groups (Volkswagen, BMW, Daimler Benz), many brands, five first-class suppliers (Continental, Bosch, Schaeffler, ZF, HELLA), as well as countless small and medium-sized auto parts suppliers, the automotive industry chain is very developed. In addition, these companies have experienced many industry changes and have rich experience in responding to industry changes. In fact, some traditional car companies have tried new energy vehicles very early, for example, BMW Group has manufactured the new energy car 1602e as early as 1972.
However, for traditional car companies, "transformation" is not an easy task. The technical reserves, corporate organizational structure, and even business models required by new energy vehicles and traditional fuel vehicles are obviously different. The future of new energy vehicles will be smart cars with autonomous driving functions, which is very different from traditional fuel vehicles:
First, the most complex, most valuable, longest manufacturing chain of the engine and gearbox of the traditional fuel vehicle, the new energy vehicle is replaced by electromechanical control, and the acceleration and shifting performance of the mid-range passenger car is comparable to the performance of the luxury fuel sports car. If the traditional fuel vehicle is completely abandoned, then the enterprises, departments and talents that were the jewels in the crown will lose their place.
Second, the future of new energy vehicles will be intelligent cars, and the automakers will write the operation software system, rather than the operating system of the traditional car era, and then the automaker will assemble it. This requires car companies to establish new and large software departments and design operating systems.
Third, smart cars need more understanding of the end customer, and the car will have software services, which is inconsistent with the existing car dealer model. At present, new forces such as Tesla in the United States and Wei Xiaoli in China mainly adopt the direct sales model.
Therefore, the cost of transforming new energy vehicles by traditional car companies is very high, and there must be huge changes in the internal and external organizations of enterprises, and the business risk is also very high.
But even so, the advantages of traditional car companies are still very obvious, the interior and exterior of the car, the experience of mass production, and the strong brand influence (there are many families in Germany who have bought the same brand of cars for two or three generations) are ready-made. Although the new energy products of Germany's traditional automobile giants are still not as famous as Tesla, there are also a number of new energy vehicles that have been sold well.
Competition pattern in the German new energy vehicle market
As mentioned above, for now, the competition in the German new energy vehicle market is the competition between traditional car companies and Tesla. In 2021, the giants barely suppress Tesla, but with Tesla's construction of factories, the competitive landscape of the German market may change.
Germany's traditional car giants are very wary of Tesla's Berlin landing. Although for now, the giant's electric vehicle business and Tesla are in different price bands - Germany's traditional car giants (except for Volkswagen's Audi) want to create a low-priced, urban traffic, with a certain degree of assisted driving of the explosive model, but Tesla's "attack" in Germany is likely to encroach on the giants' oil car market. Herbert Dies, CEO of the Volkswagen Group, once said: "Competition from Berlin (referring to Tesla's Berlin factory) will be extremely cruel."
Image source: Author Creation
So why are german giants so jealous of Tesla?
Because compared with traditional car companies, Tesla has obvious advantages in production efficiency, cost control, and software service capabilities.
In terms of production efficiency, in the Berlin factory, the total production time of a Tesla Model 3 will not exceed 10 hours (the vehicle goes through four processes of punching, welding, coating, and total, until the "total online time" of the entire process of leaving the line and leaving the factory). In contrast, Volkswagen, the 2021 sales champion, takes more than 30 hours to produce a miniature electric vehicle ID.3.
In addition, Tesla's 500,000-vehicle berlin factory employs 12,000 people, while Volkswagen plans to produce electric vehicles with 25,000 people and an annual production capacity of 700,000 vehicles. Tesla's unit ergonomics are 1.49 times higher than in Volkswagen's planning.
From the perspective of cost control, Tesla's vehicle gross profit is close to 30%, Volkswagen's most profitable Porsche vehicle gross profit margin is about 15%, BMW and Mercedes-Benz's vehicle gross profit margin is 17.6% and 12.7%, and Audi is only 10.7%. Coupled with Tesla's self-produced 4860 batteries, and Germany's traditional car companies are currently based on procurement (future planning will build their own battery factories), according to UBS research estimates, the current average tesla battery cost per vehicle is about 1300 US dollars lower than the German giants.
However, many people believe that the capacity of the Berlin factory will not quickly climb to 500,000 units. After all, the battery production line of the Berlin factory will not be in place until 2024, and given the difficulty of recruiting workers, the strict overtime restrictions in German labor laws, the continuous obstruction of environmental organizations, and the challenges of the supply chain, some investment institutions believe that the capacity of Tesla's Berlin factory is likely to be lower than expected. According to JPMorgan Chase, the Berlin plant will produce 54,000 units in 2022 and 280,000 units in 2023, while the design capacity of 500,000 units will wait until 2025. This also gives German car companies a certain amount of time to catch up.
In terms of software services, Tesla's advantages are even more obvious. According to Tesla's financial report, in 2021, the revenue item "service and other business income" based on software service revenue achieved $3.802 billion in revenue, while at present, the OTA (Over the Air Technology remote upgrade software) services of major German car companies are not satisfactory, and the software has hardly brought revenue.
However, the German car giants will strive to catch up in the next few years.
Volkswagen announced that it will invest 2 billion euros to build a new car project "Trinity" with the same level of software service capabilities as Tesla. Build a smart factory, and the production efficiency will be the same as Tesla.com. Of course, due to the wide difference between Trinity's production methods and current methods, the project will not be implemented until 2026.
BMW also proposed at the annual financial report in March 2022 that it will adopt the intelligent production method "iFACTORY" in the future to intelligently upgrade factories around the world. In addition, Daimler Benz has also launched two pure electric platforms and a self-developed car operating system.
In addition to the industry-leading Tesla and the traditional German giants who sacrificed their lives, there are also many new energy car manufacturers in China, can they smoothly enter the rapidly developing new energy vehicle market in Germany? For now, Chinese new energy car manufacturers rarely set foot in the German market, mainly because:
First, the competition is fierce: Germany has the world's top car giants, a perfect supply chain, a strong sales network, and a deep-rooted brand influence. If it is not like Tesla", it is difficult to gain an advantage in the competition.
Second, it's costly: it's very expensive to set up a supply chain and sales network in Europe. In addition, if Chinese car companies choose to export products to Germany, they need to face tariffs, and the products of Chinese new energy vehicle companies do not have advantages in price.
Third, insufficient production capacity: At present, China's new energy vehicle companies are delivering fashionable and have product bottlenecks in China. Not to mention landing in Germany, the demand for production capacity will be very high.
Therefore, Chinese car companies are more inclined to choose the four Nordic countries that are friendly to foreign car companies and have a high market acceptance of new energy vehicles. It is reported that Weilai, Xiaopeng, SAIC MG, BYD and other enterprises have delivered some vehicles in Norway (the country's new energy vehicle penetration rate in the world in 2021, reaching 89.32%).
The future of new energy vehicles in Germany
Zukunftsf higkeit is a German word often used in strategic planning, meaning "achievability of long-term goals and sustainability". Below, I would like to talk about the future development trend of new energy vehicles in Germany.
The author believes that the introduction of Tesla into Germany, where the market is relatively closed, fully reflects the determination of the Germans. Tesla will bring more consumers to the recognition of new energy vehicle products, as well as the catfish effect:
First, stimulate the new energy and intelligence of traditional giants. New energy vehicle sales are likely to continue to grow by more than 70% in 2022. In the face of Tesla, the pressure of traditional car giants has increased sharply, and although Volkswagen has sold the crown this year, it is unlikely to be guaranteed next year.
As mentioned above, although the traditional giants are currently feasible to grab the market for low-end models, low-end models are not good business, require strong cost control, and must be sold in large quantities to be profitable. At the same time, it is easy to turn a win into a loss because of accidental external factors. In contrast, the profit margin of first-class models is very high, and it is impossible for the giants to "sit and watch the Zeguo Jiangshan enter the battle map", and will certainly try their best to develop corresponding products to compete for the corresponding market.
Second, stimulate the growth of supply chain enterprises. Referring to the experience of the Chinese market, although the supply chain of new energy vehicle companies is much shorter than that of traditional fuel vehicles, supporting industries will flourish with Tesla's entry in Germany, especially the battery industry.
Third, the birth of new local car-making forces. Tesla's opening of a factory in Germany may cultivate more talents in the field of new energy vehicles for the country, which is exactly what Germany is currently lacking. Talents may work for traditional giants, or they may choose to start a business and give birth to a new brand. After all, the product structure and business model of traditional fuel vehicles and new energy vehicles are obviously different. The level of consumption in Germany/Europe is also high enough. New forces still have room to grow, albeit relatively small.
In addition to the changes brought by Tesla, the author also believes that the German government's subsidies for new energy vehicles will be reduced in the near future. First of all, such subsidies are a great financial burden on Germany; secondly, the German new energy automobile industry will continue to reduce costs, resulting in no need for subsidies; finally, subsidies for new energy vehicles actually mainly fall into the hands of the "no need for subsidies" rich class.
According to the survey, most of the consumers who can buy new energy vehicles at this stage are from high-income people (according to KfW's survey, the number of high-income families who buy new energy vehicles is 3 times the number of low-income families). Because most of the civilian class often drives a car for a long time, it will not buy another car because of the subsidy for new energy vehicles.
At the same time, new energy vehicle users need to install charging piles at home, but the civilian class often does not have an independent garage and cannot guarantee the installation of charging piles. In addition, the civilian class is often very cautious in buying cars, even if new energy vehicles are soaring today, they will continue to buy fuel vehicles out of various unfamiliarity and distrust (such as whether charging is convenient enough, whether new energy vehicles are as skinny as their own familiar fuel vehicles). In this way, the subsidies for new energy vehicles actually mainly fall into the hands of the wealthy class.
Today, Germany is the largest new energy vehicle market in Europe, and with the popularity of new energy vehicles, Germany is also expected to become the center of the European new energy automobile industry. Of course, we also hope that Germany will give birth to excellent new energy vehicle products that are different from the Chinese and American markets, and even innovative business models, which will meet the needs of the German people while more efficiently protecting the German environment and achieving true sustainable development.
Editor's note: This article is contributed by Guo Fangjie, data manager of UnionPay new energy automobile industry, a special author invited by 36Kr. Guo Fangjie focused on the research of the new energy automobile industry for several years, focusing on the use of big data analysis at home and abroad to analyze the development trend of the new energy automobile industry at home and abroad, tracking and analyzing high-quality targets, starting to look at overseas electric vehicle companies in 2021, and currently leading the team to produce data insight reports and index products for the new energy automobile industry, serving a number of overseas funds and strategic consulting companies.
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