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June 30th, 2020 | 06:23 CEST

Daimler, Tesla, Volkswagen - will electric mobility end with Chancellor Merkel?

  • Electromobility
Photo credits: pixabay.com

The South African Elon Musk is a smart entrepreneur and knows when to access the capital market in order to remain liquid. Due to his space activities he enjoys a kind of fool's licence in the USA and sometimes smokes a joint in front of a running camera. On Twitter he announced a fake takeover in order to heat up short sellers without having to fear imprisonment. Nevertheless, it remains exciting to see how Tesla will develop in the future. The electric car maker has divided the capital market and the development is now looking threatening, as the details and background show.

time to read: 7 minutes | Author: Mario Hose
ISIN: DE0007100000 , US88160R1014 , DE0007664039 , CA26780A1084

Table of contents:


    What is the reason for the existence of e-cars?

    According to a study by the Kiel Institute for the World Economy, e-cars in Germany consume an average of 300g CO2 per kilometer, which is significantly higher than the 173g CO2 of a modern diesel. The reason for this higher CO2 emission is that the energy mix in Germany consists largely of fossil fuels. Since there is unfortunately no green electricity in abundance, the increase in demand for electricity from e-cars means that more coal has to be burned to generate electricity. Although this energy source has the advantage of scalability, it is also particularly polluting.

    Even the procurement of an electric car and solar cells on the roof of the home for charging are not a solution, because if the solar power were fed into the grid, less coal would have to be used overall. Conversely, for environmental reasons, the purchase of an e-car is only logical if the entire energy mix consists of renewable energies - which logically applies not only to Germany. A scenario from which we in Europe are probably still decades away.

    Why is electric mobility increasingly under criticism?

    The idea of electromobility, that cars drive around in traffic without exhaust fumes, sounds basically good. But the problem already starts with the procurement of materials. Currently, lithium-ion batteries for electric cars are the only way to store the energy on board. Lithium is mined at great expense and mainly in developing countries like Chile and Peru. Another important component is cobalt, which is also mined under precarious conditions from poor countries like the Congo.

    The People's Republic of China has secured mining rights in many countries in order to supply the world market with batteries. The production of batteries also requires a lot of energy. The energy mix in China in 2019 consisted of around 63% of coal fired power plants. The additional demand for batteries thus increases the coal-fired power and pollutes the environment.

    Why is the battery so important?

    According to experts, the battery accounts for about half the value of a new car. Current forecasts assume that the lifetime of a battery is about eight years. Replacement of a battery at the end of this period would be very expensive and the owner may be faced with the decision to sell the vehicle for a low residual value. In addition, there is the problem that there are many different types of battery and disposal is still an unresolved problem from today's perspective.

    Shredded, a used battery would at best be combustible hazardous waste and a waste of raw materials. Lithium-ion batteries are also sensitive. If you leave an electric car with a charged battery in the Californian sun for a summer, for example, there is a high risk that it will be defective afterwards. Problems that the owner of a car with a combustion engine is not aware of.

    How much is the government subsidy for electric cars?

    The German government passed an economic stimulus package on June 3, 2020, which is intended to help the automotive industry. A so-called environmental bonus for e-cars and plug-in hybrids is intended to provide an incentive for new purchases. From July 1, 2020, pure e-cars with a net list price of up to EUR 40,000.00 will be subsidized with EUR 6,000.00 instead of the current EUR 3,000.00. The environmental bonus was already introduced in 2016 and applications for it were submitted around 200,000 times by April 2020.

    In 2019 as a whole, 3.6 million passenger cars were registered in Germany and against this background, customer interest in e-cars is relatively low despite financial incentives. The terms 'environmental bonus' or 'eco-rebate' are also misleading and suggest environmental protection, ultimately the CO2 emissions of an e-car are 73% higher than those of a modern diesel car.

    Why are customers so reluctant?

    Customers usually compare their existing car with an e-car. Then they find out that the new e-car is not only much more expensive but also has a shorter range. Also, the duration of the charging process is in no comparison to the usual two to three minutes at the gas pump. As a responsible citizen, it is therefore only natural to buy a car with a combustion engine again.

    From a psychological point of view, it also creates uncertainty when ever higher subsidies are offered for the sale of electric cars. It is obvious that customers have ever greater doubts about this technology, which obviously cannot be sold normally. It seems that e-cars were planned without taking into account the actual wishes of a majority of customers.

    Why are politicians promoting electric mobility?

    With the diesel scandal, the automotive industry has lost the trust of politicians. This is probably the reason why the German government under Chancellor Angela Merkel is also pursuing the goal of promoting electric mobility in Germany and has declared it to be clean. Taken as a whole, the emission of CO2 and other emissions in city centers will decrease, but the bottom line is that coal-fired power plants in Germany will put more strain on the environment, and in other parts of the world they will also cause additional burdens on people and nature.

    Another factor that may well have played a role in the overall context is the position of China, one of the largest sales markets for German car manufacturers, where the focus was initially also on e-cars. In the meantime, however, electromobility in China has lost its glamour as a salutary agent. Chancellor Merkel has often said in the past that she sees things "from the end". In the case of electromobility, the planned economy experiment has so far unfortunately failed to achieve the goal of protecting the environment for the reasons mentioned above.

    What significance does China have for electromobility?

    China is the workbench of the world. This is where the battery cells can be produced most cheaply and the country has secured access to raw materials. Electromobility thus creates more dependency on the Asian market because important parts of the value added are outsourced there.

    So, it is de facto obvious that subsidising e-cars with German taxpayers' money does not strengthen the automotive industry in Germany, but rather weakens it, if the battery already accounts for half the value of an e-car and is produced in China. The German automotive supplier Bosch has already withdrawn from the development of batteries because they may no longer have believed in their competitiveness.

    Why is Tesla building a plant in Germany?

    Germany is one of the countries with the highest subsidies for electric mobility in the world. This is why the largest European economy is particularly interesting for the US carmaker. Musk has also managed to give the Tesla's e-car a luxury image. Maybe that's why German politicians are happy about the settlement of the bought friend?

    However, this doesn't make it any easier for German car manufacturers to make money with the e-car, neither the margins nor the number of units will allow them to make money despite high investments. Quite apart from that, the many billions of euros of taxpayers' money and investments are gone without having protected the environment.

    What future does Tesla have?

    In China they are already working on the development of modern combustion engines. Given that, it will probably only be a matter of time until Tesla breaks with the current taboo and installs combustion engines or disappears from the scene.

    It remains exciting, how Musk tries to get the curve. The German car manufacturers will probably have a better starting position. Germany's exit from electric mobility may be heralded by the end of Merkel's chancellorship in September 2021.

    What environmentally friendly alternative is there?

    In this context it is interesting to note that dynaCERT from Canada has developed a hydrogen technology for retrofitting, which increases the efficiency of diesel engines. Combustion becomes cleaner and consumption is reduced. The hydrogen is produced on board the vehicle as needed and is added to the combustion via the air supply. Sounds like an environmentally friendly innovation with little effort and a future.

    Links to further information:
    ifw-kiel.de
    sac-group.eu/mobility-germany
    servustv.com
    daimler.com
    dynacert.com
    tesla.com
    volkswagenag.com


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    Der Autor

    Mario Hose

    Born and raised in Hannover, Lower Saxony follows social and economic developments around the globe. As a passionate entrepreneur and columnist he explains and compares the most diverse business models as well as markets for interested stock traders.

    About the author



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