you Hello and welcome to Newsdesk. I'm Melissa Chan. And I'm Alex Forrest-Whiting.
This week we're taking a closer look at the German auto industry. What's wrong with Volkswagen, BMW and Mercedes-Benz? Because the outlook for Germany's most important industry is not good.
In fact, you might have seen the previous live stream on DW. I think it's still running maybe. I'm not sure. But that just wrapped up. up but the conversation was about to wrap up with German economic minister Robert Habeck talking about this very issue of the German auto industry so here at news desk we're asking is the German car industry doomed and we've already had some of your thoughts on that on our community post and also actually in the chat now let me just read you some of them Sarah mooncake says it's all about the price Volkswagen Used to be the car for the lower end of middle income families and individuals.
Now it's extremely expensive. Olga Doctor says crazy prices. Volkswagen is becoming a luxury brand and it's no more the people's car. UGK26 says too expensive. Lack of dependability.
That's where I'm at personally. It's not all negative, by the way. We will get on to something positive, but there's quite a lot of this.
Amir Hilnovi says I worked in the IT department. of a big German car manufacturing group. From that perspective, I'd say that incompetence and inefficiency are killing innovation.
That's pretty tough. Gibson 179 says EVs, that's electric vehicles, of course, will kill the German auto industry. But there is some hope because this is from Gerhard Pedrico. Apparently, he says the German car industry is going to recover.
VW and Mercedes-Benz. are going to produce solid state batteries that are better than lithium ion. He says Germany will produce eco green algae biofuel and they will transition to EVs. So thanks very much for those comments and do keep them coming in. Also, if you do have any questions, which we will put to our guests a little bit later.
Yeah. So around the table, we have Nihal Jhari and not in the studio, but working with her in terms of. Engaging with everyone in chat is Cherry Chan.
She's in the control room today. They'll be paying extra attention to the chat. So again, along with Alex, post your questions and comments.
And then we have DW's Clifford Coonan from the business team. Thank you so much for joining us. And last but not least, our special guest, Felix Lee.
He is a journalist with Zydeutsche Zeitung. Welcome. Thank you.
And I know you've... I thought you wrote one book about the German car industry, but it looks like you've got two books now under The second book is not focused on German car industry anymore as my first book. The second book is on dependency, Germans dependency on China. Yeah, you can hold that up. Well, of course, car industry plays a major role of it.
I mean, we're talking about the second China shock now. The first China shock was a shock which concerned the US, other countries. In the...
2000s when a lot of steel industry went to China and a lot of jobs in the US got lost. The second China shock is hurting Germany because it's about machines and it's about cars. And we also want to pull up a cover of Felix's first book, right? If we can just share my screen.
We have a picture of your first book called China, Mein Vater und Ich, which of course translates to China, my father and I. And. I guess you can tell us about the story. I just want to comment on the car. It's a Volkswagen Beetle, which was one of the first cars which became really popular.
It was produced for a really long time and apparently one of the few cars that lasted without major design changes. And so that's quite an iconic image. Is that your father? That's my father, yeah. Although the name under it is my name, but it's actually my father.
It's from the 60s in the city of Aachen where he studied back then. And his dream was of course to own a Kepha, a Beetle. So you have, so did your father work in the auto industry or is that? Exactly.
He's from China, went to Taiwan, fled to Taiwan and from Taiwan he went to study in Germany because he wanted to study, that was in the 60s, motor. And back then, interesting, nobody Not even in Detroit you could study or focus on motor because everyone back then thought no, motor is already developed, there's nothing to explore anymore. It was about how to get cars bigger and bigger, but not about motor because they said gas was not...
energy was not... at that time nobody thought that would become a problem. And Aachen was the only place, so he went to Aachen to study. Of course, Germany, when you study in Germany, for a foreigner it's also no fee.
But that's why he went to Germany and then later he started as an engineer at Volkswagen in the beginning of the 70s in Wolfsburg. That's why I'm born. In Wolfsburg? In Wolfsburg, yeah.
That's why the subtitle is The Rise of a... Superpower and what family, the Lee family from Wolfsburg has to do with it. Fascinating, because that is a whole city in Germany which is dedicated to Volkswagen.
It is the Volkswagen city, the headquarters because it was founded by Adolf Hitler, the city, in 1938. And because to establish Volkswagen, Volkswagen was a state-owned company back then, and until now, this city only exists because of Volkswagen. And that's where I grew up. Amazing.
So when we say that we have the experts, I mean, we have the experts for you to ask questions about the German auto industry in a way that I think we rarely get the chance to. So thank you so much. I have a lot more questions about that.
But... But just to kick things off, Alex, I know that you have been preparing for a poll just to get everyone engaged in the chat. With the help of Cherry, who you don't see, but she's in the background. The poll that we are asking or the question that we're asking that you will have already seen on your screens.
Would you still buy a German car? There are three choices. Yes, they are still the best. Maybe if they were cheaper or no, there are better alternatives. So do vote.
It will be really interesting. And. And I will find it quite enjoyable to know what the results are for that and we can talk about it towards the end of this stream So, please do vote.
That would be great and also get your questions coming in Please to Felix and to Clifford for sure and we're also going to do a little something different today Just for the next few minutes. I thought we try to play a game With everyone in in the chat You can follow along they're gonna post the link but it's called Can You Tell Which Electric Vehicle Is Chinese? And I know the topic of our show is about the German auto industry, but as you'll see, it's very much connected to the Chinese auto industry and also to Chinese consumers.
So I know, Nehal, that you've been actually tasked with running this game. And yeah, so what do you have for us? Okay, so very brief context that everybody needs. Which is that China's of course been producing electric vehicles for a long time.
The Chinese government actually started investing in related technologies as early as 2001. But the reason people wouldn't buy them was because there was this reputation of cheap in cost and cheap in quality. And so people really stayed away from, or at least car enthusiasts weren't as much into buying Chinese EVs. Now. These cars have improved to such a large extent that I bet if you look at these pictures, you cannot tell the difference between is it a Chinese EV, is it from somewhere else, is it European? So that's the game created by Bloomberg, which is a UK-based news outlet.
And I'm going to show you five pictures. Everyone has to guess, is this a Chinese EV or not? And I'll tell you if it is.
It's a little unfair advantage. I have a feel like Felix would win. He would win this. Maybe not.
Okay, that's the first one. Oh, do you see my screen? There we go.
Nice wheels. I'll say yes. I just don't know why.
That's my gut. It's a head fake, right? If it's Chinese, yeah. You think it is, do you?
It is definitely Chinese. Oh, I'm going with what Felix says. And why is it definitely?
Because you know this. It's so future looking. And you know, I just had a friend who went to China and he said when you look at a German car now it looks so old-fashioned Because all these EV from China they look so futuristic Is it because they're new models? So they're creating from scratch and they have this concept of yeah And it's I mean electric engine and it's so much easier and the Chinese companies are so much more flexible to to create create new cars new designs than the germans are just an example for volkswagen this is already fast it takes 40 months to uh to create a new car and bring it to the market 40 40 byd needs 18 months byd the chinese leading chinese ev car company so they're so much faster so much more and And they can do it in them to a much lower price. That means they are also more creative and flexible.
When people don't like this design, it doesn't matter. 18 months later, there will be a new one. Yeah.
They also have to. So is he right, though? Okay, so you're guessing Chinese EV, yes? Yeah.
You are correct. And I have to just say congratulations to Quinn Lin, who said the same. Carolina said the same.
Too well said the same. Various others also said that they thought that it was Chinese. Congratulations, you're correct. I just went with what Felix said.
There's another important point about this is that there's 200 electric vehicle manufacturers in China, which means they have to be futuristic. You have to have something that sets you apart from all the other companies. And that can be the looks and this wonderful design of that car that we've just seen, but also the price because you're competing. price and I mean that's maybe an issue we can discuss later in the program about how that will shake out but right now it's a very very competitive market all right and you were right this is a BYD as well which stands for build your dreams and it has a pretty cool looking panoramic roof that we can't see in this picture but from what I've heard if you had that in a German car it would make it really expensive and okay next up then okay what do we have All right, this is the second one.
Oh, that looks European, but... Wow. I think that...
I'm still going to go with Chinese. I think it does look Chinese. Look at the little wheels with the little round... Felix is shaking his head.
It could be Italian, but I still would say it's Chinese. Because they're so experimental. at the moment the Chinese because of there's so many of them and they try to be competitive and try out new things the Europeans won't do it yeah. What do you think? Interesting that you say that.
I'm wrong. So you're going for Chinese? Yeah.
Oh but hang on hang on hang on Timon Schroeder says European citron question mark. I'm just saying it's French says Jerem. Oh, can't they read a logo? Oh, well, the logo is a little small.
My glasses are bad. OK, so what do we have? That's correct. Well, we guessed Chinese TV, right? It is a French company.
And strictly speaking, it's not really a car. It's what they call a quad recycle. So it's somewhere between a bicycle and a passenger car. Yeah, I didn't see this.
It's like a Chevron. Okay, all right. Okay, here's the third one.
Oh, that's an inside look. You see, I don't... I can't recognize the logo. Maybe Felix can.
I cannot. My glasses are too bad. There we go.
I'm going to say it's Chinese again. I'm just going to keep guessing Chinese. Is that Tesla?
Is that not Chinese? Maybe. No, it's not.
I can't see. I'm going to say not Chinese. Clifford.
I'm going to go with not Chinese. Okay. Which is correct. This one is from Sweden.
Although a lot of the production is done in China. But it's a Swedish company. But Polestar?
Polestar. And look, everyone in the chat is... Oh, it's owned by a Chinese company.
See, this is where it gets complicated. When we ask about whether the German car industry is doomed, I think there's complications with ownership. Swedish most famous car brand, Volvo, is Chinese now. Yes, of course.
Chinese now. The carmaker is based in Sweden. And everyone in the chat is much faster than we are. Clearly have proper... glasses on as they can see because they've all said Polestar and half Chinese half Swedish says Quinlan again so as do others so yeah okay thank you everyone you're all very clever I think we should do one more and then we should really get into the meat of things from Felix and Clifford are we going to win an e-car at the end of Euphrates I'm going to send an NFT of a car that's what you get just kidding okay let me let's do another interior Oh, okay.
She's deciding which one to show us. Is this Chinese EV or not? Oh, that looks like a Tesla.
I'm going to say it's a Tesla. It's not Chinese. It is, I think it's Chinese.
Oh, I'm going with what Felix says. Why do you say that? Because again, this futuristic look. If a German car maker would make it, it would be... Unpayable.
Yeah. The Chinese would do it. Tesla, I'm not sure if they are so advanced as this.
Oh, okay. I've seen some interiors where they've got like… Maybe they are, but I would say it's a Chinese luxury brand. So what are you saying? Are we saying yes or no?
He's saying Chinese. Chinese. Yeah. Okay.
It's correct. It's another BYD. Another BYD. And it's known for having a relatively small battery, so it's considered one of the most green cars available in Europe at the moment. Amazing.
Well, thank you so much. That was super interesting for me. I mean, again, part of the point of it is to show the complexity of the global car industry, how far Chinese vehicles have come for those who might not have been following. And also like ownership is going to be a very interesting thing. So I think just to kick things off, big question for both Clifford and Felix.
What are some of the. Biggest reasons the German auto industry is struggling and when we talk about struggling, what are we actually talking about because they are still Profitable so maybe Clifford first. Well, one of the big reasons is I mean I'll tell you a story from when I was living in China. I had a friend from East Germany Who when the wall came down he set up a business in China And he used the money to buy a Mercedes because he wanted to buy a Mercedes. There were no Mercedes in China at the time, so he brought it in.
And he was very proud of it. And one day it broke down and he brought it into the service station to get it fixed into the garage. And they said, yeah, sure, we can fix it, we can fix it. And he came back the next day and it was gone. and the garage was gone.
Oh wow, this is early days. The only people who wanted Mercedes more than the East Germans were the Chinese at that point. So he found it eventually. I mean, it's kind of stood out in Beijing because it was the only one. But this shows that there was a huge desire for Mercedes and for German cars and for Audi, which started it, and Volkswagen, which started it in China back in the 80s.
But in the four decades since then, Everything has changed completely because we've seen a lot of things. We've seen how they've absorbed so much technology in China from the Western car makers. And they've also been able to benefit from a lot of other things.
We've had subsidies, which is a big issue, which I'm sure we'll be talking about as well. So it's just been such a transform... So subsidies as in subsidies in China to support the... domestic car industry there.
That's right. Yeah. And for the car manufacturers, but also right across the supply chain, because you've got subsidies for mining to bring up the materials, you've got cheap labor, you've got all of these kinds of things that, whereas Germany has gone the other direction.
And if in terms of its prices have risen and in order to take advantage of the low costs gone to China. So a combination of all these different things and other factors, I'm sure as Felix will point out. Okay. Felix?
Yeah, that would... Two major mistakes by the German car companies and especially Volkswagen. The one mistake was, I remember 2017, I was also based in China as a correspondent and we talked to the Volkswagen chief in China and the Chinese government said, okay, every 10 cars has to be an EV.
a new electric vehicle or hybrid, which are sold in China, has to be electric. And the Chinese car companies complained, the German car companies, everyone complained. Similar to what we hear here at the moment. And in the US. Batteries are not good enough.
There's not enough stations where you can charge, not enough charging stations. So the same complaints. And we talked, we asked the VW representative and he said, yeah, all the plans for electric are in, exist, but we would be stupid to start selling electric cars when combustion engines are sold so well.
And until then, they made a huge profit, the German car companies. Now five years later every second car which is sold is electric. Every second in China.
Every second now. In China. And the Germans are not the number ones anymore.
And this is because China in these five years was doing their homework. We thought even in China everyone was in it was a pandemic and everyone nobody there was not much developing happening everyone was concerned about the pandemic. No.
China did his homework in this time. Charging is not an issue anymore, at least in the big cities. And the batteries, I mean BYD, Kattel, they have batteries now 800 kilometers, with a range of 800 kilometers. Because BYD originally started out as a battery company, not a car company, that I do know.
And that was when Warren Buffett at the time invested in BYD, attracted a lot of attention because he was betting on the battery technology. That's what's driving, no pun intended, the success of this car company. And this, as you mentioned, it started already in the 2000s of years when they already started to put more emphasis on battery.
They knew that would be the future or the most important technology for a future car. And so China, China's government, helped to to save all these mineries worldwide to get lithium. And the second, they put a lot of effort in development, into batteries. And now all of a sudden, five years later, they are ahead.
And they can do it much cheaper, much more efficient. And the second misjudgment, of course, was how important digitalization is. I mean, we're talking about there are 200 car companies. Mm. 180 of them are too many of them. If you want to survive, it's not about how good the engine is.
The big question is what software, what digital gadgets you have in the car for the Chinese consumers. This is how they decide to buy a car. Because engine, it's not a problem anymore. It's not an issue anymore. It's all about what extra gadgets they have.
And the Germans, they said, oh yeah, do we need a karaoke machine in the car? A karaoke machine? There's some of them even have karaoke machines.
I already, yeah, that's already an attraction for me. But digitalization was never, the Germans were never strong in that. And maybe also the misjudgment was, Volkswagen thought we can do our own software and they failed.
And now they need the help of the Chinese software companies or the American software companies to help them out. And this is also, of course, I mean, for 40 years, the Germans were the one who looked down and the Chinese were looking up. And now it's vice versa. Now the German needs the help from the Chinese engineers and software developers to get ahead.
And this is... This is... Big catastrophe for a whole country which was so focused on automotive manufacturing. Yeah, I mean the chat is just quite interesting because there's a whole debate going on about what's better, Chinese, German or Japanese cars.
We can't forget that. So I'll leave the chat to it to discuss that while we continue. But just flagging out, that's what lots of people are talking about.
Yeah. And just very quickly, where do German automakers sell most of their cars outside of Germany? Is China the biggest market?
But it's diminishing, you say. It is diminishing, but it's still, I mean, China is the most important and biggest auto market in the whole world. It's bigger than the U.S. So.
When we talk about which technology will take over, this will not be decided in Germany, not decided in Europe, it will be decided in China. Because it is the most important. And technology-wise all the developing is happening in China now. And until recently, I mean, Volkswagen has 39 factories where they are involved in China.
Almost every second car which until recently was which Volkswagen sold was in China. So they are so dependent on the Chinese market and we can debate as much as we want in Germany which engine will make the run. It's not our decision in Germany. It's a decision by the Chinese because this is the most important market. And just very quickly, I mean, I think a lot of people in chat.
Already know this but maybe there's a few people who might not know I mean Volkswagen is one is the umbrella company for a lot of major Brands, I mean could could we shoot off a few other like they own Audi right Audi Porsche Porsche Skoda Skoda Seat which will use to be a cupra now and So quite a number of big ones big names. Yeah And this whole, when you go in Shanghai, just at the edge of the city, this whole, when this was all exploding 20 years ago, when it really, really started to take off, there were schools just for engineers coming from Germany. It was whole villages and towns that were just full of, you know, people who were working in this burgeoning, burgeoning industry.
It was incredible to see, you know, and just now it's, now everyone's talking about whether this is the Nokia moment, like with Nokia mobile phones, right? Yeah. Well, Nokia had such dominance in the mobile phone market globally, and then suddenly it just disappeared because other...
They stopped innovating, they stopped... I mean, the iPhone came along, that was the big innovation, but also the Chinese producers had a big impact on that. And of course the iPhone was being made in China at the time.
Or the Kodak moment, the way everyone used to have Kodak cameras, and then suddenly it's all on the phones. And now people are saying that a once treasured German concept, this idea that Germany was the best carmaker in the world. And it was, and in many ways it still is.
But the market has changed completely, and I think the speed at which it's happened has taken everyone by surprise. They're still profitable. I mean that was one question I had they're still profitable It's just that in the medium term I mean because for example, I mean the most recent thing is Volkswagen is kind of announced have announced Suggested pretty much heavily that they will start cutting jobs, which is the first time which has happened Yeah, I mean this is German folks one people who work for folks one They thought this is for lifetime and this is also not only their lifetime, but the second and the third generation.
So we never had this in Germany, in Wolfsburg, where they really would lay off workers. And we're seeing some pictures of union protests in response to management saying that they're going to cut jobs. This is just last week, it looks like.
So, yeah, people aren't happy. Yeah, and the thing is, I mean, Unlike Nokia, which was just, I would say, just smartphones, it's with the car, German cars, a whole country depends on car industry. And we're not talking only about Volkswagen, which is the biggest. And we're not only talking about Mercedes and BMW. We're talking about all these who we're talking about Bosch, we're talking about ZF.
So these What are these companies? Sorry, just to explain. Suppliers.
Car parts. Car parts. Got it. And it's, I always thought we're only talking about Wolfsburg, Stuttgart and Munich. No, we're talking a whole southwest of Germany, the whole huge parts of West Germany and South Germany.
They all depend on the car industry. And even when we look at the machinery, which is the second strong industry in Germany, even they depend on... on the car industry.
So this has major impact on this. That's why I think if it really turns out that the German car makers won't make it in China, that will be a disaster for Germany, which until now is the third largest economy in the world. But it is a real shock what's happening.
So I just wanted to go just on that. Do you think they will actually go that far? And clothes factories in Germany, do you think the CEO will be able to put that in place, given the backlash, not just from the unions, but also the Workers'Council, also politically?
The government. The government. I mean, it's partly owned. VW is partly owned by the state of Lower Saxony, isn't it? So how do you think they will be able to put any of this in place, given the serious concern that there is within Germany?
about what's about to happen to their biggest industry. I think it's un-inventable. And that has not only to do with the Chinese market that they are struggling so bad in China. Electric engine is this much more simple technology than combustion. Maybe in 100 years or we look back industry history and we thought, what a mistake.
100 years, electric... engines we had this already in the 19th century if we had developed it further we would never would have wasted so much and because it's a much easier technology the Chinese are now on this Tesla's on this and you don't need so much engineers and so much workers to build an electric car so only looking at this it is un-inventable and now that they are losing so much market share will have an extra will have extra uh more impact on uh on on the german car makers and um the third thing is uh there will be there's much money is needed to be competitive in china again so they have to put we're talking about billions to invest in engineering, and they have to do it in China. So a lot of money is now needed to invest in China so they can keep up with the Chinese competitors. And then meanwhile, I mean, Clifford, I don't know if you have any insight, but has it been a true level playing field for German automakers in China? Or does the Chinese government provide assistance to their domestic...
companies. I mean, is this an issue? Because some people are saying it's unfair.
It's a big issue at the moment. And actually, the European Union this week is going to vote on putting tariffs to try on Chinese cars, Chinese imports to try and level these playing fields. The problem, I think, definitely with China, you know, it is heavily subsidized and it cuts right across the supply chain. As I was saying earlier, you know, that it's at every level in society.
These are it's an industrial policy. And you don't get industrial policy on that scale anywhere else in the world. So there's a sort of an ability to manage everything.
BYD is a private company, but it's very heavily linked with with with Shenzhen and the area around in Guangdong and how it's it kind of functions at every level. It's essentially a battery company and what they're doing is selling batteries, but they're either encased in a car or a bus or You know, it's basically, it's like so many industries in China, it's a very different approach to what we have in Western industries. So this week we have this vote in the EU to try and level the playing fields and it'll be interesting to see how that does because it's trying another level, just to what Felix was saying, talking about German strengths, about engineering and things like that.
To go back to those kind of strengths is very, very important, I think, because they still exist. But I'm very confused. I mean, my understanding is I'm actually going to play a comment from Robert Hebeck, the economic minister of Germany, of Germany, not not from this afternoon, but just from a few days ago in terms of Germany's position concerning these EU wide tariffs that they're discussing and they're going to take a vote on. Have a listen and then we'll pick up from there.
I think it's true. I think it is indeed proven that China is artificially increasing overcapacity with subsidies, in order to take over markets, to take them over aggressively. Nevertheless, I am not a fan of terrorists, of countervailing duties.
Because that will probably lead to countermeasures and will involve us in a tariff dispute, perhaps a tariff war with China. So I urge political solution. And that was very much in line with the ladies and gentlemen I just talked to. So I'm a little confused, actually. I always have been, because Germany's position...
appears to be that they don't want to slap tariffs on Chinese vehicles coming into the EU. And everybody else in Europe, with automakers in Italy and France, support this. But the German automakers who would benefit from the tariffs, at least in the European continent, don't want this.
What's going on? I assume this is being tied to their businesses in China. Yeah. I mean, you're not alone in being baffled by this. It's really...
It's kind of remarkable. If you look at how the tariffs in the US were sold as protecting the US industry, bringing production home, all of it as a positive force. And in other European countries, they see this as a way of trying to make things fair again, to bring about a level playing field.
But Germany has annoyed the G7. It's annoyed all of its partners. It's just because to protect this essentially dying industry in its current form. I mean, I don't believe that the German currency will die out, but I think in its current form, it's going to need massive changes.
And instead of trying to help in a way to make, you know, it's afraid of China. It's worried what's going to happen and that somehow China will retaliate in a way that it can't afford. But it's alone in this. And so when this vote happens on Friday about trying to bring in these tariffs to make things this level playing field, Germany has been putting pressure on other European partners to... to stop this and if it's causing a major problem in the EU and has longer-term repercussions.
But isn't part of the problem that this whole thing about that there is so many of these German companies are using, as you said before, China to make products that are sold not just in China but also parts that are coming back here so it's going to hurt German companies as well? Not so much. because the amount of German cars who are produced in China to get them imported to Europe is not big.
But of course, the German car makers are afraid of countermeasures from the Chinese side. And then unlike GM in the US, unlike Renault or Peugeot, German car makers still have a big market share in China. GM is pretty much out.
Chrysler, they're all out of China. So they have not much to lose anymore. The Germans are.
But somehow I think it's still also sort of a game. I mean, because the vote on Friday, the majority of the European countries already said they are pro the terrorists. And Germany cannot stop it anymore. But as BMW now asked Germany, please still vote against it.
So. the Germans can show at least to the Chinese side we were against it and please don't hurt us. I think so maybe it is sort of a game and the Germans do know that these terrorists will come.
This is Europe's biggest economy though. I mean the thing about this is it's a game certainly and it is this, you know, but this is Europe's biggest economy saying we don't want to offend the Chinese government, which is pretty incredible. We have got quite a lot of questions about China in particular and about these EV cars.
One thing I just want to quickly ask, Felix, is there any car not fully Chinese these days? That's asked by the genre. I think there are.
You think? I'm not 100% sure. US automakers maybe. But...
especially the premium car German car makers, they're very proud that they get all their things from... Lamborghini you mean? Made by VW by the way.
I'm even thinking of some Mercedes, I'm not sure, I cannot answer. But the thing is less and less German parts are needed in China. That's a much bigger problem because it used to be for a long time that not only German cars which were produced in China, but a lot of parts were produced in Germany or from German companies And they're less and less needed So we're not only talking about the big German car brands who are in trouble But also to the suppliers and the machineries Mr. Moon asks what percentage are Chinese EVs on German roads?
And then somebody else replied actually saying that they thought it was about 1% but... I have some interesting numbers for that. We have some data from the international...
Yeah, can we share my screen please? Well, okay. One percent?
I'll walk us through. Oh, sorry. Okay. So we have to look at the second column. That's cars in Germany.
And then we're looking at BEVs, which is battery-based electric vehicles. Eight percent were Chinese cars. And 41 percent are still made in Germany. But it's quite different when you look on China's side. 8% of EVs, right?
In the Chinese side, 67% of battery EVs are domestic. Yeah, exactly. The reason why there are not many Chinese cars on German roads yet... Let's keep that up actually for a little longer on screen for the people in chat. Yeah, let's do that.
The reason is that there are not many, because until recently they had problems to transport so many cars from... China to Germany. BYD is building these giga container ships now. They are already building it, so they are pretty much on their way. The problem is China has created huge overcapacities in electronics.
There used to be 500 EV car brands in China and 400 of them already are bankrupt. But still, they created overcapacities for 50 million cars in China. Of course, the Germans are part of this. And only half of them are sold in China.
They have to get rid of the rest. The US already closed the market. Japan closed the market. Turkey closed the market.
Canada closed the market for the Chinese car. The Europeans haven't until yet. So they're just waiting to come to Europe. And when this is happening, we don't know how much the Chinese car will be sold until then, but what we can tell, it's much, much cheaper than what the German competitors will do.
And I'm not sure if, I mean, until now, there's a huge loyalty of car buyers to stick to German cars, but there was a huge loyalty to German brands in China too, and now it vanished, and I'm not sure if it's... the same can happen in Germany when it's so much cheaper. Do you think Germans will abandon German cars? I mean, it's a big, it's such a point of pride. Yeah, but I mean, the German, the Volkswagen ID.3 Pro is at the moment still around 40,000.
They will lower the price now until 30,000. I think we have some footage of the ID.3. Yeah, but it's a similar car.
Similar similar car BYD sold in China for ten thousand So just one fourth of the price and to be honest the software is better than in the German Just to pick up on that Marty tube says it's hard to make cheaper cars as in in Germany and in Europe if the labor cost ten times as much as it does in China that's the point that's being picked up quite a bit and Yeah, I've got there. There are more questions about Chinese cars And also just one thing I must I do just want to add because somebody has said this several times criticizing the Chinese Back to the batteries that are coming out to have come out of China that apparently they were using a BMW vehicle And then there was a big fire in South Korea I don't know if you know anything about it But this person keeps bringing it up saying that the what basically what China was using and what they gave BMW It wasn't as good as what they could have had. Do you know anything about that?
Just because he's asked it several times. I'd like to, just to take it as a general point, I mean, you're talking about labour costs and safety standards and all of these things. There are efforts now from Europe to make the level playing fields, not just with the tariffs, but also even within the German car industry, they're saying that if the Chinese want to, they should have to manufacture in Europe.
With using European standards, European wages, European working conditions, all of these things, because they've got an unfair advantage, because they don't follow EU norms when it comes to a lot of car production. And then you have things like safety issues, like you've had, there's been a number of, I don't know the details for a lot of the incidents that are mentioned, but the broader point about safety concerns is there because of... different kinds of standards applying.
Now obviously if they're coming into Europe they have to meet certain standards, but it's still a big part of the whole level playing fields. Yeah, I just want to actually pull up an interesting video that we found. Actually does the control room have it or you have it, Nehal?
I have it as well. Let's show it on your... Thinking of the YouTubers.
Yes, yes, because even in Germany what's really fascinating is there are German youtubers who yeah, there you go. Maybe it removes the car. Wow, Daniel Hallmeyer We're giving him a little bit of a little bit of a Ad space here, but he's German and he is reviewing two cars a German car BMW and a BYD and this is all over YouTube tens of thousands hundreds of thousands of people are watching this and He's breaking it down in terms of a review and you can tell like The BYD car is really futuristic looking, I can see that already. That's the panoramic trooper I was talking about. Oh, that's the top, that's so expensive.
Very fancy. Yes, and that's pretty expensive for BYD, no? 50,000?
But wait for the price of the other one. Oh, okay. Uh, hold on, let me see if I can... So that's the BMW and they're both EVs. No, that's just the...
That's definitely not the price. That's just the edition. This is the...
20,000. BMW. It's about 30,000 more. So 70,800 euros for people who can't see that. And then you have to do a lot of modifications if you want it to look exactly like the other ones.
It's just the basic price. I mean, now of course we're looking at two luxury cars and Chinese luxury cars are also not cheap. The problem is in the price politics, the German car makers went. They thought, okay, yeah, when we build electric cars, they are more modern.
We can have at least the same price as a combustion, but or sell it even more expensive. The Chinese don't think that way. They know how much easier and cheaper it is to build an electric car.
And so what the German car makers did, and that was also one of the wrong decisions, they wanted to sell when they went into electronic they want to sell high-end cars they don't have much in the mid and blow range and this is where the chinese are strong now so yeah we should look at uh the little ones uh the chinese they're not very good looking there but this is what the mass of people are buying and this is what is missing in europe at the moment is missing from From Volkswagen. Now Volkswagen all over the sun said, yeah, we will bring out a mid-range or lower price electric car. But it's too late.
But it will take three, four years. And this is a long time looking at how fast the speed of developing is happening in China now. Can I ask to what extent the German automakers are struggling in part because I don't know if this has to do with the German government and their inability to roll out the infrastructure for charging stations.
In the United States, especially in the state of California where I'm from, they've been very, very aggressive working with Tesla in some cases or some of the other U.S. automakers actually working with Tesla for sharing the stations and the technology. I'm walking around all over Europe and I'm just not seeing any charging stations in the same way. Is this also the fault of the German government?
It is. It is. But of course it is because there was... Politics, governments only react when the pressure is big enough. And there was no pressure yet.
People in Europe, they said, we don't want, we don't need electric cars, or only a very few people. So the big mistake was by the companies themselves. And looking at Volkswagen, it was under Winterkorn, who is now in court at the moment, the diesel scandal in 2015. In his era, Volkswagen put all his efforts in diesel engines. That's what they bet on. Yeah.
And they had no alternatives when the diesel scandal came out. Back at that time, Toyota had hybrid. Tesla was coming up and the Chinese were coming up. And now, eight years later, nine years later, there's still not a big alternative because they... They were battled all on diesel and they had no alternative.
What happened? I mean, German innovation used to seem to exist. Everything I'm hearing over the past 30 minutes or so is both the government and the automakers sort of reacting to things and never being ahead of the curve. I'm a little confused about how they lost their sort of game just on that. One thing you said early on really got me, which is that the Chinese government literally told the German automakers, we are going to go big on EVs.
Anyone who knows anything about China knows that if the state decides to do something, it's an authoritarian country, it's going to happen. So did these people who worked in China, these German companies, with a presence in China for two decades, just decide to ignore everything they know about China? I mean, I love both your thoughts.
Yeah, yeah, complete miscalculation. I mean, it was not only that the Chinese government said, OK, every 10th car has to be electric, but also, you probably also remember, Beijing was overcrowded with cars and then you only could get a license plate by lottery. And then they said, when you wanted to get a license, it was I think 1 to 80 or something, so it was hardly possible to get a new license plate, except if you buy an electric car.
And this should have been a clear sign for all the German managers to know where the direction is going. It's not only oh please the chinese want hope that the chinese consumers buy electric it was forced by the government only if you get buy an electric car you get a license plate right away otherwise you won't so this was a clear sign and i'm surprised maybe the problem in germany is that or the german car makers they had they had a too good time because they made so much money profit in China with combustion engines. And they couldn't imagine how fast the development would go and that they would miss this turning point because until and to be honest he's still selling combustion and it's not that China, all whole China is electric now.
Chinese government also said we want electric especially in the cities, in the countryside and 60 percent of the people still live in the countryside. They still need combustion. For a long distance, yeah.
And that is picked up by AB. When we were talking about the charging points just then, that we were referring to, I'd like to point out, it might be in Western countries that there are charging points, but in most Asian and African countries, there are no charging points, so still German cars have an upper hand there, is what they are pointing out. And many more points on Chinese EVs. Did you want to come in?
Sorry, because I've got a list. Yeah, just to agree with that. I mean, I think that...
corporations think in quarterly terms and the Chinese government thinks in, I don't know, it's a cliche, but it's certainly five-year plans. And they didn't listen because they're making money every quarter and it's continuing to grow because the market is expanding. But there was a lack of recognition of what direction the market was going despite all this input, despite the fact that the pollution had to be resolved because it was potentially destabilizing the government.
which means that something had to change. And for some reason they didn't listen. And this is now, it's payback time now. And we have 200 car makers now in China.
190 too many? Even the Chinese government says too many? The question is only from those, from the one dozen who will survive, will the German car companies be under it? That is the big question.
I mean, maybe you can see Volkswagen, Toyota, Hyundai and maybe 10 Chinese car companies in... I don't know, five years, ten years? These things are happening so fast that the way we used to predict things happening in the auto industry don't really work anymore because it's just so fast moving. Just a point, sorry, just a point made by Casey Liu. The Chinese government, this is alluding to the 100 and 200 EV Chinese companies, Chinese government is running out of money, exporting EVs.
only hope for their economy with all the tariffs on chinese evs you've just talked about that earlier the government subsidies will will be stopped and the chinese ev is then done is what this person is saying casey lu but that is a big issue isn't it about this the dumping so there over capacities which are created in china is a huge problem also for china itself definitely and there will be uh the battle is at the moment is happening but price battle and but still we shouldn't we still shouldn't underestimate that among these few or 200, 100, 200 there are some very good. Yeah it's a numbers game at the end of the day right? Exactly and we know them from China right?
This is how China works I mean they create over capacity and there's a huge disruption and but at the end some of them will survive and they are excellent. Yeah, like the solar industry. Nehal, I know you had a question or a comment. Yeah, I just wanted to step back and just sort of ask, why was China so driven?
Why is it that they put their sort of bets behind EVs? Well, I think, again, it was the fact it was the battery industry was very important. It was cheap.
They had to do something about pollution because it was becoming destabilizing in the cities. It was also, it's lower tech, so it's easier. A lot of time, China was trying to buy these expensive powertrains from European car makers that they could use to drive cars, to develop cars.
But for them, it was a possibility to kind of build something themselves, a domestic industry itself. And this idea of massive number of companies producing something happens in a lot of different industries in China. Even in the e-bikes. Do you remember the e-bikes a few years ago?
Oh God, they were everywhere. Everywhere. And it was millions and they cost nothing.
And they're all from China. And they're all from China. And then within months of this happening, they were being hailed as the super champion industries of the world.
And I think there's maybe two or three companies doing it now. Most of them weren't profitable. Yeah, they never made profit.
It was all investment. And. And then you have these huge piles, stockpiles of, you know, in trash dumps of these bikes, which are a massive environmental disaster, actually.
And there's talk at the moment that this is happening in the e-vehicle sector in China, too, because this capacity isn't going... At the moment, it's being... They can't send it anywhere.
They're trying to send it to Europe, but it's not clear whether they're going to be able to. And a lot of the existing production anyway has been scrapped because... It's only in the last couple of years that these things were developed, but they've gotten a lot better.
But there's a lot of, nobody wants the bad stuff from two years ago. Actually, at the moment, only three car companies selling electric cars are profitable. This is Tesla, it's BYD, and it's Lease Auto. Which auto?
Lease Car. Yeah. Because of this overcapacity China has created, and this is sort of this... Blamed to the system, because when the government says something, we want to go in this direction, and it's happening with a lot of key industries, then every city government, every provincial government is building up their own factory. And of course, this is too many of them.
But now what are they going to do with these overcapacities? So I think Europe has no other choice than to regulate somehow. And I think the European Commission was doing it very smart.
I mean, the Americans, clearly the Canadians, the Japanese said, we don't want anything of this. So they put 100% tariffs on cars. They closed the market. There's no BYD in the United States.
The Europeans sort of leave a window open to negotiate. And this is what the Europeans want to do. This is...
but you have to. have something. So I don't understand the German car companies at all.
To negotiate with China, and you have to negotiate with China hard, because this is what the Chinese are doing, it's in their blood to negotiate hard, you have to have something. You have to have something to negotiate about. And this is what the European Commission is doing. They didn't say 100 percent and that's the end of it. They said, okay, we try to differentiate who got more subsidies, more or less, and this is depending on the tariffs.
And they let the window open to negotiate. And I think they negotiated a little bit, but maybe it didn't turn out. And now the tariffs are probably coming.
But still the window is open to negotiate. And I think this is important to do this. But you have to have something.
If you don't put tariffs at all, the Europeans have nothing to negotiate about. I'm right in saying that there's currently a 10%. tariff is that right no it depends it's between uh 18 and 35 percent i know that's what they're thinking of i thought that's what they're thinking of bringing that's what the vote is on but i thought there was already a smaller one yeah yeah it depends on i think uh i mean even the to the few bmws who are produced in china and and We have to add this. I mean, the German car companies in China are part of the overcapacity problem. I mean, I mentioned 39 fabrics where Volkswagen is involved.
So they are part of the problem too. And so even the BMWs who will be re-imported to, who are produced in China and re-imported to Europe, that will be probably tariffs on because they also take advantage of the subsidies from the Chinese side. But the EU Commission is trying to look very closely and try to differentiate and not like with a hammer like the Americans do 100% to everything what comes from China.
There are so many more questions, but I know time is ticking. No, I mean, we've got a few more minutes. Okay, well, this is one that has come up twice from two different people.
And this is to do with the difference between China, which is not a democracy, and Europe, Germany, which is a democracy. And the difference is that that... therefore can mean. Mau Mau says, please discuss functional safety and security, including cyber security standards as well, because I would rather spend €10,000 extra for it to be more tested. We talked about that before.
And then somebody else is just saying, can we talk, please, about how much the communist versus democratic economy mindset makes a difference in this whole industry and whether it does. Not just about the price, but they are. Thank you.
Yeah, so I don't know if either of you maybe prefer it. I mean, one thing that people, we've had a lot of debate about TikTok and how the data on TikTok is being stored and possibly stored in Chinese servers and how this could be used against Western powers in the future. A car is a computer on wheels and your car knows a lot about you.
And there's a lot of security issues around allowing Chinese companies with their to have this much access to the data that is contained within cars. And this means that, I mean, in some of the scenarios, if your bus fleet is a Chinese bus fleet, they can stop the bus. Worst case scenario.
Worst case scenario, yeah. Just to qualify, these are commercial companies that are out to make money. Sure. But... But a lot of them are state-owned.
There's a lot of links. And even in talking about the US... it comes down as well to Europe's relationship and to relationships between Western countries. I mean, Germany has annoyed a lot of the other G7 countries with its approach to China, the way it's been way too conciliatory in this way, particularly on areas of security.
Because if US security officials are nervous about dealing with Germany because they feel that Germany just gives everything away too easily. So there's a security aspect to this. And this, of course, feeds in, as the excellent question said, you know, it becomes a cyber security issue. Now, it can look paranoid, but at the same time, we know that there have been cases, you know, TikTok was following Financial Times journalists, you know. That was real.
Yeah, these are all real issues and a lot of stuff that could be happening that we don't know about. So you can't just dismiss it as paranoia. I think these are genuine security concerns. And we are already in the middle of it. I mean, we don't have to look in the future.
I mean, the... German network, telecommunication network, a lot of important parts are still from Huawei. It might change in a few years, but at the moment we are already. And if they do something in the German network and also in a lot of other European countries, the Chinese government can already turn the switch. Are they doing anything?
Is the EU or Germany doing anything in regards to... cybersecurity and cars car imports? Not enough. Definitely not enough because they still of course it would cost money it will cost you would have to change a lot and I mean look at TikTok I mean a lot of people still haven't realized that it's a Chinese and Chinese app interesting in China it's forbidden.
TikTok is banned in China because the Chinese government doesn't want all these content which is ironic and the Europeans are not only the Europeans, the Americans they use TikTok and don't want to or are giving them it's hard for them to regulate it it's totally understandable but this is what's happening about cars yes probably a lot Some people would say, OK, we don't want to buy a Chinese car because of the security issues. But as I mentioned, TikTok, the majority is using it. This will probably happen with Chinese cars, too. Yes. I mean, I have got so many questions.
I think we are kind of near the end. But I wonder if we can check in on the poll. Yeah, definitely. Let's do that and just see if you guys have any reactions to how people have voted.
So the question was, would you still buy a German car? No. So there were three possible answers. No, there are better alternatives.
Maybe if they were cheaper. Or yes, they are still the best. So in...
The order that they won, which won the most votes is what I'm trying to say. No, there are better alternatives, 39%. Maybe if they were cheaper, 36%.
Yes, they are still the best, only 24%. So that's what the poll says, 505 people voted. So only 20% voted for German cars. Said they are still the best, yes. Does this surprise either of you in terms of the, I mean, look, this is not scientific by any means, but does this, and it is worldwide, but does this reflect what you also observe in terms of people's feelings regarding German vehicles and then the competition out there, whether Japanese, Chinese, American?
I'm not so worried about that the Germans in the near future still can make it because engineering in Germany is still very strong. especially cars. So what worries me is the speed, how this is all happening.
And this is what the polls also show. I think a few years before that, at least if we asked the German audience, none of them would have said we buy a Chinese car, probably under five percent. Now the numbers probably are much higher because people realize how How fast the development in China is going, battery and digitalization software.
I'm not sure if the Germans can make it in the next two or three years. For German engineers this is a very short time. In the Chinese KAK development it is a long time. A lot of things are happening in this very short time. I think also, I mean, it's not that long ago that then Chancellor Merkel was saying that the internet was unknown territory.
And this is part of it. You know, the fact that Germany hasn't really excelled in engineering, in tech engineering. It has in traditional engineering forms. So that side really needs to come on.
And that's going to mean a lot more collaboration, presumably with the US. So you need to keep relations good with the US. So all of these things kind of feed into each other ultimately.
I mean, I think it is. And the German car industry is one of the wonders of the world. But it's really, it thinks it's sat on its laurels. It thinks that just because it's got this legacy that it'll help it survive. But it's a really fast moving world now and it's really struggling.
And Yanghangir Alam had actually asked this question. Could we discuss how German companies can regain their positions? Can they get more?
government help in the process where you said that they've got to what make better relations with the US but it's going to be difficult because they have to do probably do both they have to have good relationship with US tech companies and that's why we're not only talking about China the US is they they they also were lacking behind but with With Biden here, the US speeded up so much. And of course, software-wise, the US were always strong. But I think there is also no alternative than work together with Chinese companies. And this is what's already happening to some part, but it probably has to be more.
Well, I think my takeaway is that Clifford and Felix should run these German automakers. Save them. I'm not sure if I...
We can set up a consultancy. Make a fortune. Neha, I don't know if you have any thoughts from listening to all of this. Well I'm entirely baffled that you told us that BYD has so many gadgets in its car, like a karaoke machine.
Also, actually, you can play video games. Not as the driver, but... the passengers right some some husbands use it as a living room when they have fights with the oh my they go into the car and say okay this is my living room and it's on social media i've got no comment to that well i'm going to end with actually two comments some eo says german cars are doomed and peter sobsek said german cars are the best so that is how i am going to end on my thoughts not my thoughts but your thoughts so thank you very much for everybody who's put in all your questions and your comments have been many, many, and I'm sorry, I haven't been able to get to all of them. Super lively chat today from those tuning in online.
So thank you so much for joining us. We're really grateful and we hope you learned a thing or two. Thank you, Felix Lee. Thank you so much to Clifford Coonan, our brain trust here.
We're so glad that you were able to join us and I've definitely learned a lot. Yeah. And do join us again next week. you should know what we're going to talk about around about 24 hours before it will be on our YouTube community tab so on that platform and we look forward to seeing you next week thank you very much again to everyone who's commented and put questions to our guests thank you very much bye