German carmakers bet future on electric

March 30, 2021

In the home of the automobile, two announcements in March showed that German carmakers were ready to go toe-to-toe with global competitors on electric vehicles. First Volkswagen announced plans for six European battery factories by 2030, then Audi stated that it expects profits from its latest electric models to match those from traditional vehicles in as little as two years. T&E says this ambition should be supported by the EU with a phase-out date for fossil fuel car sales and ambitious CO2 targets that give the industry certainty.

VW will build six battery factories across the continent as it seeks to dominate the electric vehicle (EV) supply chain. The plants will have a combined output of 240-gigawatt hours per year – enough for almost 5 million cars annually, or roughly a third of EU car sales. This will reduce the company’s reliance on imports from global battery producers such as Korea’s LG Chem and China’s CATL.

Audi’s announcement was less grand production plans and more a statement of intent. In acknowledging that profits from its latest electric models would likely match those from traditional vehicles in just a couple of years, the premium carmaker made its strategic direction clear. Chief financial officer Arno Antlitz told the Financial Times “scale is really important, and so we expect to see margin convergence in two to three years”. He added “the price reflects the cost, and battery electric vehicles are just at the beginning.” Audi expects a third of its annual sales will be fully electric by 2025.

Julia Poliscanova, senior clean vehicles director at T&E, said: “We are seeing a flurry of announcements from the European carmaking industry of late. But when the biggest of the lot [VW] commits its future to electric vehicles, it is time for the EU to sit up and take note. Volkswagen’s ambition of 70% electric vehicles in 2030 makes a mockery of current EU targets. It should be the other way round. The message from the car industry is clear: we are ready to deliver the products if the regulations require them. But will the EU deliver?”

According to T&E, the EU regulatory framework should help carmakers’ forward-looking strategies to succeed. It argues that what the zero-emissions transition needs most is certainty. EU regulations should not only provide a phase-out date for fossil-fuel cars but set strict intermediate emissions targets in the coming decade to get there effectively. This, T&E says, will ensure investment security for electric vehicles, which will ramp-up production across the supply chain.

This comes at a time when the continent, from Portugal to Poland, and from Sweden to Spain, is preparing for a post-combustion engine future. 

Julia Poliscanova concluded: “Electric cars shouldn’t be seen as a threat to jobs, they should be seen as an opportunity. Europe is already set to be self-sufficient in batteries as early as this year and it has had a major headstart when it comes to producing vehicles. A quick and orderly transition to electric cars should be part of Europe’s industrial strategy: for the sake of Europe’s workers and the environment.”

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