‘German premium brands no longer invincible’
With the opening of the 88th Motor Show, the ‘silent death’ of the diesel engine and the fast rise of electrification and autonomous driving are the ‘talk of the town’ in Geneva (Switzerland). German premium brands, though still far ahead with their combustion technology, might no longer prove invincible in the near future.
The German car makers Volkswagen (with Audi and Porsche), Daimler (with Mercedes) and BMW are still ruling the premium market with almost a 80% share today. Nobody could imagine that they could lose all of a sudden that powerful position they have built patiently for decades.
Made in Germany threatened
But fast electrification of vehicles, the decline of diesel being stained by the dieselgate scandal and the demand for intelligent cars are creating circumstances that might threaten the ‘Made in Germany’ quality label.
“German car makers have a position that isn’t questioned in combustion engines, but Tesla managed to become the number one in electric cars”, Willi Diez, director of the German IFA institute for automotive economics (Instituts für Automobilwirtschaft) says. “It’s hard not only having to catch up and maintaining an image of excellence in the old world, but also in the new one.”
40 million euro for electric cars
“We are very confident in going to Geneva”, counters Bernhard Mattes, president of the German car industry VDA. German car makers who made record profits last year are going to invest 40 billion euro over three years in the electrification of their models and 16 to 18 million euro in connected and autonomous cars.
According to Willi Diez German car makers still hold a strong position in the Chinese market, the first car market in the world. For him prestige and tradition are the major assets. “Lots of car makers are building high quality cars, but you can’t build a brand image that quickly”, says Diez.
Lexus and Infinity no real competitors
“Neither Toyota with its Lexus or Nissan with Infinity are real competitors today”, Ferdinand Dudenhöfer from the German CAR institute (Center Automotive Research) analyzes. “They are trying for a long time, but they lack the roots and the technology that Jaguar, Land Rover and Volvo have for instance.”
Diez agrees, pointing also at the weakness of the French car makers’ position being associated with smaller cars, while for Land Rover and Jaguar the myth revives and Volvo is showing great potential with its SUV XC40 just voted ‘Car Of The Year’ on Monday in Geneva.
Tesla serious competitor
Tesla has proven on the other hand it can build a brand from zero in less than ten years to make things hot for the established car manufacturers in the 100.000 euro segment. In the American market the young brand sold as much cars as Porsche last year.
With its Model 3 at a cost under 40.000 euro having registered already hundreds of thousands of pre-orders, it could really become a “very serious competitor if it can finally cope with the mass production rhythm required”, says Dudenhöfer.
British anti-Tesla weapon
“Tesla can legitimate its presence in the premium market by its technology. It’s a new product that fascinates, like a product from Apple”, the expert says. In Geneva it are the British with the full electric Jaguar i-Pace that are presenting a market ripe ‘anti-Tesla weapon’, not the Germans.
Volkswagen only shows a concept, the I.D Vizzion, while Audi will launch its electric SUV later this year and Mercedes will launch its alternative “before the end of the decade”. “The Germans will enter the race in 2019-2020”, Dudenhöfer estimates. But competition won’t wait for them.