Frankfurt Auto Show – Industry In Crisis, Aggravated By Election Frenzy.
“I suspect the underlying theme of the show will be that it marks the point in history when the German automotive industry lost control over its own destiny
Security experts safely removed the fuse from a massive 1.4 ton ‘Blockbuster’ unexploded second world bomb in Frankfurt at the weekend, but when the biennial auto show opens there next week, the German industry will be under fire from issues likely to be much more difficult to make safe.
Not only is the German industry being criticised for cheating government noxious diesel emissions laws, but it is being investigated by the anti-monopoly authorities for illegal collusion. Perhaps worst of all, this flag waver for Germany’s world class engineering prowess is accused of incompetence in failing to meet the challenge from new electric vehicles, now being led at the top end of the market by Tesla, and lower down by Renault-Nissan, the French-Japanese alliance.
These accusations are being turbo-charged by the current general election campaign and industry leaders have been taking a low profile, hoping that by Election Day on September 24 the crisis may have passed. The politicians also accuse industry leaders of paying themselves too much money.
If that’s not enough, the global industry faces huge pressure to finance an urgent switch to provide electric cars, vehicles that drive themselves, and all the engineering and connectivity software that involves. This radical change has also whipped up the fear that cash rich information technology companies may swoop down and steal their markets.
Hype and Bluster
The press days for the Auto Show on September 12 and 13 would usually be echoing to much hype and bluster as the chief executives thump their chests and brag about how wonderful everything is, and can only get better.
This time expect a more subdued tone from the big cheeses.
Professor Peter Wells of the Cardiff Business School said this is a Rubicon moment for the industry.
“I suspect the underlying theme of the show will be that it marks the point in history when the German automotive industry lost control over its own destiny. Behind the shiny new models and brash presentations the corrosive impact of the VW emissions scandal refuses to go away despite repeated attempts to draw a line in the sand,” Wells said.
“Meanwhile, the scandal has implicated other companies and precipitated a public antipathy to diesel. Along with allegations of collusion at a senior level among the leading German car companies, (German Chancellor Angela) Merkel has felt it necessary to say that those senior executives are paid too much. There is a sense that complacency and mismanagement have combined to leave the German industry behind the times, running a car industry for last century not for this,” Wells said.
Professor Stefan Bratzel, from the Center of Automotive Management in Bergisch Gladbach, Germany, doesn’t have much sympathy for the industry either, but expects it to bounce back.
“This is all very embarrassing for the German premium manufacturers who should be leading the race for new technologies. They started too late on electromobility. BMW was early but lost faith because it wasn’t very successful with its i3 (battery car, later including a gasoline range extender). Then there was the diesel crisis. They are all working on electric cars but it takes time; in the long term it won’t be a problem but right now it is. We will see how they handle it at the show,” Bratzel said.
“This all stems from big mistakes made 10 years ago. They thought they could circumvent the environmental emission limits by tricks and sometimes more than that. This is a problem not only for the Germans but most of the diesel manufacturers. In Germany they have lost a lot of image not only with political leaders, but with the public too,” Bratzel said.
Professor Ferdinand Dudenhoeffer from the Center for Automotive Research at the University of Duisberg-Essen in Germany calls this a crisis of confidence, but thinks some kind of normal service will be resumed after the election.
“There is crisis of confidence in Germany and I think the media and public will pose a lot of questions at the show. But after the election I think we could carry on like we have in the last 10 years when Germans go to (the E.U.) Brussels to dilute the rules. But that depends on the election result,” Dudenhoeffer said.
Merkel is favorite to win the election on September 24 with the Christian Democratic Union (CDU) and its Bavarian Christian Social Union (CSU) conservative coalition. The opposition Social Democratic Party (SPD) is seen as a distant second. Investment bank UBS said latest polling suggests a 75% probability of Merkel retaining the chancellery. The odds of another grand coalition with the SPD are 60%. If Merkel needs a small party to keep in power that means little change if it’s the conservative FDP. If it’s the Green party, all bets are off.
The auto show has been devalued this year by the non-appearance of several non-German manufacturers like Alfa Romeo, Fiat, Infiniti, Jeep, Maserati, Mitsubishi, Nissan, Peugeot and Volvo. Not only that, most manufacturers have revealed their new models weeks before the show to try and get more of the publicity spotlight.
There is another ominous development at the show. Audi has eschewed its huge individual stand on the grounds of cost and this has been taken over by the “New Mobility World” exhibition, which will be full of IT companies showing how they will change the world, maybe at the cost of the traditional incumbents surrounding them.
Cardiff Business School’s Wells sees this as a big threat.
“The car industry remains the jewel in the German industrial crown, but now there are doubts over the ability of industry leaders to meet future challenges. Along with this political threat, the industry still faces the competitive threat of a battle for control with the technology companies and new business models emerging from the U.S. and elsewhere. The industry is certainly alive to the danger, but may struggle to find the right response,” Wells said.
At the show, expect yet more popular SUVs. Chinese brands Chery Automobile and Great Wall will have debutants which may threaten Europe and the U.S. Ferrari will wow the crowds with its Portofino. Most of the new electric cars there will still be in the concept stage, which says it all really.
The show opens to the public from September 14 through September 24 at the Messe Frankfurt.