Bridging the digital gap in the construction industry

The goal of the e-car offensive: challenges and obstacles

The European Union and the Federal Republic of Germany are committed to e-mobility. The German government has set an ambitious target of 15 million e-cars by 2030. The EU has decided on the end of combustion engines and presented a law for improved charging station supply at the beginning of July. But the reality is different: E-mobility is not finding the desired acceptance among people. There are many reasons for this, including excessively high prices and wrong political decisions.

E-car acceptance remains subdued

The German Federal Statistical Office reported in 2022 that Germans are still struggling to buy electric cars. Although the share of e-cars has increased, they are still a minority on German roads. Currently, just under one million e-cars are registered, representing only 4.5 percent of all passenger cars. To reach the traffic light coalition’s target, about 5,000 e-cars would have to be newly registered every day. Automotive expert Stefan Randak is skeptical about this target, calling it “wishful thinking”.

Price barrier and expensive electricity

The main reason for the hesitant e-car acceptance is the high purchase cost. Although subsidies have made electric cars more affordable, they are still more expensive than vehicles with internal combustion engines. The German Automobile Association (ADAC) named the Dacia Spring Electric 45 Essential as the cheapest e-car with a new price of €22,750. However, most e-cars are above this price level, while combustion engines are less expensive overall.

Challenges in infrastructure development

Another problem is the inadequate infrastructure for e-mobility. The availability of charging stations varies widely across Europe. While some countries, such as France, the Netherlands and Germany, have comparatively good charging station coverage, there are still large gaps in other countries, especially in southeastern European states.

The EU plans to install a charging station for passenger cars every 60 kilometers along the main roads. However, there are no uniform quality standards and there is a challenge to expand the congested network for more powerful charging stations. In addition, there are still no sustainable solutions for electric truck charging capacities.

Opportunities and prospects for e-mobility

Despite the current challenges, there are also positive developments for e-mobility. The automotive industry is increasingly setting the course for an electric future. In the first three quarters of 2022, e-car production totaled around 375,600 vehicles. This represents an increase of 66.2 percent compared with the same period last year. Although the German industry still mainly produces cars with classic combustion engines, the e-market is booming, especially in China. Volkswagen, once the market leader, now faces tough domestic competition and ranks second in e-cars in Germany, behind Tesla.

Outlook and summary

The e-car offensive in Germany and the EU faces major challenges, but also promising opportunities. High purchase costs and expensive electricity challenge the acceptance of electric cars. In addition, the expansion of the charging infrastructure is still insufficient. Nevertheless, there are positive developments in the automotive industry and progress in the planning of charging stations. Comprehensive cooperation between policymakers, industry and consumers will be necessary to sustainably advance e-mobility and achieve the ambitious goal of 15 million e-cars by 2030.

In his guest article dated May 3, 2023 at SpringerProfessional, Atreus partner and director Stefan Randak questions the strategy of German automakers, as they have fallen behind Chinese OEMs.DEUTSCHE

German car manufacturers focus on premium and electrification

The boards of directors of the German vehicle manufacturers have specified their strategy: concentration on the premium segment, renunciation of lower vehicle classes, combustion engines with parallel electrification, in-house production and cost pressure on suppliers. But the 2022 annual reports and the 2023 Shanghai auto show raise questions.

Stefan Randak

Partner & Director, Head of Solution Group Automotive and Mobility

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„Germans were in a state of alarm during the auto show in Shanghai“

German carmakers lose electric race in China

German vehicle manufacturers sold a total of 4.4 million cars in the Chinese market in 2022, achieving a market share of 19.1%. However, they have fallen behind in the electric vehicle market, with a market share of only 5% and the absence of their models among the ten best-selling electric vehicles. In view of the Chinese electric car sales share of already 25%, the German manufacturers have signalled alarm mood at the auto show in Shanghai. VW has announced that it will accelerate its electrification strategy for the Chinese market, while Audi and Mercedes are looking to expand their range of vehicles. The German manufacturers are struggling to compete with the Chinese providers in terms of offer, price and software development. VW is investing one billion euros in a new Chinese center for development, innovation and procurement to develop fully connected electric cars.

The struggle over software and equipment problems

German car manufacturers are lagging behind the competition in software and car connectivity, which leads to shortcomings in the equipment. For example, Volkswagen struggled with software issues in 2022, despite bringing in external software service providers. To cope with the lack of resources, manufacturers should refrain from developing their own infotainment systems in the face of competition from smartphone apps and systems such as Android Auto and Apple CarPlay. In contrast, Ferrari has already understood and has not installed its own navigation system in the new “Purosangue”, but only CarPlay and Android Auto.

German supplier industry in danger

While the car manufacturers in Germany were able to increase their sales and earnings, things are looking increasingly bleak for the supplier industry: The average margin is only 0 to 5%, and many companies are getting into difficulties due to the change in their product portfolio and the discontinuation of engine development. In addition, employment at suppliers has fallen by 6%.

Car makers cancel small car models and focus on luxury segment

The Corona pandemic has accelerated the decision of car manufacturers to use scarce material only for high-priced models and to phase out lower vehicle segments. Daimler, Audi and BMW are removing small and micro cars from their ranges. VW board member Oliver Blume wants to build the most sustainable luxury car brand, which is not only met with acceptance. Experts see calculable cost problems with e-mobility and software. With the elimination of the lower vehicle segment, a traditional market will be abandoned and the basis will be laid for others, especially Chinese suppliers, who will be able to offer low-cost and high-performance electric cars.

Stefan Randak

Partner & Director, Head of Solution Group Automotive and Mobility

D

„Previous attempts by Chinese suppliers to conquer the German market have not exactly been successful. (…) However, times have changed.“

Chinese carmakers conquer the german market: how they’re doing it this time around

Chinese automakers intend to enter the German market and fill the gaps in the market created by German manufacturers. They have sales experience and battery expertise. Major European automotive sales companies and vehicle rental companies enable Chinese suppliers to enter the market and offer sales and service infrastructure. For example, BYD will sell and lease through the Hedin Mobility Group and Sixt.

In Haufe Sustainability, Atreus Director Martina Becker elucidates the increasingly important role of sustainable corporate governance in today’s world. Thereby, she outlines the importance of economic, ecological and social aspects for companies and makes it clear that sustainability offers advantages, especially in difficult times.

Challenges for companies: Sustainability in times of high inflation and legal requirements

The ongoing high inflation and legal requirements such as the Supply Chain Due Diligence Act pose major challenges for companies to make their operations and processes more sustainable. Companies that do not rely on ESG factors and invest in sustainable innovation and digitization risk being left behind.

Martina Becker

Director

D

„Sustainability is also always a process that is geared towards a long-term rethink“

Data quality as the key to success

The German Supply Chain Due Diligence Act places high demands on companies, especially with regard to data availability, quality and accessibility. The aim of the law is to protect human rights and the environment. It is clear that sustainable processes cannot be implemented overnight. In order to anchor sustainability as a strategic corporate goal, a long-term rethink is required.

Sustainable supply chains: Knowledge and transparency are the deciding factors

For customers, it is of increasing importance where and how the products consumed are produced. It is of utmost importance to them if they have been produced under fair conditions and with appropriate remuneration. However, many companies lack transparency in their entire value chain. In order to fulfill their due diligence obligations and reduce CO2 emissions, companies must therefore increase their efforts towards digitization and automation along the entire supply and value chain. The challenges are particularly high for globally active companies. It requires changes in purchasing, adjustments to supplier contracts and audits to ensure that sustainable suppliers are selected. Digitalization plays an important role in this, as it enables end-to-end visibility and predictability. Real-time data management is crucial for a transparent supply chain and the reduction of CO2 emissions.

The path to climate neutrality and the black box in the value chain

In order to determine the CO2 balance of a company, the so-called Corporate Carbon Footprint (CCF) is calculated. The emission sources according to Scope 1, 2 and 3 are recorded.

Companies can achieve climate-neutral Scope 1 and 2 production by investing in new plants and switching to renewable energy. However, Scope 3, indirect CO2 emissions in the value chain, poses the biggest challenge. The sustainable transformation requires not only the change of the company’s own production processes, but also of the packaging and contents. Sustainably oriented companies are aiming for complete Scope 3 climate neutrality by 2030, which requires a comprehensive transformation of the supply chain. Effective interaction between production processes, packaging and product design is crucial.  One solution can be the circular economy, in which companies recycle their products and reduce CO2 consumption during transport.

The challenges of sustainable product development

Sustainably oriented manufacturers use the principle of the 4Rs (Reuse, Reduce, Recycle, Replace) for the development and optimization of new products. However, in the first step, according to the cradle-to-cradle principle, the question of eco-effectiveness is always asked in order to decide what is right.

In order to ensure sustainable product development, the circular economy must already be taken into account in strategic planning and not only at the end as an afterthought. The implementation of the circular economy should be integrated into the entire business process to ensure consumer-centric and sustainable product development. Examples of climate-neutral products are those whose plastic packaging and formulation are made from recycled materials or biodegradable substances. However, due to a lack of recycling systems, a lot of plastic packaging cannot be optimally recycled everywhere and must therefore be incinerated.

Another important aspect is that consumers are often unwilling to spend more money on sustainable products due to the tense market situation. Investments in sustainability are often necessary, for example for the switch to renewable energies and the use of climate-neutral logistics. Sustainable raw materials are often more expensive than conventional ones, which affects the final price. Despite this, recycled plastics account for only one-tenth of the greenhouse gas emissions of virgin plastic, underscoring the importance of sustainability. Manufacturers of sustainable brands are therefore concerned about the growth of low-cost private labels, which often do not meet sustainability standards.

Martina Becker

Director

D

„If you don’t have the right management in sales to conduct the demanding discussions and negotiations in retail, you will end up in a blind alley.“

Sustainability as a competitive advantage

Successful companies remain true to their sustainability agenda despite the tense market situation. However, the current cost inflation is a hurdle, as the costs have to be forwarded to retailers and consumers. A certain portion of investments must always be focused on sustainability and thus it should be integrated into business processes and corporate culture in order to remain credible. Only companies that are geared towards a sustainable future will end up having an easier time attracting new employees and talent.

Atreus Director and Partner Martin Schulz in conversation with DVGW energie | wasser-praxis, October 2022

The current study “Mood Barometer in the Energy Industry” by Atreus reaches the conclusion that risk management with regard to security of supply and investment in an accelerated energy transition is a top priority in the energy sector and also in many other companies. Atreus Director and Partner Martin Schulz provides information on the background.