The Cost of Future-proofing: German Auto Industry to Invest $68 Billion Into EVs, Mobility, Data Over Next Three Years

The German Association of the Automotive Industry, known in its native tongue as Verband der Automobilindustrie (VDA), says its members have formally committed themselves to investing 60 billion euros (roughly $68 billion USD) into electrification and vehicular autonomy over the next three years.

The claim was made as part of a larger announcement serving as a rundown for what German automakers hope to achieve in a period where nothing seems certain.

The European Union, along with China and several other nations, have committed themselves to embracing electrification in a bid to lower emissions and modernize roadways. “In the next three years, we will invest over 40 billion euros in electric mobility, in addition to a further 18 billion euros for digitalization, and the development of networked or automated vehicles” said VDA President Bernhard Mattes, adding that German automakers anticipate 100 EV models on offer to the public by the end of that period.

Despite robust government encouragement, it’s an incredibly ambitious plan, considering vehicle sales appear to be stagnating across the globe and EV growth isn’t yet on pace to overtake internal combustion models until around 2035 — according to most analysts’ best guesses.

However, strict electrification isn’t the only aspect to this. Mobility is a blanket term the industry uses to denote any non-traditional businesses within the industry, and it’s a central element in Germany’s sizable investment. While it certainly indicates autonomous development and electrification, it can also means ride-sharing, connectivity, data accumulation, and more.

“Automobile manufacturers are becoming manufacturers and mobility service providers. This involves significant investments, especially in IT and software. Because these technologies are developing very rapidly, new, cross-industry collaborations are also useful and necessary,” emphasized Mattes. “For this we need a nationwide, dynamic 5G mobile network coverage along all transport routes.”

Mattes also said that Germany, plus a few other sizable (and wealthy) European economies, are set have a significantly higher share of electric vehicles among new registrations compared to the EU average. To bring the rest of the continent up to acceptable levels, the VDA believes Europe “must” expand the EV charging infrastructure and continue incentivizing electric vehicle purchases. It also hopes to avoid a no-deal Brexit, as it claims the decision would result in a major setback for the industry and the larger European economy.

While it’s not terribly shocking to see an automotive lobby group press for government assistance in the selling of vehicles, the push into electrification has already been spurred by government intervention. Increasingly stringent emission regulations and environmental initiatives effectively forced automakers to think differently about the future. It’s changing things, and you don’t need to look further than Daimler and BMW to see that. Once bitter rivals, the duo recently agreed to collaborate on mobility projects in an effort to mitigate R&D costs. Volkswagen plans to do the same with Ford, while also collaborating on more traditional products.

Whether or not this all pans out is another issue, however. Scaling EV production is a massive hurdle to overcome, especially when automakers don’t have a crystal ball or unlimited funds (even if they sometimes act to the contrary) and consumers are standing around shrugging their shoulders. Meanwhile, many automakers are stretching out into new businesses while hunting for fresh revenue streams. Still, most of these pursuits have yet to prove themselves as financially viable, at least not when compared to selling traditional autos with reasonably good margins.

We know Germany can sell cars people want to pay more for, but it’s less evident the same can be done with EVs. Undeterred, Mattes claims the electric revolution is coming to Europe and that everyone, especially the government, should be ready to help. The VDA thinks getting trade disputes settled would be a good place to start.

“Now everything must be done to reach a constructive solution at the negotiating table,” Mattes urged. “The talks and negotiations must now be conducted with high priority. We must not waste any time.”

“The United States, too, can not be interested in us mutually forsaking protectionist tendencies,” he continued. “We are the largest car exporter from the USA. More than half of the 750,000 cars we produce in the US are exported. Around 118,000 people are currently employed at the U.S. plants of our manufacturers and suppliers, 8,000 more than a year ago.”

[Image: Daimler AG]