VW CEO warns German carmakers may lose world leading position

Herbert Diess, chief executive officer (CEO) of Volkswagen Group, warned on Tuesday that German carmakers face significant regulatory and technological challenges in coming years and may lose leading position in the world.

"From today's perspective the chances are perhaps 50:50 that the German automotive industry is still amongst the global leader in ten years", Diess said at the Volkswagen supplier firm event in Wolfsburg."Enormous efforts" were needed to ensure that major current automotive production sites in Germany such as Wolfsburg, Ingolstadt, Stuttgart and Munich were still "vivid industrial centers" in 5, 10 or 20 years.

The CEO emphasized that growing protectionism remained a source of concern in this context. "Looming tariffs on German cars imported in the United States are still a topic with which me must concern ourselves with. A final decision has not been reached here yet."

Aside from trade conflicts, Diess cited the difficulties experienced by German carmakers in adapting to the new Worldwide Harmonized Light Vehicles Test Procedure (WLTP) as one of further risk factors. He also criticized plans by the European Union (EU) to lower CO2 emission limits for vehicles again as posing a threat to his industry.

"We are used to the car being the subject of criticism. However, the current crusade against individual mobility and hence against the car is assuming dimensions which pose an existential threat", Diess complained.

EU members represented in the bloc's council have recently agreed to reduce the upper CO2 emission threshold for new passenger vehicles by 35 percent and by 30 percent for light-duty utility vehicles by 2030.

In response, Bernhard Mattes, president of the German Association of Automotive Industry (VDA), expressed regret that "a majority of member states could not bring themselves to strike a balance between climate policy and employment in Europe."

On Tuesday Diess calculated that the regulatory reforms would require carmakers to raise the proportion of purely-electric vehicles in their fleets to 30 percent by 2030. According to the automotive executive, such rapid structural change could prove to be a mixed blessing in Germany given that the country still relied to a relatively large extent on coal power for national energy generation.

"I am critical of the high share of e-vehicles in Germany in particular because we are likely to witness a deterioration of our environmental record with our CO2 heavy electricity rather than an improvement thereof", Diess said. He noted that Germany only ranked in the "lower midfield" of European nations with around 600g of CO2 on average per kilowatt hour of electricity generated in the country.

"This reduces the idea of electric mobility to absurdity", he added. Germany could ultimately end up with higher national CO2 emissions than today in spite of having spent hundreds of billions of euros on the new technology.

Although the share of renewables in German energy generation has risen rapidly from 23 percent in 2013 to 33 percent in 2017, whether electric vehicles would be less harmful to the environment than diesel and petrol cars on balance remains the subject of domestic debate.

Volkswagen's foremost national rival Daimler has a more positive view than Diess on electric mobility. In a recent internal assessment, Daimler estimated that total life-time emissions of electric Mercedes-Benz vehicles would be at least 40 percent lower than their fossil-fuel powered counterparts.

Even if their exact emissions levels are consequently disputed, Diess said that it was already clear that the transition to electric vehicles would cost thousands of jobs in Germany.