Mercedes-Benz, the Untertürkheim plant near Stuttgart. A special access card is needed to reach the test course. The vehicles that are driven there, along bumpy roads filled with potholes, provide a glimpse into the future -- one that outsiders are usually denied.
But on a cold winter day, Mercedes engineers are showing us one of their proudest achievements: a 26-ton truck that drives almost noiselessly and emits no exhaust gases. Its rear axle is driven electrically with power from lithium ion batteries, providing a range of up to 200 kilometers (124 miles).
The carmaker has already received inquiries from supermarket chains, which could use the electric truck to deliver goods from warehouses to individual stores in urban areas. Wolfgang Bernhard, the head of Daimler's truck division, confesses: "One or two years ago, I would have said: This will never work." Now he plans to launch the electric truck in 2020.
BMW, Eching near Munich: Engineer Maik Schoeneich is working in one of the automaker's testing facilities here. He previously worked overseas for BMW in Shenyang, a large city in northeastern China, where he had his first enlightening experience.
Whenever Schoeneich left his hotel, he had trouble breathing, felt the need to cough and could hardly see more than 50 meters (164 feet) in front of him, all because of the exhaust fumes from hundreds of thousands of cars. Back at BMW headquarters in Munich, Schoeneich began thinking about the future of cars, as well as his own career.
As an acoustics expert, he was working on minimizing the noise from internal combustion engines. It didn't feel like a future-oriented job, though. "I still have 20 years of my career ahead of me," says the engineer, "so it makes sense to do something new."
Schoeneich decided to join a new world -- that of silent, zero-emissions electric powertrains. He earned a master's degree in electric mobility and vehicle electrification at the Technical University of Munich, which helped advance his career in the company. Now Schoeneich tests electric cars for BMW.
Volkswagen, a brick building in Wolfsburg: A badminton field, a slot car race track and a foosball table are set up in the former foundry. When Johann Jungwirth comes to work on this particular morning, he hears the popping sound of people playing table tennis. "Great," he says. "After seven years in Silicon Valley, this feels like home."
Jungwirth worked at Apple in the development of driverless cars. Now the 43-year-old chief digital officer's job is to drive the VW Group into the future. Jungwirth shows up to work in a blue sweater. He doesn't have his own office, but a desk in a large room, together with his staff of 50 employees. The founders of Google and Apple, Larry Page and Steve Jobs, often visit the office -- virtually, of course. Jungwirth quotes them constantly, especially Jobs, who famously said: "The people who are crazy enough to think they can change the world are the ones who do."
Jungwirth is doing his best. He loves the idea of transforming cities into more livable environments, because self-driving cars will not require parking spaces in downtown areas. Freeing up all of this space, he says, will provide more room for "parks and playgrounds."
In Wolfsburg, a former Silicon Valley executive is developing scenarios for tomorrow's mobility. In Munich, auto engineers are preparing for the age of the electric motor. And in Stuttgart, a Daimler executive is raving about an electric truck.
Uncertainty and Existential Fears
On the one hand, this much optimism has rarely been on display in the German auto industry. On the other hand, the industry has probably never been so filled with uncertainty and even existential fears.
The public verdict is in: Daimler, BMW and Volkswagen will have great difficulty preventing their decline -- at best they can delay it. German automakers are producing air polluters with gasoline and diesel engines. They are being overtaken by companies from Silicon Valley and will soon be bested by Chinese manufacturers. Both offer electric cars and will soon be selling self-driving vehicles. Hundreds of thousands of jobs are at stake in Germany. And this doesn't even account for U.S. President Donald Trump's threat to impose tariffs on German cars built in Mexico.
The truth is that German automakers have jeopardized their own future. With the arrogance of manufacturers who have been operating a business successfully for more than a century, they did not recognize the challenges at first, and then they downplayed them. They insisted that the market would not be ready for electric cars for a long time to come. Instead, they continued to invest in diesel technology, as if it were part of the future.
Upstaged By a Silicon Valley Start-Up
But then came Tesla, a startup that had never built a car before, and upstaged the German manufacturers with its Model S electric car. Then Google began testing its self-driving cars in San Francisco. And finally, Apple began developing the technology.
At some point the established carmakers realized that everything was at stake. It was about the future of mobility and the "second invention of the automobile," as Daimler CEO Dieter Zetsche puts it. And the survival of established automakers.
The internal combustion engine, the heart of the automobile until now and a large part of the German auto industry, will have to be replaced with a new motor in the foreseeable future: the electric engine.
In the automobile industry, a way of operating that has been the norm has disappeared. Things once considered crucial will soon become redundant. Electric vehicles require no valves, pistons, air filters and throttles, no fuel injection systems, alternators, oil filters and starters, no turbochargers, fuel pumps, catalytic converters and exhaust systems, no tanks and many other elements.
The capabilities that Daimler, VW, General Motors, Ford, Toyota and all the other automobile manufacturers possess in these areas will no longer be needed in the future. New competitors can suddenly become technology leaders if they are particular effective at bringing together batteries, control software and electric engines.
Tesla has led the way. Chinese manufacturers, which are not yet up to current standards when it comes to the internal combustion engine, are also preparing for the great leap. And the Chinese government is supporting them, in the hope that electric cars will enable its domestic industry to finally conquer the world.
An Inevitable Switch
Paradoxically, the internal combustion engine is on its way out precisely because it is so successful. There are too many cars, and with their exhaust gases they are harming the climate and human health. That's why governments in many countries and cities are eager to bring about technological change, partly through regulations and laws, and partly with subsidies for electric cars and penalties for vehicles with gasoline and diesel engines.
China wants to impose a quota for electric vehicles. Large cities in Asia and Europe are weighing bans on vehicles with internal combustion engines. Beginning in 2020, European manufacturers could face billions in fines if they fail to comply with the applicable limits on CO2 emissions, which is hardly possible without electric vehicles. All of this points to the inevitability of the switch to electric mobility. The only question is how quickly it happens and how the old technology will continue to exist in parallel.
One in seven jobs in Germany depends directly or indirectly automobile manufacturers and their suppliers, companies like Bosch, Continental, Mahle, ZF Friedrichshafen, Schaeffler, Getrag and others. The degree to which these jobs will be saved or replaced with new ones in electric mobility depends on how effectively the companies cope with the transition -- if they are even able to do so, or whether the auto industry faces the same fate as steel manufacturers and energy suppliers: gradual decline.
The old and new automobile worlds are in close proximity to one another at the BMW plant in Landshut, near Munich. It smells of lubricating oil in the hall on the ground floor. Mechanics in boiler suits are screwing together engines, so-called special engines, which are only built in small numbers. They have coveted jobs. The work is challenging and interesting, and yet it probably doesn't have much of a future.
Anyone seeking a job with future prospects tries to get reassigned to the plant's second floor, where BMW produces electric engines. "We are doing pioneering work here," says one employee who has made it to the second floor.
BMW has invested €3 billion ($3.2 billion) in the development of its i3 and i8 electric cars. The company has risked a lot, more than VW or Daimler. It led the way technologically, and yet this still hasn't done the company much good. By November 2016, BMW had sold only 100,000 of its i3 and i8 models, compared to 2 million models with internal combustion engines last year alone.
Electric cars are still more expensive and don't perform as well as vehicles with a conventional powertrain. Customers are holding back. There are very few pioneering workers to be seen in the Landshut factory, where BMW makes its electric engines. One of the reasons for that, however, is that production of electric engines, with their relatively simple design, is highly automated.
Most of the work is done by robotic arms, which look like giant dentists' drills as they move behind glass walls, and automatic coiling machines that roll up copper wire. Even if there is a sharp increase in the production of electric engines, it will never create as many jobs as the production of gasoline and diesel engines.
Thousands of Jobs at Risk
At BMW, about 4,000 jobs depend on the internal combustion engine. This is an extremely small number compared to Daimler and Volkswagen, which develop and produce more parts, such as transmissions, which BMW buys from suppliers. According to estimates by the IG Metall metalworkers' union, of the 250,000 jobs in Germany that depend on the internal combustion engine, some 65,000 are in jeopardy.
If people around the world started buying nothing but electric cars within a year, the consequences would be dramatic. But the transition to electric mobility will take a long time. Horst Lischka, who represents IG Metall on the BMW supervisory board, says: "Those who are flexible and willing to take on new responsibilities will still be working at BMW in 10 to 15 years."
Engineer Maik Schoeneich is probably one of them. He is currently involved in testing to see how electric cars react to heat and cold in southern France and northern Sweden. Now that he has his graduate degree in electric mobility, his job is secure for the time being.
But Schoeneich is part of a small minority. So far, only 51 engineers have completed the advanced degree program in electric mobility. There are limits to retraining. Not every assembly line worker can become an IT expert. "We can't turn a test bench driver into a high-tech professional," says a senior BMW executive.
Transition Could Be a Bumpy Ride
These examples show that the transition to electric mobility could be a bumpy ride. It will produce losers who will have no place in the working world. Factories where internal combustion engines, transmissions and exhaust systems are produced today will be hard-hit by the coming changes. Some plants will likely be shut down. But there is still enough time left to avoid mass layoffs.
In fact, many manufacturers will even need more employees during the transition period. They have to continue developing both the old and the new technology simultaneously. BMW plans to hire 2,500 additional workers in 2017.
It is unclear where and under what conditions the new jobs will be created. Klaus Fröhlich, a member of the BMW management board, believes the company's future lies primarily in the production of self-driving cars. "We have to succeed with autonomous driving, a multibillion-euro project," by 2021, he says. Fröhlich wants to develop new, revenue-rich models, such as ride-sharing and taxi services with self-driving cars.
The project is becoming a test case on how much change is possible and how much is necessary for a traditional manufacturer. BMW board member Fröhlich wants to remove research and development for self-driving vehicles from the company and establish a dedicated spin-off company for that purpose alone.
New Flexibility Required
Inside that company, he wants to create working conditions like those in a start-up: short-term project work instead of collective bargaining agreements, and flexible working hours instead of a 35-hour work week. Fröhlich hopes to use this approach to attract developers from Silicon Valley, whose salaries exceed the framework of the collective bargaining agreements that are standard at German carmakers. This could be the precursor to a breakup of the entire company: into one that develops new technology and business ideas, and another that operates automobile plants.
There is strong resistance to his idea in the supervisory board, where labor representatives, in particular, are on a collision course with Fröhlich. "I'm warning against giving up control over important parts of the supply chain," says Manfred Schoch, chairman of the works council. Core areas like autonomous driving must remain within the group, he argues.
Schoch is no obstructionist. On the contrary, he has always promoted the development of electric cars at BMW. But Schoch believes in neither spinning off business units nor that billions in additional revenues will be created. In five to 10 years, he says, autonomous driving systems will be as much a part of the technical standard in all cars as ABS is today. "By then, no one will buy a car simply because it is capable of driving autonomously," says Schoch.
Driverless car-sharing and taxi services also won't be profitable business for BMW, says Schoch. He expects the fixed kilometer allowance in the robot taxi market to level off at 10 cents. According to his calculations, the 12-kilometer (7.5 miles) round trip from his Munich apartment to the city's opera house would cost him only €1.20. In other words, I could go to the opera every week for a year," says Schoch, "and it would translate into only €62 in revenue for BMW."
If BMW board member Fröhlich sticks to his plan to spin off the autonomous driving business, the works council and IG Metall want the employees at BMW's research and development center in Munich to be allowed to vote on their future. As they see it, each employee should decide whether to give up his or her contract with BMW to work for a separate autonomous vehicle company.
The departure into the new automotive world is already leading to a power struggle at BMW, the outcome of which remains unclear. With his arguments, works council Chairman Schoch often finds a willing ear among the representatives of the capital side in the supervisory board. R&D chief Fröhlich could be the first casualty of the transformation he himself wants to initiate.
Fröhlich, who comes across as the personification of the industry's future, usually wears jeans and sneakers with a sports jacket and an open collar. Daimler CEO Zetsche has also taken to wearing similar outfits to board meetings, car shows and a conference of Green Party delegates in Münster. The Green Party conference's resolution on transportation policy reads: "The automobile industry only has a future if it develops vehicles that emit no CO2."
Zero Emissions a Core Strategy
Perhaps it will surprise some people, says the Daimler CEO, "but I strongly agree with that." The zero-emissions car is the "core of our corporate strategy," he notes, adding that Daimler is also on the road to becoming a mobility provider.
But where exactly is the evidence of this? The Stuttgart company rakes in its record profits with diesel and gasoline cars, sedans and SUVs.
There are, of course, examples Zetsche can cite: billions in investments in electric cars under the EQ brand, established specifically for this purpose, in electric trucks, in a battery production plant near Dresden and in the Car2go car-sharing service, for example. Daimler is changing, and it is doing so earlier than other automakers. But Daimler also senses how difficult it is for traditional automakers to adjust to the new era.
Daimler introduced its Vito business van with an electric engine six years ago. Only 1,000 vehicles were produced before production had to be discontinued. "In light of the battery prices at the time, the cars were prohibitively expensive," says Daimler board member Bernhard. This is what happens with large technological advances, he explains. "Those who arrive too early lose their shirts, while those who arrive too late lose the market."
The development of battery technology now exceeds his "boldest expectations," says Bernhard. He expects costs to continue falling. At the same time, batteries are getting more powerful. This has prompted Daimler to develop a business van, a small truck, buses and its 26-ton truck with an electric engine.
But these models can only be used in distribution traffic, which involve driving relatively short distances. Bernhard estimates that this accounts for about 10 percent of all traffic.
The large trucks that travel long distances on highways will continue to be driven by diesel engines. They account for 90 percent of traffic.
Breakthrough Will Come Through Cars
The breakthrough in electric mobility has to succeed with cars. Daimler plans to bring 10 electric cars to market by 2025, and produce the necessary batteries in Germany, at its plant in Kamenz, near Dresden.
Batteries are the key factor in determining the most important criterion for an electric car, its range. They also account for up to 40 percent of a vehicle's value, which is why manufacturers cannot source them from Japanese (Panasonic), South Korean (LG Chem, Samsung) or Chinese companies (BYD). Otherwise they will become technologically dependent, and the new jobs will be created abroad, argue former German Economics Minister Sigmar Gabriel and IG Metall Chairman Jörg Hofmann.
Daimler has been producing batteries for the last four years, and Dieter Zetsche has a different view of things. "I recently paid another visit to a battery cell plant," says Zetsche, "and I was just about the only person there." Production is highly automated. No more than a fraction of the jobs that will be lost with the demise of the internal combustion engine could be replaced with battery cell production. More importantly, there's an oversupply of lithium-ion cells around the world.
After years of losses, Daimler has discontinued battery cell production in Kamenz. Now cells purchased by the plant are wired into batteries and provided with cooling systems and electronic controls. This is where Zetsche believes that the automaker's intelligence is needed. A company can develop an edge over the competition, for example, if its battery packages are especially well-protected against accidents. Daimler is continuing to expand this part of battery production with investments in the billions. A new factory is being built in Kamenz, and additional plants are on the drawing boards for Asia and North America.
Tesla is pursuing a different strategy, which is primarily the doing of founder Elon Musk. The billionaire is less of an economist who seeks quick profits. More than anything, Musk is a visionary.
He was correct with his assessment that many were waiting for a sporty car with an electric engine and a range of more than 500 kilometers (311 miles). Tesla caught the established manufacturers off guard with its Model S. And now Musk is betting that an automaker can also produce battery cells, and that all it takes is the ability to think big.
In a joint venture with Panasonic, Tesla is building a giant battery factory in the Nevada desert. The aim is to produce batteries at an unbeatably low price and secure a head start for Tesla's electric vehicles. In pursuing this approach, Tesla is relying on lithium ion batteries as its technology. It is a bet on the future, and if other battery cells prevail, Tesla will have a very costly problem on its hands.
The German manufacturers are avoiding this risk by buying their batteries from those manufacturers who are technologically at the forefront. This is how major corporations act when they have to provide their shareholders with profits every year. Unlike Tesla, they cannot afford to lose money for longer periods of time.
Some time ago, Volkswagen would have ejected a manager like Johann Jungwirth within no more than six months. The former Apple manager is building so-called Future Centers in Potsdam outside Berlin, Beijing and Silicon Valley, renting posh office space and hiring expensive employees, who he refers to as "the best in the world." Other managers at VW, who are required to cut costs and slash jobs, are unlikely to approve. And in the Wolfsburg system, there are many ways to thwart an inconvenient coworker.
For instance, the purchasing department could refuse to provide a slot car race track as office furnishings -- to name but one harmless example. Above all, however, the heads of the Audi, Porsche and Volkswagen brands, who are much higher up the chain of command than Jungwirth, could force the newcomer to wait for an appointment in which he had intended to tell them where the roadmap to the digital age can be found. As if they didn't know this themselves.
Pressure for Change
Still, after the diesel scandal there is enormous pressure on the VW Group to change. That's why Jungwirth was hired in the first place, and it's why the man from the Silicon Valley has powerful supporters in Wolfsburg. His department reports directly to CEO Matthias Müller. And Bernd Osterloh, chairman of the works council, fully supports the chief digital officer.
Jungwirth is developing the digitalization strategy for the entire group. Previously, individual brands had often competed with one another. It would be typical for Audi and Volkswagen to compete over which brand introduces a self-driving car first. Jungwirth wants to ensure that important developments are only done once and the technology is available to all brands.
One problem is that Volkswagen, in contrast to Daimler and BMW, which are highly profitable, is entering the race with a handicap. The company has to eliminate 30,000 jobs because the brand is already operating inefficiently in the old automotive world. The group needs to cut billions in costs. It also faces the threat of more high penalty payments resulting from the diesel emissions scandal. At the same time, the company wants to invest billions in new technologies.
Nevertheless, both Jungwirth and CEO Müller are optimistic. VW plans to launch more than 30 electric models by 2025. And by then it expects every fourth or fifth car it sells to have an electric engine. Müller says that Volkswagen should become a "leading global provider of sustainable mobility."
The tone of voice is reminiscent of Müller's predecessor Martin Winterkorn, who wanted to make the VW Group the world's largest automaker. When Winterkorn was forced to leave in the fall of 2015, the Volkswagen brand was in tatters. Is Müller's plan just as doomed to failure as Winterkorn's?
The article you are reading originally appeared in German in issue 4/2017 (January 20, 2017) of DER SPIEGEL.
The VW Group has largely ignored electric mobility until now. The question will be: How fast can giant tanker VW, where it has always been viewed as the highest honor when a manager was said to have "gasoline in his blood," turn itself around?
In other words, what are the German automakers' prospects in the transition to electric mobility?
They are not as bad as is generally assumed. This is mostly because the switch from gasoline and diesel to electric cars will not take place at a specific time -- it will be a gradual transition. Many vehicles with internal combustion engines will continue to enter the market in the next 10 years, along with electric cars, hybrid models, which combine both technologies, and cars powered by a fuel cell.
At the same time, the number of vehicles sold is growing, surpassing the 80 million mark for the first time in 2016. From a global standpoint, the fact that young people in European cities are turning away from the automobile is more of a marginal phenomenon. In China, other Asian countries, Latin America, Africa and Eastern Europe, many people want nothing more than their own car. McKinsey estimates that about 125 million cars will be sold in 2025, an increase of more than 50 percent over the 2016 figure. The auto industry remains a growth industry.
Big Losses in Mobility Services
On the other hand, there are some ideas that can be burst like soap bubbles. Almost all manufacturers have announced their intention to offer mobility services. This sounds like the future. But one company that embarked on this path many years ago is now forced to rethink its plans.
Daimler offers about 14,000 cars in its Car2go program in 29 cities worldwide. CEO Zetsche had planned to achieve €1 billion in sales by the year 2020 with the mobility business. But, as Zetsche confesses, the company has not even come close to that goal.
Car2go is losing money in the double-digit millions. The program is now being curtailed instead of expanded. Car2go has withdrawn from Birmingham and London. The service is no longer being offered in parts of Berlin and Hamburg. To reduce costs, Daimler is preparing a merger with BMW subsidiary DriveNow. It is difficult to imagine that this business will one day offset the lost revenue from the sale of vehicles with internal combustion engines.
Not all companies will successfully negotiate the upcoming change in engine technology. Some will disappear from the market, as the DKW, Rover and Saab brands have disappeared in the past. Perhaps the VW Group will be broken up, and perhaps Daimler or BMW will be acquired.
But Google, Apple or Tesla could also be among the losers. Google and Apple have already abandoned the idea of producing cars themselves. Instead, they are now focusing on working with traditional manufacturers. And electric car pioneer Tesla could quickly run into difficulties if its massive investment in its own battery factory doesn't pay off. The Silicon Valley company, which has yet to earn a profit in any fiscal year, is not safe against a takeover or its own demise.
Everything is possible, even that the Daimler CEO loses his trademark walrus moustache.
Dieter Zetsche, after all, is betting that his company will have left "the competitors in the dust in e-mobility." If he loses, he says he'll shave off the moustache.