By Andrew Stuttaford
Saturday, August 05, 2017
The substantive issue is not
whether diesel is doomed in the long run – even the German car industry accepts
that – but how this should happen, and the time frame. The German car industry
is not ready to supply the market with hybrid engines, let alone electric
engines…If your car industry operates like a cartel, the development of
alternative technologies get suppressed. This works exceedingly well so long as
you keep technological leadership. And it breaks down when the underlying
technology changes or when there is a sudden shift in the structure of demand….
[T]he car of the future will have
an electric engine, and lots of smart artificial intelligence. We don’t know
yet whether Tesla is the new iPhone of the car industry… What we do know is
that the German car industry is not at the forefront of either development… It
is up against the likes of Google, and possibly Apple, whose market
capitalisation is far too large.
The new competitors are not part of
the cartel…The developers have a different background than do the mechanical
engineers of today’s car industry today. So, there is no reason to believe that
the German car industry will retain its fat profit margins. It will decline
just like newspapers declined. It won’t disappear, but wither slowly. Diesel
sales are falling fast, even in Germany. Salaries will eventually come under
pressure, and the most talented engineers and scientists will seek
alternatives. What we do know is that Germany is absolutely unprepared for this
development.
In this context, we noted a comment
by Marcel Fratzscher, who argues that Germany is preaching free trade at G20
summits, but is practicing protectionism at home when it blocks foreign
takeovers of companies that own certain key technologies. He says the veto
right is ill-defined, and thus particularly potent because politicians use it
at their discretion. Germany, and the EU as a whole, are prioritising
protection over innovation.
And there was I, thinking that Merkel was a champion of
liberal (in the good sense of that much misused word) values…..
The longer term problem that electrification and
self-driving cars might represent for Germany’s auto sector also rates a
mention in a new piece in The Economist
on some of the challenges facing the country, including (somewhat cheekily
given that magazine’s own greenery) the effect of Germany’s high energy costs
(much of them arising out of Merkel’s policies) on its competitiveness.
And:
That trend is compounded by a
conservative attitude to certain kinds of new technologies. Germans are even
more hostile than the French to a free-trade treaty with America and to
big-data giants like Google. In another backwards-looking move, Mrs Merkel’s
government decided to cut the retirement age.
For now, however, Germany’s economy is in good shape and
Merkel appears to be coasting to an easy re-election later this year, but I was
struck by this in The Economist’s
article:
All told, says Stephan Richter, a
pundit, Germany’s “anaesthetic” political class has not used the country’s
golden decade to equip it for the future: “past performance is no indication of
future success.”
Indeed, but the sins have been of commission as well as
omission. The decisions that Merkel has made on issue after issue after issue
(the economy, immigration, energy, the EU—and there are plenty of other
blunders to pick from) have already been damaging, and the final bill is not
yet in.
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