Market Study Car Companies Step-Up Investment in E-Mobility
The leading car companies are preparing for the breakthrough of electric mobility: According to an analysis by Ernst & Young, the 16 largest car companies in the world have initiated 25 investment projects in the past two years.
The imminent breakthrough of electromobility is leading to massive investments in the automotive industry. Over the past two years, the 16 largest car companies in the world have initiated 25 concrete investment projects, i.e. projects at a specific location that are connected to electric mobility. The total investment volume of these projects amounts to $ 6.4 billion. 22 projects with a value of $ 5.2 billion were initiated in 2017.
Three German car manufacturers are especially active investors: 15 investment projects in e-mobility with a total volume of $ 5.8 billion have been launched by Volkswagen, BMW and Daimler since the beginning of 2016. Germany accounted for $ 3.9 billion. China ($ 1.2 billion) and the USA ($ 1.1 billion) follow in the ranking of most active investors.
Including all other investments, for example in plant expansions, new paint shops or new development centers, the 16 largest car companies in the world announced projects worth $ 33.8 billion last year. This is 68 % more than in the previous year, when the volume had been $ 20.1 billion. While the USA was still leading the list of most important investment targets in 2016, Germany moved up to first place in the investment ranking in 2017: projects with a total volume of $ 15.17 billion were made in Germany. With $ 10.2 billion, the USA is second in the country ranking, followed by China ($ 2.5 billion) and Spain ($ 1 billion).
Financial Challenges Posed by New Drives
Due to the current reorientation of the industry towards new drive technologies, car manufacturers are facing considerable financial challenges, says Peter Fuß, partner at EY: "The development departments are working intensely on new technologies in the areas of electrification, networking and autonomous driving — and in many cases they are breaking new ground. We are therefore experiencing a phase of transition. At the same time, legal requirements in Europe and China, for instance, are forcing companies to increase sales of electric cars as quickly as possible. This will require considerable financial efforts."
Electromobility: Major Investments in Germany
"In the medium term, the electric drive will significantly gain in importance," emphasizes Fuß. "China will implement a ten percent quota for electric cars in 2019. In order to continue to play a role in this market, which is the largest for German car manufacturers, the supply of electric cars must be considerably expanded". Nearly all major car companies have announced that they will launch new electric models on a grand scale in the coming years.
Today, the companies are setting the course for those locations that will play an important role in the future production networks for electric vehicles — it seems that at least the German car companies are strongly committed to their home location. For example, Volkswagen announced the conversion of the Zwickau plant to a pure e-mobility plant with an investment volume of around $ 1.2 billion. BMW is investing $ 246 million in a competence center for battery cells in Munich, and Daimler is allocating $ 614 million to the transformation of the Hamburg plant into a location for electric mobility drive components. Daimler subsidiary Accumotive is investing another $ 614 million in a further factory for lithium-ion batteries in Kamenz.
"At the moment, it seems unlikely that the large-scale production of battery cells will take place in Germany. Nevertheless, there are signs that a significant part of the subsequent production is being built up in Germany. In this way, important know-how is being developed and can be kept in Germany," stresses Fuß. The increasing importance of electromobility will lead to massive changes in the value chain and investment planning, said Meyer. "The cards are now being reshuffled. The current electrical offensive of German companies gives reason to hope that Germany will be able to keep a large slice of the cake of global car production in the future".
Investment in Emerging Economies Is Declining
Since 2010, most of the money for new factories or modernization measures has gone to the USA ($ 46,76 billion), Germany ($ 43.3 billion) and China ($ 33.4 billion). However, in the case of China it should be noted that investments by Chinese car companies have not been considered in the analysis. The newly initiated projects in the USA and Germany mainly involve modernization measures to increase the efficiency of the production plants, some of which are decades old. In Germany, major new investments — such as the billion euro investment announced by Porsche for the development and construction of the Mission E electric sports car — are the exception.
After substantial investments had been made in emerging economies until 2012, in recent years, the established industrialized countries were in the focus of the car companies: the so-called BRIC countries — Brazil, Russia, India and China — still accounted for an average of 42 % of the global investment volume in the years from 2010 to 2012, whereas in the years from 2014 to 2017 these countries only accounted for 19 % of the global investment volume on average, in the past year the investment volume declined to only nine percent.
This article was first published by Next Mobility