This morning’s volume of The Morning Dump will be a little different. Rather than break down the day’s news into a bunch of smaller, partially interwoven stories, I’m just going to tell one big story in an effort to answer the question: How screwed is Europe’s car industry?
There’s a lot of chatter and teeth-gnashing about the death of Europe’s car industry, which feels a little premature given that most European carmakers are still making money and still selling a lot of cars. Is the future of Europe’s car industry one of immediate collapse, eventual decline, or merely cyclical disruption?
Buckle up folks, we’re in for a long ride.
Europe, And Especially Germany, Are Freaking Out A Bit
Your perspective on what is happening in Europe will be colored by your pre-existing notions of the world and, perhaps, by how many people (or bots) you follow on Twitter who have blue checkmarks next to their names.
The extreme bear case for Europe is that the continent (particularly economic powerhouses like Germany and France) is simply not built for the new world. They are old-fashioned carmakers making old-fashioned cars, and they’re not able to adjust to the new EV-centric building environment because of large structural issues.
If you want to fully understand this view, there’s a long thread from investor David Galbraith on Twitter in which he lays out the case, but the key bit is below (quoted, because embedding all these Tweets now is annoying):
Industrial production is obviously about making things. But it is no longer about making industrial era things. Cars are a great example here. as although EVs look the same as the type of cars that Germany produces, the way they are produced and their business model and margins are totally different.
The economic model of these large industrials is based on the, ‘them and us’’, industrial era social pact between workers and owners and mimics the state itself. Industrial workers are unionised and get defined benefit pensions but there is no shared ownership or options pools and all profits go to the top, often family dynasties.
Over time, these companies become more like a family owned pension funds rather than a manufacturer. They are highly resistant to change, structurally, so they can only innovate within the existing paradigm, not for expertise reasons (BMW management went all in on electric a decade ago, but the unions pushed back) but structural ones.
[…]
EVs, on the other hand, are digital era products. Their margins come from batteries and software. Asia has control of the entire battery supply chain and Asia and the US have control of the software one. Europe is nowhere. The German, French and Italian car manufacturers are like Nokia, post smartphone.
If you accept this scenario, it’s difficult to see a future for European carmakers who lack both the software expertise and the battery expertise to be successful. Certainly, the Volkswagen investment in Rivian is more proof that big automakers struggle with software. After spending billions on its own software unit, Volkswagen has partially given up and will instead install Rivian-based software in some of its future vehicles (and Apple software in other ones)
Facing a lot of pressure and crashing operation margins, VW just demoted its CFO Patrick Andreas Mayer and promoted Seat CFO David Powels in his place. From Manager Magazine:
[T]he numbers for the VW brand had gotten out of hand. When the operating return on sales in the first half of 2023 landed at an unsatisfactory 3.8 percent and the forecasts continued to point downward, brand boss Thomas Schäfer (54) and finance manager Mayer had set up a profit program: an additional 10 billion euros were to be needed to secure a return of 6.5 percent in 2026. Schäfer and Mayer also found what they were looking for. But it took them a good six months to get started; there were fierce negotiations with the employees and, not a good signal in the Volkswagen empire, the search for the billions was critically monitored by the major shareholders and supervisory boards of the Porsche and Piëch families.
Indeed, the old families play a big role in European automakers. For VW it’s Porsche and Piëch, and for BMW it’s the Quandts. For Fiat and Stellantis it’s the Agnellis. Daimler (Mercedes) and Renault are the outliers, here, though Renault has a considerable state investment so that might not be any better.
The unions in Germany are not pleased with Volkswagen’s threat to start closing plants to try to fix their problems. Here’s a fun anecdote from an opinion piece in The Guardian this weekend titled: “An ‘earthquake’ at Volkswagen – and a crisis for Germany?” that summarizes the mood at a meeting between workers and leadership:
Workers unleashed their collective anger, unfurling banners and chanting protest slogans, among them: “We’re Volkswagen, you are not.” For about 20 minutes, according to eyewitnesses (media were excluded from the hall), the din from the chants and whistles prevented the bosses from speaking. Instead, they stayed behind a long table, stony-faced, looking a little embarrassed. Dressed in open-necked white shirts and dark jackets, their summer tans appeared to have faded in the bright lights and the frosty atmosphere.
“We are short of around 500,000 car sales a year,” VW’s financial chief, Arno Antlitz, reportedly told the hall. That, he said, was the equivalent of production from two factories. “It’s not to do with our product or poor performance. The market is simply not there any more.” He gave the company “one or two years” to turn the situation around. Experts estimate that VW has about 20,000 employees too many.
Oliver Blume, chief executive of Volkswagen Group, might have been a father addressing his family at the dinner table as he told the employees in no uncertain terms that the company had been living beyond its means – drawing an estimated annual €1.5bn from its cashflow for around 15 years – and that things would have to change. He compared the situation to a “family kitty” which “by month’s end is empty”.
I love that little bit about “summer tans” fading under the bright lights. If you’ve never worked with Europeans you might not know that, somehow, it feels like the entire leadership of every company goes to Ibiza or Mykonos or wherever for all of August.
Either way, things are not good. This is a lot of text, so here’s a graph from the ACEA, which is the trade group for the European car industry:
Those are EU car sales for the overall car industry, and you can see that sales have risen a bit since the pandemic, but it’s not the kind of huge growth that carmakers might want. If we’re looking just at Volkswagen, the company was quite profitable last year, with $24.5 billion brought home, albeit on revenue of around $350 billion. This year, profits have dropped, but costs have remained stubbornly high.
A lot of these companies have made a lot of money selling cars in China, so a downturn in European car sales isn’t that bad, right? Right? Well… European (particularly German) automakers have been struggling in China, where car sales have dropped for five straight months. The companies that are succeeding in China are either Tesla or homegrown electric carmakers like BYD.
It gets worse.
European automakers are racing to make more efficient cars because, in the grand scheme of things, if you believe that a slight increase in global temperatures is a risk to life as we know it on this planet, then who really gives two sausage-y craps about the operating margin of any company? I can’t prove that anyone in the leadership of any of these companies actually believes in the existential threat, but it doesn’t matter because European lawmakers do and are going to charge automakers for exceeding C02 limits, and the results could be million or billions of dollars in fines.
The theory that the government (and automakers, and the media) had, was that EV adoption would accelerate and that all the EVs would offset all the gas-powered cars. That didn’t happen. So either automakers can lose more money paying fines on cars or, simply, just make fewer gas-powered cars, thus losing more money…
That’s basically what Renault CEO Luca de Meo said this weekend in a radio interview:
“If electric vehicles remain at today’s level, the European industry may have to pay 15 billion euros in fines or give up the production of more than 2.5 million vehicles,” de Meo told France Inter radio.
“The speed of the electric ramp-up is half of what we would need to achieve the objectives that would allow us not to pay fines,” de Meo, who is also president of the European Automobile Manufacturers Association (ACEA), said of the sector.
In theory, European carmakers could import cheaper EVs from their Chinese partners but, again, the European Union has put large tariffs on Chinese imports, making that harder (and potentially making Britain a prime spot for Chinese cars).
Looking at all this information it’s hard not to draw the conclusion that European carmakers are uniquely screwed.
I don’t entirely agree. First of all, there was plenty of hand-wringing about Toyota and its future, and Toyota just had its most profitable year ever. That’s not to say that Toyota is a perfect company — it isn’t — but its exposure to the United States has been a huge benefit, and its forward-looking view of hybrids has helped it survive a downturn in China and questions about domestic demand in Japan.
Second, this idea that electric cars are “digital” products and so simple that they don’t need a ton of suppliers or traditional dealers has been disproven many times. All electric cars rely on numerous Tier 1, Tier 2, and Tier 3 suppliers. Even Tesla, as we discussed last week, relies on suppliers or partnerships with other companies for batteries for its most popular vehicles. BYD is probably the most integrated company as it builds its own batteries, but BYD also uses dealerships. Few new automakers have been able to be truly successful without some sort of dealership, making Tesla more the exception than the rule. Also, Fisker was premised on the idea of cars being “digital” products and, yeah, it didn’t work out so well.
The world of carmaking is way more complicated than can be summed up in a thread and, while things look bad now, European automakers have a lot of safety valves.
Third, as Tesla disrupted the world so, too can Tesla and Chinese automakers be disrupted. European and Japanese automakers are investing heavily in solid-state batteries which, if they actually work, could help reduce the stranglehold that China has on EV production and fundamentally alter the value structure of new cars. The same can be said for hydrogen, e-fuels, or even just a smart model for making a very affordable and nice EV.
And, finally, all of this hand-wringing isn’t a bad sign. Many of Europe’s carmakers, high off of pandemic-era profits, are facing a grim few quarters. Their approach to EVs has been mixed, their ownership/production model is challenged, and traditional money-printers like China (and even the United States) are under attack.
They should be freaking out! Then they should do something about it. Carmakers, unions, and leaders will need to decide exactly what the future looks like and will have to make some hard choices. They’ll also have to attract more Chinese auto production (as they’ve done with Leapmotor in Poland and BYD in Hungary).
Where should Europe look? America! For all of our problems, of which I’d rank Justin Verlander’s pitch location near the top, we’re not doing so poorly. Early on, the government, under the Trump Administration, decided to keep Chinese-built EVs out of the country. This helped relieve pressure on domestic automakers to adapt.
While the Inflation Reduction Act isn’t perfect, it’s helping get more people into electric cars by continuing to make them more affordable and, even better, is encouraging a lot more domestic battery production. We’re still far behind in charging infrastructure and cost, but companies like Ford and GM have a lot more breathing room to get to a sustainable future. We, too, have increasingly tough C02 requirements, but we also make huge allowances for hybrids and PHEVs.
The EU is going to have to decide what it wants: More domestic production? Cheaper electric vehicles? Higher C02 allowances? More hybrids? They’re tough choices, but it’s not like Europe has no choices.
What I’m Listening To While Writing TMD
I miss Whitney Houston. What a galactic talent. Also “Didn’t we almost have it all?” just felt appropriate this morning.
The Big Question
How screwed is Europe, on a scale from the Chicago White Sox to the New York Yankees?
I’m not sure about Europe, but the U.S. infrastructure is certainly not prepared to adopt EVs en masse. If you are a 50 something looking for an EV truck in Perioia, IL you need to identify if you have to re-wire your home before you start comparing range and features.
At karaoke last week, a tiny little Asian-American woman took the mic for a Whitney Houston song. I don’t know which one.
She fucking crushed it. Every key change, every high note, every dip into tenor and soar into soprano. It was incredible. The whole bar erupted in cheers and applause.
I thought the car industry stopped measuring growth in unit sales a while ago. I thought the new measures of growth were vehicle weight, height and number of seats.
““It’s not to do with our product or poor performance.”
What utter corporate BS.
It’s all about the product – and your performance in deciding what product gets sent out the doors:
ID Buzz – 12 years too late.
Golf 8 and the ID lineup – Terrible driver interfaces because you got rid of buttons.
Overall – VWs getting bigger, more complex, more expensive and less reliable – when your entire raison d’être is simplicity, durability and affordability.
I came here to say the same. VW made good to great products for a long time. Now they make too many unpleasant products nobody wants, especially in the EV category. Their current financials and projections reflect that. Dieselgate, was a classic performance screw up. I bet the “dipping into the kitty” is mostly about paying for that mess and less about the cost of their workforce.
There is another market factor to consider as well. Most conventional car buyers are not enthusiasts, they buy an appliance or something pretty with a status badge and if it works for them, will continue to buy the same or from the same manufacturer. With EVs, it’s all new and unfamiliar. People are scrutinizing the offerings a lot more. I know someone who just ordered a BMW EV (never owned a BMW before). She told me she has never done this much research into a car before deciding. If your product is full of the stupid design decisions VW has been making, not to mention any history of glitches and recalls. Every potential customer will be very aware and will be looking at your competition as well. This is not a category where you can afford to play these games.
The future for European car manufacturers speaks Mandarin.
“Industrial production is obviously about making things. But it is no longer about making industrial era things. Cars are a great example here. as although EVs look the same as the type of cars that Germany produces, the way they are produced and their business model and margins are totally different….
Industrial production is obviously about making things. But it is no longer about making industrial era things. Cars are a great example here. as although EVs look the same as the type of cars that Germany produces, the way they are produced and their business model and margins are totally different.”
Typical SV horseshit. The car, its function, and what people want from it are the same as they have ever been – safe, reliable and economic transportation. How the wheels are turned it literally the only difference between BEVs and other propulsion methods. Bolting in a pair of motors doesn’t automagically turn your transportation box into an extension of your smartphone no matter how much non-automotive industry commentors wish is to be.
A lot of this stems from the fact that for a long time Tesla was covered by tech journalists with no automotive experience, and then you had automotive journalists going to CES with no technology experience.
I’d like to say I’d settle for just “transportation” but with my cars I’ve learned to accept even less than that.
These clowns
making excuses for their failurescomplaining are the ones turning the cars into iphones and trying to reinvent everything that’s already been perfected. Make a damn analog damn EV with actual damn switches and dials and a steering wheel connected to the damn knuckles and an express nanny kill button and I’ll give up ICE and they can worry less about reliability and lack of software expertise in making UIs that hardly anybody wants. For the UXs people do want, Carplay and Android Auto already have them covered.Then explain why EV offerings from the startups set, who genuinely offer a similar sentiment and put their money where their mouth is unlike the legacies, are significantly more compelling to anyone who is earnestly looking for an EV, tire kickers be damned.
Expecting European car sales to increase at rates much higher than that graph shows isn’t that realistic because of simple demography. Rising living standards in the post-Communist states will drive some increases in demand, as will immigration (to the extent that Europeans will tolerate immigration and work to incorporate immigrants into the economy, anyway), but population growth will be sluggish at best and negative in many cases. China was a big market and European auto makes made quite a bit of money there, but the partnership and IP transfer requirements and China’s own concerns about future technology and the environment make it unsurprising that it’s a source of much revenue these days.
So how do European automakers respond? One way is, of course, to flatten all of those historic town centers and rip out all that transit infrastructure so future generations are as dependent on cars as residents of new subdivisions sprouting up around Houston’s Loop One Billion or so, but that will take time. Until then, they can start investing in places where they have an advantage already. India and Africa are the areas where the next big increases in personal consideration will occur. India already has its own auto production, but while Africa has auto plants, it doesn’t have much in the way of indigenous brands. The Germans have had factories in South Africa for decades (although so have Toyota and Nissan) and VW is in Nigeria as well. Peugeots have been workhorses across much of the former French colonies and the commercial relationships that put them there still exist, and France still treats much of its former possessions much like we in the US treat Latin America..
The Chinese have put a lot of money and effort into building relationships in Africa as well, but quite a bit of that is taking the form of post-colonial exploitation with infrastructure loans that allow the Chinese to take control of airports and the like if the loans go into default. With preexisting European business ties and a proven history of their own exploitation of the continent (and while postindustrial Britain can’t ship over any Morrises, London’s extensive financial sector can make extortionate loans as well as anyone in New York or Shanghai – look what West-meets-East did in Hong Kong), Europe can build partnerships with businesses and consumers in the next-generation powerhouses like Ghana and Kenya that will (if they have any decency and restraint) can be beneficial to both.
Except, as has been noted in these fine pages repeatedly, building cars is hard(er) than building cell phones! The infrastructure, skilled labor, and supply chains that old guard manufacturers have built up may not completely transfer over from ICE to EV, but enough will that something will survive. I’m also reminded of the now-hilarious Jim Collins opinion book from 1994, Built To Last. Survival isn’t guaranteed, and even when achieved, what comes out on the other end might not look like what went in.
This could be an interesting comparison piece alongside the ‘GM was first but then dropped the ball’ series.
Off topic a bit, sorta, but:
Has anyone else noticed that the new Chevy Silverado ads (at least on MLB.tv) are using the song ‘China Grove’ by The Doobie Brothers?
I can’t decide if that is epic American bravado trolling, or just a laughable mindfuck of stupidity.
I mean, it’s right there in the chorus.
Can’t decide if that’s better or worse than Royal Caribbean using Lust for Life to advertise family friendly vacations
One time I was in the supermarket and realized the muzak was All Lost In The Supermarket. I kind of felt trolled, though that expression didn’t exist back then.
Iggy is legitimately of an Icon for longevity, which is the feeling one gets when one tries to leave a cruise ship.
If there is one person a middle-aged white dad needs to channel when containing the rage from the incompetence of Filipino passport checkers in Freeport, Bahamas…there are way worse choices than Iggy. That string bean has always gotten it.
I mean, I’ve seen Chaldean parents choking their children to get a henna tattoo and braids for their bridesmaids, and we were still in Miami.
Reminds me of the time I was driving through Texas and passed a sign for a town with that name. I started singing the lyrics to myself and suddenly realized I wasn’t just in a China Grove, but the China Grove. If there was an internet back then, I would have posted that “mind blown” gif.
Or the Cadillac SUV ad from last year using an instrumental track of “Nobody Speak” from DJ Shadow / Run the Jewels. Cadillac owners are shown happily driving around while the absent vocal track is “Picture this, I’m a bag of dicks, put me to your lips….” Not sure if this was a creative director’s revenge or just a case of “The target market is so old they’ll never make the association – or so we can hope.”
I died laughing when I heard Nobody Speak in a Caddy ad.
It’s probably the coolest idea Caddy has ever had, cleared by lawyers, and snuck past accounting.
Lee Iacocca tried to license Born in the USA for a patriotic pro-US themed ad campaign, but was rejected, so paid Kenny Rogers to record a faux-Springsteen soundalike instead
Do people not realize that Born in the USA is critical of the US justice system and vietnam war???
No they do not
I think it was the oppo. RTG are extremely conscious of their image. That song is really good, and the commercial emits the vibe of kind of “Hell yeah, let’s be a bit badass.”
I thought it was well done.
The rights were cheap.
This is me just now realizing how funny it is that GMC used “Eminence Front” as their ad music for a while. (But I guess it worked? Because all I thought at the time was, “Cool song, well done.”)
Of the countries on the map in the lede image I’ve got cars from the Netherlands and the UK, neither of which is shown as having a significant auto industry, and from Chassieu, France, which is right about where that screw is. This may not bode well.
By the way, some, but not all, of those islands near the middle of the north edge of the map should be colored as part of Germany.
The Dutch are too busy making yachts and good beer to care about cars.
what good beer are they making?
Amstel? Heineken? Grolsch?
I’m sure there are some microbrews in the Netherlands making good stuff, but by and large, the Dutch aren’t known for making good beer. which is fine. they make good shoes, and yachts, incidentally, if you tie a bunch of Dutch shoes together you can have a yacht.
anyway, they are flanked by two countries that make exceptional beer, Germany and Belgium. with the exception of Bitburger, and a few other selections, Germany and Belgium are far and away superior beer makers than the Netherlands.
Umm, what the shit?
Belgians are Dutch. Good grief. haha. The Dutch aren’t just Amsterdam.
I know it’s confusing, but you’re just gonna have to trust me (or wiki Belgium).
Belgium hasn’t been Dutch since 1830.
aside from the northern part of Belgium sharing a common language (sort of) with the Dutch, they aren’t Dutch.
if you told a Belgian that they are Dutch, you’d have a fight on your hands.
why don’t you call Alcase a German area while you’re at it, or say that Tirol is part of Austria?
I liked you in Reality Bites, but you need to do some map looking.
I happen to be both from Amsterdam and Brussels. Them folks are pretty aligned these days. Except for the French (of course, lol) and on St. Maartin.
that’s certainly a fair statement..
from a beer perspective, the Netherlands is a bit constrained, since you are from the region, you are probably aware that Heineken has a virtual stranglehold on the hospitality industry. bars, restaurants, etc are all locked into being Heineken houses.
which honestly, if I’m in the Netherlands and it’s coming from a tap, Heineken is a decent pilsner. import though? rumor has it that the Heineken that gets shipped overseas is what’s been spilled on the floors, fed to the dogs, and what the dogs piss out, that’s what they ship over here. it tastes of it too. but yeah, it’s hard for a Dutch beer to compete against Heineken.
not to stray too far from the beer, but there’s a time when nationalism is good though, Chocomel is the best damn chocolate milk I’ve ever had.
Belgium is flush with amazing little breweries that pull some big weight. La Chouffe is easily on my top 5 beers ever list, good news for me, if I know where to shop, I can find it in the states without too much fuss.
Belgians are not Dutch. 60% of Belgians *speak* Dutch. Not the same thing.
Kevin DeBruyn and Curaçao might have a dissenting opinion.
Kevin De Bruyne (if that’s who you mean) is Belgian. Curaçao is a constituent country of the Netherlands, nothing to do with Belgium.
Well, 100% of all Dutch territories are taught English as a mandatory requirement in school, among other languages, so that makes them…
Well technically they don’t speak Dutch, but Flemish 😉
However both languages are mutually intelligible and the latter can be considered a dialect of the former. I guess we could fit Afrikaans as another dialect?
In any case, the Flemish (the people) had the opportunity to join the Netherlands when they freed themselves from Spain, but the major point at stake was religion. The dutch are Protestant while the Flemish are Catholic, so when creating the kingdom of Belgium, the Flemish joined the Francophone Waloons because common religion was seen as more important than common language.
(For the record, the waloons also have their romance language that can be considered an ancient cousin of French)
Considering the political tensions in the past decades (by that I mean since the 1830s and the creation of the country), it’s surprising the country still holds (one of the reasons the EU is based in Brussels is the county’s ability to compromise and manage this cultural dichotomy)
I’ve always felt that the region a beer comes from is largely unimportant. I’ve had good German beers and bad German beers. Good and bad American beers, etc. Except Italy. All Italian beer is bad. There’s a reason why they stick to wine.
Italy has one of the best craft beer scenes in the world, as does Japan, interestingly enough.
I must have been looking in the wrong places. Got any recommendations?
As a beer nerd, I stick to the cheese and seafood when I’m in the Netherlands.
Don’t forget windmills and wooden shoes. Those crazy Dutch
VW group can’t help but do the ironic thing and make mostly expensive user unfriendly automobiles.
BMW can’t help but make ugly and heavy vehicles.
Mercedes isn’t getting better.
And Stellantis isn’t content with only messing up their European vehicles, they need to mess up the American vehicles as well.
I’m not an optimist, especially not when it comes to the automotive sector.
Hell, Jeep has had a production ready Wrangler BEV for 3 years and by the time they’ll make one I’ll have been out of the auto market for 2 years (2028).
I’m a Toyota fan, but I also understand that I’m a customer. Nothing more. No matter what brand you prefer, you are a customer and they are selling you a product. If the product doesn’t interest buyers in whatever way, they won’t sell.
I don’t feel bad for any automaker. From bailouts, questionable reliability, warranties that haven’t increased since the 90’s, to napping on hybrid or the Maverick-sized truck segment, they’ve all shown time and time again how disconnected they are.
Vote with your wallet (when you can) and stop with the blind brand loyalty. I’m the first one to chirp Toyota on all the issues I mentioned above. I get there are a lot of government regulations that all play part in what automakers can and cannot build, but the only thing we can do as customers is vote with our wallets and either buy, or not buy a product.
Sink or swim, simple as.
Very well said. It’s also ridiculous to me that governments in the EU and US are going so far out of their way to block any and all Chinese cars but will bend over backwards to coddle these domestic manufacturers who have proven to be increasingly out of touch with the world.
The first country to really try and court Chinese automakers to open up domestic manufacturing plants is going to be raking it in.
It is a bit funny that Toyota was not, or at least were not fully drinking the BEV Cool-Aid and yet still exceeded profits by a large margin. All of the companies giving up the midsize sedan to tack a bit of a price bump onto a tall roof version of the same basic cars are now losing sales to the tried and true basic 4 cylinder Camry?
I do vote with my wallet, by purchasing old, good, useful vehicles I like and daily them. I have no issues purchasing genuine parts for my 34 year old Jeep, or OEM BMW parts for my 25 year old M3. I absolutely could afford a brand new car, and there is nothing brand new that interests me more than many vehicles built in the 90s, which was when car engineering, reliability, and technology peaked.
“the 90s, which was when car engineering, reliability, and technology peaked.”
Hardly. Vehicles today get better MPG, are cleaner and are far safer (for their occupants) than the cars of the 1990s despite the weight gains. SatNav is a Godsend, especially if you’re in a foreign country for the first time. As to reliability I’ll put my plain Jane 21st century cars up against their 1990s equivalents any day of the week and twice on Sunday.
As has been pointed out many times the fans of 1990s cars are waxing poetic based on survivor bias. Plenty of cars made in the 1990s aren’t around anymore because they were POS and junked for it long ago.
Care to put a modern Hyundai up against a 90’s Excel? No? How about a modern Mazda against one from the 1990s? Closer but side by side the modern Mazda will win. Or how about a modern Mercedes vs one made in the 1990s with its self destructing electrical wiring? A modern Cadillac vs a 90s model with an early Northstar?
If the weakness in the EU auto industry are software (US) and batteries (Asia) as stated, then it seems like at least half of that equation is reasonably easy to solve – unlike the manufacturing of real things that requires a lot of costly infrastructure and tooling, there is effectively zero ‘moat’ around software – just open your wallet and start hiring the top experts in the field away from the ‘states. The Rivian deal looks like a clear move in that direction.
Good news for the EU, bad news for the US. People seem to be waking up to the fact that the race to ‘post-industrialism’ might have left the foundations of the economy shaky; hopefully that penny dropped in time to do something about it.
This requires a bigger culture change than you would think. European companies are extremely averse to paying engineers or programmers anything like what they can get in the US. The idea of paying a software or mechanical engineer more than their manager is routine in the US, but absolutely unthinkable in Europe. I often look at openings for my job at European companies, and it’s at least a 66% pay cut for equivalent experience, and yet the manager openings are almost on par with their US equivalents. Europe seems structurally unable to deal with individual contributor-level employees who are not members of the managerial class becoming wealthy, it’s a very curious blindspot.
…I’m sorry but what is c-suite if not managerial?
Also [citation needed] on mech engineers getting software pay. I’ve seen some pretty paltry 50-60k salaries here in FL for 3+ years of experience at established firms for serious clean-sheet work, whereas software gets $lol for walking in half-sober to push GPT’d code to production.
C-suite is managerial (the upper level of managerial). Managerial just means you have people who work for you.
Mech engineers don’t get software pay, but it shouldn’t be that far off, especially depending on the industry (aerospace, or programming adjacent like interface design). My impression is that there is a slow change underway in that software pay is going down while hardware pay is going up. But regardless, if a company is offering 50k-60k for 3+ years of experience, they should be told to fuck off in no uncertain terms. That’s like what you offer the C-student new hire as try-out money.
I don’t think software pay is going down so much as it’s not going up as much as it used to.
I mean that’s hard to say sounds realistic when the guy who does the test and production work for all of our PCBs only makes $80k after working in production as hourly for 2 years. (those two years as hourly was at $37K – I took his job.)
Presumably your PCB guy is a critical element of the production process, and as such should ask for a big ol’ raise. But even so, that $80k would put him above average in France, Germany, or the UK, and even more so when accounting for the higher taxes. Euro engineering salaries are really insultingly low.
One hopes they change to eat our lunch, actually. I’m a little sick and tired of the silicon valley “but what if we made our code monkeys put a lease agreement in front of it AND put ads that track them better than the stasi” model.
Except VW already tried hiring US talent https://techcrunch.com/2024/06/28/volkswagens-silicon-valley-software-hub-is-already-stacked-with-rivian-talent/
Honestly it sound like a redux of Microsoft / Nokia fiasco, remember that?
I blame corporate culture.
It is always possible (sometimes it feels ‘likely’) to have the right idea and royally screw up its execution!
Sadly the Microsoft/Nokia fiasco resulted in a good product. Just too late to the game.
Yeah, they weren’t as bad as they’re made out to be. Nokia still knew how to make good hardware and the Windows tile platform was different than what Apple or Android offered and they deserved a chance. But there were no apps! Or barely. That’s what sunk Windows phones and Nokia with it. I mean, Nokia was already in doodoo when they got bought up by Microsoft, and that’s also because of their native OS failure with Symbian (also few to no apps). At that point, people rightfully had expectations and Windows phones didn’t meet them.
I was working for Rogers at the time while in uni… It was a really interesting period when most normies were switching to their first smartphones. (Hello data add-on bonu$!) Phones still came out every few months that would amaze us with a feature or design. I miss those days (and when HTC was relevant..)
Yup. You can hire the right talent. But if you don’t have the right management/processes/culture the talent is wasted.
Look, times change. People either change with the times, or they get left behind. It’s been that way since the beginning of history.
The resistance to change comes from certain elements within European (and other) societies. These unhelpful elements seek to conserve power and wealth in the hands of those who already have them, while at the same time ensuring that power and wealth are unattainable for the masses. These are the people that need to go.
No worries, I’m sure a $60,000 EV Van will save VW.
Well, Euro cars don’t have the best reputation in terms of reliability. At least Renault has Nissan and Mitsubishi, so they at least theoretically have some ability to make cars that can tolerate ghetto driving conditions LOL
but the rest of the Euros are fuuuuuuuuuuuuuuuuuuuuuucked
As I’ve said several times I think the Germans really screwed themselves by chasing the Tesla dragon. They assumed that everyone in the 2020s would want tech spaceships controlled entirely by giant tablets…and in typical German fashion they over engineered ridiculously complex solutions to problems that no one had.
If you read reviews of Mercedes, VWs, BMWs (although they’re doing fine), Audis, et cetera the complaints are essentially the same across the board. All of them are bogged down by layers upon layers of overly complex technology, to the point that interacting with them every day becomes a chore. I’ve driven my dad’s X5 50e a few times and I still can’t tell you where a lot of the functions are because the infotainment has hundreds of individual widgets.
Every Volkswagen dealership has cars on its lots that have been returned after a couple hundred miles. There are absolutely ridiculous leases available on (insert German EV here) because they can’t move them. There are literally hundreds of each BEV German car on lots near me right now. It’s nuts.
I don’t see any easy out either. They went all in on technology and have incinerated billions on these already doomed systems and interfaces….and most of them disregarded hybrids to go all in on EVs prematurely. Everyone was giving Toyota shit a few years ago for not hopping on the EV bandwagon but look at them now. They’re as profitable as ever and half of all cars they sell are now hybrids. IMHO that’s doing more for the environment than thousands of carbon intensive to produce EVs that are rotting on lots right now are.
The same goes for the Koreans. They make cars that are easy to interact with that maintain physical controls for necessary functions. People appreciate that. My Kona N is probably the easiest car to interact with that I’ve owned. On most drives the only time I even touch the screen is to click “accept” at the start of the drive to make the “don’t use this while driving” warning disappear.
There’s no easy out here and unfortunately we may lose some pretty iconic brands as a result. But unfortunately they made their beds and now they have to sleep in them. The only people that want tech on tech on tech are Tesla customers/Silicon Valley ghouls who will continue to buy Teslas and the latest shiny new EV startup products. Ze Germans need to backtrack on all the tech monstrosities, find a way to get some hybrids out there, and start over to an extent.
I’ve drive a 2023 GTI for almost a year. I still can’t figure out how I sometimes accidentally get the particular screenview I want for SiriusXM.
Every few weeks I think about dumping it for something like a Prius. Then I get a chance to really drive her and she reels me right back in.
I had a MK7.5 for two years. I get the appeal of the GTI, I’m just not willing to put up with the German-ness for what’s essentially an economy car. If we’re talking something like an M2 or (Insert Parsh here) then hell yeah I’ll live with the headaches.
…but for an affordable daily that’s biggest selling points are its versatility and ease to live with? I couldn’t do it, and I especially couldn’t do it now with the haptic nonsense. I’d rather have my car, which is a little bit harder to live with day to day but much more special when it comes to the driving experience. And people knock Hyundai, but 27 months in mine has been problem free and held up during multiple track days.
Unfortunately my GTI had a litany of issues in that same timespan.
I don’t know why car manufacturers are making it more complicated than it needs to be. For 99% of people, CarPlay is just fine. Put a screen in there, but make it car play compatible. Leave the HVAC as a couple mechanical dials.
Boom. Problem solved.
Obviously this won’t work for fancy autonomous vehicles but for what people actually need, this is the solution.
Also, fancy autonomous vehicles are a myth, so integration with a smartphone should take care of pretty much everybody.
VW did exactly this with the UP!
Then discontinued it.
Probably because they can’t charge a subscription for something that’s not a part of the car…
Massive corporate ego. They enjoy the sophisticated nuance and texture of their own farts and are surprised when consumers do not.
We’re going to see the perfect storm hit the auto industry. The combination of government mandated EVs, insane pricing and stagnant wages means many manufacturers simply won’t survive.
Only a minority of the population can afford to spend $60k and up on a new vehicle. Add in the fact that the resale value of used EVs drops to nearly nothing after about 7 years, and that means even the used car market is about to be totally up ended.
Quite frankly, PHEVs need to be the short to medium term push, give them incentive/tax/emissions credits and benefits at 50-75% that of EVs, and factor emissions correctly, and we’ll end up with a massive net reduction in emissions. It’s absolutely insane to me that every nation is so aggressively gung-ho to push EV laws that are jeopardizing massive pools of workers at all (but largely lower to middle) income levels. All this while allowing industries like air travel and international shipping to be nearly unregulated in their emissions. This is despite the massively disproportionate percentage of emissions these industries emit due to effectively zero restrictions on the type of (very, very dirty) fuel they can burn with no emissions controls.
To add to this, most sources I’m seeing show Transportation as a total aggregate to be about 14% of global emissions, while heat and energy generation alone are a full 25%, and a further 21% by industry like manufacturing. In fact, the amount of energy generated internationally from coal has Increased by 200 GW since 2015.
None of this is to say that EVs are inherently bad, but it continues to feel as though the hidden hand of lobbying is internationally continuing to push the responsibility of emissions reductions onto individual consumers who are contributing a hilariously small percentage compared to the companies that are getting away with insane volumes of pollutants. The EU needs to broaden it’s approach and move towards a more wholistic view, where PHEVs and Hybrids are accounted for more accurately, and to focus on other issues that can be tackled without a catastrophic long term economic impact.
Also if they factored in EVs and PHEVs into emissions, maybe we’d still have manuals in the GTI.
Many people have been saying.
My prediction – once they can’t squeeze any more blood from the stone of EVs, the next step will be shaming people for eating meat. Again while more coal plants are being built.
You’re spot on though, it’s the exact same intent behind shifting consumer focus from big issues to little ones they feel they have control over. Things like paper straws and reusable bags/bottles. Things that are objectively good for the climate certainly, but their net impact is minimal. The evil in it isn’t because it’s not helpful, because it technically is. The evil in it is that it shifts focus away from the issues that have real impact, and should the public be riled up and voting accordingly, would have a much larger impact on the super-polluting companies and industries.
While I don’t have great sources for my numbers on hand, so take this with a grain (or ten) of salt, but private jets emit about 4.9kg of CO2 per mile, while the original Hummer H1 only emitted 0.9kg per mile. The new Starbucks CEO commutes ~1000 miles to on a private jet instead of relocating. This is around 5 metric tons of CO2 PER TRIP. While a brand new Prius emits 60 grams/mile. Assuming this trip is done on average 3 round trips per week, or 600 times per year, this one guy emits 1500 metric tons of C02 (1,500,000kg), in one year of commuting, which is about 25 Million miles in a current Prius. All while likely paying next to no income tax because his pay package is mostly stock and unrealized capital gains.
So please legislators, please tell me why we MUST outlaw all ICE/Hybrid/PHEV vehicles by 2030 as the only way to save our planet.
I have long believed (and opined here) that the reason EV mandates are seen as the lowest of low hanging fruit is because the type of politicians, think tank workers, lobbyists, etc that advocate for and pass them sincerely can’t conceive of many of the legitimate issues with the bans:
-They are generally affluent, so the higher prices of EVs are not a concern. Nor is the cost of a plane ticket to go somewhere outside the EV’s driving range.
-They are generally urban and coastal, where charging infrastructure is both plentiful and close together, and where road trips are short or non-existent (see point 1).
-Stereotyping a bit, but their passions and hobbies are less likely to involve towing, trucks, powersports, camping, or other things that are both more associated with rural people and more difficult to do with an EV.
I don’t discount the existence of malice against perceived political enemies, or even sincere delusion about the scale of carbon reduction that is actually possible with EVs, but I honestly believe the backlash to the bans caught some people by surprise because it exposed them to ideas outside their bubble. I only hope it translates to repeals.
Paper straws are a litmus test.
Humans don’t like to change. So when change does have to happen, it starts in smaller, less risky places. If/once that’s successful, you can change something riskier. And so on. Ideally, people will get used to changes. Hopefully.
It’s impressive how they all flew in to discuss the climate instead of… a zoom meeting.
While they rebuild the NewaClear plants they once claimed obsolete. The case is the same with energy and lab grown meat, if the poison is profitable…
I’m nuke-agnostic. What do you mean by lab grown meat?
Oh, just google it. lol
I don’t think they are waiting for the EV stone to go bloodless. Meat shaming is definitely already a thing. But yeah, I agree, that will be the next heavy focus. And once again the people most significantly impacted will be those of lower income, who not only eat animals, but also grow them for the purpose of eating.
Who are these low income people with backyard cattle? I ask this sincerely because the only people with a chicken coop (illegal but I’m no snitch) I knew were a pair of dominicans and they were extremely frugal, not broke.
Damn near every person with a few acres in a small town, here in the western united states. Herds of 30-80 head are massively common. Thats far larger than any personal consumption argument, but not large enough to part of the conglomerates. And those herds make up a huge part of annual income for these people.
Interesting. I’m in Florida; any small time cattlemen around here all sold to developers because competing against the Cracker families was difficult and then covid fucked them royally, so I didn’t think small guys were still in the game.
Out here they formed a bunch of co-ops, where the farmers work together to sell in bulk to the grocery stores. Seems like it is still a tough living, but they seem to be holding their own for now. But you are right, more and more of them do keep disappearing. Once they are all gone, I’m afraid much of my concern for the cattle industry will also be gone.
You better patch that screw hole or the earth will go flat!
All will be fine with the Euro boys.
Once they embrace Jon Voight day.
Worked for the Yankees…
Add in the Peugeots at Stellantis, they own about half of what the Agnelli/Elkann family does, but that still makes them the second largest shareholder. The two founding families combined control over 1/5 of the outstanding shares. Robert Peugeot is the company’s vice chairman
I read the Galbraith thread over the weekend and found it very compelling.
What is the case for Europe suddenly becoming a world leader in either batteries or software?
German expertise in mechanical manufacturing and assembly may be somewhat overblown when it comes to cars, but it is real, and probably the only reason to consider buying them over an equivalent Japanese or American model. What value does the Mercedes Benz or BMW badge provide when the batteries and motors are made in China like everyone else’s and the software is written by Americans? It’s hard to say.
That’s been my argument for some time regarding EVs. They will become a commodity as the entire power train will become ubiquitous. Cars preference will come down to the aesthetic. In that case, you better have a top notch styling team.
The aesthetic and the price.
Neither of which bodes well for the likes of BMW or MB.
There is a lot more to a car than batteries and software – the way the suspension, steering, brakes, etc. are calibrated and the qualitiy of those parts can make for vastly different driving experiences. A Polestar 2 with the Performance Pack Öhlins dampers drives nothing like a Model 3, for instance.
Increasingly, everything you mentioned is done with software.
But even granting the things that aren’t, I find it difficult to believe that enough people buy a vehicle for suspension tuning or steering feel that it will make a difference.
Buying a BMW for the unique engine is one thing, buying it for a few minor tuning changes seems less likely.
Sadly, you’re right, people who choose a car based on how it drives are a minority – most people choose based on looks, brand perception and status and similar factors…
Most people who buy a BMW these days don’t give a rat’s ass that most of them don’t have an inline 6 anymore or that the 1 and 2 series are FWD.
Could it be that the European brands all went from independent manufactures to just a bunch of brands under 5 umbrellas to the point that they are all the same thing with just different plastic bits bolted on? Like maybe actual competition in the market is better than having a monopoly?
Just because I can buy the same SUV with a SEAT, Skoda, VW, and Audi badge, or VW, Porsche, Bentley, and Lamborghini badge on the front of it doesn’t mean that they’re not all totally unique vehicles – each with their own unique front badge and pricetag…
Honestly, I find the VW’s lack of competition disturbing.
And what they heck are they doing with Ducati?