Electric Cars are Left Without a Real Alternative

Dear Friends & Shareholders,

Current developments in the automotive industry are akin to a war of faith: some manufacturers, particularly Tesla and Volkswagen, are clearly opting for electric cars. Others drive multi-track and also want to offer vehicles with gas or fuel cell drive. There are many indications that electric cars will win the war.

Recently, Toyota made a remarkable turnaround. The second largest carmaker in the world after VW is now suddenly focusing increasingly on electric mobility. As early as 2025, every second car Toyota delivers (approximately 5 million cars) will be equipped with an electric motor. Of this total, approximately 1 million cars are to be pure electric vehicles, the rest plug-in hybrids. Toyota thus seems to be waving the black flag for cars with fuel cells, at least to some extent.

The crux with cars that refuel with hydrogen, from which a fuel cell then generates electricity, is that the technology is not harmless. Just last month a hydrogen filling station exploded in Norway which immediately reignited the discussion about the safety of cars with fuel cells. In addition, the production of hydrogen consumes an extremely large amount of electricity. After all, it is hardly conceivable that a nationwide network of hydrogen filling stations will be installed. Most countries are already finding it difficult to set up sufficient charging points for electric cars in addition to normal petrol and diesel filling stations.

The fuel cell is probably most suitable for long-haul traffic. Due to the long distances, a comparatively coarse network of hydrogen filling stations would probably be sufficient for long-haul trucks.

Phase-out Hybrid Drive Model

In contrast to cars with fuel cells, vehicles with hybrid drive are technologically mature; the bestselling Toyota Prius has been around for 22 years. Hybrid drives are something of an “old economy” – the technological breakthrough was yesterday. After all, an electric motor is simply added to a combustion engine. While this noticeably reduces fuel consumption, it is obvious that it is costly to equip a car with two engines in parallel. The purchase costs of plug-in hybrids are correspondingly high. At the very least, they could comply with the CO2 upper limits that will apply in Europe from 2020 and 2021.

The End of the Diesel Engine

What applies to hybrid cars applies all the more to vehicles with diesel engines. Since VW’s diesel scandal we have learned that “clean diesel”, as VW used to advertise the technology, is a myth. True, the diesel engines emit comparatively little CO2; however, diesel engines are questionable in terms of nitrogen oxides and fine dust.

In the two largest automobile markets in the world, the USA and China, diesel vehicles were already very unpopular even before “Dieselgate” was discovered. With driving bans in cities and high difficulties in reselling used diesel vehicles, their sales on the old continent have recently fallen sharply, expediting their demise in Europe.

The most realistic alternative to electric cars still seems to be passenger cars with conventional combustion engines that fill up with biofuel. In the meantime, production has progressed so far that it is also possible to produce fuel from plant waste that is chemically equivalent to refined petrol or diesel from oil. However, first of all it is still a niche technology. And secondly, biofuel has an image problem with consumers after the fuels of the first generations have silted up engines and thus destroyed them. Star investor Warren Buffet once said: “It takes years to build up a reputation and five minutes to ruin it.” Against this backdrop, the breakthrough of biofuel is likely to take several more years.

Apart from the technological advantages, politicians are also clearly in favour of electromobility. Most governments support e-cars with subsidies and restrict vehicles with conventional drives. In addition, the biggest disadvantages are gradually disappearing. On the one hand, the network of charging stations is becoming denser every day. On the other hand, batteries are becoming cheaper and more powerful. Soon electric cars will also be able to compete with combustion engines or diesel vehicles in terms of purchase price. They are already ahead of the field when it comes to total cost of ownership.

As it stands today, insufficient capacities with respect to battery cell manufacturing and raw materials production could prove to be the biggest bottlenecks. At present, fewer battery cells are produced than there is demand for, leading to well-publicized electric vehicle production delays (i.e. Kia and Audi, to name just two). In an effort to alleviate this, corresponding factories are being built and ramped up around the globe. Once they have reached significant production capacities, expected in the near future, necessary raw materials such as cobalt and lithium are likely to become scarce.