Are EVs Really Killing ICE Vehicles? It's the Software, Stupid!

That is what Daniel Rabe told a group of 15 journalists assembled by CLEW (Clean Energy Wire). This German journalism organization aims to incentivize news about the energy transition going around worldwide. The conversation happened at one of the sessions of the digital research tour “The future of the European car industry: the challenge of industrial transformation.” We are among the 15 selected journalists to cover that. Despite the name of the event, the challenge and its outcomes are global.

Rabe is a researcher from the IG Metall “Team Transformation,” a group from Europe’s largest industrial union in charge of understanding the challenges that the automotive industry will face. He shared this session with Monika Martišková, a researcher at Charles University from Prague, Czechia.

While most people are focused on changing the internal combustion engine with electric motors, Rabe thinks that the core of the change is in software.

“Car companies have two paths to follow: either become technology companies, focused on the software, or vehicle manufacturing businesses. I believe they have no other way to go than to become technology companies.”

At least two companies have already confirmed that this is their goal: Volkswagen and Renault. On January 16, 2020, Herbert Diess said in his annual speech to Volkswagen senior staff in Berlin that the company would have to “slaughter some sacred cows” and become a technology company.

While presenting the Renaulution plan, Luca de Meo specifically said he wants to turn Renault “from a car company working with tech to a tech company working with cars.”

The reason is that electric cars are not as complex as combustion-engined vehicles. Some analysts even say that electric motors are pretty much the same. In other words, the experience with any EV will be pretty similar to all others unless their manufacturers can offer a plus. Software may be the way to set them apart.

Rabe stressed that automakers could not become simple car manufacturers. His concern probably has to do with the fact that Foxconn has a solid strategy to offer precisely that: EV manufacturing for any company willing to sell electric cars. And it is not alone.

And old-timer in manufacturing services, Magna has reinforced the same intention. It is developing the Sony Vision-S – a car the Japanese company insists it will never sell despite all the evidence to the contrary – and it will manufacture the Fisker Ocean. More contenders present themselves in that arena each day, such as Geely.

The massive union currently faces something that seems to be paradoxical. IG Metall demands to be part of the plans to shift the industry, which will imply a heavier use of automation to increase productivity. The common conception about more robots is that they will mean fewer jobs. According to Rabe, that is not the case.

“It didn’t happen in the past and should not happen now because the lower car prices that automation has brought also raised the demand for vehicles, which allowed the companies to keep about the same headcount.”

There’s another challenge the transformation brings: tech companies are notoriously contrary to unions. Tesla and Amazon are perfect examples of that, and IG Metall has started to deal with that at Tesla’s Giga Grünheide. That’s not something that concerns Rabe.

“It has never been different: we always had to fight to preserve worker’s rights. We do not think the transformation is making things more difficult. What we see is that some companies are in real danger because they are not preparing for the shift.”

This is something that concerns Martišková. She revealed how dependent on the automotive industry eastern European countries are, with a high share of jobs that is even higher than that in Germany.

Considering how many changes are happening with the automotive industry, we asked both researchers if they don’t think that the car business should try to establish a different business model as well. Earth Overshoot Day is sooner year after year, which means that we are consuming more resources than before. Shifting the current business model to one that repeats that logic will also demand action in the future. Perhaps the right time to change everything is now.

Martišková asked that same question multiple times.

“I think the change should be more extensive.”

Rabe analyzed that from the perspective of automakers.

“Companies will go after profits. If they can make money with the shift, they’ll accept it. If they can’t, they won’t, but that is a good opportunity to change. In my personal opinion, what we are seeing nowadays is not enough.”