Oktobertfest 2021 Was Canceled. The Auto Show Wasn’t

An inside look at IAA Mobility. Yes, the German auto show

By Gary S. Vasilash

The event formerly—for almost 70 years—known as “the Frankfurt Motor Show” is no more, as this year the event is officially titled “IAA Mobility,” and it moved about four hours southeast by car to Munich.

According to the organizers, the thesis of the event is “Mobility is the foundation for freedom, prosperity, and encounters. We face new challenges daily, such as urbanization, climate change, and digitization. But instead of borders, we recognize the call for action. It is up to us to go new ways, ask questions, and find answers.”

Which doesn’t sound like, well, an auto show as they have long existed.

Concept Mercedes-Maybach EQS: Do the 1% like garish grilles on EVs? (Image: Mercedes)

So to get some insights on the event, on this edition of “Autoline After Hours” “Autoline’s” John McElroy and Chris Paukert of Roadshow by CNET, both of whom were at the media days of IAA Mobility, talk with me about what they saw, the vehicles that they found to be of interest. (I wasn’t there.)

One interesting observation that they make is that while there were certainly plenty of introductions by the German car companies—like the Concept Mercedes-Maybach EQS, an electric vehicle that is for, well, the Maybach set; the BMW i Vision Circular, which McElroy points out has a clever approach to the traditional kidney grille, as it basically fills the front end in tasteful matter, not something garishly slapped on the nose; and the Volkswagen ID.Life, a small city car that Paukert notes is unlikely to be able to ever come to the U.S. due to the homologation requirements—the footprint of the show was far different than that of the Frankfurt venue.

In addition to which, we talk about the speed with which Tesla makes changes to its systems (e.g., electrical architecture) and whether traditional OEMs have the capability to catching up, whether those traditional OEMs should combine their mainstream powertrain operations into an independent standalone company and take the savings from the elimination of the cost of their individual ops to spend on things like electrification, and more.

All of which you can see here.

The Emerging EV Challenge

Incumbents will gain some share. But it is going to take a lot of work to get it

By Gary S. Vasilash

When GM announced its sales for the first half of 2021, the Chevrolet Bolt EV and the new variant the Bolt EUV did quite well. Comparatively speaking.

That is, sales were up 142.4% compared with the first half of 2020.

Of course, 2020 was the COVID year, so the sales of pretty much every vehicle has shown robust signs of sales, but few with such a high percentage rise.

That said, the total number of sales for the two models in the first half of 2021 was 20,288. To put that number into context, realize that the company sold 31,886 Malibus during the same period—and that represented a decline of 33.5% for the stalwart sedan.

And to put the Bolt EV/EUV sales into context, know that in the second quarter alone of 2021 Tesla delivered 199,360 Model 3 and Model Y units—or looked at another way, Tesla sold in three months 179,072 more vehicles than Chevrolet did in six months.

“IONIQ 5 introduces the Hyundai brand to a while new set of buyers, Jose Munoz ,president and CEO, Hyundai Motor America, said of the forthcoming EV. Buyers matter. Especially new ones. (Image: Hyundai)

General Motors has a lot of commitment to EVs going forward, In November 2020 it announced that it would have 30 new EVs on the global market by 2025, of which two-thirds would be available in North America. Then in June 2021 it announced it was adding commercial trucks to the North American mix, as well as additional EV production capacity.

In the GM boilerplate it describes itself as “a global company focused on advancing an all-electric future that is inclusive and accessible to all.”

Last week Mercedes announced its all-EV approach by 2030.

But presumably this is not a plan that is “inclusive and accessible to all.”

Also last week GM announced a recall of 2017-2019 Bolt EVs. A problem with the vehicles potentially bursting into flames.

This is the second time these models have been subject to a recall, with the first being in November 2020.

The new GM EVs that are on the way will not have the same battery system used by the Bolt EV and Bolt EUV. It is an all-new design.

However, GM is not exactly in a position to make that as a benefit of the new vehicles because it would throw some serious shade on the Bolts.

Perhaps the limited sales of the Bolts works in GM’s favor because if the number of recalled vehicles was larger, if there were more people aware of the problem, then it would have even more work ahead of it trying to convince people that it, too, can make EVs with the best of them.

It is widely known that Tesla owners give Tesla a pass in a way that traditional OEMs have never gotten, nor will they. If there are manufacturing defects, shrug. If there are performance problems, shrug. If owners learn of those who are using the so-called “Autopilot” system and run into the side of a semi, a moment of silence followed by a shrug.

If any of these things are related to a traditional OEM: Wailing and gnashing of teeth by the customer base—and that’s just the start.

To be sure there will be more people buying EVs from the traditional brands. While in some cases it may be because the vehicles look damn good—Audi is certainly staking a claim in the design space—in more cases it will probably be predicated on the availability that can come from volume: not only availability in terms of the vehicles being on lots, but availability in terms of economies of scale helping reduce prices.

But given the delta between Model 3/Y sales and Chevy Bolt EV/EUV sales, I can’t help but think that the traditional OEMs may have a bigger problem on their hands than they might expect.

Although Hyundai has certainly been in the U.S. market since 1986, arguably it is still a challenger brand in the market compared to those that have been around for 100 years or more.

While its sales numbers are still modest in the U.S. vis-à-vis the established players, in the first half it sold 407,135 vehicles, or 49% more than it did in the first half of 2020.

Hyundai has been offering hybrids, EVs and even fuel cell vehicles in a way that many traditional OEMs don’t match.

So let’s say for the sake of argument that the same people who buy Samsung phones rather than iPhones would be more likely to go with a Hyundai than a Chevy. (If we go back to the aforementioned design advantage, Hyundai is certainly proved that point.)

So a chunk of the traditional goes there.

Then there are the new entrants. Lucid. Fisker. Lucid is staring at a high price point (think of it as a Cadillac competitor) and Fisker is more in the middle. Both of those companies have announced that they are working on what could be described as vehicles that are more inclusive and accessible.

While it might seem that the incumbents have the advantage simply because of their name recognition and availability, IBM doesn’t make PCs; when’s the last time you bought an image-related product from Kodak; and although a Pan Am shuttle took people to a space station in 2001: A Space Odyssey, Pan Am went out of business in 1991.

Mercedes Going All-EV: Sort Of

On the one hand, the company is all in. On the other, there is a recognition that people need to buy the vehicles

By Gary S. Vasilash

The important point about Mercedes-Benz announcement of its transition to “electric-only output” by the end of the decade “where market conditions allow” is that: where market conditions allow.

If people aren’t buying EVs, then there is little point in making EVs—except the whole thing that legislation may make it a requirement to do so.

Ola Källenius, Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG: Desirability is key. (Image: Mercedes-Benz)

Which is something that gets lost in most of the discussion of the subject.

But if people are buying a whole lot of a given type of car with a given type of powertrain may be predicated on the fact that the alternatives are rather insufficiently appealing.

The phenomenon that is Tesla proves the point that if there are vehicles that are sufficiently desirable people will buy them.

In is only recently that OEMs have gotten to the point where they aren’t just sticking electric powertrains in vehicles in order to meet the aforementioned legislative demands, that OEMs have twigged to the fact that Tesla is not only annihilating these traditional OEMs when it comes to EVs, but is also crushing it when it comes to sales of premium vehicles.

People want to buy Teslas. Teslas look good. They have class-leading performance. They are supported by an extensive charging infrastructure.

As Ola Källenius, CEO of Daimler AG and Mercedes-Benz AG, acknowledged, “Our main duty in this transformation is to convince customers to make the switch with compelling products.”

Otherwise, the market conditions are not going to be such that people are going to want to buy electric Mercedes in any great numbers. The same goes for any other OEM that is putting out EVs.

Now in the case of Mercedes the company doesn’t need to worry so much about gross volumes as it does gross margins.

It acknowledged, “An important lever is to increase net revenue per unit by raising the proportion of high-end electric vehicles such as Mercedes-Maybach and Mercedes-AMG models, while at the same time taking more direct control over pricing and sales. Rising revenue from digital services will further support results. Mercedes is also working on further reducing variable and fixed costs and cutting the capex share of investments.”

So get the top end revenues while decreasing the amount it takes to build them, and supplement that with digital income.

Källenius: “This step marks a profound reallocation of capital. By managing this faster transformation while safeguarding our profitability targets, we will ensure the enduring success of Mercedes-Benz.”

Clearly, unless it makes a move now, then that success may not be as enduring as the company would like. 

And How Do Others Compete With That?

Tesla signifies more than an electric vehicle. . .

“Many consumers perceive Tesla as a leading-edge, high tech, environmentally progressive brand driven by a charismatic leader who not only builds cars and crossovers, but also sends rockets into space and is a global industrial visionary. That combination is hard to beat and has gotten the attention of the entire global auto industry.”  –Tom Libby, associate director, automotive industry analysis, IHS Markit 

Here’s something to consider: there are about 880 Mercedes dealerships in the U.S.—and just some 130 Tesla outlets (Image: IHS Markit)

The Rich Are Different

Because they can afford expensive sedans

The starting price for the Mercedes-Maybach S-Class Sedan has been announced.

It is $184,900.

Starting price.

Other stuff extra. (E.g., heated and cooled cupholders–which is something that Chrysler had on offer years ago–a refrigerated compartment–hello, Ford Flex–and custom champagne flutes and built-in holders–OK, we’ll give that one to Merc.)

Mercedes-Maybach S-Class Sedan. (Image: Mercedes)

We’ll leave it there.

It could be noted that the destination and delivery line item adds $1,050 to the price.

But if you’d even notice that you aren’t in the market for the S-Class.

Mercedes Hyperscreen in the Age of the Jitterbug

Age 55-64. That’s the point at which the mean net worth of a person in the U.S. is in excess of $1-million. Specifically, according to the most recent figures from the Federal Reserve, it is $1175,900.

For those 65-74 it is more, $1,217,700.

For those beyond that, less, $977,600.

Mercedes-Benz has announced the MBUX Hyperscreen. It is a screen that will be offered as an option in the forthcoming EQS, an electric version of the Mercedes S-Class.

The Hyperscreen is approximately 56 inches wide—think from one side of the car to the other—and covers 377 square inches.

There are 12 actuators under the screen that provide haptic feedback.

The Mercedes MBUX Hyperscreen: information-intensive. (Image: Mercedes-Benz)

There are 8 CPU core, 24-gigabyte RAM and 46.4 GM per second RAM memory bandwidth.

It will activate a massage functions in the seats. It will remind you of someone’s birthday.

Navigation. Entertainment. Climate. The status of the electric propulsion system. Oh, and the “classic cockpit display with two circular instruments has been refreshed with an all-new digital look” for the Hyperscreen.

The price of a Mercedes S-Class starts at about $173,000.

Odds are, the EQS will be a bit more expensive.

Which leads to a question of the type of person who is likely be able to afford the EQS. Probably someone who is in a higher income bracket. Which according to the aforementioned Federal Reserve figures is likely to be someone who is in a higher age bracket.

The issue of cognitive overload provided by the Hyperscreen certainly things like a possibility.

After all, at the risk of being ageist: those Jitterbug phones have huge buttons and a simple interface. . . .–gsv