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The Age of Electric Cars Is Dawning Ahead of Schedule

FRANKFURT — An electric Volkswagen ID.3 for the same price as a Golf. A Tesla Model 3 that costs as much as a BMW 3 Series. A Renault Zoe electric subcompact whose monthly lease payment might equal a nice dinner for two in Paris.

As car sales collapsed in Europe because of the pandemic, one category grew rapidly: electric vehicles. One reason is that purchase prices in Europe are coming tantalizingly close to the prices for cars with gasoline or diesel engines.

At the moment this near parity is possible only with government subsidies that, depending on the country, can cut more than $10,000 from the final price. Carmakers are offering deals on electric cars to meet stricter European Union regulations on carbon dioxide emissions. In Germany, an electric Renault Zoe can be leased for 139 euros a month, or $164.

Electric vehicles are not yet as popular in the United States, largely because government incentives are less generous. Battery-powered cars account for about 2 percent of new car sales in America, while in Europe the market share is approaching 5 percent. Including hybrids, the share rises to nearly 9 percent in Europe, according to Matthias Schmidt, an independent analyst in Berlin.

As electric cars become more mainstream, the automobile industry is rapidly approaching the tipping point when, even without subsidies, it will be as cheap, and maybe cheaper, to own a plug-in vehicle than one that burns fossil fuels. The carmaker that reaches price parity first may be positioned to dominate the segment.

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Credit…Philip Cheung for The New York Times

A few years ago, industry experts expected 2025 would be the turning point. But technology is advancing faster than expected, and could be poised for a quantum leap. Elon Musk is expected to announce a breakthrough at Tesla’s “Battery Day” event on Tuesday that would allow electric cars to travel significantly farther without adding weight.

The balance of power in the auto industry may depend on which carmaker, electronics company or start-up succeeds in squeezing the most power per pound into a battery, what’s known as energy density. A battery with high energy density is inherently cheaper because it requires fewer raw materials and less weight to deliver the same range.

“We’re seeing energy density increase faster than ever before,” said Milan Thakore, a senior research analyst at Wood Mackenzie, an energy consultant which recently pushed its prediction of the tipping point ahead by a year, to 2024.

Some industry experts are even more bullish. Hui Zhang, managing director in Germany of NIO, a Chinese electric carmaker with global ambitions, said he thought parity could be achieved in 2023.

Venkat Viswanathan, an associate professor at Carnegie Mellon University who closely follows the industry, is more cautious. But he said: “We are already on a very accelerated timeline. If you asked anyone in 2010 whether we would have price parity by 2025, they would have said that was impossible.”

This transition will probably arrive at different times for different segments of the market. High-end electric vehicles are pretty close to parity already. The Tesla Model 3 and the gas-powered BMW 3 Series both sell for about $41,000 in the United States.

A Tesla may even be cheaper to own than a BMW because it never needs oil changes or new spark plugs and electricity is cheaper, per mile, than gasoline. Which car a customer chooses is more a matter of preference, particularly whether an owner is willing to trade the convenience of gas stations for charging points that take more time. (On the other hand, owners can also charge their Teslas at home.)

Consumers tend to focus on sticker prices, and it will take longer before unsubsidized electric cars cost as little to drive off a dealer’s lot as an economy car.

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Credit…Samuel Zeller for The New York Times

The holy grail in the electric vehicle industry has been to push the cost of battery packs — the rechargeable system that stores energy — below $100 per kilowatt-hour, the standard measure of battery power. That is the point, more or less, at which propelling a vehicle with electricity will be as cheap as it is with gasoline.

Current battery packs cost around $150 to $200 per kilowatt-hour, depending on the technology. That means a battery pack costs around $20,000. But the price has dropped 80 percent since 2008, according to the United States Department of Energy.

All electric cars use lithium-ion batteries, but there are many variations on that basic chemistry, and intense competition to find the combination of materials that stores the most power for the least weight.

For traditional car companies, this is all very scary. Internal combustion engines have not changed fundamentally for decades, but battery technology is still wide open. There are even geopolitical implications. China is pouring resources into battery research, seeing the shift to electric power as a chance for companies like NIO to break into the European and someday, American, markets. In less than a decade, the Chinese battery maker CATL has become one of the world’s biggest manufacturers.

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Credit…Felix Schmitt for The New York Times

The California company has been selling electric cars since 2008 and can draw on years of data to calculate how far it can safely push a battery’s performance without causing overheating or excessive wear. That knowledge allows Tesla to offer better range than competitors who have to be more careful. Tesla’s four models are the only widely available electric cars that can go more than 300 miles on a charge, according to Kelley Blue Book.

On Tuesday, Mr. Musk could unveil a technology offering 50 percent more storage per pound at lower cost, according to analysts at the Swiss bank UBS. If so, competitors could recede even further in the rearview mirror.

“The traditional car industry is still behind,” said Peter Carlsson, who ran Tesla’s supplier network in the company’s early days and is now chief executive of Northvolt, a new Swedish company that has contracts to manufacture batteries for Volkswagen and BMW.

“But,” Mr. Carlsson said, “there is a massive amount of resources going into the race to beat Tesla. A number, not all, of the big carmakers are going to catch up.”

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Credit…Felix Odell for The New York Times

The traditional carmakers’ best hope to avoid oblivion will be to exploit their expertise in supply chains and mass production to churn out economical electrical cars by the millions.

A key test of the traditional automakers’ ability to survive will be Volkswagen’s new battery-powered ID.3, which will start at under €30,000, or $35,000, after subsidies and is arriving at European dealerships now. By using its global manufacturing and sales network, Volkswagen hopes to sell electric vehicles by the millions within a few years. It plans to begin selling the ID.4, an electric sport utility vehicle, in the United States next year. (ID stands for “intelligent design.”)

But there is a steep learning curve.

“We have been mass-producing internal combustion vehicles since Henry Ford. We don’t have that for battery vehicles. It’s a very new technology,” said Jürgen Fleischer, a professor at the Karlsruhe Institute of Technology in southwestern Germany whose research focuses on battery manufacturing. “The question will be how fast can we can get through this learning curve?”

Peter Rawlinson, who led design of the Tesla Model S and is now chief executive of the electric car start-up Lucid, likes to wow audiences by showing up at events dragging a rolling carry-on bag containing the company’s supercompact drive unit. Electric motor, transmission and differential in one, the unit saves space and, along with hundreds of other weight-saving tweaks, will allow the company’s Lucid Air luxury car — which the company unveiled on Sept. 9 — to travel more than 400 miles on a charge, Mr. Rawlinson said.

His point is that designers should focus on things like aerodynamic drag and weight to avoid the need for big, expensive batteries in the first place. “There is kind of a myopia,” Mr. Rawlinson said. “Everyone is talking about batteries. It’s the whole system.”

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Credit…Felix Schmitt for The New York Times

When Jana Höffner bought an electric Renault Zoe in 2013, driving anywhere outside her home in Stuttgart was an adventure. Charging stations were rare, and didn’t always work. Ms. Höffner drove her Zoe to places like Norway or Sicily just to see if she could make it without having to call for a tow.

Ms. Höffner, who works in online communication for the state of Baden-Württemberg, has since traded up to a Tesla Model 3 equipped with software that guides her to the company’s own network of chargers, which can fill the battery to 80 percent capacity in about half an hour. She sounds almost nostalgic when she remembers how hard it was to recharge back in the electric-vehicle stone age.

“Now, it’s boring,” Ms. Höffner said. “You say where you want to go and the car takes care of the rest.”

The European Union has nearly 200,000 chargers, far short of the three million that will be needed when electric cars become ubiquitous, according to Transport & Environment, an advocacy group. The United States remains far behind, with less than half as many as Europe.

But the European network is already dense enough that owning and charging an electric car is “no problem,” said Ms. Höffner, who can’t charge at home and depends on public infrastructure.

Price and infrastructure are closely connected. At least in theory, people won’t need big, expensive batteries if there is a place nearby to quickly recharge. (Charging times are also dropping fast.)

Lucid’s first vehicle is a luxury car, but Mr. Rawlinson said his dream was to build an electric car attainable by the middle class. In his view, that would mean a lightweight vehicle capable of traveling 150 miles between charges.

“I want to make a $25,000 car,” Mr. Rawlinson said. “That’s what is going to change the world.”

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Deutsche Bank Reports Huge Loss for 2019

FRANKFURT — Deutsche Bank reported a whopping loss for the last three months of 2019 and for the full year as it cut staff and wrote down the value of assets, affirming its status as one of Europe’s most troubled big lenders.

The bank said it lost 1.5 billion euros, or $1.6 billion, in the last three months of 2019, bringing the total loss for the year to 5.3 billion euros. In 2018 the bank effectively broke even for the year and in the fourth quarter.

The Frankfurt-based bank, once Europe’s largest by assets, is in the midst of a desperate attempt to recover from years of scandal and mismanagement that has caused its share price to plummet more than 90 percent since 2007.

Deutsche Bank is also emblematic of the state of European banks, many of which are still struggling with the consequences of a financial crisis more than a decade ago. Most banks in Europe don’t earn enough profit to cover what it costs them to raise money, the European Central Bank said this week in an assessment of the eurozone’s most important lenders.

Deutsche Bank portrayed its loss as a resolute attempt to deal with mistakes of the past. Among other things, the bank absorbed severance payments as it eliminated more than 4,000 jobs, bringing the total number of employees to 88,000. The bank also recorded losses as it acknowledged that some assets had lost value.

“Our new strategy is gaining traction,” Christian Sewing, the bank’s chief executive, said in a statement. “We’re very confident we can finance our transformation with our own resources and return to growth.”

Mr. Sewing said the company is 70 percent through a restructuring program that, though costly in the short term, would deliver consistent profits.

“I stand in front of you in a very optimistic frame of mind,” he said at a news conference in Frankfurt. “We have taken a series of landmark decisions and made good progress with the most radical transformation of Deutsche Bank for two decades.”

Shares of the bank rose more than 3 percent in midday trading; they have been a good investment for anyone who bought the stock when it hit bottom in August. Since then, the shares have risen more than 40 percent, though they are still worth only a sliver of their value a decade ago.

Until Mr. Sewing, an expert in risk management, took over in 2018, Deutsche Bank was led by investment bankers reluctant to make drastic changes to the company’s aggressive moneymaking strategies. Since then, the bank has scaled back its ambitions.

Ever since it acquired Wall Street’s Bankers Trust in 1999, Deutsche Bank aspired to be in a league with American megabanks like Goldman Sachs and JPMorgan Chase. But it did so by taking chances, including issuing hundreds of billions of dollars in high-risk derivatives. It lent money to Donald Trump’s organization when other banks wouldn’t.

The 2008 financial crisis exposed a series of wrongdoings, including rigged interest rates, laundered money and violations of United States sanctions against countries like Iran. The scandals damaged Deutsche Bank’s reputation and led to billions of dollars in fines. Regulators anxious to avoid more financial crises forced Deutsche Bank and other lenders to take fewer risks.

The bank, which once symbolized German economic prowess, is now focusing on less glamorous and less hazardous businesses like helping German exporters manage financial transactions abroad. Deutsche Bank is in the process of closing or shrinking operations that sell stocks, and has quarantined risky assets in a separate unit.

Other big European banks, like UBS of Switzerland and Barclays in Britain, scaled back their operations after the 2008 financial crisis, but Deutsche Bank clung to investment banking even as it continued to generate billions of euros in losses.

The bank has not completely abandoned investment banking. It reported a sharp increase in sales from trading bonds and other debt. But Mr. Sewing said the bank has not changed course on investment banking.

“We have not shifted any resources into the investment bank,” he said.

Deutsche Bank also emphasized that it is sticking with the United States market, despite its long history of problems with American regulators who criticized the bank for weak internal controls.

“In order to be successful, Deutsche Bank needs to be global, with a meaningful footprint in the U.S.,” said Christiana Riley, chief executive of the bank’s American operations. “There is no other market like the U.S.”

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Climate Change Could Cause the Next Financial Meltdown

FRANKFURT — Climate change has already been blamed for deadly bush fires in Australia, dying coral reefs, rising sea levels and ever more cataclysmic storms. Could it also cause the next financial crisis?

A report issued this week by an umbrella organization for the world’s central banks argued that the answer is yes, while warning that central bankers lack tools to deal with what it says could be one of the biggest economic dislocations of all time.

The book-length report, published by the Bank for International Settlements in Basel, Switzerland, signals what could be the overriding theme for central banks in the decade to come.

“Climate change poses unprecedented challenges to human societies, and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us,” François Villeroy de Galhau, governor of the Banque de France, said in the report.

Central banks spent much of the last 10 years hauling their economies out of a deep financial crisis that began in 2008. They may well spend the next decade coping with the disruptive effects of climate change and technology, the report said.

The European Central Bank, which on Thursday concluded a two-day meeting in Frankfurt focusing on monetary policy, is beginning to grapple with those challenges. The bank did not make any changes in interest rates or its economic stimulus program on Thursday. Instead, other issues are coming to the fore.

Christine Lagarde, the central bank’s president, who took office late last year, has pledged to put climate change on the bank’s agenda, and it was a topic of discussion at the last monetary policy meeting, in December.

Members of the European Central Bank’s governing council argued “that there was a need to step up efforts to understand the economic consequences of climate change,” according to the bank’s official account of the discussion.

Global warming will play a big role in the European Central Bank’s strategic review, a broad reassessment of the way the bank tries to manage inflation. For example, when trying to influence market interest rates, the bank could decide to stop buying bonds of corporations considered big producers of greenhouse gases.

This new awareness of the financial consequences of a hotter earth comes as central banks are contending with another new challenge: technologies that threaten their monopoly on issuing money and their power to combat a financial crisis.

Unofficial digital currencies like Bitcoin or Facebook’s Libra, which is still in the planning stages, bypass central banks and could undermine their control of the monetary system. The obvious solution is for central banks to get into the digital currency business themselves.

On Wednesday, the central banks of Canada, Britain, Japan, Sweden and Switzerland said they were working together with the Bank for International Settlements to figure out what would happen if they did just that.

It’s complicated, though.

Like cash, people can use digital currencies to pay other people directly, without a bank in the middle. Unlike cash, digital currencies allow person-to-person transactions to take place online.

Such a system could be more efficient, but also risky, according to a report issued on Wednesday by the World Economic Forum, the organization that stages the annual conclave in Davos.

Commercial banks might become superfluous, and fail. Central banks would in effect become giant retail banks. But they have no experience dealing with millions of individual customers and could be overwhelmed. If a central bank collapsed, so would the monetary system.

Climate change also takes central banks into uncharted territory. Think the subprime crisis in 2008 was bad? Imagine a real estate crisis caused by rising sea levels and coastal flooding that renders thousands of square miles of land uninhabitable or useless for farming.

By some estimates, global gross domestic product could plunge by 25 percent because of the effects of climate change. Central banks have enough trouble dealing with mild recessions, and would not be powerful enough to combat an economic downturn of that scale.

“In the worst case scenario, central banks may have to intervene as climate rescuers of last resort or as some sort of collective insurer for climate damages,” according to the report, published by the Bank for International Settlements, a clearinghouse for the world’s major central banks.

It suggested some precautionary measures central banks could take.

Central banks, which often function as bank regulators, could require lenders to hold more capital if they hold assets vulnerable to the economic effects of a shift to renewable energy. An example might be a bank that has lent a lot of money to fossil fuel companies, or to the Saudi government.

The auto industry already illustrates how investors are moving their money away from companies seen as polluters and into companies seen as green, with disruptive effects on economies. Tesla’s value on the stock market is more than $100 billion, second only to Toyota among carmakers.

In this way, Tesla is being rewarded for producing emission-free electric vehicles. But the migration of capital away from the established manufacturers makes it difficult for them to invest in new technology, and threatens massive job losses and social and political upheaval.

Central banks need to coordinate their policies to deal with these new challenges, according to the Bank for International Settlements report. Unfortunately, coordination is not something that central banks are very good at right now.

“Climate change is a global problem that demands a global solution,” the paper said. But it added that “monetary policy seems, currently, to be difficult to coordinate between countries.”