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Abu Dhabi, UAEMonday 18 June 2018

Electric shock felt at Frankfurt Motor Show 

European car firms announce far-reaching electric vehicle programmes as governments begin to tighten the noose on the combustion engine

European car bosses gathering for the Frankfurt Motor Show this week are beginning to address the realities of mass vehicle electrification, and its consequences for jobs and profit, their minds focused by government pledges to outlaw the combustion engine.

As the latest such reported statement by China added momentum to a push for zero-emissions motoring, German titans Volkswagen, BMW and Daimler all announced far-reaching electric vehicle programmes in the run-up to the Frankfurt Motor Show.

They are all hoping to hit ambitious hybrid and all-electric car sales targets with a flood of new models by the mid 2020s.

The Daimler boss Dieter Zetsche said the migration from combustion to electric vehicles should be left up to the market rather than forced by quotas.

"We want to reach the maximum speed ourselves, we don't need quotas for that," he told Reuters.

Mr Zetsche said Mercedes-Benz has sold more cars with diesel engines so far this year than in the same period last year, despite talk of possible diesel bans in some German cities.

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Planned electric Mercedes models will initially be just half as profitable as conventional alternatives, Daimler warned. The group said it will have to find savings by outsourcing more component manufacturing, which may in turn threaten German jobs.

"In-house production is almost irrelevant to the consumer," Mr Zetsche said.

The company set a target of saving €4 billion (Dh17.53bn) by 2025 to help fund the cost of its electric cars.

"Daimler is the first company to state explicitly how much electric vehicles are going to hurt margins," said the Bernstein analyst Max Warburton. "It was brave to go first - but of course it won't be the last."

BMW, meanwhile, plans to stick to a goal for 8 to 10 per cent return on sales at its automotive division, even with the arrival of less profitable electric cars, its chief executive told Reuters on Tuesday.

"We're sticking to our 8 to 10 per cent goal and maintain this range, even when electric mobility becomes more widespread," Harald Krueger said.

Mr Krueger also said that the share of BMW's sales in Europe accounted for by diesel engines had dropped to 69.3 per cent from 74.3 per cent, but that he saw no need for writedowns on the value of the cars in its leasing fleet.

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Volkswagen (VW) said it was seeking new global supplier contracts to source 50 billion euros of electric car content including batteries, which are not yet manufactured competitively in Europe.

"A company like Volkswagen must lead, not follow," the chief executive Matthias Mueller said.

VW diesel emissions-cheating exposed by US regulators in 2015 triggered global public outrage, dozens more investigations into test-rigging by the wider industry and a push by some lawmakers to ban diesel and eventually all engines.

The French car maker PSA is considering moving the production of electric vehicle components back to within the company.

"We are having some thoughts regarding 'make or buy' concerning the electric chain of motors, we will move the components part back to within the company, but not the battery chemicals part," said the PSA executive Patrice Lucas.