Hyundai Europe COO Thomas Schmid forecasts that the cost of electrification will force automakers to focus on a healthy business by cutting marketing costs and limiting sales incentives. Electrification is still too costly to reach the smaller segments, even in the midterm and even in the form of a mild hybrid, says Schmid, who has been Hyundai Europe’s COO since 2015. Plug-in hybrid vehicles will not be a long-term solution, either, as sales depend too heavily on government incentives, he says. The 60-year-old Austrian national, who will step down from his post at the end of the year, discussed these topics and more with Automotive News Europe Correspondent Andrea Malan.
European automakers are rushing to get ready for the transition to the 2020 European CO2 emissions limits. How will it impact the market?
Every carmaker has the same basic task: Improve profitability due to the tremendous cost of electrification. Therefore, and you already see it in the markets, everyone is trying to reduce incentives. There is maybe one exception: That’s the Volkswagen Group. They need huge volumes to keep a high cash flow because they are currently financing all their investments out of cash flow. Other automakers, such as Fiat Chrysler, reduced their incentive levels, and you see it in the market share now. That is also true for Renault or PSA Group and for Japanese companies such as Toyota and Mazda. Everyone is more focused on a healthy business. To me that’s an indication that this increase in registrations might not happen because they can already now reduce the production of high-CO2 vehicles. That would be a smarter way to tackle the problem.
Looking to 2020, will the market be up or down compared with 2019?
There are two risks. No. 1 is the 95 grams per kilometer CO2 limit with its high penalties [for noncompliance start in 2020]. Manufacturers will try to balance. That means no one will push for high volumes. That’s why the market will suffer a slight decline. You actually see it already, if you compare the data with previous forecasts. The second risk is Brexit.
What would be the impact of Brexit on Hyundai?
The UK is our second-largest EU market after Germany.
Can you put a figure on it?
We risk a 10 percent loss in the UK, which we have to compensate for elsewhere.
Will Hyundai meet its EU CO2 reduction target next year and avoid fines?
Of course. We are preparing to supply electric vehicles in sufficient volume and to deliver them without long delivery times to our customers. However, everyone has to sell many more battery-electric vehicles. That raises some questions: Does the European market have that many customers who want to buy a full-electric car? How long will it take for the national governments to put in place a strategy to roll out a sufficient number of charging stations? When will customer be able to get their electricity with a single card everywhere?
Hyundai will push EVs in 2020-21 to reach your CO2 reduction goals. Does that leave you vulnerable by 2022 and for the rest of the decade?
Yes, that’s a concern. It’s likely that by the mid-2020s we will see competition [for EVs] reach the level we see today for cars with internal combustion engines.
What are the pros and cons of a wider choice of EVs available to buyers?
Well, it would be an opportunity for European customers, and [if there is a strong uptake] it would allow us to slowly lower prices for electric vehicles. But we would still need in Europe 50,000 additional charging stations just to enable long-distance driving. We know 80 to 90 percent of people live in apartments. Do they have parking on the street or in the garage? If not, where are they going to recharge? The infrastructure problem is critical, and it’s unlikely we will have a widely available network in two years. It’s more likely to take 10 years. Given these obstacles, it is not possible that full-electric vehicles will have a 30 to 40 percent market share, contrary to some forecasts. This just won’t work.
Why has Norway achieved this?
The structure of living in Norway is different. They have lots of public charging stations already. People who live in apartments have second houses in the country and recharge during the weekend. And many of them have two cars — one electric and one diesel. In addition, several countries want to ban the sale of combustion vehicles by 2030 or shortly after. In that case, it’s likely that everyone will keep the car longer, maintain it better, so repair shops will see their business grow. We would move into an almost old-timer used-car market.
Plug-in hybrids offer CO2 results of around 30g/km. Are they a solution?
At the moment, plug-in hybrids show very low CO2 values thanks to the testing procedure. But in some countries, like the Netherlands, incentives for plug-in hybrids were canceled when the government realized that people never recharged the battery. They just use the combustion engine, resulting in much higher consumption. With the introduction next year of the real-driving emissions (RDE) test, the data will change for plug-in hybrids because this procedure includes highway driving. When the battery is empty, you face the problem that CO2 values jump dramatically. The idea was that plug-in hybrids would allow you to go into the city in electric mode and use the combustion outside. You already see it in the figures that plug-in hybrid sales are decreasing due to the removal of incentives in some countries. They are down a two-digit percentage every month, while hybrid and full-electric cars are still growing very fast.
Is it too early to commit to plug-in hybrids as a solution because of all this uncertainty?
It’s a solution in the transition period, particularly for the heavier cars. But you still see a dramatic month-by-month decline in plug-in hybrid sales.
What new products can we expect to see from Hyundai in 2020? Is the new Tucson imminent?
Some spy pictures [of the Tucson] have already been published. We are renewing our product range, so we will have a very busy 2020. We revealed at this year’s Frankfurt auto show the new i10, whose deliveries will start in January. Then we will launch a new or updated model every two months. Sorry that I can’t say more than that right now.