Some unconventional thoughts about the auto industry
October 16, 2019 |
Alex Lebkucher


My intent in writing this paper is to share my unorthodox views regarding the auto industry.

Unlike many industry experts and participants, I do not have years of experience in the business. What I do have is years of experience that comes from having grown up in the midst of it.

By way of background, I grew up in the South of Germany, surrounded by car manufacturing giants. Myhometown, Ludwigsburg, is 15 kilometers away from the Stuttgart, which is the headquarters of DaimlerBenz, Bosch, Mahle, and other major auto manufacturers, and only 10 kilometers from Zuffenhausen whichis the headquarters of Porsche.

Almost everybody in my family worked in the car industry or had at least one auto industry-related entry on their resume: General Motors, Porsche, Daimler, ZF Friedrichshafen, Knorr Bremsen, Bosch, Mahle were commonplace as places to work.

When I graduated from university, the last thing that I wanted to do was to work in the auto industry, which could almost be described as the family business. So I took a job as a management consultant at what is now the largest discount-retailer in the world.

This perspective gives me certain advantages when it comes to assessing the auto industry: With the perspective of someone who now works in a different industry, I can see that I have depths of experience and knowledge that come from conversations around the family table and elsewhere with friends, cousins and family members. But in addition to that, because I don’t work in the industry, I have been able to develop an independent perspective. I don’t have an auto industry employer or some sort of “company line” that might constrain what I say or think.

What I have written below is based on many conversations with friends and others from the industry. I have listed my sources at the end – but only to the extent that they were willing.

Much of what I write here goes against commonly held opinions within the car manufacturing industry. Moreover, in many regards, I hold these views with a strong sense of conviction. Nevertheless, I´m not naïveenough to think that I am in possession of the absolute truth. The main theme will be the upcoming changes within the luxury segment of the car manufacturing industry; however, I will also take you onto a few offramps that will lead us to some interesting sub-topics.

To conclude the introduction, I would like to point out that I neither own shares of any of these listed companies nor do I own a car made by any of them. I drive a Peugeot SUV (which holds 3% market share
in Germany) privately, in a country where the gold standard is rather VW, Mercedes, Audi, and BMW.


A car is a motor-driven vehicle, which brings you on the road (or a track across the fields) from point A to point B. Its main benefit lies in its capacity for moving quickly and easily (whenever, wherever) to the desired destination. Cars can be classified into various types:

Microcars (often used in Japan), City cars (Fiat 500), Subcompact cars (Volkswagen Polo), Compact cars(Toyota Auris), Mid-size cars (Ford Mondeo), Full-size cars (Chevrolet Impala), Mini MVP (Fiat 500 L),
Compact MPV (Renault Scenic), Large MPV (Dodge Grand Caravan), Premium compact (Audi A3), Midsize luxury (Volvo S90), Full-size luxury (Mercedes-Benz S-Class), Sportscar (Ferrari SF 90 Stradale),
Hypercar (Koenigsegg Agera R).

Regardless of the distinctions listed, the main benefit is primarily always the same; the vehicle takes a driver(and the other passengers) from A to B. But why then this multitude of different types? There are practical reasons for this and some rather less rational reasons. For practical reasons, I count the need of a family to have a comfortable car with enough space, or a city car for a resident of Rome. Among those with less rational reasons, I count a well-heeled citizen of Heilbronn, who tortured himself with his Audi R8 due to the morning traffic jam on the Autobahn 81.

Of course, a car has not only its main benefit but also numerous additional benefits. A car (especially in the luxury-segment) can emit prestige, drive faster, offer more comfort, and even provide more security.


If we look at the luxury car market, we can see that further distinctions can be made. There are brands like Audi, Mercedes, and Volvo, which are luxuries but not as rare as Ferrari, Porsche, and Rolls-Royce and therefore, can be classified as “everyday” luxury brands. Likewise, we can make distinctions about the target group. If you are looking for a very fast sports car, you are probably not going to be visiting a Rolls-Royce dealer. And if you are looking for a glamorous vehicle, you had better not ask your Koenigsegg dealer for a test drive. However, these rules are becoming more and more blurred. Porsche offers the Panamera, the Cayenne, and Macan family-friendly cars which are not as sporty as a 911. The same applies to a Lamborghini Urus and a Ferrari Lusso. These car manufacturers expand their previous limits to win new groups of buyers, even if hardcore fans call these cars “not real Porsches” or Ferraris. It´s a balancing act between winning new customers, who have been unwilling to buy a “simple” sportscar before, and the pure DNA of the brand.

Ferrari Lusso,family approved

Another distinguishing factor of the luxury brands can be seen in the annual production figures. They rangefrom a double-digit number at Bugatti and Koenigsegg, to a limited number in the four-digit range at Ferrariand Lamborghini, to more than 250 thousand units at Porsche. Brands like Mercedes, Audi, and BMW usually limit only special models. There are also some differences in terms of profitability. Ferrari offers a 23% operating return on sales as the benchmark leader, followed by Porsche with 17%, Aston Martin with 13%, BMW and Mercedes each with 8%, and Audi (Lamborghini included) with 6%. Not all brands are working profitably. Bentley, for example, was losing €288 Million. All numbers are based on the financial statements of 2018.

In the last few years, new luxury car brands have emerged with the electric car trend. Tesla is of course the most famous of these by far. The idea behind the Tesla brand is to offer an electric car that allows you to drive without feeling guilty for melting the icebergs and yet still enjoy the legendary fun of driving a sportscar. .1. I also sort brands like Nio and BYD in these subcategories of luxury cars.

  • I will later come back to this topic

Nio, Chinese production with German design

Almost every luxury car brand owns a certain myth. This myth forms the cornerstone of the brand DNA and is often strongly related to its history. At Ferrari, the racing successes are in the foreground, at Porsche the drive for perfection, at Rolls-Royce the grandeur of past times and at Lamborghini a dispute with Enzo Ferrari himself. The myth builds a certain kind of moat that makes that brand unique.

Porsche,advertising in the 1990s, addressing the upcoming Japanese car-brands in Europe.

Let us think about a plan to find a second Ferrari, Porsche, or Lamborghini for a few seconds. In addition to achieving technical competence, we will also have to spend an enormous amount of money on forming the brand. What golden past are we able to sell for as a marketing strategy? How do we manage to get the most talented people in the industry work for us (money is often not enough, where is the prestige?); and how do we get customers to buy a more up-and-coming car-brand when they can simply buy established and recognized brands. In short, it is incredibly difficult to create a luxury car-brand these days. Even established car manufacturers are struggling with this (see PSA and the luxury brand DS Automotive, founded in 2014). But this moat also has an Achilles-heel. As the established manufacturers experience periods of technical downtime, they are creating space for new brands to get a foot on the playground. I have already mentioned Tesla, Nio, and co. But also, car family-dynasties like the Piechs build new brands, which do not drive with diesel or gasoline.

Every schoolchild today seems to know what a Ferrari is and what makes a Bentley special. In the form of
superlatives, one quickly finds a discussion as to whether Lamborghini is faster and cooler than Porsche, or the Bugatti is more exclusive than a Koenigsegg. In modern music, you will find many songs, which are bragging about car brands (“Hey Porsche” from the rapper Nelly or Ace Hoods “Bugatti” spontaneously falls among others) and these promote the myths of the various brands and keeps them alive. This form of word of mouth is a gift for the brands, as it usually comes for free. In other ways, younger children are targeted for marketing reasons. The next generation of potential buyers is introduced with movies like Disney’s Cars or with toys like the Playmobil Porsche. There are also children’s toys on the market, which look like the taller models and can be driven by the children themselves.

Also, social media is increasingly more important to the luxury car manufacturers. Facebook, Instagram, Twitter and the messaging-service WhatsApp play important roles today, in that they emotionalize the brand and make initial contact with prospective customers. Various studies show that the younger generation is often more exacting in what they expect from the car manufacturing brands and how they would like to customize their favorite car. Daimler is planning to establish a service for their customers within the “Industrie 4.0-Konzept,” which offer them some new benefits. After ordering the car, the customer will have the opportunity to change the order at any time until the car is produced (another color, a more powerful engine etc.). The customer will also receive a message when his car is on the production line and he will be able to follow this process live via webcam. Daimler also offers a “lifestyle configurator” to the potential customer. This configurator asks for the favorite sport, the beloved food etc. and suggests after that an appropriate Mercedes Model to the interviewed.


The classic sales business, especially in the luxury segment, is the dominant source of income for manufacturers However, the leasing business, which is well-known from the mass market, is also becoming
increasingly popular here. True to the motto, “you may not be able to afford to buy a Jaguar, but you can
lease it!” Corporate clients have long been at home with brands such as Mercedes, Audi, Maserati and even
high-end brands like Porsche are offering more and more models that are suitable for this business model
(Porsche Panamera etc.). The auto parts industry is also to be mentioned here as well as that of auto repairs
and inspections. What many of us ignore in this consideration is that many brands are breaking away from
the traditional line of business (often with a positive revaluation to the brand itself). Ferrari operates its own roller coaster world in Dubai as well as in Barcelona (others are planned), has its own themed hotels and sells perfume as licensor under its own brand. Incidentally, you can dress up in the Ferrari online shop and stock up on Ferrari watches.

Porsche runs its own designer brand with Porsche Design and maintains boutiques in Milan (Via della Spiga, 42), and other locations. In addition, the company plans residential property projects in Frankfurt and Stuttgart after launching the first Porsche Design Tower in Miami (Collins Ave, Sunny Isles Beach). The 60- floor residential concept with its comprehensive Porsche-Design features is waiting for a select group of buyers. The highlight forms the so called Dezervator, an elevator which is accessible by car from the street and brings you directly into your own apartment. Maximum discretion guaranteed, and the beloved car can be stored right in the apartment.

Aston Martin, among others offers, an exclusive club-membership which includes hand selected travel offers
(in cooperation with Waldorf Astoria), drive events, and Formula 1 packages. These examples illustrate the kinds of additional sources of revenue the manufacturers have found over the past years and also how they
also manage to emotionalize and sensitize customers to their brand.

Porsche Design Tower Miami, The elevator-concept called Dezavator

Have you ever bought a product in a basic configuration and later bought another product from the same
brand in a premium version? This is a popular strategy in the luxury-car segment. The first step into the
sacred family of the brand is often an entry-level model, which binds the customer to the brand in the long
term. Often the entry-level models are sensitively priced; the high margins are achieved with the premium
models later along the customer journey. Studies confirm the phrase: Once Ferrari always Ferrari. The Volkswagen Group is perfecting this basic idea in a different way. A young customer is addressed via Skoda,
from age thirty. The Seat brand should then attract the customers’ attention and then after that, Volkswagen. In the first premium segment, Audi is waiting, followed by the upmarket Porsche, Lamborghini and Bentley. This segmentation was established also to prevent an internal cannibalization.

We have now highlighted some aspects in the luxury-car segment, so I would like to come along with following question: Is everything good within the luxury car manufacturing industry right now? After a few interviews with managers and engineers within the industry, my answer is not in the least. There is a frightening consensus that the mass market will maybe collapse drastically. “The mobility requirements are changing rapidly; the profit drivers are breaking away and the strongly declining cashflows leave only little room for needed R& D”. I had an exchange with an employee of a German luxury car manufacturer, he told me this: “We are aware of the issues and are trying to close the profit gapes by buying start-ups, but it does not look good so far. But before we die as a luxury manufacturer, the mass market will long be dead. High-end brands like Ferrari have a high chance of survival, since they are selling manageable quantities of produced cars, but luxury brands with higher output quantities will be very poor”. I suggest that we will see more merges between car manufacturers soon as well as an increased level of collaboration (e.g.: VW and Ford), but whether this measure will be enough remains questionable.


Growing up at a time when it was normal to spend Sunday watching TV and keeping our fingers crossed for Michael Schumacher in his Ferrari—this made me a Formula 1- Fan. My dad’s heroes had been drivers like Gilles Villneuve, Niki Lauda, etc. There had been days of discussions about the last races; the mortality rate of the racers was high and the driving maneuvers breathtaking. And today? Since 2014, there is virtually only one winner: Mercedes AMG-Petronas. Formula 1 is in a crisis as boredom rules! Really? My answer is basically no! That’s not the problem, the years 1999-2004 were completely dominated by Ferrari, before that, there was a reign of Williams and McLaren and before that we meet Ferrari again. So why the crisis today? Formula 1 competes with various other sports (baseball, football, soccer) and has one major disadvantage. The formula is not family-friendly. The noise of the engines is unbearable for children’s ears, it is relatively tedious to watch at the track and comparatively expensive to other sport-events. Two teams dominate the regulation in Formula 1 (Ferrari and Mercedes) and the budgets are unevenly distributed (guess who has the deepest pockets). But why do car manufacturers ever take a step into Formula 1 and invest a fair amount of money to develop a team, to develop the expensive cars and to battle with other brands? Development reasons are an important point here, but the main point is the huge interest for marketing and the value of such triumphs for the brand. There are also Formula 1 teams, which often are associated with no car manufacturer at all. The energy drink producer RedBull is a good example here, even as Aston Martin takes a role in the team as a consultant.

The Formula 1 has been owned by Liberty Media since 2016, with its famous investor John Malone. The company interest in the Formula 1 was driven by the idea; the way the company was managed undervalued it. That it has a strong brand which has not been recognized in countries like the USA, Asia and Africa, etc. and therefore has an enormous opportunity to grow in these different markets.

Formula 1 has made some brands glorious and famous, but the future will likely take place in a different
formula. Welcome to Formula E. I have recently visited a race in Berlin, and I noticed something immediately.
Amazingly many young people and families attended the race. There were numerous marketing events. Amazed, I noticed how many manufacturers are already represented there: Audi, BMW, DS (PSA), Mercedes, Porsche, Jaguar, Nio, etc. As a viewer of Formula E, you have the chance to elect a driver via the Formula E App for an extra boost during the race. The driver with the most votes will receive this advantage.
So, the viewer has the opportunity to get directly involved into the race. Formula E brings the races to the
big cities of the world and is an extremely good platform for manufacturers from a marketing and development perspective. Formula E is owned by the 2012 founded Formula E Holdings, which is run by Enrique Bañuelos and Alejandro Agag (CEO). The Formula E Holdings have signed a contract with the FIA to pay about 24,3 Million € as a license minimum for ten years.

Some experts say that it will only be a matter of time before Ferrari and co. will follow. Other signals show
that the Formula E is not as attractive as many car manufactures have thought it would be. Nio announced
that they will leave the Formula E by 2019.

Will Formula 1 die out? The race must make changes in principle; otherwise, it will be superfluous, because its importance for manufacturers is likely to decrease. Motorsport is still cool, but the future calls for climate friendliness and not for V12 engines. This is especially important for luxury brands, where waxing technologies are often the number-one success factor.

Formula E, Audi Sport


I briefly warn anyone who believes that the future of mobility is the plug-in electric car (power is externally
introduced and stored in a battery, if needed, then led to the electric engine). The following chapter will sound controversial to that faction. My results have emerged from extensive interviews, discussions and disputes. For this I interviewed personalities from the fields of physics, exchanged ideas with engineers, visited employees of electricity companies (network operators), and researched studies. My results do not coincide with the majority opinion, but the first signs of industry changes point to my findings, which gives me a slight satisfaction.

Let’s have a few thoughts on electromobility. At recent annual meetings, the CEO´s of car manufacturing giants are now happily selling the vision that we will all be riding in an electric car in the future (often the same CEO´s who called Elon Musk a stupid fool 10 years ago), even if the present situation suggests that electric cars are a toy for millionaires rather than a real car for millions. This is not the most serious illusion regarding the suggested USP of electric cars (climate protection, environment friendly). Let’s first look at my findings about this. The lithium needed for the battery comes from places like the Atacama Desert in Chile. As an example, I was able to look at images of a plant that pumps 21 million liters of groundwater from the ground every day to filter out the lithium which occurs at a rate of 10% in the rock with which it is mined.

Atacama-dessert Chile, production of Lithium

Now ask yourself what happens to water in high-temperature surrounding. It evaporates and thus lowers the groundwater level. The result is a water shortage, which is to the great detriment of the local population. There is daily news about a “war on water” between the mining companies and the inhabitants there, but we can indulge in the illusion that the electric car is more environmentally friendly. Another issue is the electricity used to load the battery (where does this electricity come from?) If you live in a country or region with a power mix based on oil, coal, etc., you better give up the illusion of an environmentally friendly revolution. Expressly, I say that electric cars are at least as harmful to the climate as gasoline and diesel cars. We want to take a step forward and not to the side.

We also need to address an infrastructure problem. I´m not talking about the need to invest a fair amount
of money to establish enough charging-points, but about how to deal with a highly volatile need for energy.
The highest amount of electricity will be needed overnight. The normal user is likely to drive home from his
job to his house and then is going to charge his car. “Now imagine that 50 million car owners are trying to charge their cars at exactly 6 o´clock in the evening. The whole energy-system will collapse immediately. There are studies which ask for an intelligent charging-system as follows: You will point out the need to drive your car at 7 o´clock in the morning. So, it does not matter when the car will be charged until 7´o´clock. It could be 1´clock or 5 o´clock in the morning. The result will be always the same, but, using these alternative time slots, the energy infrastructure will not be pressured over the limit.”

But why are the car manufactures so bullish on electric cars right now? The political pressure and increasing
demand of customers is certainly one explanation, but even more importantly, they only need to make marginal adjustments in their production line compared to other alternatives. An attempt is being made to
take the ailing business models into the future and now instead of selling gasoline cars they simply try to sell electric cars, which do not need complex engines (an electric engine is easier to develop then an petrol engine; it is the battery that makes things difficult so far). In general, there is no need for improvements in the construction of existing vehicle models. I found it interesting, that even engineers told me secretly, that the electric car will likely have no future, although the hydrogen technology does. I invite everybody to take a closer look what is coming in the next years and what is already on the market today.

Mercedes GLC-F Cell, already rentable today

Hydrogen technology offers several advantages over plugin electrical technology. Existing gas station structures can be used. The cleanliness of the fuel is guaranteed. The fueling time is identical to a petrol tank operation and energy is only directly produced when needed inside the car.”

This technology is new territory for most engineers, and it is currently being researched by Toyota, Hyundai,
Mercedes, Audi, etc. There are still many key questions to be resolved, such as: How do you best secure the tank contents in an accident? The tank is the problem area; it is under 700 bar of pressure and hydrogen is known to have the urge to escape. But all interviewed engineers agreed that this will only be a temporary

Above all, I would like to point out with this section, that nothing has yet been decided on the question about the technology of the future. Let’s together have a look at the subject again in 5 to 10 years, and we’ll surely see that predictions are often just predictions and reality is going its own way.


I think most readers know exactly what autonomous driving means. There are different stages and we are
already well-advanced today. Nevertheless, most of us drive in our car; if it includes autonomous support systems, today it is more likely used for safety reasons and to make an annoying situation (like traffic jams) more pleasant. Soon, we probably will not have to drive anymore. The car can do that for us. We will have time during the journey to take care of other things, such as to process office mails, etc.

But what does that mean for our luxury segment? You buy a Ferrari to drive it yourself. Just being passive
while the computer is running down a program will probably not be enough. The luxury market will also respond to this technology, especially as far as the topic of safety is concerned, but never exclusively offering
autonomous vehicles. However, exclusive autonomousness would be conceivable for manufacturers in
which the buyer is more likely to be chauffeured than to drive by himself (e.g., Rolls-Royce). The luxury
market for high-end cars is not being revolutionized by this technological change but much more supported.
The individual traffic, however, will completely be turned upside down. Brands in the mass market and the
lower luxury segment will have a hard time. I live near a state capital where it is no longer permitted to drive
over the city limits towards the city center with an older diesel car. This will be only the beginning. The individual traffic will probably be completely expelled from the cities. Solutions include Park and Ride points.
Imagine driving your car (whether autonomous or not) to the city limits and getting into a large box with wheels, which brings you autonomously and like a shared taxi to your desired location. Also conceivable
are various subscription models. Different price models will emerge, depending on luxury and speed. A startup around former German managers is working on a similar concept in the USA. This includes a mobile pedestal that is more reminiscent of a box with wheels than a car.

Canoo Box

I believe that this city-concept here will only form the beginning and gradually take over to the surrounding
areas. This would also be much more ecological and economical. A car is idle about 95% of the time.


I firmly believe that the imminent changes will transform the car industry, more than the production line of
Henry Ford or the airbag did. It will bring many brands to the brink of existence, foster mergers within the
industry, and revitalize all the mobility we know (greener, faster, better). The luxury brands will continue to
follow the well-known paths in the high-end sector. You just must drive a real Porsche yourself; the computer
is for the masses. I’m looking forward to everything that’s coming up, and I’m sure as always that I know
nothing, and the future will be a good teacher. Now I am looking forward to the discussion with you. Let’s





Annett Fischer, Bosch Mobility Solutions, Speaker

Dr. Karl -Thomas Neumann, former Continental CEO, former VW Group China CEO, former Opel CEO

Michael Dreiser, Porsche Motorsport

Porsche Design Group, Nadine Cornel Head of Public Relations

Prof. Dr. Ferdinand Dudenhöffer, University Duisburg-Essen, Car Automotive Research
Bismarckstraße 90
Raum BC 304
47057 Duisburg

Prof. Dr. Harald Lesch, University Munich, Institute for Astronomy and Astrophysics
Scheinerstr. 1
D-81679 München

You can access the White Paper here.

I’m a Zurich based investor. Since 1997, I’ve managed a privately offered investment fund known as the Aquamarine Fund.

I am also the author of a book titled The Education of a Value Investor, which was published in 2014.

As I wrote in my book, we are all a work in progress. This site documents my ongoing quest for “wealth, wisdom and enlightenment”.

I have created a /now page – inspired by Derek Sivers

I’m a Zurich based investor. Since 1997, I’ve managed a privately offered investment fund known as the Aquamarine Fund.

I am also the author of a book titled The Education of a Value Investor, which was published in 2014.

As I wrote in my book, we are all a work in progress. This site documents my ongoing quest for “wealth, wisdom and enlightenment”.

I have created a /now page – inspired by Derek Sivers

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