MUNICH — The stumbling effort by Germany’s auto giants to embrace electric cars has entrepreneurs taking matters into their own hands.

German car manufacturers are gradually joining the race to swap combustion engines for batteries, jolted into action by Tesla’s success and the European Union’s recent decision to tighten carbon dioxide emission rules for cars.

Yet they are still lagging behind: Germany looks set to miss its goal of having 1 million electric cars on the road by 2020, as well as undershooting its overall emissions targets for next year.

The German government, which is reportedly considering extending its €4,000 subsidy for buyers of electric cars, is urging manufacturers to step up their efforts. At the German car industry association’s annual New Year’s reception last month, Transport Minister Andreas Scheuer called on the hosts to develop more affordable electric car models.

Germany needs an “electric Beetle effect,” Scheuer added, referring to the Volkswagen car that became a symbol of the German postwar economic boom.

“No one believed us academics ... So we built a prototype, but people still didn’t believe it. I couldn’t accept that, and that’s how I came to found a startup” — Günther Schuh, founder of startup e.Go

As traditional carmakers scramble to catch up, a handful of startups are racing ahead to kick off the Verkehrswende, Germany’s much-anticipated shift to sustainable transport.

In Aachen, near the border with France, university professor Günther Schuh founded the startup e.Go in 2015. This March, the company will begin production on an affordable electric car, the compact four-seater e.Go Life.

Schuh credits the German car industry’s sluggishness with turning him into an entrepreneur.

In 2010, he and his students at Aachen University developed a concept for a small electric delivery truck to explore whether producing an affordable electric vehicle was possible. Established carmakers did not take the idea seriously, he said.

“No one believed us academics,” Schuh said. “So we built a prototype, but people still didn’t believe it. I couldn’t accept that, and that’s how I came to found a startup.”

The truck, dubbed StreetScooter, was a hit: it was eventually bought by Germany’s postal service Deutsche Post, which plans to ramp up production.

In Munich, meanwhile, a team of young entrepreneurs has developed a solar-powered electric car. Their startup, Sono Motors, began as a garage experiment in 2012 but has since become a company employing some 100 people.

A prototype of their car, the Sion, is parked outside the company offices. Its surface is covered with solar panels; other features include an air purifying system made from moss. They also plan to integrate car-sharing software into every Sion.

The Sion’s electric battery provides up to 250 kilometers in range, according to Sono Motors. The integrated solar cells can give an added boost of up to 30 kilometers depending on weather conditions.

While 30 kilometers might not sound like much, it covers the average commuting distance in Germany, said co-founder Laurin Hahn. On a sunny day, the car could recharge itself while the driver is at work.

The founders say that more than 9,000 people have paid a downpayment on a Sion, which is scheduled to go into production later this year.

“We need startups to make transport sustainable,” said co-founder Jona Christians. “We can push ahead much faster in areas like e-mobility because we don’t come with the baggage that large manufacturers have.”

Cost concerns

Yet being a small player in the car industry also has its challenges. Last year, Sono Motors announced that the Sion’s price would have to rise from €20,000 to €25,500 as the battery cost had increased.

Schuh, the professor turned entrepreneur, noted that startups often pay more for auto parts than established firms, as they buy in smaller quantities.

“Making an electric car isn’t an art. Making one that’s affordable is,” he said. “And that’s difficult for startups because they’re at a disadvantage when buying parts.”

Schuh’s e.Go Life will start at €15,900 including the battery, a comparatively cheap price for an electric car, but it features a shorter range of 120 kilometers to 180 kilometers.

Financing remains a major issue for German car startups: Schuh said that he was only able to get e.Go off the ground thanks to the profit from selling StreetScooter to Deutsche Post.

“I don’t think startups can compete against traditional car manufacturers. It’s incredibly difficult and requires billions of investment" — Markus Lienkamp, professor of automotive technology at the Technical University of Munich

“We have a huge obstacle in Germany and that’s access to capital. You’ll get the first €100,000 and the next €3-€5 million of venture capital, but €20 million or more is difficult,” he said. “That stops big ideas in their tracks.”

The risk-averse behavior of German investors worries Christian Hochfeld, director of Berlin-based sustainable transport think tank Agora Verkehrswende. He believes the lack of investment in startups is hampering innovation in the transport sector.

“New companies are mainly emerging in California or China, where large amounts of venture capital — or state capital, in China’s case — are spent on mobility solutions,” he said. “We need that to change if Germany wants to keep up.”

Yet given the vast amounts of investment required, some are skeptical that startups can play a major role in the electric car sector once large manufacturers catch up.

After their slow start, Germany's iconic carmakers are now throwing vast quantities of cash at electric vehicles.

Volkswagen says it will invest €44 billion to develop electric cars and more for batteries; it aims to be making 3 million electric vehicles a year across all its brands by 2025. BMW recently announced it would invest €200 million to expand a Munich electric car factory, while also spending €4 billion on batteries. Daimler is spending €1 billion globally on battery production.

That doesn't leave much space for newcomers.

Markus Lienkamp, professor of automotive technology at the Technical University of Munich, currently oversees a startup at his faculty: an electric car intended for developing countries.

Dubbed the aCar, the small flatbed truck is designed for rural terrain with little infrastructure. A prototype, dusty from test drives in Ghana, stands in the faculty garage; production is due to start next year.

Lienkamp believes the project can succeed, as the startup plugs a gap in the market — therefore avoiding competition with large firms — and keeps costs as low as possible by using off-the-shelf parts.

In the mass market, however, he sees few opportunities for car startups.

Producing a car, from design to crash testing, is an expensive business. As small firms pay more for parts and equipment, most startups would struggle to sell their cars at a competitive price, Lienkamp said.

“I don’t think startups can compete against traditional car manufacturers. It’s incredibly difficult and requires billions of investment,” he said. Tesla, he added, was a rare exception.

Lienkamp speaks from experience. Beside the aCar prototype, the faculty garage also houses an electric car called the Visio.M, a sleek two-seater.

When the university presented the car prototype in 2014, it made headlines. The Visio.M was not only lighter but also far cheaper than other models available at the time, projected to sell for about €16,000.

The engineering team was ready to go into serial development, but Lienkamp calculated that such a move would require €1 billion — more than any manufacturer or investor was prepared to give.

Five years on, the Visio.M is still unlikely to enter the market. Nevertheless, Lienkamp believes the project fulfilled its purpose: provoking Germany’s car giants into action.

“After that, car manufacturers had no more excuses. If even a university manages to build an affordable electric car, they cannot say it’s too difficult,” Lienkamp said.

“That’s the role of universities and start-ups,” he added. “To annoy the car industry long enough until they change their ways.”

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