A systemic revolution for an industry that is just more than one hundred years old, this is how some editorials describe what the car manufacturing sector is facing this decade, and into the next ones, switching from internal combustion engines to electricity propulsion. Great, electromobility is likely one important solution to reduce the carbon footprint of road transport, but…
Climate experts insist action to fight climate change must take place here and now, in this decade, not in some distant future, and the full environmental impact of electromobility is unlikely to materialize any time soon. Not only do heavy industries take time to change, social acceptance also takes time, especially when the new offer is not immediately a “must have”, unlike the iPhone 14! There are many reasons for motorists not rushing to replace their ICEV by an EV. A major one is the price of the electric alternative, between one quarter and one third more expensive than the equivalent thermal model on our markets.
One of the reasons: The cost of manufacturing the battery is not reducing as quickly as expected. Breakeven between ICEV and EV keeps on receding to the future, 2030 now (it was 2025 not long ago), not good news for the small models where the battery is the largest element of cost, easily one third. The blame is put on materials (metals like cobalt, but also good old copper), but technology breakthroughs, the switch to solid electrolyte, synonymous of reduced cost, reduced weight, increased autonomy, faster recharge, improved safety, is slow to emerge as well, not before the end of this decade, according to the most optimistic technology developers.
In the meantime, and it has been going on for the last twenty years, cars have become more expensive, for many reasons: enhanced on-board safety, additional comfort equipment, and the trend toward bulkier and heavier SUVs, away from the traditional sleek sedans. Taken together, car manufacturers’ profitability has also improved, the race for volumes having given way to the race for margins, higher in the top segments, with a direct consequence that new car purchasers are more and more concentrated in the wealthier and older segments of the society. This is creating a somewhat fragmentation of the market, exaggerating: new cars in the top of the range and on the other end of the pool, small ones, quietly aging the “Cuban way”, according to one Member of the European Parliament.
As the electric revolution comes to the fore, the three main car manufacturing regions clearly face diverse challenges and adopt diverse strategies and policies, in a world that seems headed for a multi-polar, more regional than global, order:
Last, but not least, inflation has hit, thus impoverishing even further the middle and lower classes. And the continent has steadfastly de-industrialized, an ongoing fate of the last forty years. End of globalization re-shoring could have been an opportunity, but does anyone seriously believe today the EU car manufacturing industry can be up to the electromobility task, facing cheap Chinese imports of small EVs and limited commercial possibility of export to the U.S.? More likely, the future of EU road transport will tell a sad story of dwindling sales in the top-of-the-range segments, small volumes with hefty margins, Ferrari or Aston-Martin like, and a mixed bag of ageing ICEVs and EV Chinese imports in the smaller segments.
Is it sunset for the car industry in Europe?
Philippe Marchand is a Bioenergy Steering Committee Member of the European Technology and Innovation Platform (ETIP).