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Misconceptions about the European Car Manufacturing Industry

05.20.24 | Blog | By:

The replacement of thermal engines by electric motors in light-duty vehicles seems non-negotiable, the only question being when. As in any systemic change of this magnitude, potentially affecting more than one billion cars on the roads of our planet, the transition has to deal with many hurdles, affordability of the new technology, widespread distribution of the fuel, impact on existing industrial sector, including contractors, second-hand market existence.

Regarding the third issue, most commentators today insist China has taken a ten-year technological lead on electromobility, a significant competitive edge against the legacy car manufacturing industry, mostly from the West, Europe and U.S., not forgetting Japan and South Korea. Mobility being a significant part of household expenses, politicians cannot ignore the elephant in the room: Allowing cheap Chinese EVs may destroy the Western car industry. Spending power, with foreign dependency, or employment, with supply autonomy, in other terms, over-simplifying the debate.

Zooming on Europe, a standard misconception is that there is “a” EU car industry, when the situation is far more contrasted, fragmented, as many things on the Old Continent.

First, the EU is not the United States of Europe, and cannot command a state vision similar in force and coherence as in the U.S. or in China. The 27 countries may adhere to a strategic agenda, painstakingly negotiated in Brussels and Strasbourg by means of trialogues between the European Commission, the European Parliament and the Council of Member States, but much time and national alterations may occur from directive to practice. In essence, taking into account the loose nature of the EU and the large differences in approaches and strategies pursued by the Member States.

Consider the car industry. First, a few continental statistics:

  • 6% of employment in the EU, direct and indirect: 14 million jobs.
  • Of which 3.5 in manufacturing: 11%.
  • 7 % of EU GDP.
  • 84 billion Euros trade surplus: an export sector.

Clearly, an industry that cannot be overlooked by the powers that be.

But, despite the delocalization of assembly plants toward Spain or Eastern Europe, low-cost, countries (Czech Republic, Poland), in the last decades of the previous century, away from the historical players, France, Germany, Italy, the industry is not uniformly spread across the continent. No car industry in Ireland, Bulgaria or Croatia. While, in Germany, the EU undisputed leader, the one million jobs and the 24 assembly plants (twice more than in France) herald the top position in the national industry and its contribution of 10% to the GDP. Along with a specialization in the luxury segment, with Mercedes, BMW and Audi, nowhere as important in the rest of Europe, helping the German car industry to be definitely export-orientated (more than 60% of turnover).

This can only create dissensions among Member States when it comes to deciding how to deal with heavily state-subsidized Chinese car imports or supporting the development of a European EV manufacturing industry, to replace the legacy “thermal” one. Or when it comes to attracting foreign investors, U.S. Tesla or Chinese BYD, in EV assembly plants or battery manufacturing. France and Germany are quite active in this lobbying. There is no such thing as a community of views in the EU regarding the political relationship with China, or with the U.S. as well, nor is there a common vision regarding how to fight climate change, with the surge of right-wing parties’ prominence in elections, much less supportive of drastic decisions like Panzer-speed switch to electromobility.

On top of these industrial and geopolitical considerations, one must acknowledge the difference in wealth between Member States. Net-income per capita is quite diverse across the EU.  For instance, Bulgaria, well below 10,000 Euros per annum, and the Netherlands, over 40,000. Access to new cars, expensive purchases, can only diverge, and EV registration shows just that: 4% in Bulgaria, 35% in the Netherlands, in 2022. Average age of the quarter billion cars on EU roads is also a good telltale.

But averages, like all statistics, can be misleading. There does not seem to be that much difference between champions of fast renewal, like wealthy Germany (9.5) or France (9), and keepers, like lower-income Slovakia (13.9) or Croatia (12.6), which implies corporate policies and inequality ratios (like Gini) also play a role, as much as the date of integration in the EU, 2013 for Croatia, synonymous of wealth momentum. More headaches to devise public support policies respecting EU rules.

In conclusion, the huge momentum to fight climate change that created the EU Green Deal during the last five years is brittle, fragilizing the fast-track strategy to implement electromobility. Causing a lot of misgiving to European carmakers, unsure now whether the billions they have been investing very recently to produce EVs have been well- or ill-advised, at least in terms of optimum timing (too much, too soon? Or too late?).

Philippe Marchand is a Bioenergy Steering Committee Member of the European Technology and  Innovation Platform (ETIP).

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