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AB 2000 studies

Alain Boublil Blog


towars a crisis of the car industry in Europe

Europe is capable of the best as of the worst. Without talking about the peace which reigns for near 80 years over its people, an unprecedent fact in history, and when war is close to its doors, the creation of the euro has constituted an exceptional success. The move to the unique currency, which was posing many technical problems, was perfectly achieved. Thanks to euro the States-members of the euro zone have been able to go through many crisis occurred for twenty years. The European Central Bank has allowed to financing without difficulties the measures taken by each State to contain as far as possible the heavy consequences on the economies of the Covid-19 pandemic and of the invasion of Ukraine by Russia.

Unlike, the energetic policy imposed by Brussels under the German pressure has leaded to very disputable results and is not without connection with the inflationist wave which has hurt the nations of the Old Continent. The markets liberalization has not profited to consumers and the commercial expenditures to attract market shares has limited the investments capacities of the operators. Unlike also, the freedom granted to each country to supply itself from where it wanted has put Europe under Russia dependance. The stigmatization of nuclear by Germany, supported by Brussels, which allowed to getting in the same time the vote of the ecologists and of the miners, has strengthened coal and brown-coal production, to the detriment of environment. The difficulties the States-members are facing to approve the financing rules of the energy transition show well that all the lessons have not yet been learnt. The disagreements are still tough about the electricity market reform and the European ministers had not managed to approve the text proposed by the Commission.

Through the interdiction in any State from 2035 of the sale of vehicles emitting CO2, is Europe making the same mistakes? Only electric cars and light trucks can be offered for sale to clients, when truck transportation, even if it is a heavy emitter of particles and greenhouse gas, is not concerned. The first observation is that this decision is not in line with consumer choices. So, in France, despite intense promotion campaigns and public subventions, during 2023 first half, only 15% of the registrations were made for electric vehicles. Presented in another way, 85% of the buyers have preferred to keep a traditional or hybrid, about which we know that their advantages regarding emissions are very disputable, mechanizations. The reason is simple: electric vehicles autonomy is not enough and especially difficult to forecast. Which family will buy a car which will not allow it to go to vacations with its children?

The car industry will so be confronted with tough challenges. From now to 2035, it will have to both satisfy its client needs with traditional mechanization and to finance the heavy investments, especially in the production of batteries, to be able to propose enough electric vehicles at the announced term. Atop of that, doubts weight on the calendar and of the precise content of the new rules which can, past experiences prove it, change without that has been forecasted.

The second challenge concerns the supply safety. Batteries need raw materials whose production is today in a very large majority made by China. The European industry risks to be confronted with a major threat. In case of a deterioration of the relations with Beijing, it is quite possible that would be instituted restrictions to the exportations of these materials, under the form of taxes or of volumes limitation. Europe has had difficulties to get rid of Russian natural gas imports but it got it because there were abundant natural gas reserves elsewhere. It is far from being sure that will be found and put into exploitation enough lithium or rare earths deposits to cope with these possible restrictions inside the timing imposed by the calendar decided by Brussels.

The States will have also to support the necessary investments to adapt power transportation networks to the needs of the recharging points, frequently concentrated where are heavy traffics during the peak periods, as holidays travels departures. We know the generated hostility and the proceedings instituted against the construction of wind farms in France or of the high-tension power lines in Germany to feed with renewables sources the Southern regions which are major consumers. There is very low probability that these investments can be easily done and the State could be obliged to ask an adaptation of the calendar of the change in favor of electric vehicles, which would create new uncertainty for the enterprises.

At last, and it is not the least important issue, the European industry has a huge backwardness behind the Chinese carmakers which, in few years, has acquired a dominant position. In 2022, half of the electric of hybrid vehicles used in the world was in China. Between 2011 and 2022, the country had a trade deficit in the car market, the amounts of imports fluctuating between 40 and 60 billion dollars. From 2022, the situation was reversed and with its 80 billion exports, the balance registered a surplus. The leading position taken by the Chinese industry in the electric vehicles leads to the conclusion that this trend will increase in the future.

It will amplify with the interdiction of the thermal engines. Neither the United States, nor Japan, which are the two other major markets, have taken such decisions. The Chinese leaders, Geely, which controls Volvo, NIO, or Great Wall have already announced their strategy to conquer the European market. BYD, which has as a shareholder Warren Buffett, has sold in China 1.2 million electric or hybrid vehicles, i.e, twice more than a year ago, these last six months, also thinks to set up itself in Europe. In the past, local car producers and notably the German ones, took profit from a technical lead which allowed them to offer a high quality. Everything is changing with electrification when, this time, it is the Chinese carmakers which are the leaders.

The only group, with Tesla, which could challenge that leading position, is Toyota which has launched a research program on the achievement of the “solid-state batteries”, much less heavy and which wouldn’t need special metals as lithium. But the group is postponing year after year its production forecasts of electric vehicle powered by these new batteries. Tesla will remain positioned on the high-range and is a threat for Mercedes and BMW but, to the difference of the Chinese carmakers, it doesn’t target the whole market.

The exit from vehicles with thermal engines will, at last, threat hundreds of thousand jobs in Europe because the electric vehicles assembly lines are much simpler. They need much less components. Carmakers and their suppliers, along with the heavy investments to be realized in order to obtain the new production tools, will have to cope with huge reconversion programs for their employees.

The end of the production of vehicles emitting CO2 has another characteristic: it is unequally shared because it is going to affect only the countries which produce vehicles. Regarding the others, nothing will change because they will continue to import. Then the risk is high that the  image of Europe in the producing countries, due to these measures, will be heavily affected.       




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