...EU car makers are losing 2 years to put EV investments in the backburner, while Chinese EV makers are already making strategic inroads to invest directly in EU.
...Western auto makers can't make up ground against the Chinese because their corporations decide on free market basis answering to shareholder interests, while the Chinese has a larger picture in mind, putting corporation interest aside to support Govt call to scale quickly for global domination.
...China has won hands down. Their ability to seize greater global market share enables them to continuously re-invest into R&D to produce vehicles of the future. Friend or foe? Europe’s big Chinese EV dilemma
Bad news hasn’t been enough to get European car makers and politicians to rethink their anti-China strategy. But that’s exactly what might need to happen. Hans van LeeuwenEurope correspondent
Sep 13, 2024 – 12.00pm
Greg Jackson, the founder and boss of Origin-backed energy retailer and tech platform Octopus, is one of Britain’s foremost techno-optimists. But even by his standards, he was sounding bullish this week. He’s just come back from what he called “the obligatory executive tour of China”.
On the trip, he learnt that China’s electric vehicle (EV) companies spend 7 to 11 per cent of their revenue on R&D. And he saw Chinese cities shedding smog and noise pollution as road traffic goes electric. “Forgive my language, but f--- me, right?” he told a room full of EV execs in London.
“Whatever you see today will look out of date in a few years’ time … and the astonishing progress is only accelerating, and that’s in every part of the system – from batteries, to the renewable generation to make batteries cheaper, to all of the digitalisation that brings this to the consumer.”
Jackson was trying to contrast the pedal-to-the-metal EV revolution he saw in China with the stuttering progress back in Europe. “Unlike us, they’re not agonising over how you solve the problems of tomorrow; they’re just getting on with the opportunity of today.”
He was speaking at the launch of Electric Vehicles UK, a new body set up by EV evangelists within the industry to combat the apparently waning enthusiasm of the car-buying public.
After comedian and car enthusiast Rowan Atkinson, of Mr Bean fame, last year said he felt “duped” by having plumped for an EV, the industry’s proponents say it’s the politicians, journalists and consumers who are being duped by misleading claims and outright misinformation.
The campaign launch was a rare front-foot moment for an industry that has been battered by bad news in recent weeks.
VW is mulling the closure of some of its German factories – the first shrinkage of the company’s industrial footprint in its nine-decade history.
And just as that news was breaking, Volvo told the market that it would take longer than expected to become an EV-only company, saying hybrids would now be part of the mix beyond its previous 2030 phase-out target.
Also in Sweden, Northvolt, a big pioneer of European battery manufacturing, this week said it would mothball part of one plant, close another, and solicit a joint-venture partner for a planned gigafactory in Poland.
“Our success is in part dependent on the overall market ramp-up of electric vehicles,” lamented Northvolt’s caretaker chairman Tom Johnstone. Europe falls behind
As he was suggesting, that European ramp-up has fallen well behind the growth in China and North America. Market researcher Rho Motion reported this week that although global sales of EVs and plug-in hybrids surged 20 per cent in August from a year earlier, in Europe there had been a 33 per cent slump.
In Britain, market analysts expect EVs to account for 17 per cent to 18 per cent of sales in 2024 – falling short of the government’s target for this year of 22 per cent, which will be enforced on individual car makers through potential fines.
The slowdown has been most marked in Germany, after the government axed a subsidy for EV buyers last year. A 4 per cent decline in year-to-date sales in Europe was led by a 23 per cent freefall in the Continent’s biggest market.
The German carmakers, who have pumped billions into new tech and factories to make EVs, have raised the alarm, pushing Berlin into backtrack mode.
Chancellor Olaf Scholz’s government has now proposed hefty tax deductions to companies buying EVs for their fleet, at a total cost of €465 million ($770 million) over four years. The price of EVs that qualify for the tax break will be €95,000, up from a previously proposed €75,000.
That tweak is significant. One of the biggest issues troubling European car buyers is not just the usual gripes about charging infrastructure and driving range. It’s the lofty price tag on many European-made EVs.
Although battery electric vehicles are cheaper to run, in Europe they’re expensive to buy. And they’re still hard to sell second-hand.
EU and British regulations are targeting an end to new petrol and diesel car sales as soon as 2030. But that’s still not enough to prise open buyers’ wallets if the price isn’t right.
A Bank of America EV tracker released last week showed that most European car makers (except BMW) are losing market share worldwide.
“Battery electric vehicle prices need to come down in order to trigger a sales boom, regardless of regulation,” BoA’s report said, predicting a 2 per cent drop in sales for this year.
The European Commission, which sets those regulations, still sees a glass half-full. Take out Germany, a recent EC report said, and the Continent’s EV demand is still growing. If you include plug-in and other hybrids, more than half the European market is now electrified in some form. And the market share of diesel vehicles has fallen from 50 per cent a decade ago to just 11 per cent now. Chinese cars wanted
Momentum is ebbing, however, and turning that around requires cheaper EVs, says Peter Wells, a professor at Cardiff Business School. The trouble is, many European manufacturers can’t seem to shift their focus from those high-end EV models – leaving the field open to Chinese companies such as BYD and SAIC.
“EVs like the BYD Seagull are exactly what we want in Europe, but manufacturers are reluctant to take the profit hit,” Wells recently told Forbes magazine.
“Without these vehicles, it leaves large parts of the consumer base completely isolated. They have the right to be upset if they realise they are being denied the opportunity to buy low-cost, small but entirely competent [Chinese EVs].”
But try telling Brussels that. The European Commission is worried that the 27-country bloc is over-reliant on China for the energy transition, whether it’s batteries, wind turbines, solar panels or EVs. The Eurocrats, and some politicians, also fear that Europe’s car and battery makers simply can’t compete with Chinese companies fuelled by lavish state subsidies.
In the EV market, the problem is not yet acute: the EU imported fewer than half a million EVs from China in the past year, amounting to about 4 per cent of what European households spent buying cars.
The worry, though, is that this could accelerate sharply. So Brussels in early July proposed slapping bruising tariffs on imports of cheap Chinese EVs, ranging from 17 per cent to 36 per cent, on top of an existing 10 per cent levy.
The tariffs are only provisional, but they may already be having a cooling effect: registrations for Chinese-made EVs in Europe tanked almost 10 per cent in July from the same month last year.
The tariff regime won’t come into full force until the end of October, as long as the EU’s individual governments give their backing to the Brussels plan before then. But that is no longer a given.
Spanish Prime Minister Pedro Sanchez has been in China this week, and seems to be having second thoughts. “We need to reconsider – all of us, not only member states, but also the Commission – our position,” he said on Wednesday.
The Spaniards may be worried less about the German and French car industries than about the likely effect of a Brussels-Beijing trade war on Spain’s food exports to China. But that didn’t stop German chancellor Scholz’s office welcoming Sanchez’s comments as “a direction of travel that we share”. Wake-up call?
The Chinese aren’t waiting for the Europeans to make up their minds. BYD, one of China’s leading EV makers and already selling strongly into Britain and Europe, is looking at setting up a factory inside the EU, choosing autocrat-friendly Hungary. Chery Auto is working with Spain’s EV Motors on a plant in Catalonia, and is eyeing up the UK.
Many in the industry hope that China will be a partner in Europe’s EV revolution, not a rival. Without China, they say, consumers are unlikely to get the kind of price signal they need. And without consumer buy-in, European transport won’t decarbonise, and Europe’s auto and battery industries won’t be competitive on the world stage.
Andy Leyland, a co-founder of supply-chain specialists SC Insights, said Northvolt’s strategic retreat this week should be a wake-up call.
“Northvolt is the great hope of the European battery landscape, with money and debt thrown at it, yet still it hasn’t produced any cells of meaningful quantity,” he said.
“Europe needs to rethink its masterplan and energy transition industrial strategy, and potentially work on collaborations with Asian counterparts rather than trying to reinvent the wheel … partner or perish.”
It’s a stark message. Europe’s car makers, and the politicians who want to protect them, may just be facing a bump in the EV road. But they may also be arriving at a fork in that road: an existential choice between continuing straight on with business as usual, or veering towards radical change – even if that means a hit to margins, and collaborating with the Chinese competition.
Either prong of the fork, however, the destination is inevitably decarbonisation. If that goal is unavoidable, then it looks like the Europeans have some difficult navigating to do if they’re to steer away from a steep decline.
