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Bloomberg, by Albertina Torsoli, Stefan Nicola, Monica Raymunt
In life-or-death moments, opponents can become allies at any time.
Under the offensive of Chinese automakers and Tesla, European automakers are losing the mass market little by little, and their survival will be in jeopardy if new solutions are not found soon.
Volkswagen, Renault and Stellantis are considering joining forces to jointly produce low-cost electric vehicles to defend against existential threats.
In February, Stellantis CEO David Tang said in an interview: "We have become clear that companies that are not ready to face Chinese companies will get into trouble in the future." He has previously said that if the European auto industry does not adjust, it will face a "bloodbath".
Too far behind
Volkswagen ID. on the production line at the Zwickau plant in Germany3 electric cars
As EV growth slows, auto executives are looking for ways to save themselves, and the coming months will be critical.
According to Bloomberg, the sales of pure electric vehicles in 2023 will not crowd out fuel vehicles, but the growth rate will be the slowest since 2019. This situation has intensified the competition between car companies, even the leader Tesla has not been spared, affected by the slowdown in growth, Tesla did not hesitate to discount**, the first to launch the first war.
In 2024, Tesla's stock price will fall by 20%, reducing its market value by about $150 billion.
European automakers are lagging behind in the field of electric vehicles. Tesla and BYD have more BEVs in 2023** than they combined
When it comes to electric vehicles, European automakers have lagged far behind, with Tesla and BYD selling more pure EVs in 2023 than they combined.
* Removing subsidies for new energy vehicles and rejecting electric vehicles by rental car companies due to high maintenance costs, ** in the United States and Europe may further fuel anti-electric vehicle sentiment ......In 2024, all signs are very unfavorable for the development of electric vehicles, and this is when the inflection point is coming.
The EU's stricter emissions regulations will come into force in 2025, and manufacturers will need to sell more BEVs or face hefty fines. According to Bloomberg calculations based on company and regulatory data, Volkswagen could face fines of up to more than 2 billion euros.
Volkswagen, Stellantis and Renault are all independently developed** in 2models of 50,000 euros or less, while Mercedes-Benz and BMW plan to launch several new and more technologically advanced electric vehicles by 2025.
Volkswagen ID3 (left), BYD Dolphin (right).
While European automakers are under pressure, Chinese companies are entering the market, often with better and cheaper models. For example, the BYD Dolphin is priced more than the Volkswagen ID. with a similar configuration3 cheaper about 7000 euros. At first, Volkswagen was very bullish on ID3. Think of it as a Beetle in the age of electric vehicles. At the Geneva Motor Show, which opens on February 26, BYD will showcase a number of electric models, including a luxury SUV, highlighting the company's ambitions in Europe.
Europe's automotive industry employs around 13 million people and accounts for 7% of the EU economy. Failure to develop an effective plan for mobility in the EV transition will cost the industry as a whole.
German component manufacturer ZF Friedrichshafen AG has 16Holger Klein, the company's chief executive, who employs 50,000 people, said: "The EU's auto parts companies, which have already spent billions of dollars to electrify transportation, are they suddenly realizing the question: Are we doing it right? ”
As automakers are reducing production of electric vehicles, European parts companies are likely to cut 20% of their workforce. On February 19, a major company in Tesla, Volkswagen and Ford announced that they would lay off 10,000 employees.
Airbus mode
EV sales are slowing in Europe, and demand for battery EVs is cooling in the region. Note: Figures for 2023 include estimates for December 2023; The 2024 estimate is based on BNEF BEV+PHEV sales**, assuming 67% of them are BEV
Renault CEO Luca de Meo has been advocating for the "Airbus" model to be emulated in the automotive industry. In the 60s of the last century, in order to counter Boeing, McDonnell Douglas and other American companies, Germany, France, Spain and the United Kingdom jointly founded Airbus, and gradually surpassed Boeing.
He believes that the automotive industry's Airbus will help spread the huge cost of making low-cost electric vehicles, while allowing them to benefit from a larger scale.
At the end of 2023, Renault presented the concept of an electric city car that would cost less than 20,000 euros and be available only for the Volkswagen ID3 in half. The company is primarily inspired by the Japanese K-Car. This popular minicar is produced by several manufacturers and receives preferential treatment from regulators.
De Mayo dismissed the possibility of a major merger, saying flexibility is more important than size, and that talks for a joint EV platform are "all talking". "We are very willing to share in such investments because it is very difficult for small cars to make money," he said. We're figuring it out. ”
As investment plans are scaled back, traditional automakers return more money to shareholders. In 2023, GM, Ford and Stellantis spent a total of $22.7 billion on buybacks** and paid dividends, while Renault also proposed its largest shareholder dividend plan in five years in February.
Renault Revoz D. in Nova Mesto, Sloveniad.At the plant, an employee uses a winch to install a drive system from Renault Twingo Electric
The turmoil in Europe is likely to ripple into the United States, and GM and Ford are also cutting back on EV investments and have expressed a willingness to work with rivals. According to the New York Times, Biden is considering slowing down the transition to electric vehicles.
There are many reasons that lead to electric vehicles***. Software glitches and high maintenance costs put consumers off. Due to the complexity of repairs, electric cars are more expensive to insure than conventional cars, for example, twice as much as conventional cars in the UK. But for mainstream buyers, affordability may be the biggest obstacle.
BNEF analyst Colin McRacher believes the decline is expected to be temporary as battery technology and charging infrastructure improve.
Still, there is a huge discrepancy between expectations and reality. At its electric vehicle hub in the eastern German city of Zwickau, Volkswagen laid off more than 200 temporary workers and cut one shift on an assembly line. While overall passenger car sales in Europe rose 11% in January, analysts expect the share of electric vehicles to generally stagnate this year due to consumer lurk.
Competitiveness issues
Volkswagen Inc. Volkswagen IDInside the 3 factory, employees work on the assembly line of the Zwickau plant in Germany
Automotive giant Volkswagen is still struggling, and EV partnership negotiations could be crucial for it.
According to Bloomberg Intelligence, Tesla and BYD are still far ahead of Volkswagen for at least the next few years. Analysts, led by Michael Dean, say Volkswagen is no longer a contender for the electric car crown.
In the wake of Emissionsgate in 2015, Europe's largest automaker, under the leadership of then-CEO Herbert Diess, laid out what is arguably the industry's most "radical" plan for the development of electric vehicles. However, due to a software vulnerability, the launch of the main electric model has been delayed, Diess 2022**.
His successor, Oliver Blume, reversed several of Diess's initiatives, including the cancellation of a €2 billion plant in Germany. Executives said they were prepared to cut costs further this year.
Tesla has earned nearly $9 billion in carbon credits from its competitors
Unless a new viable strategy can be developed, European automakers risk falling further behind. And in order to meet emissions regulations, they may have to buy more emission credits from Tesla, allowing the company to make a net profit.
While the postponement of the ban may provide respite, it does not solve the problem of competitiveness in Europe's transition to the electric era. Alexandre Marian, managing director of Paris-based corporate consultancy AlixPartners, said: "Directors and CEOs in the automotive industry are nervous and on the sidelines about the outlook for 2024. ”