Will Europe join forces to confront the flood of Chinese electric cars?

The unexpected slowdown in the adoption of electric cars prompts auto industry executives to search for new solutions (Reuters)

In an unprecedented move to confront the existential threats posed by Chinese competitors and Tesla, major European automakers Volkswagen, Renault and Stellantis are considering establishing cooperation with competitors to produce cost-effective electric cars, according to a recent report by Bloomberg.

The European auto industry is grappling with competitive weaknesses, and Stellantis NV CEO Carlos Tavares admitted that companies unprepared for Chinese competition could face serious consequences, stressing the need for a paradigm shift in the industry.

Tavares warned that the European auto sector would fail if it did not adapt quickly to the requirements of competition.

Regulatory pressures and financial consequences

The unexpected slowdown in electric vehicle adoption is prompting auto industry executives to look for new solutions.

Discussions range from pooling development resources, to pooling cross-border businesses.

All-electric vehicle sales are expected to see their slowest growth since 2019 (Reuters)

Despite ambitions to replace conventional combustion-engined cars by 2035, sales of fully electric cars are expected to see their slowest growth since 2019.

Even Tesla - which is facing a 20% decline in its shares in light of the significant discounts it is offering - was not immune to the slowdown, as it lost more than twice what Volkswagen lost in market value.

Explore collaborative solutions

Headwinds for the sector include declining government incentives, rising repair costs holding back leasing companies, and growing consumer frustration with climate policies affecting their finances.

Emissions rules that the European Union is about to implement in 2025 could result in heavy fines for manufacturers who fail to meet stringent standards.

Bloomberg notes that Chinese manufacturers, who are supported by the state and offer better and less expensive models of electric cars, are increasing pressure on European automakers.

The Dolphin car produced by BYD, whose price is about 7,000 euros less than the similar Volkswagen ID3, embodies an example of the competitive challenge for European companies.

Since Europe's auto industry, which employs more than 13 million people in total, represents 7% of the EU economy, failure to formulate a viable alternative plan poses the risk of systemic disruption to the entire industry.

The potential change in Europe is echoing in the United States, where GM and Ford are scaling back their investments in electric vehicles.

(French)

Renault CEO Luca De Meo defends the Airbus Automotive alliance, drawing inspiration from the model of the successful European plane maker that combined assets across Germany, France, Spain and the UK to compete with Boeing.

De Meo's vision includes sharing costs to develop affordable electric cars, while taking advantage of economies of scale.

Consumer challenges and misaligned expectations

According to Bloomberg, the potential change in Europe is echoing in the United States, where General Motors and Ford are reducing their investments in electric cars and exploring partnerships.

This comes as President

Biden's

administration is considering expanding the transition to electric vehicles, reflecting the global impact of industry challenges.

Volkswagen, Stellantis and Renault aim to confront the slowdown with affordable electric car models, costing 25,000 euros or less, according to Bloomberg, citing experts.

Mercedes and BMW also plan to introduce advanced electric cars by the middle of the decade.

However, these efforts may be insufficient unless European automakers can realign their strategies.

A critical turning point in 2024

The last resort for European automakers may be to call for more trade and regulatory protection.

As the European Union reviews plans to phase out conventional cars, manufacturers are preparing to see coordinated lobbying efforts after the European parliamentary elections next June.

Meanwhile, the European Commission is investigating China's support for the electric car industry, raising the possibility of additional tariffs.

With tension clearly felt in boardrooms, 2024 becomes a critical turning point for the industry, prompting CEOs to take a wait-and-see approach.

The outcome of these deliberations will shape the future landscape of Europe's automotive industry as it grapples with the challenges of the electric age.

Source: Bloomberg