The landscape of the European automobile industry is facing a myriad of challenges as it struggles to keep pace with a rapidly changing market, especially in the context of electrification. Recent discussions at an event hosted by the Works Council of Volkswagen Saxony in Zwickau, eastern Germany, highlighted these concerns amidst a backdrop of regulatory pressures and competition, particularly from China. This gathering took place on October 28, 2024, where employees and industry stakeholders addressed the uncertain future of traditional automobile manufacturing.
Analysts have pointed out that the industry is grappling with significant obstacles, including a scarcity of affordable electric vehicle (EV) models, a slower-than-expected rollout of necessary charging infrastructure, intense competition from Chinese manufacturers, and stringent new carbon regulations. Julia Poliscanova, senior director for vehicles and e-mobility supply chains at Transport & Environment, provided insight into the state of the market during a video call with CNBC. Poliscanova described the outlook for European automakers as “quite bleak,” stating, “They are behind on electrification, their products are just not as good as the formidable Chinese competition – and that is not anyone’s fault but the carmakers.”
Compounding these issues is the declining demand for vehicles in Europe, which remains below pre-Covid-19 levels, exacerbated by rising interest rates. As the European Union prepares to implement a tighter cap on average emissions from new vehicle sales, set to reduce from 110.1 grams of CO2 per kilometre to 93.6 g/km next year, the potential for hefty fines looms large for manufacturers who do not comply. The European Automobile Manufacturers’ Association (ACEA) has called for regulatory relief, urging that the 2025 compliance costs be eased to support the industry's transition towards greener mobility.
Poliscanova expressed frustration regarding calls to dilute the carbon regulations, arguing that weakening these targets would hinder competitiveness and prolong the transition to a sustainable automotive future. She asserted, “The vehicle CO2 target, however, is critical in making them more competitive and making them transition quicker.” She cautioned against any proposed delays to compliance, which she likened to “scrapping the regulation altogether” and warned of further implications for the European industry.
The financial performance of major European car manufacturers has taken a hit, with shares of the so-called "big five" — Volkswagen, Mercedes, BMW, Stellantis, and Renault — experiencing significant declines this year. Stellantis has reported a drop of 37%, while VW and BMW have seen falls of 23% and 21% respectively. In contrast, Renault has experienced a 19% increase in its shares, attributed to its lower dependency on the Chinese and U.S. markets, suggesting it may be better positioned relative to its competitors.
Leading analysts, including Rico Luman from ING, have echoed a pessimistic sentiment regarding future financial improvements within the sector, stating, “From a financial perspective, I’m not expecting much improvement at this point.” Luman noted that electric vehicles generally yield lower profits compared to hybrid models, indicating a potential strain on profitability as companies are pressured to accelerate their shift towards fully electric offerings.
The recent Paris Motor Show saw major European automakers debuting several low-cost EV models in a bid to stimulate a demand rebound and regain market share from Chinese companies that have recently surged ahead. This featured push aims to address a crucial need for more affordable electric options among consumers, as emphasized by industry insiders.
Overall, as the European automotive sector navigates through this challenging terrain, a combination of regulatory developments, market dynamics, and shifts in consumer preferences will play critical roles in determining its future trajectory.
Source: Noah Wire Services