The next Europe save the auto sector

Stellantis' choice to import the electric cars of the Chinese startup Leapmotor into Europe casts new shadows on the future of the group's Italian plants and in particular on Mirafiori, where the production of the electric 500 is concentrated. The agreement with Leapmotor, of which Stallantis is a shareholder with 21 percent, provides for the launch in Europe in September of two models, the T03 city car and the C10 SUV. Sales will take place through a network of 200 dealers which will rise to 500 by 2026. It has not yet been defined whether Leapmotor cars will also be produced in Europe. The fact is that, to date, another slice of the European market will be eaten by a Chinese manufacturer, and not by an Italian, French or German one.

It doesn't seem like a great result for a continent that boasted a technological record in the automotive world and is now being surpassed in the technology of the future by the Chinese.

This is the snapshot of world production: according to data from Oica, the international organization of motor vehicle manufacturers, the largest car and commercial vehicle producers in the world are now the Chinese, who in 2023 produced more than 30 million vehicles (an increase of 17 percent compared to 2019). Japan, on the other hand, produces almost 9 million vehicles a year. The United States travels around 10 million. Europe as a whole produced more than 18 million vehicles in 2023: despite having partially recovered the ground lost during the pandemic, production is still 15 percent lower than 2019 levels. The leading European producer is Germany with 4.1 million pieces followed by Spain (2.5 million) and France (1.5 million). Italy is in seventh place with just 880 thousand vehicles.

The Chinese have learned to make good cars thanks also to the joint ventures set up in their territory by European companies, enticed by the potential Asian market and low production costs: the first was Volkswagen 40 years ago. Then the Chinese chose with admirable foresight to invest in electric cars and batteries, becoming world leaders in this field. So much so that many of the European or American battery-powered cars circulating on our roads, such as the Tesla 3, the Smart, the Mini Cooper, the future Cupra Tavascan, some Honda models, are produced in China.

Today the European industry finds itself displaced, behind on electrification (even in the hybrid sector, dominated by Toyota), without control of the battery sector, forced by European standards and competition to invest in new technology but with a clientele still not very numerous. Dario Duse, Country Leader Italy of the consultancy firm AlixPartners, explained that “all the large manufacturers have an electrified range available, and it is expected that a further 616 billion dollars will be invested in the world by 2027, but at the same time the industry has took a wait-and-see attitude. The electric, burdened by higher costs than the similar versions with combustion engine, also continues to have production volumes per platform and model that are far lower than the similar traditional versions, with a consequent problem also of the ability to absorb fixed costs”.

In this complex situation, European politics moves in an apparently schizophrenic way: while the USA imposes duties of 102.5 percent on Chinese cars, the European Commission has launched an investigation to verify whether Beijing is illegally subsidizing its industry but a possible increase in duties, possible starting from July, is hindered by the companies that produce in China, such as the German ones, and in the meantime countries such as Hungary, Spain and even Italy invite the Chinese to produce here. BYD will build a plant in Hungary, where Nio and Catl, the largest battery company in the world, have already landed. In Spain, Chery will use an ex-Nissan factory to make electric cars. And Rome continues to court Chinese producers to be able to have another house in Italy next to Stellantis.

While Europeans aren't sure what to do, nearly a fifth (19.5 percent) of electric vehicles sold in Europe last year were built in China. Strictly Chinese brands, in particular, have captured 8 percent of this market and the environmental organization Transport & Environment predicts that they could reach 11 percent in 2024 and 20 percent in 2027. The value of exports of battery-powered cars from China to Europe has grown sevenfold in the space of four years, going from 1.6 billion dollars in 2020 to 11.5 billion in 2023. And in the meantime, thousands of vehicles imported from China have invaded several sea ports Europeans, playing in advance to avoid a possible increase in duties, currently set at 10 percent.

Predictable result of this great upheaval? New Chinese factories in Europe, possible passage of European brands to Asian companies, as has already happened with Volvo, and progressive destruction of the European car industry. In his Letter to Europe, Renault CEO Luca De Meo wrote: “Europe is developing a whole new set of rules and regulations. On average, between now and 2030 the various directorates of the European Commission will introduce eight to ten new regulations per year. And this without a body that approves the publication calendar. This is an extremely disadvantageous situation for companies, which are often forced to adapt to the rapid pace of application of these new regulations, mobilizing huge engineering resources (up to 25 percent of an R&D department) to study their application”. According to the Italian manager it is necessary to “define an industrial strategy for Europe, in which the automotive industry is one of the main pillars. The automotive sector represents more than 1/3 of the total European industry. Europe needs a regulatory framework with a stable basis but evolving in content, following the example of the Chinese model. It is essential to create favorable conditions for the creation of new European companies on the Airbus model, with expertise in key technologies. Bring all the interested parties around the table to develop this strategy: scientists, industries, associations, unions and NGOs. End the current system based on the continuous introduction of new rules, the setting of deadlines and the threat of fines for non-enforcement”. The task of saving the European car is up to the next Parliament.