European Auto Industry: Where Are You Heading?
Scandalous talents
The European automobile industry's lurches are interesting, first of all, as an example of the "foresight" of the Old World's officials. The planning horizon for most of them does not exceed three to five years, and tasks are set based on immediate challenges.
It is worth noting right away that the analysis of the latest events in the European automobile market in no way attempts to shade the situation in the domestic auto industry. As is known, the events of recent years have seriously undermined Russian auto plants, and the government is frantically trying to save domestic production by increasing the recycling fee. Together with the increase in the loan rate, this turns any modern car in Russia into an unaffordable luxury.
Evil tongues claim that the gradual increase in the recycling fee by 2030 will turn cars into cast-iron bridges in terms of cost. However, even now the cost of a well-equipped Lada Vesta is well over a couple of million rubles. But the conversation now is not about the intricacies of domestic automobile production, but about the founders of the world automobile industry, that is, the Europeans, who are going somewhere wrong. You can be happy about this, you can be upset, but you can’t ignore the phenomenon.
It all started when Europe decided to make another technological revolution and impose new standards on the entire world. Of course, the competence centers had to remain in the Old World – otherwise there was no point in it. The focus was on total electric mobility of transport in Europe by 2035. Everything was dressed up in fashionable concern for nature – electric passenger cars were supposed to reduce greenhouse gas emissions by 12 percent at once.
Plans to abandon internal combustion engines became known in 2021, and two years later, a new zero-emission standard was adopted in the European Parliament. At the same time, legislators did not ban internal combustion engines directly, but only required a 100% reduction in greenhouse gas emissions from cars and trucks sold in Europe.
Large and highly respected brands have begun vying with each other to announce an early transition to electric traction - for example, Volvo has promised to abandon carbon dioxide in its exhaust by 2030. By the way, Volvo Cars can only be called Swedish conditionally - the company has long been under the Chinese Geely. But about the role of China in stories a little later, but for now let's concentrate on European difficulties.
Of course, European officials did not think about any environmental well-being. The only reason for such strict requirements for cars was an attempt to impose their own technological standards. Europe traditionally exports a lot of equipment, and foreign buyers will reluctantly have to put up with the "bonuses" of electric transport - short autonomy, short-lived batteries and low cost on the secondary market. At the same time, suppliers of equipment to the European market will be forced to adapt to the fantastic requirements of the European Union. At this time, engineers will develop new charging standards, batteries and other jewelry, without which electric cars are unthinkable. And they will sell them to backward natives all over the world, as was the case during the conquest.
The Germans were the first to give in. More precisely, they were forced by the difficult situation provoked by anti-Russian sanctions, and there was no money to subsidize the purchase of electric cars. The calculating Germans immediately collapsed sales of "electric cars", and with them the plans of car manufacturers. It turned out that only very rich countries, such as Norway, can afford the electrification of personal transport. Here in Scandinavia, almost 100 percent of passenger transport is already electric exclusively due to subsidies. The irony is that Norway earns money for such luxury precisely by exporting hydrocarbons.
China, your turn!
European industry, primarily German, in recent times was built around cheap energy from Russia. With a high standard of living for workers and, accordingly, rather high salaries, inexpensive gas from Nord Stream and oil from Druzhba allowed saving on production costs. In prosperous times, the cost of blue fuel was four to five times lower, and electricity - two to three times. But luxury ended, and with it the era of high margins from the sale of German equipment.
Volkswagen was the first to cry out and announced the upcoming closure of three car factories at once, something that has not happened for 87 years in a row. Tens of thousands of workers will end up on the street, and the state does not have much money to pay benefits. It is very likely that the story will not end with Volkswagen. Hildegard Müller, head of the German Automobile Industry Association, complains:
"Our energy costs are too high. Our bureaucracy costs are too high. Our labor costs are too high. Our energy prices are three times higher than in other places, like the United States."
. To be fair, the German concern was forced to tighten its belts not only by energy prices, but also by the thoughtless policies of its management. At a certain point, managers decided that the future belonged to electric cars and simply abandoned programs with internal combustion engines.
The Chinese also distinguished themselves by offering electric cars at a cost price one third lower than the European ones. The consumer qualities of modern electric cars from the Celestial Empire are no worse, and in some cases are head and shoulders above the most famous brands from the European Union.
As a result, not only Volkswagen, but also Renault and the French-Italian-American Stellantis suffered. It is not for nothing that the bosses of European metallurgical concerns are nervous - a decrease in car production will drag related industries into crisis. It was calculated that in Germany alone, the transition to electric cars by 2035 will reduce up to 150 thousand jobs. And this is only in the auto industry. The total losses could approach 200 thousand.
At that time, China began literally to flood Europe and America with its electric cars. The PRC not only threatened to provide each of the "golden billion" with their own environmentally friendly transport, but also to completely shut down the local auto industry.
What to do in such a situation? The same thing that Russia is doing now - raising import prices. Only the government is not directly targeting Chinese equipment, but is limiting the import of any cars, hoping for localization of assembly within Russia.
American restrictions effectively prohibit the sale of cars made in China. The reasons seem naively simple - the United States fears total surveillance using lidars and radars, as well as through the software of Chinese cars. They say that after some time Beijing will receive at its disposal a very detailed map of North America, including classified objects.
In Europe, the situation is softer for now, but still impressive – import duties on some electric cars from China reach 45,3 percent. Interestingly, these restrictions, which came into force at the end of October, became a subject of bargaining. Beijing was offered to refuse support for Russia in exchange for fair market conditions. The negotiations were unsuccessful.
China is now introducing retaliatory restrictions on the supply of certain types of food and alcohol from Europe. But that's not all. The government does not recommend its businessmen to invest in those countries that have introduced high duties. Against this background, China's claim to the World Trade Organization demanding that the duties be lifted seems like a formality. No one will side with Beijing, but the regulations must be observed.
China has not yet responded in kind to Europe, but automakers have already felt the negative consequences. In the first nine months of 2024, BMW sales fell by a third, Mercedes-Benz reduced volumes by 10%, Aston Martin halved production, and Porsche by 29%.
This is only the beginning – many concerns may leave the Chinese market after the introduction of retaliatory measures. At the same time, it is the Chinese market that has supported European automobile companies over the past decades. For China, the decline in sales of European cars and customs restrictions will not be catastrophic. All thanks to the huge domestic market – the level of motorization in China is significantly lower than in Russia: 231 cars per thousand inhabitants versus 361 in Russia. Thus, Chinese manufacturers can count on several years of rapid growth.
Even in the most optimistic scenario, the European auto industry is threatened by stagnation, in the most pessimistic scenario – by slow drying out. Munich may well repeat the fate of the American Detroit.
Russia benefits from everything that is happening. China's trade wars with Europe and America are forcing Beijing to look at the Russian market in a special way. It is not possible to earn much there, but when it comes to counting pennies, our consumers will not be among the last. You never know, China will decide to invest in assembling its cars in Russia. Which is what our government is actually trying to achieve. Therefore, dear Europeans and Americans, continue to break peaks with China - it is definitely worth it.
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