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EU car industry in crisis: Falling sales and competition from China
Story by DPA International
2 Hrs ago
Cars are seen lined up at the vehicle terminal at the Bremerhaven container port. The automotive sector in Europe is facing a crisis. Instead of rapidly expanding, the market for electric vehicles (EVs) is stagnating, undermining the European Union’s ambitious targets to end sales of new diesel and petrol cars by 2035. Ingo Wagner/dpa© DPA International
The automotive sector in Europe is facing a crisis. Instead of rapidly expanding, the market for electric vehicles (EVs) is stagnating, undermining the European Union’s ambitious targets to end sales of new diesel and petrol cars by 2035.
Attempts to boost electric car sales with state e-car purchase bonuses have failed. The sales of European e-cars are not helped by strong competition from Chinese EV manufacturers. What causes these problems and how do European carmakers expect the EU to act?
EUROPEAN AUTO INDUSTRY CALLS FOR SUPPORT
European carmakers in September asked the EU for "urgent" assistance as they contend with slumping electric vehicle sales and stricter emissions regulations due in force next year.
The European Automobile Manufacturers’ Association (ACEA) said the industry was trying its best to comply with decarbonization targets, but was hamstrung by problems including a shrinking electric car market, lack of charging infrastructure and poor EU manufacturing competitiveness.
In a formal request to the commission, the industry lobby group asked "EU institutions to come forward with urgent relief measures before new CO2 targets for cars and vans come into effect in 2025."
Europe has been racing to produce more electric cars as part of its green transition, with the clock ticking on an EU deadline to phase out the sale of fossil fuel-burning cars by 2035.
However, after years of growth, electric car sales began falling at the end of 2023, and now account for just 12.5% of new cars sold on the continent.
"We are missing crucial conditions to reach the necessary boost in production and adoption of zero-emission vehicles: charging and hydrogen refilling infrastructure, as well as a competitive manufacturing environment, affordable green energy, purchase and tax incentives, and a secure supply of raw materials, hydrogen and batteries," the ACEA said.
The lobby group asked the commission to bring forward a planned review of the CO2 regulations, which is currently slated for 2026 and 2027.
Czech Transport Minister Martin Kupka wants the impact review of the ban on the sale of new cars with internal combustion engines in the EU brought forward to as early as next year.
According to commission's Sofia Alves, the automotive industry will have to transform to achieve Europe’s goals for a carbon-neutral economy – which should bring benefits to everyone.
Since the technology of electric mobility should become available quickly and at affordable prices, the commission recommends that manufacturers work with universities and research and development centres, Alves told the Bulgarian News Agency (BTA).
It was a collective effort of the EU, member states and the automotive industry. All participants in the process would have to pay part of that price, but the goal was bigger and more important, Alves argued.
GERMAN CAR GIANTS' WOES RIPPLE ACROSS EUROPE
Troubles facing carmakers in Germany, a country with a large automotive industry including brands like the Volkswagen Group (VW) and BMW, have an impact on other countries’ industries, too.
German manufacturers are struggling with weak sales figures and the high costs of switching to electric drive systems.
Mercedes recently had to cut its profit forecast for this year due to stuttering sales in China. Previously, BMW had lowered its sales and profit expectations for the current year.
For the first time in 30 years, Volkswagen could face compulsory redundancies and plant closures. According to a media report, the European auto giant could cut 30,000 of its 300,000 jobs in Germany.
The cuts in Germany are being closely watched by European countries cooperating with VW.
For instance, the Slovenian automotive industry, which represents around 10% of the national gross domestic product (GDP), is export-oriented and Germany is among its most important markets.
"We are monitoring the situation both at the level of our key markets and at the level of the key customers of the Slovenian car industry," the Economy Ministry's State Secretary Matevž Frangež said.
In Portugal, Volkswagen’s Autoeuropa plant in Palmela, south of Lisbon, continues to have a major economic impact on the country, contributing 1.3% to GDP in 2023, and is also the major foreign investment ever made in the country.
In Germany, a number of factors have been identified as to why the car industry is getting into difficulties.
Stagnating e-mobility: The cancellation of a federal subsidy in Germany last year has caused demand for battery cars to collapse.
The factories are not being utilised to capacity and there is a threat of high fines due to the stricter EU fleet targets for CO2 emissions from 2025.
Politicians’ flip-flopping about electromobility was also unsettling customers and led to distortions, German industry expert Frank Schwope said.
Weak economy: Economic uncertainty is also causing weak business overall.
In August, new car registrations in Germany slumped by almost 28% compared to the same month last year, while in the EU as a whole they fell by 18%.
The German Association of the Automotive Industry (VDA) is forecasting only 2.8 million new electric car registrations for the year as a whole, around a quarter less than in the pre-crisis year of 2019. And experts do not expect sustainable growth in Europe.
Dependence on China: At the same time, business abroad is also faltering.
The German automotive industry’s high dependency on China, where it does around a third of its business, is proving fatal.
For years, the car market there had ensured rapid growth and good profits. The current faltering demand for their models is now hitting Volkswagen and other manufacturers all the harder.
High costs: At the same time, German manufacturers are struggling with a significant increase in energy and labour costs.
According to industry expert Schwope, the production of inexpensive entry-level models is therefore not profitable in Germany.
Ambitious return targets: Schwope says, however, that part of the problem is also high management expectations regarding profit margins.
The pressure to economize is now correspondingly high. Manufacturers are still earning good money and are by no means on the brink of insolvency, according to the expert.
TARIFFS ON CHINESE EV: EU COUNTRIES TO VOTE ON FRIDAY
European manufacturers are up against competition from cheaper Chinese EVs, with Brussles accusing Beijing of unfairly subsidizing domestic manufacturers.
In order to prevent European electric car manufacturers from being further undermined by Chinese carmakers, the commission is planning to impose additional tariffs of up to 36% on electric vehicles imported from China, on top of the current tariffs of 10%.
The issue has divided the bloc.
The tariffs would become permanent for five years after a vote by the EU’s 27 member states, scheduled for Friday, EU diplomats told the French press agency AFP.
With the new instrument, the EU hopes to protect its automobile industry, which provides jobs to around 14 million people in the bloc.
Germany, and most recently Spain, have criticised the tariffs, which they fear could lead to a trade war with China, but other EU states including France and Italy support them.
At least 15 countries – representing 65% of the EU’s population – would have to oppose the tariffs in order to prevent them from becoming definitive.
The content of this article is based on reporting by AFP, ANSA, BTA, CTK, dpa, EFE, LUSA and STA as part of the European Newsroom (enr) project.
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