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European automakers are still digesting the shock of cheap Chinese automakers like BYD suddenly hitting their shores, months after the first private ships eerily began delivering cars to the continent. That’s where I am.
But as more data emerges about China’s encroachment on European markets, denial of the country’s threat must soon turn to acceptance if the worst outcome is to be avoided.
Whether they’re worried that China’s EVs will wreak havoc on their export markets or that they’ll further devastate their own production, European automakers are worried that China’s recent One need only learn the lessons of history to understand the worst-case scenario of an onslaught of
Chinese EV appears
European brands have been gradually losing ground to Chinese imports in recent years.
According to data from the European Automobile Manufacturers Association (ACEA), from 2019 to 2022, the market share of European car manufacturers in the EU fell from 74.2% to 70.6%. Meanwhile, China’s share rose from 0% to 1.3%.
But that hides a much more dramatic change currently taking place in Europe.
Chinese manufacturers, particularly BYD, have shocked traditional automakers over the past 12 months with ultra-low prices and aggressive expansion plans in Europe.
The results so far speak for themselves.
A quarter of all EVs sold in Europe this year could be manufactured in the EU, up from 19.5% last year, according to research by campaign group Transport and Environment.
This is a dramatic change in export-input dynamics across the continent, especially for industrial power Germany.
It’s also a change that may remind history buffs of the US Rust Belt.
Germany’s Rust Belt?
The Rust Belt represents the deindustrialization of America’s major steel hubs in the Northwestern and Middle Eastern states as manufacturing moves offshore.
Manufacturing employment had already experienced a significant decline between the 1970s and 2000, falling by 35% in the first decade of this century.
The fallout from the sudden loss of industry has been felt for decades through economic decline, immigration, and urban decline.
Commentators have often referred to the Rust Belt to explain the rising wave of populism that propelled Donald Trump to the White House.
According to ACEA, around 11% of German employees worked in the country’s automotive sector in 2021, making it the sixth-highest share in the EU.
In addition to losing customers on its own continent, Germany will likely lose out to BYD vehicles in other export markets as well, accelerating the move towards more import-intensive trade dynamics.
Nigel Griffiths, director of automotive forecasting at S&P Global Mobility, doesn’t think the European EV market will deteriorate enough to create a new rust belt on the scale of the United States, but the situation will get worse.
“We believe things are moving towards a change in this trend. Europe will go from being a net exporter of cars to becoming a net importer of cars, as it has been for decades,” Mr Griffiths said. luck.
The outlook for Europe’s auto jobs had been bleak for several years before COVID-19, accelerated by the shift to electric vehicles, which reduced the number of parts needed to make a car, Griffiths said. Point out.
The semiconductor shortage crisis has also forced automakers to prioritize the types of models they produce, giving Chinese automakers more room to enter the market.
“They all suggest that there will be far fewer jobs in this sector. So it’s happening at the same time as this trade effect, and it’s going to be negative for long-term employment in this sector as well,” Griffiths said. he said.
Nishita Agarwal, an auto industry analyst at the Economist Intelligence Unit (EIU), is more optimistic about Europe’s ability to fend off the Chinese threat and protect regional jobs.
An EU investigation into alleged anti-competitive subsidies provided to Chinese carmakers by their government could result in additional tariffs on Chinese imports.
Mr Agarwal said other measures to protect the country’s automakers were likely to be introduced.
“However, given China’s dominance in EV and battery production and sales, there will be disruption in the short term as European companies scramble to develop and source alternative supplies,” Agarwal said. .
As Felipe Muñoz, global analyst at JATO Dynamics, explains, battery superiority is no small obstacle.
“China is the only country in the world with an electrification policy that not only extends to public incentives and infrastructure, but also includes full control of the raw materials needed for battery production,” Muñoz said.
“The United States and Europe currently do not have this advantage. If this situation does not change and the country’s industry continues to rely on Chinese parts, the influence of European automakers will decline not only in Europe but globally. Let’s go.”
Japanese lesson
A better comparison than the Rust Belt might come from looking east 40 years earlier.
According to S&P’s Mr. Griffiths, the battle between European and Chinese automakers, particularly over their respective export markets, is comparable to the battle between Japanese incumbents and South Korean disruptors.
South Korean automakers copied Japan’s strategy to export to Western markets, with Hyundai, Daewoo and Kia signing deals with American parts makers and shipping hundreds of thousands of models to the United States.
College students and other bargain hunters flocked to cheaper Korean products, and it didn’t take long for American buyers to regain the brand loyalty that Japanese automakers like Toyota had built over decades. Ta. LA Times Reported in 1987.
According to Griffiths, South Korea’s intrusion into Japan’s export market occurred over a 10-year period. However, European automakers cannot expect the same preparation time as in the past.
“In China, they’re probably looking at how the Koreans came in, and they’ll probably try to do the same thing, but two or three times faster,” Griffiths said.
“They won’t wait more than 10 years.”
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