The European auto industry is facing major challenges due to China’s growing dominance in the electric vehicle market, which will lead to a shakeup and potential revenue losses.
So says the study conducted by Allianz Tradewhich concludes that it is necessary to address these challenges by adapting to the supplier base, satisfying the changing needs of customers and promoting competition in the electric vehicle market.
He Allianz Trade report also warns that the European automotive industry faces a rMassive organization and a potential loss in revenue due to changes taking place in the vehicle market, driven by China’s growing share of the electric vehicle segment.
In fact, he estimates that the European automotive industry could be reduced by 24,000 million euros per yearand associated supply chain industries could be reduced by an additional €21 billion.
The report highlights several factors, such as the shift towards a less car-centric society, China’s leadership in electric vehiclesfewer components in electric vehicles and a European ban on new internal combustion vehicles from 2035.
This is something that is especially important for Europe for several reasons. On the one hand, the automotive sector is the largest industrial sector in Europe, representing 10% of the manufacturing industry in general. In addition, it has a major impact on upstream industries such as metals, plastics, and electronics.
In addition, 80% of the cars sold in Europe are assembled locally in the European automotive industry. And, as if that were not enough, exports generate a significant trade surplus for the European economy, which has fluctuated between 70,000 and 110,000 million euros per year in the last decade.
The electric vehicle grows at a good pace
The shift towards electric vehicles is transforming the European automotive industry, says a report by Allianz Trade which highlights that in 2022 sales of alternative energy vehicles reached a record 4.4 million units, rrepresenting 47% of all new vehicle registrations in Europe.
In fact, battery electric vehicles (BEVs) led this growth, with a 28% sales increase and representing 12% of all new vehicle registrations.
And with a planned ban on internal combustion engines by 2035, the auto industry is in the midst of a complete shakeup, grappling with changes to its supply chain, changing customer demands, competition from new entrants and the evolution of a market less focused on automobiles.
China is the main enemy
However, the biggest risk for the European industry comes from China. China recognized the potential of electric vehicles 15 years ago and has invested heavily in building a competitive electric vehicle ecosystem ever since.
As a result, China leads the global electric vehicle landscape, selling more than double BEV by 2022 compared to Europe and the United States together. Furthermore, it has a competitive advantage in almost all aspects of the electric vehicle value chain.
Chinese brands account for more than 80% of electric vehicle sales in their own countrywhich has led to a significant increase in its market share, from 40% in 2020 to 50% in 2022. At the same time, Chinese imports already account for three of the best-selling BEVs in Europe.
Worrying numbers
If Chinese manufacturers increase their domestic market share to 75% by 2030, European manufacturers could lose more than 7 billion euros in annual net profit for that year, determines the Allianz Trade report.
This would also result in a 39% drop in total sales of European car manufacturers in China, and local production would drop from 4.4 million units to 2.7 million in 2030.
It is estimated that European imports of cars made in China could reach 1.5 million vehicles in 2030, which would have a significant impact on the added value of the European economy, reaching 24,200 million euros in the automotive sector.
Europe has to react
Finally, the Allianz Trade report encourages institutions atTake steps to reduce or stop this trend with potentially catastrophic consequences for the automotive industry on the European continent.
To address these challenges, policymakers could seek reciprocal trade terms with China and the United Statesproposes Allianz Trade.
Also promote improved charging infrastructure to drive adoption of electric vehicles, allow Chinese investment in local car assembly to generate more added value in Europe, increase self-sufficiency in critical raw materials for battery manufacturing, and invest in next-generation battery technologies.
These measures would help the European automotive sector to prepare for the challenges of the future and mitigate the possible impacts, the document concludes.
Additional source | The Driven
