Europe Might Need to Shift  Gears If It Wants To Stay In The Game

 

The race is on:  Europe, the cradle of the car industry, and where it all started almost 130 years ago when the first automobile was invented is now trying to catch up with China, a place booming with startups in the automotive industry, where the car as we know is now practically being reinvented.

The European emission scandal back in 2015 seriously damaged the industry’s reputation, finances, and public trust. As a result, sustainability became a market factor, and many countries with the biggest European cities — Paris, London, Dusseldorf and Stuttgart — introduced new regulations and frameworks limiting the use of fossil fuel powered engines at the same time promoting electric cars.

Let’s look at the numbers: in 2017, China secured seven times more investments in the electric vehicle manufacturing industry than the EU did (21.7 billion Euros to 3.2 billion Euros).

Experts predict that if electric vehicles are imported rather than manufactured in Europe, the EU’s automotive industry might have to get rid of a quarter of its jobs by 2030.

China is now the largest electric car market in the world; not only does it account for half of the global sales but is also the place where almost two-thirds of the world’s manufacturing capacity for lithium-ion batteries reside.

These two factors coupled with the fact that car companies can avoid heavy tariffs on imported vehicles, play a huge role in car companies building their electric cars in China.

These are also the reasons why Tesla’s Chinese Gigafactory is responsible for building the new Model 3 and  Y, which are scheduled to premiere in March 2019 and hit the production lines in early 2020.

China is also seen as the leader of the EV battery technology. This is not good news for the European automotive industry as major European battery companies are picking China as a place to invest in rather than the EU. For example, Lithium Werks, a Netherlands company, already has two factories in China, while the third one is already scheduled to open soon.

CEO of the company, K. Koolen, commented on this move by saying that “the company is investing in China because the infrastructure is better and it’s easier to get the permits needed to build a factory.” However, in Europe, they’ve faced too many red tapes which stopped the process.

of investing: “In Europe, there’s a lot of hassle and a lot of procedures to follow. It takes a long time. The Chinese government has a long-term vision for the industry, while Europe does not.”

European Commission tried to make things better and came up with a strategy that included encouraging companies to invest more in battery technologies through providing them with larger funding. However, it may not too little too late : V. Irle, co-founder of the Swedish research company EV-Volumes commented on the strategy saying that “it’s already too late for European companies to establish themselves as large-scale manufacturers of lithium-ion batteries as that train has already departed.”

In 2001, China started the “863 EV Project”, which was a combination of a fuel cell, a hybrid EV, and a pure EV.  Fast forward to 2018; an increase of 114 percent in the production of EV’s in China has already been recorded in comparison to the first half of 2017. Europe, on the other hand, is estimated to have just 1 percent of the lithium-ion batteries market.

So why is Europe in such position right now? Why has catching up with China become such a big challenge? The answer is quite simple: In terms of computerization, electrification, and sharing of vehicles, China is way ahead. By now, it has already established seven times more investments in EV production than the EU has — and all this has happened in just one year.

Experts say that the biggest reason why Europe has fallen so far behind China is the fact that EU’s automakers took too long before they started to develop electric cars. V. Irle has a simple explanation for this one: “They didn’t take electric vehicles seriously because they didn’t like them. Until recently, many of the big players focused their resources on gasoline-powered cars.”

China, on the other hand, has put in place targets for electric vehicle production, and offered incentives to buyers which have helped the industry boom.

However, Europe doesn’t want to be left out of this game. Swedish battery maker Northvolt —which was founded by former Tesla executives — has promised to build Europe’s largest lithium-ion battery factory over the course of the next 6 years. Many EU members also have their own plans with regards to electric cars.

Germany’s EV market doubled between 2016 and 2017 and is now the second in Europe. Norway took the first place since every second passenger car that was sold there in 2017 was an electric one. Croatia is proud of their very own — Rimac supercar. Additionally, Poland has launched a competition to come up with an entirely Polish made electric vehicle.

The new EU regulations and emission standards mean that the European market will soon see even more electric cars come into the market: experts predict that the new rules could increase the sale of electric cars in Europe from 0.6 percent to a higher single digit over the next 5 to 6 years.

This fact puts Europe in the middle: it will most likely outpace the US, where the regulatory push has eased under the Trump administration, but it will also run short when compared to China, where the government is mandating more electric cars.

The Chinese market already features an impressive number of 400 different types of electric cars. The European market only has  6. When you think about it, EU companies really do have it all: incredible know-how, expertise, R&D, and highly skilled professional workers. But while China has gone ahead to become the biggest electric car market in such a short period of time, Europe has been asleep on the wheel. Now, if it wants to catch up, it really needs to shift gears.

As we’ve mentioned at the very beginning, Europe was the place where the car, as we know it, was born. However, now, as it’s being reinvented, the EU needs to embrace a new and dynamic strategy.

Some analysts say that Europe’s last hope may be to take the same approach as it did with the Airbus in the aviation industry. The plane-maker was created by merging a clutch of existing firms and is now the only serious challenge to Boeing in the US.

Doing the same for the electric car market — or at least for electric batteries — could actually be a game changer for the EU’s auto industry.