On October 28, 2024, an employee at the Volkswagen Zwickau plant stood next to the Volkswagen logo inside the factory during an information conference organized by the Volkswagen Saxony State Works Council in Zwickau, eastern Germany.
Jens Schrute AFP | Getty Images
Analysts say the perfect storm of challenges facing the European auto industry shows no sign of abating.
Automakers have been grappling with a host of headwinds on the road to full electrification, including a lack of affordable models, a slower-than-expected rollout of charging stations, fierce competition from China, tougher carbon emissions regulations and targeted carbon The future of emissions policy.
It is against this backdrop that the industry will face a bumpy next year, analysts say.
Julia Poliscanova, senior director of vehicles and electric vehicle supply chain at the Transport and Environment Campaign group, described the outlook for European carmakers as “pretty bleak”.
“They are lagging behind in terms of electrification, their products are not as good as their strong Chinese competitors — that’s not anyone’s fault but the fault of the automakers,” Poliskanova told CNBC via video call.
Poliscanova highlighted that car sales in Europe remain below pre-Covid-19 levels as the industry continues to grapple with higher interest rates.
Some European original equipment manufacturers (OEMs) have expressed concerns about the next step in tightening carbon emissions regulations, especially as demand for electric vehicles declines.
The average emissions cap for new car sales in the EU is expected to drop to 93.6 grams of carbon dioxide per kilometer (g/km) from next year, a 15% reduction from the 2021 baseline of 110.1 g/km.
Exceeding the limits – which were agreed in 2019 as part of the 27-nation bloc’s ambition to become climate neutral by 2050 – could result in hefty fines.
European Automobile Manufacturers Association (ACEA) call The EU will reduce compliance costs in 2025 “while keeping the green mobility transition firmly on track.”
The car lobby group representing car companies including BMW, Ferrari, Renault, Volkswagen and Volvo said in late November that action was needed to further support the industry, citing sluggish demand for electric vehicles and a deteriorating economic environment.
A spokesman for the European Commission could not immediately comment on calls for regulatory relief for carmakers. An EU spokesperson previously told CNBC that the EU’s executive arm was “very sensitive to the challenges facing” the industry.
What’s next for the European auto giants?
The Ministry of Transport and Environment’s Poliskanova said it was “really frustrating” to see calls for the European Commission to water down its carbon emissions regulations.
“To me, it’s not relevant… The vehicle CO2 emissions target won’t help them sell or sell more cars in China, that’s not the point. However, the vehicle CO2 emissions target is critical to improving their competitiveness and achieving transformation Faster,” Poliskanova said.
“So this is pushing them, even if it hurts some of their higher margins in the short term, it’s pushing them to make products that are viable going forward,” she added.
Poliskanova said the move to postpone fines was the same as abolishing regulation altogether, warning that it would only delay the inevitable “which is the death of European industry”.
“We’re behind on electrification. So how exactly does delaying the goals and making us further behind help the industry? I don’t understand. I just don’t understand how that helps the transformation that they have to go through,” Poliskanova said explain.
The stocks of the so-called “big five” in the European automotive industry—Volkswagen, BenzBMW, star and Renault – share prices have fallen sharply this year, although France’s Renault is a notable exception.
From a financial perspective, I currently don’t foresee much improvement.
Rico Luhmann
Senior Sector Economist, Transport & Logistics, ING
Milan-listed Stellantis led the decline, down 37% so far this year, while Germany’s crisis-hit Volkswagen fell 23% over the same period and Munich-based BMW fell 21%.
Meanwhile, shares in Renault rose 19% on hopes the carmaker might outperform rivals due to its relatively limited presence in China and the United States.
“Not much improvement expected”
Deutsche Bank analysts said in a research report released on December 9 that “global auto stocks are going through a difficult time.”
“Unfortunately, we think the industry may be heading into another year of volatility and headwinds across regions. We expect more noise about potential policy impacts in the U.S., further restructuring announcements in Europe, weaker demand outside of China, and pricing Softened,” they added.
This aerial photo taken on June 28, 2024 shows newly produced BMW cars parked at a factory in Shenyang, northeastern China’s Liaoning province.
STER | AFP | Getty Images
Rico Luman, senior sector economist for transport and logistics at ING, took a pessimistic view on the prospects for European original equipment manufacturers.
“From a financial perspective, I’m afraid it won’t be better because (electric vehicles) will end up being a less profitable model,” Luhmann told CNBC via video call.
“They tend to focus more on conventional hybrids as well as plug-in hybrids because the profitability is strong there. So if they are forced to move more to electric vehicles, then that will impact profitability. So, from From a financial perspective, I don’t think much improvement is expected at this point,” he added.
“What people need are cheaper electric cars”
Europe’s largest car manufacturers A series of low-cost electric vehicles were launched at the Paris Motor Show in October in an attempt to reverse sluggish demand and regain some of the market share currently held by Chinese brands.
It was hoped that the new model would represent a turning point for the region’s automotive industry.
Horst Schneider, head of European automotive research at Bank of America, said European lawmakers may need to give carmakers some wiggle room next year, even though the companies have had several years to prepare for new carbon regulations.
“Most carmakers are lagging behind, except maybe BMW and Stellantis. Volkswagen has the biggest gap because it is also the largest carmaker and has the most exposure (to internal combustion engines). The EV rollout has been a bit of a flop, but Renault has also been affected. had an impact.
“So I would say all the mass-market automakers, except Stellantis, are under pressure because EV prices are still well above ICE prices, about 20 or 25 percent,” Schneider said.
“What people want are cheaper electric cars. They will be launched in 2025, so some carmakers say there is no need to really cut the target – but I think in general it is good to give carmakers more time.” Good thing, because people are very receptive to electric cars.
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