The motor industry slows down its electrical commitment

The opinion of Akio Toyoda, CEO of the Toyota brand between 2009 and 2023, about electric cars is well known. At the beginning of the year he stated that no matter how much it improves, at most pure electric will only achieve 30% of sales in the future. The brand has always had a cautious attitude with the development of this technology, but that same caution, which was a “rare bird” in the sector, now seems to have spread. Mercedes, which intended for electric and hybrid vehicles to reach 50% of its production in 2025, has recently announced its intention to delay this achievement to 2030. General Motors communicated at the end of 2023 its intention to slow down the production of electric vehicles and Ford did it earlier this year. Even, Tesla, flagship of electric mobility and sales leader in Europe, has announced a drop in production.n by 2024. In addition, management has reduced 10% of the workforce.

Do these manufacturers' announcements mean that we are facing an electric car crisis? If it is not a crisis, what is the reason for this industrial stoppage? The International Energy Agency states that sales of electric cars have increased by 25% in the first quarter of the year. An increase similar to that of 2022. In Spain, a March report from the national association of manufacturers (ANFAC) states that electrified vehicles They decreased their production by 25.6% due to the drop in demand in Europe. The market share of electrified vehicles was 9.5% in the first two months, about 4.4 points less than in the same period of the previous year. In Germany, the end of electricity subsidies has led to a drop in sales of 8% in a single quarter. «Something is happening that was expected. The European administration has tried to impose a technology, but without being clear about the investments needed in infrastructure, without providing it with the means and without the user fully assimilating and understanding the change. Many cars are expensive and there is still no clarity on whether or not you can handle a long journey. In addition, there is brutal competition from China and a paradigm shift. Kids today no longer see it as necessary to have a car, their mobility is based on BlaBlaCar or going by bus or train… I always say that The future of mobility is eclectic, not electric, because it will depend on each person and each need. For a person who does 6 km a day, the same is not needed as for someone who does between 80-100 km a day; For the latter it is better to opt for a high-efficiency thermal one,” says Antonio García, researcher at the CMT-Thermal Engines Institute of the Polytechnic University of Valencia (UPV). «The uncertainty of automotive companies and public administrations about the future configuration of the sector due to the wide variety of emerging technologies, such as the autonomous vehicle, and the consequent reluctance of administrations to advance more quickly in urban planning and installation of charging stations, are two of the factors that influence the slowdown of the electric vehicle,” comments Bertha Vallejo, visiting researcher at the Ingenio Institute, a joint center of the Polytechnic University of Valencia (UPV) and the CSIC. As if that were not enough, studies such as that of the Association of British Insurers estimate that Electrical repairs are up to 25% more expensive.

More than a hundred years

The motor industry in Europe It represents more than 7% of the GDP and generates 8.5% of employment (in Spain it contributes 81% of GDP and 9% of employment). «Curiously, the EU, as in other environmental aspects, was a pioneer when it came to encouraging the demand for cars, but not so much their production, since for a long time it opted for the hybrid model, which turned out to be a strategic error. “China, on the other hand, did not have a motor industry to defend and opted directly for the electric car,” says a recent report by the Elcano Royal Institute in which it analyzes the market prospects for these vehicles. He also points out that “in the EU it is observed with concern how the US and China have articulated policies to support the sector that could leave the European industry (and especially the German industry) anchored in the past, that is, leading combustion engines.” which in principle should stop being produced in 2035.

Has there been too much progress in imposing electric mobility? «The European industry has a socioeconomic debt that new manufacturers do not have. If you have 20 factories, you have to distribute the workload among them, and you also have the commitment to maintain jobs… New manufacturers do not have all of these problems. We have started the house from the roof. The problem in Europe comes from 2015 when the Dieselgate scandal broke out. There, the European industry lost its lobbying power, which was what managed to rationalize the regulatory deadlines. Then the authorities have forced the objectives to be met, because the manufacturers were not trustworthy. Electricity is a great idea, but not even imposing it, because it is not the solution for all needs. The entire global motor industry has been based on an industrial model that has been around for a hundred years and when electricity is imposed we face the problems of any other industry, making scalable solutions,” says Ignacio García Rojí, spokesperson for Somauto (specialist firm in vertical engine portals).

China opted very early and very clearly for electric vehicles and has managed to be the largest producer of electric vehicles in the world with 54% of the market (many of those who produce are foreign, from brands such as Tesla or Renault)… According to the report ElCano, China provided state subsidies for electric and hybrid vehicles worth $57 billion between 2016 and 2022. Subsidies for the acquisition of vehicles were going to be withdrawn in 2023 (after 11 years), but that year they were extended until 2027. Current production aid includes everything from direct production subsidies to discounts on electricity prices. , raw materials and batteries, through preferential loans and the cheap provision of land. Reading the report, it is not surprising that the European Commission decided at the end of 2023 to open an anti-subsidy investigation since “The aid from the Chinese Government has harmed the EU industry (the prices of Chinese electric vehicles are usually 20% lower). than those manufactured in the EU. has to decide whether to increase tariffs on Chinese cars. It is now set at 10% and could rise to between 15% and 30% (in the US the tariff is already 27%). «In China, production is greater than its internal demand. Between 2023 and 2025, about five million units are expected to be manufactured and domestic demand is capable of absorbing between 3 and 4. That is why they want to export and do it now before new tariffs are applied,” says Cristian Campos, professor at the UOC Economics and Business Studies. The researcher remembers the recent announcement of the Chinese brand Chery to install one of its factories in Catalonia. «If you are within the EU you can skip the tariffs. And even if it pays labor at European cost, the brand will still have access to economical materials such as copper or rare earths. Another Chinese firm, BYD, a direct competitor of Tesla in the US, promises to disembark with models for less than 20,000 euros with premium features like a rotating touch screen and wireless phone charging. «There is a report from Allianz Trade on the impact of China's arrival in the EU market that says that by 2030 it will mean a reduction in the business model for other brands of up to 7 billion euros per year. “Some European brands are considering whether it is worth continuing to produce or if they move on to design and have others do the manufacturing.”

Trade war

The Commission considers that Between 2021 and 2023, sales of Chinese cars in Europe have doubled. To stop the advance of Chinese brands, increasing tariffs is being studied, but there is fear of a possible trade war or that Beijing will retaliate. It must be remembered that the Asian country is the largest market for European brands, especially German ones. In the case of BMW, it represented almost a third of sales in the first quarter of 2024.

The situation It is reminiscent of years ago with photovoltaic panels. The EU wanted to impose tariffs of no less than 48% on the Chinese because they were eroding EU production, but when Chinese leaders threatened to attack EU imports of wine and cars, Brussels backed down. Now, Beijing responds to France for tightening car import conditions with an investigation into cognacs.