Dear WIMM Reader,
today I am doing a short recap of the automotive industry and its future.
As always, you can write me by replying to this email.
Onto the update:
From Financial Times’ article “BMW sounds the alarm as China squeezes Europe’s carmakers”.
[…] Europe’s automakers have progressively been squeezed out of the Chinese market: cheaper, domestically produced electric vehicles have been gaining share at the expense of the premium traditional cars in which companies like BMW, Mercedes-Benz, Volkswagen and Stellantis specialise.
As a result, sales have been crushed. Porsche’s revenue from China, for instance, fell by roughly two-thirds between 2022 and 2025, according to S&P Capital IQ. And the Chinese profit pool — which in peak years accounted for about half of the operating profit at BMW and Mercedes-Benz, according to Citigroup analysts — has shrunk to a puddle, or dried up completely. VW’s operating profit from its Chinese joint ventures almost halved last year, to €958mn. […]
Unsurprisingly, the European Union is considering protecting its domestic industry with “Made in Europe” rules for public procurement and access to subsidies. That, at least, would safeguard European parts suppliers and jobs. Sniffing the wind too, European carmakers have tentatively started to co-operate with their Chinese rivals: witness Stellantis’ discussions with Dongfeng over use of its spare capacity in France. It is still an uphill road if ever there was one.
This is how bad the situation is:
I wrote in two essays what the impact in transition to EV means:
Summarizing from Part I of my EV series, we are experiencing a once-in-century paradigm and platform shift that will bring (probably) new winners. The classic car with an internal combustion engine (ICE) was developed and perfected over at least 100 years. The traditional automaker’s competitive advantage lies in advanced proprietary engines, manufacturing, design, and (sometimes) distribution.
Transitioning to making electric vehicles (EVs) the competitive advance moves to manufacturing (ie. gigafactory), design, and distribution, BUT you have 5-10x less spare parts and need a totally new skillset: software. The Chinese EVs will take probably 25% of the European market in 2024 as seen in Figure 2, according to
..and saying:
Let’s assume you have the money (ie. $5-10 billion), the design, and distribution. What you’ll need to make the EV will focus on 5 key areas: e-motor, battery, hypercasting, autopilot, and multimedia.
How will Europe solve the battery supply chain and software (autopilot and media)?
All regulations (from GDPR to AI, Digital Markets Act and Digital Service Act) made it impossible for European companies to compete, hence no companies in AI too (!)
To produce batteries, you need the entire supply chain, which in the current conditions (regulation), will not happen in the EU. Here is a brief:
This is the situation as we speak:
Ernest Hemingway said:
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
Here is again Bloomberg:
So, what I think will happen:
It will be a slow death for the European manufacturers
Lacking software and technology (battery), they will partner with the Chinese companies to survive, although losing most (all?) autonomy.
Will push for “Made in Europe” cars to preserve some of the jobs in the supply chain
That’s all. Game over!
What do you think excessive regulation brings? Prosperity? Let’s be serious.
Have a nice day!
Sorin
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