An employee of the Volkswagen Zwickau plant stands next to the VW logo on the factory premises at an information event held by the Volkswagen Sachsen works council in Zwickau, eastern Germany, on October 28, 2024.
Jens Schlüter Afp | Getty Images
The real storm of challenges facing the European automotive industry shows no signs of abating, analysts say.
Automakers are struggling to cope with a number of headwinds on the path to full electrification, including a lack of affordable models, a slower-than-expected rollout of charging stations, strong competition from China, stricter CO2 regulations and the prospect of targeted U.S. Customs duties.
Against this background, analysts say the industry will be prepared for bumpy developments next year.
Julia Poliscanova, senior director of vehicles and e-mobility supply chains at campaign group Transport & Environment, described the outlook for European automakers as “pretty bleak”.
“They're behind on electrification, their products are simply not as good as those of the formidable Chinese competition – and that's not the fault of anyone but the automakers,” Poliscanova told CNBC via video call.
Poliscanova highlighted the fact that car sales in Europe remain below pre-Covid-19 levels as the industry continues to struggle to get to grips with higher interest rates.
Some European original equipment manufacturers (OEMs) have expressed concern about the next tightening of CO2 regulations, particularly given the slowing demand for electric vehicles.
The European Union's cap on average emissions from new car sales is expected to fall to 93.6 grams of CO2 per kilometer (g/km) from next year, a fall of 15% from the baseline of 110.1 g/km in the year 2021 corresponds.
Exceeding these limits – which were agreed in 2019 and are part of the 27-country bloc's goal of achieving climate neutrality by 2050 – can result in hefty fines.
The Association of European Automobile Manufacturers (ACEA) has called on the EU to reduce compliance costs for 2025 “while keeping the green mobility transformation on track.”
The car lobby group, which represents companies including BMW, Ferrari, Renault, Volkswagen and Volvo, said in late November that measures were needed to further support the industry, citing sluggish demand for electric vehicles and a deteriorating economic climate.
What's next for Europe's auto giants?
Transport & Environment's Poliscanova said it was “really frustrating” that some were calling on the European Commission to weaken its carbon regulations.
“For me there is no connection… The CO2 target for cars will not help them in China or sell more cars, that is not the point. However, the CO2 target for vehicles is crucial to make them more competitive and enable them to transition more quickly,” Poliscanova said.
“So it drives them to produce future-ready products, even if it comes at the expense of some of their higher profit margins in the short term,” she added.
Postponing the fines would amount to a complete abolition of the regulation, Poliscanova said, warning that this would only delay the inevitable “which is the demise of European industry.”
“We are behind on electrification. How on earth does delaying the goal and putting us even further behind help the industry? I don't understand. I just don’t understand how it helps the transition they have to go through,” Poliscanova said.
A European Commission spokesman was not immediately available to comment on calls to give automakers regulatory relief starting next year. An EU spokesperson previously told CNBC that the bloc's executive branch is “sensitive to the challenges facing the industry.”
Stocks from the so-called “Big Five” of the European automotive industry – Volkswagen, MercedesBMW, Stellar and Renault – have largely collapsed this year, although France's Renault is a notable exception.
From a financial perspective, I don't expect much improvement at the moment.
Rico Luman
Lead sector economist for transport and logistics at ING
Milan-listed Stellantis led the way in losses, down 38% since the start of the year, with crisis-hit German group Volkswagen down 23% and Munich-based BMW down 21% over the same period.
Renault, meanwhile, posted gains of 19% on hopes the automaker could outperform rivals given its relatively limited exposure to China and U.S. markets.
“I don’t expect much improvement”
“Automotive stocks are having a tough time globally,” analysts at Deutsche Bank said in a research note published on December 9th.
“Unfortunately, we expect the industry to face another year of volatility and headwinds across all regions. “We expect more noise about possible political fallout in the US, further restructuring announcements in Europe, subdued demand from China and a moderation in prices,” they added.
This aerial photo taken on June 28, 2024 shows newly produced BMW cars parked at a factory in Shenyang, northeast China's Liaoning Province.
Str | Afp | Getty Images
Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, was pessimistic about the outlook for Europe's OEMs.
“From a financial perspective, I don’t think it’s going to be any better because.” [EVs] end up being less profitable models,” Luman told CNBC via video call.
“They tend to focus a lot more on conventional hybrids and also plug-in hybrids because those are profitable. So if they are forced to shift more to fill EVs, that will impact profitability. So from a financial perspective, I'm not. “I expect a significant improvement at this point,” he added.
“What people need are cheaper electric vehicles”
Several of Europe's biggest automakers unveiled a range of low-cost electric vehicles at the Paris Motor Show in October, aiming to boost falling demand and regain some of the market share currently held by Chinese brands.
It was hoped at the time that the new models could represent a turning point for the region's automotive industry.
Horst Schneider, head of European automotive research at Bank of America, said some leeway from European lawmakers may be needed to support automakers next year, even though companies have had years to prepare for the new CO2 emissions. prepare regulations.
“Most car manufacturers are lagging behind, perhaps with the exception of BMW and Stellantis. Volkswagen has the biggest lag because it is also the largest car manufacturer and has the most exposure to the market.” [Internal Combustion Engines]. “The introduction of electric vehicles has somehow failed, but Renault is also under pressure,” Schneider told CNBC's “Street Signs Europe” on December 6.
“That's why I would say that all mass-market automakers – excluding Stellantis – are under pressure just because electric vehicle prices are still too far above the price of internal combustion engines, they're around 20% or 25%,” Schneider said.
“What people need are cheaper electric vehicles. They're coming to market sometime in 2025, so some automakers say there's no reason to really cut the targets – but I think in general giving automakers more time is good because adoption is increasing. “The consumer side is just not there yet,” he added.
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