First, we watched the rise of Tesla and now we’re witnessing the rise of China. For us Europeans, these are challenging times. But are we fully aware of what is at stake?
From the UK perspective, I’m writing about an industry that has a turnover of around £67 billion a year and adds £14bn of value to the economy every year through £77bn of trade, as well as accounting for around 7% of the nation’s R&D spend and employing some 800,000 people.
From an EU perspective, I’m writing about an industry accounting for 8% of GDP, 30% of R&D spending and 13 million jobs. The UK may no longer be part of the EU, but on this issue, I think we face the same challenges together. It is very simple: strip out the automotive industry and Europe will find itself with a structural trade deficit.
Today, our sector is facing its most profound change in 150 years. The urge to reduce our environmental impact, the phasing out of the internal combustion engine by 2035 and the ever-increasing safety and cybersecurity requirements for our cars are making them heavier and more expensive. All these constraints add up.
Regulations have piled up, sometimes with unexpected results: the average European car is 60% heavier than 20 years ago, it is 50% more expensive and the number of jobs at car makers has fallen by up to 40% in some countries. Of course, these new cars are also more environmentally friendly.
But there’s another side to this argument. Unfortunately, more expensive cars are also cars that people are less likely to buy. The reality is that we’re keeping older and more polluting cars on the roads for longer, and the age of the European car fleet has risen from seven to 12 years on average.
What’s more, for more than a century, car makers had been playing one demanding but familiar sport, in which the combustion engine set the rules. Now we have to excel in several disciplines with very different and specific requirements: electric vehicles, software, mobility services, the circular economy…
Each of these sports requires a new value chain, covering new materials, new players, a whole new world to understand, from raw material extraction to battery recycling.
This new, extended and fragmented playing field is also characterised by unprecedented volatility. For the internal combustion engine, the technology we were working with was mature and innovation incremental. Batteries are very different: a billion-pound investment in a gigafactory can be called into question overnight if a new chemistry pops up.
