Automotive Industry:Europe: Difference between revisions

* Technological Leadership:  the advantages that European OEMs had in ICE design and high-quality engineering are increasingly losing their importance as the changeover to electric and software-defined vehicles accelerates. In the electric vehicle (EV) realm, the European auto sector is having difficulty keeping up with other global players in battery cell design, power electronics, extending battery range, and innovative rapid charging technologies. Companies skilled in designing software first and hardware second are increasingly poised for market leadership.

* Cost: US and Chinese factories rapidly adopt robotics, moving closer to more sophisticated automation. Moreover, many of these companies have more flexible cost structures because their labor outlays are lower due to little or no unionization at their plants. And energy price volatility is likely to be a permanent fixture, the result of geopolitical conflicts and resource scarcity, which will affect European automakers more than such companies in other regions.

* Geopolitics: Planned deglobalization is more the norm now to guard against political uncertainties and disruption. Supply chains are shrinking as automakers in developed countries are encouraged to source parts and materials locally.  

* Chinese Sales Market: The rise of Chinese EV makers catering to local preferences has forced European companies to lower their prices in China, as they struggle to sell as planned. The Chinese market is becoming more challenging for European OEMs as Chinese competitors improve and nationalism grows.

Scenario 1  is the least desirable outcome but is perhaps a window on the direction that the European auto industry is moving unless steps are taken to stem the bleeding. If Europe's investment in local battery and semi-conductor production does not speed up, supply of such critical items is likely to remain prone to shortages and global dependencies.  

The European companies are beset by a lack of developed local technology talent and by stringent regulations that hinder the ability to catch up to their rivals in software and EV advances. These shortcomings also extend to ADAS and battery breakthroughs as well as factory automation. Focused investments in R&D and the acquisition, training, and retention of local IT talent is also needed to combat this.

Importantly, European OEMs will also need to cut costs through restructuring labor and making investments into automation, navigating headwinds from labor unions.

For the European auto industry, staying on its current path is likely to lead to secular decline. Even taking limited steps to improve is expected to result in stagnation or only slight gains. But achieving real leadership and a positive future is not out of reach.