Car makers operating in Europe’s traditional automotive manufacturing hubs, including Germany and the UK, are sounding the alarm over the cost of developing and building both cars and automotive technology locally as they brace themselves for competition from cheaper, more profitable Chinese electric cars.
“We want to invest in technology, batteries, chips but Europe is too slow in this game,” Thomas Schaefer, head of the Volkswagen brand, told Autocar at the recent Munich mobility show.
Schaefer singled out battery plants as an example where the local costs are hampering plans to onshore what will be a key investment as EVs ramp up. The VW Group said back in 2021 it would build six battery plants in Europe but has so far announced only three.
“For a battery plant, electricity price is key. China is six cents per kilowatt hour [kWh], or five cents, or less. Canada is seven cents," said Schaefer. "Germany is up to three times as high. It’s cheaper to build in Canada and re-import into Germany, even with all the logistics and import duty”.
Europe is being squeezed as an automotive manufacturing hub by both North America and China because of a mix of local subsidies, lower energy prices, cheaper labour costs and supply chain efficiency.
The threat from China is more fundamental because local players are increasingly using their manufacturing efficiency to export vehicles that threaten to undercut European-built models.
At the Munich show, competitors such as BYD, MG, Leapmotor, Seres and HiPhi lined up to give tangible proof to the old guard of what they were up against.
Currently, global legacy car makers have a 95% market share in Europe, leaving Tesla and the Chinese players 5%. By 2030, the Chinese will be up to 20% in Europe, with Tesla at 10%, banking firm UBS predicted in a recent report looking into the cost effectiveness of Chinese-built cars.
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