It's been called the "toxic cocktail." A mix of high labor costs, shrinking markets across the world, uneven electric vehicle sales and tough new competition from China are working together to bedevil Europe's car companies. Any one of these issues would mean a serious headache for any automaker; together, they make for one of the more apocalyptic environments we've seen for these companies since perhaps the Great Recession.
But Europe's automakers do have a plan to fight back, and that's what we'll cover on today's Critical Materials news roundup. Also on deck: a look at the impact EVs will have on auto jobs, and why U.S. EV and battery investments are hardly slowing down.
30%: High Stakes For Europe's Automakers At The Paris Motor Show
I'm a bit ashamed to admit this but as an American, I don't really think about Renault all that much. (Sorry, everyone.) But I've been thinking more and more about the French automaker these days because its newest designs are absolutely fire: the new electric Renault 5, the new Renault 4 E-Tech and others have me wishing this brand would give the U.S. market another go.
Frankly, Renault is going to need all the firepower it can muster. Nearly all the European automakers—the Volkswagen Group, Stellantis, Mercedes-Benz and so on—are losing market share like crazy in China and their home turf at the same time. So at the 2024 Paris Motor Show, which commenced on Monday, those car companies shored up their defenses with new budget EVs.
Here's Bloomberg:
With drivers balking at the high cost of owning electric vehicles, Stellantis NV, Renault SA and Volkswagen AG plan to showcase their latest budget EVs at the biennial event that starts Monday. Their aim is to turn around a slump that started last year when governments began pulling back incentives to ditch combustion engines.
The stakes are high for the new models to succeed. Chinese rivals led by BYD Co. are gaining market share in the region with cheaper models. And if the European carmakers fail to sell more EVs, they’ll be on the hook for as much as €15 billion in fines for failing to meet stricter fleet emissions-reduction targets.
“The mood is not great around EVs right now — there’s not enough charging infrastructure, there’s volatility on price, but let’s see,” Renault Chief Executive Officer Luca de Meo said. “We are really trying our best.”
Renault is at the forefront of the affordability push, unveiling plug-in models in Paris including the R4, which is expected to cost less than €35,000 ($38,269). It’s also showing off the new R5, a €25,000 electric version of a 1970s gasoline car that offered fuel-efficient transport during a time of soaring oil prices.
Other examples include Stellantis' new Chinese joint venture Leapmotor, the Skoda Elroq, some new electric Mini Coopers and so on.
As is the case in America, the overall car market is shrinking because people are fed up with high prices and high interest rates, so more affordable EVs like these are the right move for now. The problem is that China's automakers are making serious inroads into Europe too, and they're hardly just sitting back and letting the home team score some runs (or goals, I guess I should say, since this is Europe we're talking about):
BYD is bringing EVs and plug-in hybrids to Paris including mass-market models competing with the French and German cars as well as Tesla Inc.’s Model Y. In a bid to demonstrate its technology prowess, BYD also will be showcasing the Yangwang U8, a luxury SUV costing around 1 million yuan ($141,509).
Guangzhou-based Xpeng Inc., which has a partnership with Volkswagen, will present its upcoming P7+ sedan, a longer-wheelbase version of the €50,000 P7 that competes with more expensive mid-size models from BMW and Mercedes.
While manufacturers including Great Wall Motor Co. and Nio Inc. are absent from the show, a number of Chinese automakers have sent their staff to Paris to discuss potential partnerships, market entries and European production with local manufacturers and dealers.
And China still has a tight control over the part of EVs that matters the most: the batteries. Plus, it has the edge on labor costs, though we can't pretend that situation is all sunshine and rainbows.
Do Europe's automakers have a fighting chance here?
60%: Will EVs Really Mean Fewer Auto Jobs?
What do Donald Trump and Akio Toyoda have in common? At least one thing that I can think of: both are convinced that the move to EVs will have a disastrous impact on employment in the auto sector, which is a crucial part of any country's economy and certainly the global one. Toyoda seems to consider himself not only chairman of the world's largest automaker by volume but also the vanguard of Japan's auto sector and the millions it employs; Trump never passes up an opportunity to spread doom and gloom about EVs on the campaign trail.
It's no secret that EVs need fewer parts than internal combustion vehicles do. So how bad could the jobs impact really be? Right now, research points to "maybe better, actually" or "a bit worse than now." In other words, it depends on who you ask and how they culled their data. Here's The Detroit News:
But emerging research on the topic — including a new, first-of-its-kind study from the University of Michigan — suggests that vehicle manufacturing won't see the job losses EV skeptics have warned of, though the impacts will be mixed. The UM study suggests that building electric vehicles requires more labor — or in other words, more jobs — than gas-powered cars over a plant's first 15 years or more of making EVs.
"(R)apid widespread loss of employment at vehicle assembly plants is a smaller risk than many fear," the team of researchers led by Ph.D. engineers Omar Ahmed and Andrew Weng wrote. That finding, though there are important caveats, conflicts with Trump’s comments on the topic.
Analyses on other areas of the automotive supply chain, the UM team pointed out, suggest a wide range of job impacts. For manufacturing of battery cells poised to replace traditional gas-powered engines, two leading studies indicated there could be a jobs boom.
Researchers at Carnegie Mellon University and McKinsey & Company estimated that battery cell manufacturing in an all-EV auto industry could represent 107,000 or 71,000 jobs, respectively. Those would be significant increases over the roughly 57,000 engine manufacturing jobs in the United States.
A third study from Argonne National Laboratory, however, suggested that battery cell manufacturing might only be responsible for 31,000 jobs in an all-EV market. Trump has played to fears of such a decline.
So the jury's kind of out, but I have a very hard time believing this will be some extinction event due to electrification alone; intense competition in this space (see above) is the far greater threat.
I also think that so much of the rhetoric around EVs ignores the jobs that are coming or are in play right now due to investments in this space, including and especially right here in America. To that end...
90%: America's EV Investments Are Hardly Slowing Down
Maybe some automakers are culling back their EV plans and delaying certain models as sales grow, but not at the level they expected in 2024. I tend to think of this as I do with artificial intelligence: the initial hype wave is over, and now the serious players are settling in for what will be a long war and not some overnight transformation.
But don't think investments in the space are slowing down. Not at all, and especially not in the U.S. Here's one example from Bloomberg again:
The Biden administration is poised to loan nearly $671 million to Aspen Aerogels Inc. to make a key component of electric car batteries in the election battleground state of Georgia.
The conditional financing, being announced Wednesday by the US Energy Department, will fund construction of a new manufacturing plant producing thermal barriers that help prevent battery fires. It’s part of President Joe Biden’s push to build a domestic supply chain for electric vehicles and the advanced batteries that power them.
“We are making sure that the supply side is made here in this country,” Jigar Shah, director of the Energy Department Loan Programs Office, said in an interview. “We have taken very seriously the onshoring of the entire supply chain.”
Or how today, a Canadian miner announced General Motors will contribute $625 million to a Nevada joint venture for battery-related materials for EVs and hybrids. Or how a Stellantis-backed Silicon Valley startup called Lyten will invest more than $1 billion into "the world's first factory for lithium-sulfur batteries," also in Nevada.
The lists go on and on, and I think it's fascinating that we have three examples like that on one day. But don't think this technology is going anywhere; the alternative is that America lets China continue to take the lead it, and no sane person on the business or policy side in the U.S. wants that.
100%: What Brand Do You Wish Sold EVs In Your Country?
I can't even remember the last time I saw a Renault on U.S. roads (perhaps this one possibly abandoned one I see in Manhattan from time to time) but in the last couple years, it's quietly upped its design game. As more Americans seek affordable EVs, I wish that new Renault 5 had a path to sales here. But between the battery issues and the tax incentive rules around local production, I'm certainly not holding my breath.
Your turn: what EVs do you wish were sold in your neck of the woods?
Contact the author: patrick.george@insideevs.com
