Euro Auto Industry Downturn

[Russell Hall]

All the economic commentators such as Forbes, Bloomberg and Reuters are united in predicting a bleak winter for the European auto industry with production declines and falling demand. Predictions of production falls range from 6.8% to 11% with S&P Global Mobility sharing the view of transmission maker ZF that the worst case fall would be up to 30%. The cause all agree on is the price and shortage of energy particularly gas. The effect is to increase production costs and to reduce demand by making the European population poorer. Combined with rising inflation and the threat of war many do not see it as the time to buy a new car. The move to electrification is not to schedule. Der Spiegel quotes research that shows operating an electric in Germany is 30 euro a month more expensive than a combustion engine due to rising power costs. ZF predicts a collapse in demand for electric cars in Germany next year and says the 2035 phase out of the ICU won't be met. Production costs in Germany are uneconomic particularly metal smelting. BMW is moving production of the new mini to China. LNG gas is up to seven times more expensive than the pipeline gas it replaces and cannot be unloaded at the required pace.
In France Macron is outraged that the LNG from America is charged at four times the American domestic price. He urges that the rusted French nuclear reactors be put back in service as soon as possible.
Last financial year was profitable for European makers despite chip shortages because they concentrated on higher range models. Losses are predicted for the current financial year but makers of higher priced vehicles are predicted to do better.

 

[Kenfuego]

All the economic commentators such as Forbes, Bloomberg and Reuters are united in predicting a bleak winter for the European auto industry with production declines and falling demand. Predictions of production falls range from 6.8% to 11% with S&P Global Mobility sharing the view of transmission maker ZF that the worst case fall would be up to 30%. The cause all agree on is the price and shortage of energy particularly gas. The effect is to increase production costs and to reduce demand by making the European population poorer. Combined with rising inflation and the threat of war many do not see it as the time to buy a new car. The move to electrification is not to schedule. Der Spiegel quotes research that shows operating an electric in Germany is 30 euro a month more expensive than a combustion engine due to rising power costs. ZF predicts a collapse in demand for electric cars in Germany next year and says the 2035 phase out of the ICU won't be met. Production costs in Germany are uneconomic particularly metal smelting. BMW is moving production of the new mini to China. LNG gas is up to seven times more expensive than the pipeline gas it replaces and cannot be unloaded at the required pace.
In France Macron is outraged that the LNG from America is charged at four times the American domestic price. He urges that the rusted French nuclear reactors be put back in service as soon as possible.
Last financial year was profitable for European makers despite chip shortages because they concentrated on higher range models. Losses are predicted for the current financial year but makers of higher priced vehicles are predicted to do better.

Russell
I think there is a crunch time coming with inflationary pressures and the economic measures that may be inflicted, to dampen spending and also cope with Energy shortages, fears of expanding conflicts and the uncertainty of a Putin manipulating energy supplies to punish and pound those who oppose and also engage in economic sanctions against Russia and of course the uncertainty of the China market, its supply chains and its continuance in production of cheap components and as a base for manufacture of electric cars.

Some dire predictions floating around about the China Economy and that causes some investor jitters that it may yet divert from serious economic issues by invading Taiwan and then the possibility that Japan and Korea may see the movement of manufacturing investment along with India, even those countries are facing disruption and a falling away of traditional markets for their products, so the uncertainty grows.

Not the best Economic climate world-wide for launching competitive bread and butter examples of cars for a mass market. It seems that only niche markets survive propped up by the super "Idle rich"!! that have the means to indulge themselves with designer priced whoopi cars. And that is pretty dismal prospects for serious production car makers. If things get worse, it might be stick with the old and develop secondary markets to service them.

Ken

 

[Russell Hall]

Building the Citroen C5X in China may end up being a sound decision. Carlos Tavares didn't sound too pessimistic at Paris last week. He was more concerned with campaigning against the EU7 pollution guidelines (too much cost for a short term gain) and arguing for the continuation of hybrids beyond 2035 as a lower cost low emission compromise.

 

[Kenfuego]

Building the Citroen C5X in China may end up being a sound decision. Carlos Tavares didn't sound too pessimistic at Paris last week. He was more concerned with campaigning against the EU7 pollution guidelines (too much cost for a short term gain) and arguing for the continuation of hybrids beyond 2035 as a lower cost low emission compromise.

Seems like most manufacturers had factored in the hybrids as a good path to follow to allow for an orderly transition and maintaining profit levels from sales before the great leap to sole E battery powered cars for the masses. Sadly commonsense went out the window, so now they will have to rejig their survival and profit planning, but to what?

Robot assembly factories can be re-programmed to produce anything, but if there is not a viable market buying "anything" other than war materials and vanities for the indulgent rich, it doesn't bode well for the industry. Sad to spread doom and gloom but it could go horribly askew.

Ken

 

[Russell Hall]

All the lobbying by Tavares and Stellantis has been to no avail. The European parliament has legislation to be voted on next week to introduce a 55% emission cut in 2030 and zero emissions in 2035. Tavares say the 2030 reduction can be met but at great cost that can't be recouped in the five years.
The German industry is more optimistic about Chinese production than the French. BMW says Cowley is not a suitable place to produce the new electric Mini. Instead all production will move to China which now has the advantage of cheap and plentiful energy as well as lower labour costs. Unlike Stellantis the Germans appear comfortable with managing the political risks with Scholz due to visit China.

 

[Russell Hall]

An EU body looking into the transition to electrics predicts up to 600,000 jobs could be lost in the European car industry. A Commission is to be set up to look into the situation.

 

[JoBo]

It’s up to governments as an option - if a car company want’s to sell cars in a country then they have to make them there. At least to something approaching balancing imports.
Of course if they want to massively cut emissions then killing almost all energy intensive industries. Bonus, unemployment can’t afford to buy a car anyway. Let them breed horses for transport instead

 

[Russell Hall]

The world auto industry has been marked by major rises and falls. In the 1950's America was the dominant auto producer in the world and the European industry could only survive behind a tariff wall. The rise of Japanese production changed the situation and Detroit today is a sad shadow of its past. We have seen countries like Korea and Thailand become major producers and now China is the largest auto producer in the world. The European companies will have to be quick on their feet to make sure their position in world production is not lost during the transition to electrics. The situation for the European companies is complicated by their energy crisis, particular for the Germans. It is possible some energy intensive production will move overseas. There are over twelve million jobs in the Euro auto industry at stake.