Does Europe’s automotive industry lag behind, supposedly stuck in producing “state-of-the-art technology that is however no longer wanted”? Or is Europe’s automotive industry a key asset in the quest for carbon neutrality, digital leadership and a sustainable, globally competitive economy?
in CLEPA, by Sigrid de Vries, 05-03-2020
Regardless of what might seem popular belief, it’s high time general mindset adapted to the latter. The upcoming new Industrial Strategy offers a key opportunity to do so.
It’s not a matter of ‘if’ but of ‘how’ to achieve the ambitious objectives of carbon neutrality, digitalisation and sustainable growth. And for that to happen, Europe must play to its strengths. The European automotive industry, and in particular the automotive parts and components industry, has strong assets to this regard.
Automotive is a prime example of a strategic value chain, and mobility is a booming business
The sector ranks among the most competitive, innovative and resilient, employs a highly-skilled workforce of 5 million and invests more in R&D than any other private party. Automotive is also a prime example of a strategic value chain, with a long string of companies and activities linking the products’ coming about from cradle to grave and back, and with a wide ripple effect into other parts of the economy. One job in vehicle manufacturing creates on average 3 more in the direct supply chain and a further 3 to 5 in the wider economic fabric.
Mobility, furthermore, is a booming business with further growth and demand expected. With the face of mobility changing to connected, automated, shared, seamless and multimodal, products and services become increasingly smart, linked, usage rather than ownership centred, and technologically complex. There is a lot of value to be had in mobility, with new players from tech to telecoms eagerly wanting a piece of the growing pie.
Why is China investing so heavily in growing its own competitive automotive industry? Because of the high value-add and trigger effect for broader economic activity. How does China try and secure a place at the global automotive stage? By putting massive efforts in automotive R&D aiming for advanced quality products, mimicking the strategies of its strong EU competitors.
The sensors in your smart phone that measure your steps or ambient temperature were designed for use in cars first, not phones
Does China limit itself to electric vehicles? No doubt electric is where the offensive started, rooted in cheap access to battery production as much as in trailing competence in combustion-engine technologies. But China is also the world largest producer of ‘traditional’ vehicles and powertrain components (20% of Europe’s imported automotive parts come from China, as the impact of the Corona virus has vividly brought to attention), and the country is massively eying hydrogen-based solutions as well. Because mobility doesn’t allow a one-solution focus: urban buses are a key target, as is long-haul transport.
Will it then, ultimately, be the large tech companies that make their automotive competitors obsolete? At least for now, the tech-meets-automotive encounters don’t point in that direction.
Tesla’s positioning itself as a tech company can be seen also as an acknowledgement that understanding and mastering whole-vehicle architecture is a competence in itself. A vehicle is a complex system of systems which need to work in an integrated, secure, safe, clean and steady manner for years on end. The sensors in your smart phone that measure your steps or ambient temperature were designed for use in cars first, not phones, and by automotive suppliers who are used to design against extreme circumstances, be it vibrations, weather events or others.
Together with the vehicle manufacturers, automotive suppliers combine expertise in technology, vehicle architecture and manufacturing that is second to none in the world. They lead in system integration which allows manufacturing of a complex good like a car on industrial scale, at highest quality level at competitive cost. Integration of advanced technology at ‘automotive grade’ level represents an excellence, a critical knowledge and strategic knowhow that are precious and enviable.
There is no alternative to climate change or digitalisation. What’s needed, is a business case that works
The challenge now, for Europe, is to allow European industry to thrive in order to meet the ambitious targets society has set. The justification is a given; there is no alternative when it comes to climate change or digitalisation. What is needed, is a business case that works—a model to earn a revenue by serving customer demand, upholding the values we all hold dear, supporting economies and jobs in Europe in successful competition with other regions in the world.
In business terms this means two things: if Europe is serious about leading the world, this must also entail that others actually follow. If they don’t or adopt a different pace, Europe risks losing crucial parts of its value chain and the ultimate goals won’t be achieved either.
The second reality is that current technology pays for new technology. Hence, innovative transitional technologies are an essential asset and lever to establish a mass-market for the more disruptive solutions, in an ecological, affordable and economically sustainable way.
We have high hopes for the new EU industrial strategy which is to accompany the Green Deal and the Digital Agenda. The signals from the Digital Strategy and Data Strategy are positive. As regards the ambition to turn the Green Deal into a growth strategy, CLEPA will work with policy makers and stakeholders to ensure a supportive regulatory framework that is free of technology bias, promotes innovation, invests in education and skills, and applies a holistic approach. We are keen on looking at the broader picture of both the vehicle and the system it is embedded in, including infrastructure, energy sources and carriers, and the link with related strategic value chains.
Sigrid de Vries, CLEPA Secretary General