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The big miss on electric cars is remaking Europe's auto industry

Albertina Torsoli, Stefan Nicola, Monica Raymunt, Bloomberg News on

Published in Automotive News

Volkswagen, Renault and Stellantis are thinking the unthinkable, exploring tie-ups with sworn competitors to make cheaper electric vehicles and fend off existential threats.

As Chinese rivals and Tesla Inc. expose competitive weaknesses at Europe’s biggest mass-market carmakers, it’s become clear that a sense of urgency is growing and a business-as-usual approach is a losing option.

There’s a “perfect recognition that in the future, the companies which are not fit to face the Chinese competition will put themselves in trouble,” Carlos Tavares, chief executive officer of Stellantis NV — the company created from the 2021 merger of Italy’s Fiat and France’s PSA Group — said in an interview last week. He has previously said that Europe’s auto industry faces a “bloodbath” if it doesn’t adapt.

Pushed by a slowdown in the pace of EV adoption, auto executives are discussing ideas ranging from pooling development resources to bundling businesses across European borders to better compete in the once-in-a-generation shift. The coming months are crucial.

Rather than muscling aside gas guzzlers, sales of fully electric cars this year are set to grow at the slowest rate since 2019, according to BloombergNEF, with the unexpected stall in momentum intensifying competition. Even for Tesla, the slowdown — which has led to widespread discounting — has made an impact. A 20% share slump this year has erased about $150 billion from its market capitalization — more than double VW’s value.

Headwinds for the sector include governments dropping incentives, rental firms balking at ballooning repair costs and consumers increasingly frustrated with climate policies impacting their pocketbooks. Elections in the U.S. and Europe could further fuel anti-EV sentiment, just as an inflection point approaches.


In 2025, tighter emissions rules come into effect in the European Union, meaning manufacturers need to sell more battery-powered cars or face hefty fines. In an unlikely worst-case scenario, Volkswagen AG could face penalties of more than €2 billion ($2.2 billion) if it fails to sufficiently reduce fleet emissions, according to Bloomberg calculations based on company and regulatory data.

As pressure builds on European carmakers to sell more EVs, China’s state-supported manufacturers are entering the cooling market with models that are often better and cheaper.

BYD Co.’s Dolphin, for instance, is listed at about €7,000 less than a similarly equipped VW ID.3, which the German carmaker originally pitched as the Beetle of the EV era. The Chinese manufacturer will underscore its European ambitions by showing off several electric models at the Geneva car show next week, including a luxury SUV rivaling the Mercedes-Benz G-Class.

Failure for Europe’s carmakers to come up with a working Plan B risks upheaval in an industry that employs some 13 million people and accounts for 7% of the EU economy.


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