“No longer competitive in China” – Consultancy forecasts decline of European carmakers
Der Spiegel
The EU’s existing rules limiting cars’ CO2 emissions will push the continent's carmakers deep into the red and accelerate their overall decline, which is also caused by China's technological dominance, said business consultancy Kearney in a report seen by Spiegel magazine.
European manufacturers are “no longer competitive in China when it comes to battery-powered vehicles,” and in the US market they are burdened by president Donald Trump's tariff policies, Wulf Stolle, partner at the consultancy and author of the report, told Spiegel. This makes the European domestic market all the more important, but the industry is facing “unprecedented regulatory and financial pressure” due to the EU's CO2 fleet limits, he added. However, temporary exemptions would “only prolong the gradual decline of the European automotive industry.”
Germany’s government agreed last week to push the EU to soften its 2035 deadline for new combustion engine car registrations, citing threats to jobs and industrial competitiveness. Environmental NGOs warn the decision would delay the unavoidable shift to electric mobility, undermine climate targets, and leave Europe's carmakers more exposed to Chinese rivals.
Stolle argued that carmakers face a dilemma, as a higher proportion of combustion engines in their model mix brings higher profits, but would lead to heavy penalties for missing CO2 targets. If carmakers sell more electric cars, they avoid penalties, but would incur losses because electric cars are still more expensive to manufacture and profit margins are lower. European manufacturers could “go through a painful process of contraction,” Stolle warned.
In a letter to the European Commission, German chancellor Friedrich Merz said that proposals to make fleet limits more flexible were a welcome first step to help manufacturers, as penalty payments "must be avoidable."
Stolle explained that the industry faces a structural transition because electric cars are a fundamentally different product from conventional models. Battery and software expertise determine market success, and Chinese companies are ahead in both areas, he said.
If the EU’s car emission policies remain in place, European manufacturers’ total return on sales would fall from an average of 5.5 percent today to as low as minus 2.9 percent by 2030, the consultancy forecasted. Unchanged, “the EU requirements will lead to heavy losses by 2030,” Stolle said.
