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BMW CEO Oliver Zipse speaks during the presentation of the new BMW “New Class” at an event on the eve of the IAA Motor Show in Munich.
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Europe’s largest automakers are wary of the competitive threat posed by emerging Chinese companies as the industry moves toward electrification, several chief executives told CNBC in recent days.
Europe’s dominance in the automotive sector has been established for decades through its ability to manufacture high-quality internal combustion engines. But that competitive advantage is becoming less important as demand for pure electric vehicles grows and Chinese companies benefiting from state subsidies can produce batteries at a lower cost.
Christophe Périllat, CEO, French auto parts manufacturer ValeoChina is now a key market for the company, as previous “barriers to entry” for internal combustion engines have been removed, told CNBC on Monday.This has enabled a new wave of Chinese companies to emerge not only domestically but also as potential exporters
This development poses a significant threat to European auto giants such as Volkswagen, renault and BMWas they look to scale up electric and hybrid offerings without state subsidies.
![Auto supplier Valeo says Chinese automakers are thriving under EV revolution](https://i0.wp.com/image.cnbcfm.com/api/v1/image/107295468-16938207241693820721-31047420529-1080pnbcnews.jpg?w=640&ssl=1)
Renault Chief Executive Luca De Meo told CNBC on Monday at the IAA Mobility conference in Munich that the French automaker will continue to increase investment in new technologies, battery factories and gigafactories, And hopes that the company’s new all-electric vehicle division, Ampere, will give it a leg up on the competition in the automotive space. A “different movement” from traditional markets.
“In fact, one of the commitments we made to Ampere was to cut costs by 40% from generation to generation, and that involved massive investments in technology, development and manufacturing,” De Meo told CNBC’s Annette Weissbach.
“We think we have the reason and the confidence to do it, it will take some time because the Chinese OEMs are a generation ahead of the Europeans, because the market conditions in China are different, so this is the battle and we are ready to participate. “
![Renault CEO: 'We are ready' to fight Chinese rivals](https://i0.wp.com/image.cnbcfm.com/api/v1/image/107295447-16938159221693815918-31046667074-1080pnbcnews.jpg?w=640&ssl=1)
Volkswagen Chief Executive Oliver Blume also acknowledged the challenge from the East, saying the company this year formulated a new China strategy focused on developing technologies specifically for Chinese needs.
The German giant has created automotive software company CARIAD and is working with Chinese EV startup Xpeng Motors, joint venture partner SAIC Motor and self-driving company Horizon Robotics.
“Competition is also a positive aspect of improving ourselves, so China is one of our key markets and we will continue to invest heavily there,” Bloom said.
![Volkswagen CEO outlines plan to deal with China macro headwinds](https://i0.wp.com/image.cnbcfm.com/api/v1/image/107295441-16938120721693812069-31046043767-1080pnbcnews.jpg?w=640&ssl=1)
He added that Volkswagen already had “huge cost plans” and saw a huge opportunity to scale up production of electric vehicles while reducing battery production costs by 50%.
“On the one hand, we have a lot of experience in terms of the ability of the car to drive, we have very high quality standards in the Volkswagen Group, we focus on design, we have a great heritage in all our brands, and those aspects are huge with the new competition. They have an advantage over their opponents,” Bloom said.
“On the other hand, we have to step up in terms of electrification, digitalization and interconnection, so we are developing our own platform and combining it with partners around, so I think we are in a good position, but, in the end, Speed is what matters, so the Volkswagen Group has made the right decision.”
European leaders ‘moving too slowly’
China has been building battery factories at a dizzying pace over the past decade, with China’s gigafactory capacity set to rise to 4,200 GWh by 2030, and new announcements on capacity building, according to CRU metals researchers Continuously introduced. group.
They stress that even at current levels, converting the entire Chinese fleet to pure electric vehicles would require twice the GWh of capacity.
“At the end of the day, battery factories are very dependent on the cost of electricity, and that’s the biggest cost driver if you’re making batteries, and that’s where Europe still has to catch up. Compared to China or North America, our electricity costs are just too high.” High.” , Skoda CEO Klaus Zellmer told CNBC on Monday.
![Xpeng Motors to enter German market, says president of Chinese EV maker](https://i0.wp.com/image.cnbcfm.com/api/v1/image/107295461-16938194541693819452-31047222422-1080pnbcnews.jpg?w=640&ssl=1)
In the U.S., President Joe Biden’s landmark Inflation Cutting Act allocated $370 billion for climate and clean energy investments, dramatically expanded tax credits and other incentives for clean car manufacturing, and supported domestic pure electric vehicles Automotive supply chain.
European companies now have access to various subsidies and incentives, but Zellmer said these were “nowhere near the level” of the US or China, and policymakers were “not moving fast enough” to keep pace.
Skoda is part of the VW Group, which has also created its own battery-making company, PowerCo, and plans to build a massive gigafactory in Canada to complement existing factories in Spain and Germany, Zellmer noted.
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“I think we’re in a good position on the supply side, but Europe isn’t in a good position right now when it comes to expanding our footprint through gigafactories,” Zellmer added.
While companies such as Renault and Volkswagen, which have traditionally specialized in mass-produced, affordable mid-range cars, appear wary of the Chinese threat, luxury automakers appear more confident in their ability to maintain their value proposition.
Michael Steiner, Head of Research and Development porscheThe German luxury goods maker, which made its initial public offering last year, is focusing on high-quality components to differentiate itself from its Chinese rivals, told CNBC.
“China is the most important competitor and is developing very rapidly in terms of batteries and battery technology. For Porsche, we are looking for better batteries with higher energy density,” Steiner said.
“We have our own subsidiary called the Cellforce Group where we develop and produce or will produce batteries for performance cars that are even better than mass batteries and batteries that you can buy.”
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