Renault 5 electric vehicle (Photo by Richard Bord/Getty Images)
Renault CEO Luca de Meo believes the threat from China’s electric vehicles to European manufacturers is so dire that a radical, pan-continental governmental solution along the lines of a new Airbus Industrie is required.
De Meo renewed his plea Monday at the Geneva Auto Show. Some analysts like the idea but others see it as more of a cry for help from a company itself in difficulties.
Airbus Industrie was set up in 1970 to help Europe compete with airliner market leader Boeing Co of the U.S.
Although the threat seems to come from China, it only exists because the European Union decreed this existential menace by forcing automakers to go electric before they were ready. EU politicians have decided that electric cars must account for just over 20% of the new car market this year and on to about 80% by 2030 and 100% by 2035.
To save the industry from this threat the EU could dilute the CO2 emissions rules which precipitated the threat in the first place. Allowing a higher proportion of hybrids and plug-in hybrids would go some way to alleviating the potential disaster, or simply allowing the market to decide which technology should win. Or maybe an Airbus for Cars will do the job.
The trouble for Europe is Chinese manufacturers, led by the likes of SAIC’s MG and BYD, are about 5 years ahead of the rest of the world in making EVs, and can do it up to 30% cheaper, according to investment bank UBS. Last year China sold just over 350,000 sedans and SUVs in Europe, mainly electric ones, according to French auto consultants Inovev. SAIC’s MG led the way with 239,000 mainly EVs. BYD was well behind with 16,000 but is coming up fast in the overtaking lane.
Renault chief executive officer Luca de Meo (Photo by DANIEL LEAL/AFP via Getty Images)
Over the next five years in Europe, sales of EVs are expected to more than quadruple from about 2 million in 2023 to over 9 million by 2030. Average prices are close to €50,000 ($54,250). Sales so far have been mainly to wealthy early adopters or corporate purchasers, and the huge increase in EV sales can only take place if mass-market models are available for average wage earners. That means prices need to be more like €10,000 ($10,850). European manufacturers show no signs of being interested in or remotely able to meet that demand. Meanwhile in China, little urban runabouts like the BYD Seagull are selling big (sales 280,000 in 2023 according to Inovev) and the Wuling Bingo (235,000), with prices said to start at around $5,000.
That is the agenda behind de Meo’s plea for help. Cynics may say that Renault of France is making this suggestion because of its own weakness. Renault has squandered an EV lead it had about 10 years ago, and after the merger of its French competitors Peugeot and Citroen into the huge Stellantis stable of brands it finds itself in desperate straits because of a lack of scale.
De Meo renewed his “Airbus” plea in a speech at the Geneva auto show Monday, saying Europe’s automakers could work together to develop and build accessible cars.
“We need to be creative to find a solution,” de Meo told journalists, as reported by Automotive News Europe.
MG4 electric car. MG was the top selling Chinese brand in Europe in 2023. (Photo by Valeria ... [+]
Renault launched the Renault 5 at the show, a small EV, priced from about €25,000 ($27,100), still at the lower end of prices, but not close to being affordable against the likes of China’s Seagull and Bingo.
“Partners can share the investment and reduce the costs,” he said.
De Meo said the challenge is to create a value chain in Europe that includes batteries, electric motors and electronics, much as China has done with government support.
“The goal is to source everything in Europe at a competitive price. We need to be creative to find a solution to the challenge of building affordable EVs in Europe,” de Meo said, according to Automotive News Europe.
De Meo said EU safety rules for small cars should be more flexible, allowing tiny Japanese “kei” cars in urban areas. Other options could include lowering tax on small EVs with batteries smaller than 30 kW.
“Speed is important against the Chinese,” he said. “We’re in an uncertain world. In the past, with internal-combustion cars, you could foresee what was coming.” Now, he said, “if you take four or five years to react, it’s too late.”
British-based automotive analyst Dr Charles Tennant said the race is on to meet demand in the lower-priced mass market.
“If the legacy manufacturers do not get a grip with this then the Chinese EV producers such as BYD will happily oblige. The idea of a collective response to this challenge – an Airbus of autos – makes sense for the legacy European manufacturers, especially to drive down costs, where Chinese cars cost up to 30% less to produce and over 50% of all EV’s sold globally in 2023 were made by more efficient new players,” Tennant said in an email exchange.
“So, if European manufacturers want a slice of the pie that is the predicted 9 million EV car sales by 2030 then they need to re-engineer their current practices and processes holistically, and this could start with a massive EV skateboard type universal platform share to speed up new product introduction and significantly drive down costs. But at the same time they need to rethink what consumers of the future want or need and this may be smaller lower specification city cars at the €10,000 price point,” Tennant said.
Professor Ferdinand Dudenhoeffer, director of the Center for Automotive Research in Bochum, isn’t so sure.
“Airbus for Cars” sounds good and is a nice idea. But I see little possibility that this really will be a business case. On the one hand, there are the competition rules that would have to be suspended. Secondly, coordination with different countries such as Japan, Germany, France, England, Italy and the USA is hardly conceivable. This is going wrong. And Renault-Nissan shows how difficult alliances are,” Dudenhoeffer said in an email.
“So it's more of a cry for help that is reminiscent of desperation than a solid business model. Renault is in a very difficult situation. They are relatively small and hardly represented in China,” he said.
Airbus Industrie consists of the German-French-Spanish-owned European Aeronautic Defence and Space company with 80% and Britain’s BAE Systems with 20%.
