European Automakers Face Hurdles In 2023 As China Threat Looms

The European automotive industry is facing a difficult year. Full Recession or Mild Recession? One major manufacturer has warned that factories will close in 2023, while another says it will have to prepare for volatility and challenges. One investment researcher declares a global recession is underway. Another industry expert says it’s been an uncertain year for the global automotive sector, but another expects 2023 to be even more “normal.”

In Europe, the Chinese threat will be formidable, especially in the area of ​​electric vehicles.

As the industry recovers from the devastation caused by the coronavirus pandemic, it’s no surprise that experts are at odds. rice field. Russia’s invasion of Ukraine shocked the world, especially Europe.

To exacerbate the uncertainty, European industry and global industry are also at the foot of the electric revolution. This requires large investments, made even more dangerous by the fact that European Union (EU) politicians have already decided that battery electric vehicles (BEVs) will win the technology race. . They have decreed that by 2035 the new internal combustion engine (ICE)-equipped sedans and his SUVs will be persona non grata. This includes plug-in hybrids, which have been outlawed despite public hesitance over the BEV’s all-around capabilities.

According to industry consultancy LMC Automotive, Western Europe’s vehicle sales are expected to grow by 7.8% to reach 10.95 million units in 2023. That sounds promising, but last month he was projecting a 9.4% rise. LMC Automotive warns of a ‘recession period’ in the first half of 2023.

If any of these forecasts look solid and healthy, remembering the pre-coronavirus tally of 14.29 million sales in 2019 makes it less so. Much of the industry’s production is still being adjusted to serve the Western European market of more than 300 million he is now. expectations. In 2022, sales in Western Europe will fall by 4.1% to 10.15 million units. Western Europe includes all the big markets such as Germany, France, UK, Italy and Spain.

Supply issues are improving, but we’re not back to normal yet.

“We expect supply constraints to improve over time and will continue to impact vehicle sales as potential buyers continue to wait longer for new vehicles. In addition, the demand situation itself is deteriorating as Western Europe enters a recession in the first half of 2023, even though potential demand far exceeds what[manufacturers]can supply.” The LMC said in a report.

“Households continue to face higher prices and higher financing costs, impacting their willingness to buy big-ticket items. “There is an increasing risk that it will start to affect the population,” the report said.

Stellantis CEO Carlos Tavares spoke at the CES technology trade show in Las Vegas last week, warning of possible factory closures as more expensive electric vehicles have shrunk the overall market. Tavares pointed out again that the auto industry will have to absorb his 40% higher cost of his BEV.

“If the market shrinks, we don’t need that many plants. We will have to make some unpopular decisions,” Reuters quoted Tavares, without adding geographic details. .

Stellantis was created by the merger of Peugeot and Fiat Chrysler and includes brands such as Citroen, Opel, Vauxhall, Jeep, Dodge, Ram, Lancia, DS, Alfa Romeo and Maserati. Currently, it boasts the second largest sales volume in Europe after Volkswagen.

Volkswagen said in a statement after announcing a 6.8% drop in VW brand sales in 2022 to 4.56 million units, that chip shortages remain and that 2023 will remain volatile and challenging. rice field. Volkswagen brands include Audi, Porsche, SEAT, Skoda, Bentley and Lamborghini.

Investment research firm Evercore ISI says a global recession is underway in its 2023 outlook.

“Looking to 2023, a true global production recovery remains elusive, with pricing and volume/mix continuing to dominate the debate. It is tracking, slightly above the LMC’s +3% forecast and down from its previous +5-6% forecast,” Evercore ISI said in a report.

“Europe still has limited prospects given the unknowns regarding energy policy and Russia/Ukraine risks. Output is up slightly (+1-4%) but flat/down The risks are clear,” said Evercore.

Philippe Nossard, an analyst at consultancy Cox Automotive, forecasts an uncertain year as production improves. Essential ingredients such as cobalt, magnesium, platinum and lithium are so expensive that they are particularly detrimental to BEV.

“Add this to high interest rates and inflation in most EU countries and the business and consumer confidence issues are understandable,” Nossad said in an article for Automotive News Europe.

And watch out for the Chinese.

“Chinese brands looking to gain international standing fill the void left by well-established automakers as they phase out affordable but ultimately unprofitable legacy (ICE) models. For now, many Chinese manufacturers will focus on offering not only EVs, but also internal combustion engine and hybrid variants.China has plans to accelerate EVs significantly, but local Without manufacturing, there are barriers from Europe and America,” says Nothard.

Automotive News executive editor Jamie Butters says 2022 wasn’t the year of recovery he expected.

“Russia’s invasion of Ukraine has taken a toll on European production, which remains an important part of the globally integrated automotive industry,” he said in his column.

“Next year could be a return to more normalcy in terms of factory output and vehicles sold at or below the sticker,” Butters said.

“But what we’re coming back to is a changed industry: more digital retail, more EVs,” he said.

Perhaps German automakers can show a way to ease the problem in 2023.

According to Professor Oliver Falck of the IFO Institute, German automakers remained “strained” in December, according to the latest research.

“Overall, the German automotive industry looks better today than it was at the end of summer 2022. However, the outlook for the coming months remains cautious,” Falk said.