Challenges Facing Europe’s Automotive Industry
Spanish automotive components manufacturer Gestamp has raised concerns about the decline of the automotive industry in Europe, highlighting its potential effects on related industrial sectors, including steel. This situation is exacerbated by increasing competition from Chinese automakers.
Decline in Production
Speaking with the Financial Times, Gestamp’s chairman, Francisco Riberas, noted that European auto production has decreased by 20-25% since its peak in 2017. He described the current state of the industry as an existential crisis, especially as Chinese manufacturers make significant gains in the electric vehicle market.
Impact on Economy and Employment
Riberas emphasized the automotive industry’s role as a foundational element for various other European industries. It currently accounts for about 7% of the region’s GDP and supports nearly 14 million jobs. While he welcomes investments from Chinese firms, he insists these investments should lead to genuine local production and job creation, rather than merely assembling vehicles from imported components.
The Need for Local Sourcing
He argued that Chinese manufacturers must prioritize local sourcing of vehicle components to maintain the integrity of the European automotive value chain. Traditionally, each job in a vehicle manufacturing plant supports three jobs in the component industry. However, the current model is unsustainable if it relies heavily on imports.
Disadvantages and Competitive Financing
Riberas also pointed out the disparities in financing conditions, citing that European automotive companies face competitive challenges due to access to less favorable financing compared to their Chinese counterparts.
Support for the EU Industrial Accelerator Act
In light of these challenges, Riberas expressed support for the EU’s Industrial Accelerator Act (IAA), which aims to enhance local production. The proposed legislation includes a 70% local content requirement for automotive components to qualify for subsidies, alongside greater scrutiny of substantial foreign investments from China.
However, he cautioned that regulatory measures alone wouldn’t suffice. A more comprehensive European strategy encompassing increased investments in technology, digitalization, and artificial intelligence is essential for boosting competitiveness in the automotive sector.
