Europe needs an automotive industrial policy

2023 was this pivotal year when Europe realized that China is the new automotive giant. This comes after Tesla’s spectacular emergence. For us, Europeans these are challenging times. Yet are we fully aware of what is at stake? We are talking about an industry accounting for 8% of the EU's GDP, 30% of its R&D spending, and 13 million jobs. It's very simple: strip out the automotive industry and Europe will find itself with a structural trade deficit!

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Today, our sector is facing its most profound mutation in 150 years. The urge to reduce our environmental impact, the phasing out of the internal combustion engine by 2035, and the ever-increasing safety and cyber-security requirements for our cars, making them heavier and more expensive: all these constraints add up. And we pile up regulations... sometimes with unexpected results: the average European car is 60% heavier than 20 years ago, it is 50% more expensive and the number of jobs at carmakers has fallen, by up to 40% in some countries. Of course, this car is more environmentally friendly. Unfortunately, more expensive cars are also cars that people are less likely to buy. Bottom line: we keep older and more polluting cars longer on the roads, and the age of the European car fleet has risen from 7 to 12 years on average!

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There is more! For over a century, carmakers had been playing one demanding, but familiar sport. The combustion engine set the rules. Now, we have to excel in several disciplines with very different and specific requirements: electric vehicles, software, mobility services, circular economy... Each of these sports implies a new value chain to cover, new materials, new players, a whole new world to understand, from raw materials’ extraction to battery recycling.

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This new, extended, and fragmented playing field is also characterized by unprecedented volatility. Technological volatility, first, in contrast to the world of the internal combustion engine, when technology was mature, and innovation was incremental. Take the batteries: the relevance of billion euros investments in a gigafactory can be called into question overnight if a new chemistry pops up. Volatility is also in the price of the raw materials, for example when the price of lithium is multiplied by 12 and divided by 2, in only 3 years. And regulation also is volatile, as illustrated by the recent debates about the EURO7 standard.

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For the automotive industry, the age-old mantra was scale and efficiency. A new imperative has come to light: innovation and strategic agility. This is what car makers now have to put at the core of everything they do.

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A new global geography is also shaking our European certainties. When it came to the internal combustion engine, our leadership was undisputed. For a century, we benefitted from this technology as a barrier to entry. Today, the Europeans find themselves in a position of relative fragility. The Chinese control 75% of the world's battery production and 90% of lithium refining. In addition, while the United States massively stimulate their industry, and the Chinese organize it through planning, we, Europeans, regulate, often with no coherence, without any holistic view over our challenges.

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Of course, building our future as European carmakers is first and foremost about entrepreneurial innovation on our side. We have to invent business models fit for the new playing field, invest in new technologies, and offer products and solutions for an affordable and sustainable mobility. Over the past 3 years, Renault has not stood idly by, proposing, among other initiatives, Ampere. This is the most substantial and comprehensive response of the European automotive industry to the challenges coming from both East and West.

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However, today I am deeply convinced that we also need a collective response and a public authority able to coordinate a European mobilization if we want our automotive industry to perform at its full potential.

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Having devoted all my career to this industry, I see the question before us today as pretty simple: does Europe has the will to finally equip itself with a genuine industrial policy for our sector, with a holistic ambition, instead of just piling up deadlines and fines? In my view, this should be our top priority: a few clear principles and objectives, a plan, and a dynamic review process so that we can constantly adapt, because what comes next will be no walk in the park! And as an antidote to the proliferation of diktats from the various authorities, let's establish a one-stop shop for mobility and automotive regulations! Let's foster the emergence of a framework of stable rules and standards across Europe, following the example of what the Chinese have successfully achieved. Let's put in place all the conditions for the emergence of structuring projects and European champions in key technologies. Europe did it in the past: it was called Airbus.

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It is just as urgent to finally coordinate the efforts of the many industries involved in the huge transition underway, because challenges such as the energy transition and the digital revolution cut across the traditional sectors. The mining sector, chemicals, energy, manufacturing industries, infrastructure, national and local authorities all need to work together. Their efforts have to be orchestrated across the entire value chain, from upstream to downstream.

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Let's also look at what our competitors are doing! And let's keep adapting! Faced with China and the United States, Europe must invent its own model. This hybrid model, between private initiative and public intervention, should enable us, first, to protect and strengthen ourselves, and then, in the medium and long term, go back on the offensive, always in a context of reciprocity and healthy competition.

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European carmakers are fully committed to decarbonization: they are investing $250?billion in electrification. On the other hand, while they applaud the objective, they believe they should have their a say about how it is achieved: adopting a principle of technological neutrality, encouraging Europe's 200 biggest cities to harmonize their mobility policies, setting up green economic development zones in each country to foster the emergence of clusters, developing the market of compact and affordable electric vehicles to ensure that cars remain affordable for all, with limited impact in cities and on the environment.

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Fostering an ecosystem for hydrogen production and distribution, or in the software… These are concrete examples of value chains that require a team approach. Let the public authorities identify 10 of them as strategic priorities and launch cross-cutting initiatives on a European scale! Let’ force the relevant players to coordinate, using the conditionality principle. I think this would be enough to get the ball rolling and bring Europe up to the level we deserve.

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These are just some of the proposals I am putting forward for discussion today, because these challenges are facing us all: politicians, manufacturers, stakeholders and citizens. To pave the way for a shared response and collective mobilization, let's put the automobile back at the heart of the public debate. Let's stop seeing the automotive industry as the problem, and it will be part of the solution!

See the original article in Les Echos : https://www.lesechos.fr/idees-debats/cercle/opinion-luca-de-meo-lautomobile-a-besoin-dune-politique-industrielle-coordonnee-en-europe-2047324