The automotive industry generated total revenues of $1,875.5 billion in 2022, representing a total annual growth rate of 0.8 percent from 2017 to 2022. This is a clear indicator that it remains a key player in the global economy, but it is inevitable that the balance of power within it has drastically changed over the past decade.
According to data published by the International Organization of Motor Vehicle Manufacturers (OICA), for the 13th consecutive year, China dominates global motor vehicle production, having produced more than 27 million cars and commercial vehicles. Following China are the United States, whose companies produced just over ten million vehicles last year, while Japan ranks third with 7.83 million vehicles produced.
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From supply chain shortages to rising inflation and interest rates, automakers have certainly had their hands full. In Western markets, vehicle sales fell in 2022, but in Asia and the Pacific, car sales managed to continue an upward trend, albeit at a modest pace. The Asia-Pacific region, to put things into perspective, again dominated the market in 2022, contributing as much as 56.5 percent of global value. All data is expressed in nominal values without adjustment for inflation and is based on constant average annual exchange rates for 2021.
Asia shows year after year how dominant it is over the competition, while the European automotive industry is achieving increasingly poor figures. For example, France produced more than two million cars a decade ago, and today barely over one million vehicles. Germany produced around six million cars a decade ago, and today produces about three.
Thailand has thus, despite Renault, Citroën, and Peugeot, become a larger car manufacturer than France, while Spain is larger than all European countries except Germany.
‘It’s a struggle’
Renault CEO Luca De Meo stated at the IAA Mobility conference in Munich in September that the French automaker continues to grow its investments in new technologies, battery factories, and gigafactories, hoping that Renault’s new pure EV unit, Ampere, will allow it to compete in ‘a different sport’ from its traditional markets.
– One of the commitments we are taking on with Ampere is actually to reduce costs by 40 percent from generation to generation, and this involves significant investment in technology, development, and manufacturing techniques. We believe we have the arguments and confidence to do this; it will take some time because Chinese original equipment manufacturers started their generation before Europeans due to different market conditions in China, so it is a struggle, and we are ready to engage – said De Meo.
Volkswagen CEO Oliver Blume is not shying away from challenges from the east, who told CNBC last month that the company has established a new strategy for China this year to focus on technology development to meet specific demand in that market.
The German giant has already established the automotive software company CARIAD, as well as a partnership with Chinese EV startup Xpeng, a partner in the joint investment SAIC, and the autonomous driving company Horizon Robotics.
– Competition is also a positive aspect for our improvement, so China is one of our important markets, and we continue to invest strongly there – said Blume.
He added that Volkswagen has established a ‘big cost initiative’ and sees significant opportunities to increase electric vehicle production while reducing battery production costs by 50 percent.
Excessive costs for Europe
– On one hand, we have vast experience regarding the driving capabilities of cars, we have high-quality standards in the Volkswagen group, we focus on design, we have a great heritage of all our brands, and these aspects are a significant advantage compared to new competitors.
On the other hand, we need to accelerate in terms of electrification, digitalization, and connectivity, so we are developing our own platforms and combining them with partnerships, so I think we are in a good position, but ultimately, what counts is speed, and therefore we in the Volkswagen group have made the right decisions – said Blume.
Over the last decade, China has quietly built battery factories at a dizzying pace, with gigafactory capacities in the country expected to grow to 4,200 gigawatt-hours by 2030, and that number will only continue to rise in the future, according to researchers from CRU Group. They emphasized that even at the current level, the capacity is double the gigawatt-hours (GWh) needed to ‘convert’ the entire Chinese vehicle fleet to battery electric vehicles.
– The battery factory heavily relies on electricity costs at the end of the day; that is the biggest cost driver if you are producing battery cells, and that is what Europe still needs to catch up on. Our electricity costs compared to China or North America are too high – said Škoda CEO Klaus Zellmer.
