Secretary General of the European Automobile Manufacturers' Association (ACEA)

Europe’s automobile industry will face some fundamental challenges this year. These include the looming prospect of a no-deal Brexit, the ever-present threat of US tariffs on car imports from the EU, as well as meeting stringent CO2 targets – both those for 2020 and the recently-agreed post-2020 targets for cars, vans and trucks. Given the challenges ahead, it is more than ever vital that efforts to safeguard the competitiveness of Europe’s auto industry are stepped up, also bearing in mind the rather shaky growth forecast for the car market in 2019.

Last year, car registrations in the EU remained more or less stable compared to 2017, with full-year growth coming in at +0.1%. Although 2018 marked the fifth consecutive year of growth – with almost 15.2 million cars registered – the level of growth has been slowing down rapidly over the last few years.

Annual growth fell from +9.3% in 2015 to +3.4% in 2017, before stalling at the slight increase of just one tenth of a percent that we saw last year. For 2019, ACEA now forecasts that EU passenger car sales will stagnate at a similar level to the 2018 figure in terms of units sold. So, at best, we expect a stable car market this year − with a growth rate of under 1%.

In this context, 2019 is a pivotal year, with both Brexit and trade tensions with the US posing a serious threat to our industry. Indeed, trade is a major pillar of our sector’s competitiveness, as ACEA’s 15 members are truly global companies and major exporters.

With little more than a month left until Brexit, the prospect of a cliff-edge scenario unfortunately still cannot be ruled out. On the contrary, the closer we get to B-Day, the more likely a no-deal Brexit seems to become. This causes huge uncertainty for the European economy, thereby also affecting consumer confidence.

Regarding the operations of the auto industry in the UK, manufacturers are now being forced to take drastic contingency measures. Some are looking for warehouse space to stockpile parts, others are planning a temporary production shutdown after Brexit, and some car makers are even cutting back their investments in the United Kingdom. Indeed, recent figures published by our British counterpart SMMT, show that investment in the UK car industry fell by 50% in 2018.

And despite all the planning on the side of our industry, the fact remains that no level of contingency preparedness can really cover all the gaps left by the UK’s exit from the EU without a deal in place. With only a few weeks left till Friday 29 March, ACEA therefore continues to urge both sides to intensify their efforts to conclude a withdrawal deal in time. Should a deal prove elusive then both parties must consider delaying Brexit for as long as it takes for an agreement to be reached.

At the same time, the threat of US tariffs being imposed on imports of motor vehicles and auto parts from Europe unfortunately has become very real since the submission of the US Commerce Department’s report on its national security investigation to the White House earlier this month.

Allow me, once again, to reiterate that European auto makers do not pose a threat to US national security. In fact, not only do our members import vehicles into the United States but they also have a major manufacturing footprint there, directly and indirectly employing hundreds of thousands of Americans. They also export 60% of the cars they build in the US to third countries, including to the EU.

Extra duties would mean that all car manufacturers in the United States, whether domestic or international, would face a significant increase in costs. This, in turn, would have to be mitigated by lowering margins, reducing production costs or passing additional costs on to consumers. Such measures would make American automobile manufacturing less competitive and hit US consumers in their pockets. In other words, the imposition of tariffs would have a counter-productive effect on the US economy.

Last week, the European Commission clearly indicated that it intends to retaliate against the imposition of any measures. The potential for this situation to escalate is extremely worrying to businesses on both sides of the Atlantic. Because in the end, our industry thrives best in an environment without trade barriers. Any trade-restrictive measures will not only severely affect the EU automobile industry, but also the US economy and consumers alike.

Amid this challenging trade climate, the recently-agreed 2025 and 2030 targets for CO2 emissions from new cars and vans are also going to be extremely demanding for Europe’s auto industry. Largely due to the continuing decline in diesel sales – which are being offset primarily by an increase in sales of petrol cars, which emit more CO2 – first indications suggest that 2018 was the second year in a row where CO2 emissions from new cars actually increased.

Hence, meeting future targets will require a significantly stronger market uptake of electric cars and other alternatively-powered vehicles than is currently proving possible. If we look at ACEA’s latest full-year figures for 2018, only 2% of all new cars registered were electrically-chargeable ones. By contrast, petrol further expanded its market share by almost six and a half percentage points in 2018, accounting for 56.7% of all cars sold in the EU.

Of course, all auto manufacturers continue to invest strongly in their portfolios of alternatively-powered cars, particularly electric ones. However, the fact is that consumers remain sceptical. There are several reasons for this, such as the limited affordability of these cars as well as the lack of a sufficiently dense network of charging and refuelling infrastructure.

If Europe is serious about delivering these highly ambitious CO2 reductions in practice, policy makers need to ensure that the right enabling framework is put in place, most notably by making the necessary investments in charging and refuelling infrastructure.

The CO2 targets, and the shift to electric vehicles they require, will also have an impact on jobs across the entire automotive value chain, which employs some 13.3 million Europeans today. Likewise, the move to electrification will also affect the affordability and cost of new vehicles. It is estimated that batteries will make up 35-50% of the cost of an electric car in the future. However, it remains uncertain as to whether those batteries will be produced in the EU or imported instead.

Of course, we welcome initiatives to encourage investments in battery production in Europe, but it will be some time before we see if this will really take off. And even if batteries were to be produced on a large scale in the European Union, this would require skills which today’s manufacturing employees are unlikely to have.

Our industry will play its part in adapting to this shift. But in order to limit the negative impact of these structural changes, policy makers need to act swiftly. We need concrete plans to manage this employment and skills transition in a proper, socially-acceptable way.

European automobile manufacturers are committed to addressing the challenges ahead. They are investing and innovating to move mobility forward. However, this equally requires the ongoing support of policy makers, as they have to ensure that mobility remains affordable and accessible for all Europeans in the future, regardless of their financial means or where they live. Without a doubt, this should also top the agenda of the next European Parliament and European Commission.

Erik Jonnaert
Secretary General of ACEA

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