The entry of Chinese automakers in the European market has left the region’s incumbent automakers divided over how Brussels should respond. As China takes the lead in building affordable electric vehicles, Stellantis CEO Carlos Tavares has advised European political leaders to help protect homegrown automakers struggling to catch up. Speaking at the inauguration of a battery factory in northern France, he said, “Whether the European car industry must be protected during the catch-up period, that’s a question that should be asked”. Tavares’ warning comes as his company and other regional automakers try to expand in the European market.Compared to other established European automakers, such as Germany’s Mercedes-Benz, that rely heavily on exports, Stellantis has already scaled back its Jeep operations in China. However, Mercedes CEO Ola Källenius has advised caution against protectionist measures. Despite the differences in their views, both automakers are co-shareholders in Automotive Cells Company, the venture behind the French battery factory that opened this week, with over €7.3 billion worth of investment in France, Germany and Italy.
When asked about Chinese automakers’ aggressive expansion into the European electric vehicle market, Källenius underscored that globalization and free trade have led to an enormous amount of economic growth and wealth generation over the last three decades. He said that Europe should continue to build on free trade and not resort to protectionism, particularly in Germany, which relies heavily on exports to sustain its business model. Instead of reacting, European automakers should invest in innovation and new technology to make their products the most desirable in the market, according to Källenius. He said that innovation, investing in new technologies, and delighting and surprising customers are what will protect the competitiveness of European automakers.
Despite increasing costs associated with switching to cleaner energy generation, Källenius believes that Europe’s battery makers can be competitive against China’s in the mid- to long-term. Many Chinese battery makers are also dependent on energy imports, which provides an opportunity for Europe to massively build up its renewable energy capacity, particularly in wind-rich and offshore areas.
While a transformational change in the automotive industry and entry of new players leads to higher competitive intensity, which automotive players feel across the board, Källenius said Mercedes is careful not to get sucked into any price war and would focus on the upper end of the segments they are in, rather than compete with volume players.