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31/1/2025
Industry desperately hopes for support from Brussels
The Strategic Dialogue on the Future of the European Automotive Industry was launched yesterday by the European Commission.[1] Under the leadership of Commission President Ursula von der Leyen, the European automotive industry, social partners and other key stakeholders will work together to develop an action plan to lead the industry out of crisis. Particularly in the field of electric mobility, European carmakers appear to have little with which to counter the competition from China. Unless something is done, competitiveness risks being lost with important consequences for economic development in the Eurozone and especially Germany.
Our Chart of the Week shows that the Stoxx Europe 600 Auto index has significantly underperformed the broader Stoxx Europe 600.[2] While the leading index has risen by around 10% since January 2024, the specialized auto sub-index has fallen by roughly the same amount. In recent months, however, there has been a growing sense that the industry barometer may have found a floor. In our view, this may also be due to the expectation that the EU may provide some relief to car manufacturers in order to boost their competitiveness.
Sources: Bloomberg Finance L.P., DWS Investment GmbH as of 1/28/25
Many of the problems facing the automotive industry are homemade such as the temporarily significant delay in the development of competitive electric cars. Bureaucratic requirements imposed by politicians have not helped. The tightening of CO2 emission limits by the European Union later this year, for example, is likely to cause significant problems for many manufacturers. These limits do not look achievable with internal combustion engines or hybrids. Manufacturers will have to sell more electric vehicles. If they fail to do so, they will face heavy fines from Brussels. According to the manufacturers, the expected fines could run into billions.
Manuel Kallweit, chief economist at the German Association of the Automotive Industry (VDA), was quoted by the Stuttgarter Nachrichten newspaper as saying that sales of battery-only vehicles alone would have to rise by around 75%, or around 666,000 units, compared to last year.[3] We believe that dialogue with the EU is necessary to address these challenges. But carmakers need political action as well as words.
European Commission as of 01/20/25
Bloomberg Finance L.P. as of 01/28/25
Stuttgarter Nachrichten as of 01/21/25
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