Economist specializing in the automotive industry, Bernard Jullien will participate in a roundtable discussion at the Electric Road Forum, held from June 29 to July 1. The theme: Make the electrification of mobility an opportunity for employees and car areas. He explains to us why the ban on internal combustion engines is not necessarily the catastrophe foreseen for the European car industry.
Challenges – Following the announcement of the ban on the sale of thermal cars in 2035, we heard Luc Chatel, President of the Automotive Platform (PFA), make alarming remarks about employment in the European car industry. Do you share his concern?
Bernard Julien – It is true that the working content of an electric car is significantly lower than its petrol or diesel equivalent. France has already lost a lot on the assembly of cars, but not on the manufacture of powertrains. With the switch to electricity, there is therefore a lot to lose. FNA (National Automobile Federation, editor’s note) and CFDT insist on the significant impact of dedicated sales, which can result in the loss of 70,000 jobs. Above all, some highly specialized companies will be difficult to rebuild. PFA estimates that at the same volume (two million cars produced in France), the loss would be 50,000 jobs out of 200,000.
But there are two ways to modulate the problem. Continuing to lose volume is an assumption. So we scratch at the wages, the move continues. French industry risks becoming marginal, as is the case in Italy. Luc Chatel does not see how to prevent this temptation to move. France benefited from an external surplus in the niche of electric cars, as only Zoé existed. Now it is in deficit: the Twingo and Stellantis electricity has been imported. However, the situation is not unchangeable: this will change with Renault, thanks to the Mégane and R5 produced in France. On the other hand, Stellantis does not play the game: Apart from probable C5 or 3008 electric, we can not see how there could be a move.
Luc Chatel believes that it is impossible to move if we abandon rechargeable hybrids. But for these models, the deficit is even bigger! We import models, primarily German, at high prices. The record for employment and production is therefore not brilliant, but Renault is leading by example. Electric is a moving handle. Renault seeks to be competitive in Douai with large volumes to make this factory similar to Volkswagen in Wolfsburg. In Douvrin, a gig factory set up with ACC, which provides an annual volume of 24 GWh and then 40 GWh in another phase, provides content to the idea. Northern France could become a real industrial center for electric cars, including affordable models like the R5. Renault is in the process of reconsidering the relocation of segment B models (multipurpose city cars), which are the best-selling in France. So contrary to what we fear, it may be the group’s Turkish place that will suffer in favor of France.
More and more models from western manufacturers are moving to China (DS 9, BMW iX3, etc.). It seems to be accelerating with electrification. Is this a persistent trend?
There is a rule in the automotive industry, it is to produce next to the markets. The car industry is not T-shirts! There are only intercontinental flows when volumes remain marginal. In addition to 50,000 or 100,000 units, factories are created. There is no long-term strategy to manufacture models for Europe in China. The same goes for batteries. Yes, the battery technology is Chinese, which means Chinese surplus, but the assembly is taking place in Europe, especially in Germany so far. What is more problematic is that Western electric models in the Chinese market will struggle to regain market share from their thermal predecessors. Only General Motors seems better off thanks to its little Wuling. But I do not believe in the yellow danger.
The current shortage situation leads to a strategy of low volumes and high margins among some manufacturers, even if it means sacrificing the most affordable models. Do you think this can last?
It is true that small cars in the A-segment have been killed by rules pushed by the Germans, which impose more and more safety systems. This is a problem, because if we go for electricity, cars must be light in order to reduce the size of the batteries. With today’s mandatory driving assistance packages, it is almost impossible to go under a ton.
Then you have to ask yourself the question of volume! Fourteen or seventeen million cars every year in Europe, it does not have the same effect on employment. If prices remain too high, the renewal of the stock will be only 3% instead of 5% each year. And that is crucial for employment in France. We had jobs in France when we made 205s at an affordable price. In our market you need the popular car, it is historic and vital. With a low volume of 13 million. this corresponds to DKK 4 million. fewer annual units. That would mean twenty fewer factories. It is colossal and all countries would be affected.
Will the desire for “pricing power” (reduction of costs and increase in sales prices), to use the term from Carlos Tavares, put quantities aside?
Above all, I think this is a fad, as we saw the opposite profit at Fiat and Renault. We are in a very special, extraordinary economy. The automotive industry is usually overcapacity because people already have cars. Sellers’ game is to offer drinks to people who are not thirsty. One has to convince people who have had their car for four years that they cannot wait another year. Today, it is this part of the customers who do not buy a car during the shortage period, it is also the one that is missing, so the factories turn normally and the manufacturers start looking for the shortage again.
Could the need for research and development (R&D) to design new technologies compensate for the loss of jobs in assembly?
Admittedly, Toyota and Volkswagen do not follow the “Marchionne line” (former CEO of Fiat, editor’s note), which boasted of reducing R & D budgets. But I do not see French manufacturers making massive investments in research and development, whether it is in battery technologies or even hydrogen. There should be a French plan for the development of energy storage. Northvolt (Swedish battery specialist, affiliated with Volkswagen, editor’s note) is sexier than our French battery industry: There is a clear discourse and above all the desire to produce batteries where the energy is clean.