View From The EU: Automakers in a Tizzy

Europe's transition away from fossil fuels to low-emission, climate-friendly powertrains is in danger of being chaotic rather than a managed, ordered move, and that’s leaving automakers uncertain which way to turn.

Automakers in a Pickle

This week we’ve seen two of Europe’s biggest players, Stellantis and Volkswagen, issue profit warnings as demand for battery-electric vehicles slump amid a general slowdown in consumer demand for new cars.

Since some European governments have dropped consumer subsidies to buy BEVs, sales have declined sharply, especially in the major markets of France and Germany where sales fell 36.8% in July year-on-year. The German government announced a tax relief program for companies last month in a bid to address the slump.

Europe’s automakers, heavily dependent on exports to the U.S. and China, are also reeling from weaking demand in these markets and fearful of a tit-for-tat trade war with Beijing as EU members are expected to approve punitive tariffs against Chinese-built BEVs to counter the unfair subsidies they receive from the communist government.

Even premier luxury brands are feeling the pinch, with Aston Martin following Mercedes-Benz and BMW issuing a full-year profit warning as consumer demand in China falters amid its challenging economic outlook.

German automakers are particularly exposed because they are reliant on China for around a third of their sales as that market’s domestic producers continue their ongoing price war.

Where the legacy manufacturers have a real problem is the influx of Chinese automakers who, even with the proposed new EU tariffs, can still market their vehicles cheaper than anything OEMs can build within the European economic bloc.

Even Volvo has not yet been able to match the profit margin it achieves on internal-combustion-engine and hybrid models with its high sticker price premium BEVs. So, there’s little hope any other European manufacturer would do better without the sort of joint venture Stellantis has created with the Chinese Leapmotor company.

Long Arm of the Longshoremen

Europe’s automakers need the latest blow to their chances of selling into the world’s second largest automotive market like a hole in the head as U.S. dockworkers strike East Coast and Gulf Coast ports.

The International Longshoremen’s Association union, representing 45,000 port workers, has suspended its strike action until Jan. 15 to allow for additional time to negotiate with the United States Maritime Alliance (USMX) employer group for a new 6-year contract.

Steve Hughes, CEO of HCS International, advising the auto sector on shipping issues, tells Reuters: “If (the strike) turns into weeks, it’s going to be a tragedy.” He adds that while automakers could survive some time without vehicle deliveries, a shortage of parts would certainly hurt.

Barclays analyst Dan Levy says 70% of auto parts imports into the U.S. come via the affected ports, although companies would have built up some inventory once strike action was becoming a possibility. However, in a protracted stoppage, automakers would be forced to fly in parts. He concludes: “All of this is very, very inflationary.

“The European (automakers) lean heavily on Baltimore for imports and Southeastern ports (i.e. Charleston) for exports, as most of their U.S. production exposure is in this region.”

No Swede Dreams for Tesla

Yet another Swedish workers union has stepped into the expanding industrial action against U.S. BEV-maker Tesla as a strike by its workshop staff nears its first anniversary.

Servicing of Tesla’s charging network in the country is now under threat as the Vision trade union announces a blockade in sympathy to the IF Metall strike that began last October.

These workers, employed by municipal energy companies, will no longer service, repair or run maintenance tasks at Tesla’s BEV charging stations, reports Bloomberg.

IF Metall staff at 10 of the automaker’s Swedish repair shops went on strike over Tesla’s refusal to sign a collective agreement in defiance of a Nordic business norm to accept a written contract that sets out key employment terms including wages, working hours and leave policies.

Vision’s Eva-Lotta Nilsson, referring to the ubiquity of collective agreements, says: “We need to protect the Swedish model when it’s threatened.” Tesla is also facing sympathy industrial action from dockworkers in neighboring Denmark, Finland and Norway. Since December, it has had to transport cars bound for Sweden via trucks from continental Europe.

Its Model Y is the best-selling new car in Sweden this year through August, although sales of the model were down 8.8%, according to Mobility Sweden data. Tesla sold 16,478 cars in Sweden in the first nine months of the year, an increase of 1% from the same period of 2023, lifting the automaker's overall market share to 8.5% in 2024 from 7.8% a year prior, according to Mobility Sweden statistics.

However, the increased market share comes thanks to a general decline in vehicle sales in the nation. Market analyst Fitch Solutions forecasts Sweden’s vehicle market to decline 2.5% in 2024 before rebounding 2.8% in 2025, driven by stronger economic growth and more affordable auto financing owing to lower borrowing costs as the Sweden’s central bank, Riksbank, eases its monetary policy and cuts interest rates.