TRADE BARRIERS FOR EUROPE OR FIGHT BACK ON THE CARDS

FUTURE TECH

December 1, 2023

TRADE BARRIERS FOR EUROPE OR FIGHT BACK ON THE CARDS

The motor show held during September 2023 featured more Chinese vehicle manufacturers than ever before, just as the European Commission President (one of quite a few) Ursula Von der Leyen decided to shake things up. Alarmed by the wave of Chinese made battery electric vehicles on offer across the 27 member states (‘EU27’), Ursula announced the intention to investigate pricing.

The very next day officials from China responded with incredulity and vitriol, because they understand this is the first salvo in what could become a trade war. We already know the EU27 and UK have blindly followed the ‘Net Zero’ agenda before infrastructure, vehicle production capacity or lower cost / more robust battery technology was available, to the point of trying to ban all alternatives. 

The vehicle manufacturers have been for the most part under open attack from the various European governments, punitive direct taxation and ceaseless non-Government organisation lobbying to ban vehicle use completely. 

Were there underlying issues?

Indeed, yes. For decades the Europeans built vehicles which defined the pinnacle in handling performance, straight line performance, sheer beauty and more. Three product lines stood out, which although never dominated single markets apart from Germany, but were in everyone’s cross hairs:

  • Audi A4
  • BMW 3 series
  • Mercedes-Benz C class

Not all versions of any of these three were necessarily ‘best’ at anything, but all offered immense choice of powertrains, options, body styles and above all….. status. A person buying any one of these models understood they could buy equally effective cheaper vehicles, but these would announce one’s arrival.

Vehicle manufacturers all over the world knew this. They marvelled how BMW could fit a weedy 1.6 litre engine into the same hole as an almighty 3 litre straight six, yet charged substantially more for each upgrade than the cost of the parts. 

Some manufacturers developed unique products – some even established unique brands to compete – usually with partial success. However, the magic trio marched on, decade after decade.

This was dangerous. Finding a successful formula is incredibly difficult, but sticking to the same formula allows others to copy and eventually compete head-to-head. 

The first success 

Tesla was the first to understand the type of customer who was attracted to this trio of products, and placed their faith in prevailing international political movements towards battery electric vehicles. They simply wanted to get the type of customer that would have bought one of the target vehicles, knowing that many had become bored with the millimetric progress of each ‘new’ generation. 

It took a decade and nearly broke Tesla on more than one occasion, but right now the evangelists who drive Tesla would have been the very same people driving an Audi, BMW or Mercedes-Benz. Add to this mix California styling and above all the idea the drivers are ‘right’, the customer profile resembles that of an Apple follower more than a regular car owner. 

Sweeping in behind Tesla is a gaggle of manufacturers trying to reach a lower price point to access the main market. Given 70% or so of all Li-Ion batteries and their components from China or are made by Chinese companies, the EU27 sector is at quite a disadvantage. The years of building battery factories have been a waste – Europe started too late with too little.

An example of over complex products

Imagine we had the franchise to build modern versions of a late 1950s icon – the Mini. Imagine that we have built three generations of this modern interpretation, and expanded the idea to induce versions that are definitely not small.

Enter the 4th generation:

Step 1 – develop a jointly engineered platform with GWM, leading the way to the third pure electric Mini (including the ‘demo’ only first cut). This is on platform J01, was announced to the world on 1st September 2023 and enters production in November 2023. It looks like a 3-door hatch, except the proportions seem to show a nose more akin to a Jaguar E-type than a Mini, so ensuring any connection to the Issigonis original is almost erased.

Step 2 – develop the dedicated FAAR platform (also dubbed ‘UKL2’) to replace the 3 door, 5 door and convertible models, all powered by internal combustion engines – this is, after all, where the profit is. These were slated to start production in November 2023. So, already we have a single body type – 3 door hatch – a pure electric version supplied by GWM from China and an internal combustion engine powered one supplied from the UK. 

Step 3 – finally, give a home to the Mini Countryman in a BMW plant. The Leipzig plant. This is the big coming out party for the third generation of Countryman, since the U25 platform can be built with internal combustion, PHEV or pure electric drive – just like the 2022 BMW X1 / iX1. Intelligent product planning, the BMW Group way.

Then comes UK government finance to the tune of £600 million, which will allow the UK plant at Cowley to build the J01 platform from 2026 – along with a new Mini model on the J05 platform, pitched as an SUV below the Countryman. This is spread-betting, where import tariffs into the EU become un-economic – there is an alternative source of supply. Plus £600 million of tax cash.

OK…. so much product, so many mutations…. Who cares for a thing that is called Mini but is big and has a huge bonnet? Is that really going to excite people who know almost nothing about cars? It is time the manufacturers stopped talking to themselves. 

Give in? No!

The trio of vehicles mentioned earlier are examples of a wider problem. Unintended complacency. 

The USA has been through several major convulsions because major players refused to see the prevailing threats until it was too late – ranging from the near collapse of Ford when Model T production ended to GM setting up Saturn to compete with Toyota, which it never really managed. In each case the status quo is allowed to roll along unchallenged, apparently unaware of what customers could do if another viable alternative should be offered to them. 

Famously the Japanese motor industry matched the USA industry in terms of durability, then beat it on price, running costs, reliability and quality. A few decades later South Korea did exactly the same thing.

This is the first time the European sector has been through such a market convulsion. It has to fight back:

Build costs have not really been managed for decades, so this should be a focus. Design for build and as well as taking apart is important not only for repair but end of life too – something Europe needs to improve. The result is more integrated functions for each part, but not necessarily higher overall cost.

Vehicles that are visually attractive, dynamically pleasing and comfortable to use. The European sector defined this for a long time, so needs to ease off the chintz and refocus on top class performance regardless of vehicle price point. 

The European sector must not deceive itself that dusting down concepts from three, four or five decades ago is enough to ‘fix’ things. The non-European vehicle manufacturers are profoundly competitive too, and so there needs to be a bigger product ‘input’ to create distance from them. Trade barriers are not the answer.

Consumer choice is the answer, and if vehicles are not selling, then merely tweaking the formula is probably not enough. In the past the ‘icons’ were born from the desire to do something different, even if the components were relatively conventional. For our prosperity as well as the manufacturers, we must return to these values.

What’s in this for South Africa?

The big story is a move towards even better vehicle design, which will take years to work through but promises a future of longer life parts. In turn those parts will have a service life and be available for re-work, just as engines and transmissions are today. The objective is to reduce energy use in both the original manufactured ‘new’ vehicle as well as parts for service or repair. 

The primary difference between what is happening now and what will happen over the next decade is partnerships. Toyota, Renault-Nissan-Mitsubishi Alliance, Stellantis and more are all exploring how to expand their parts supply business with green parts or refurbished parts. To make this work all the manufacturers need partners ‘on the ground’ to harvest parts and indeed, re-manufacture. It makes no sense to try and give a part a new life by shipping it from South Africa to France and back.

So, buckle up. This is one ride you won’t want to miss. Meanwhile, the automotive industry continues to fight for its survival. I wish them prosperity and a long life.

Story by: Andrew Marsh

Classic COrner & REStoration

Classic cars are the next big investment. As such the sector of restoration is growing in the realms of collision repair and it’s definitely the “sexier” side of the business. There are many opportunities to create exotic special-builds as well as keep timeless beauties in mint condition.

DRIVEN

With three motoring-journalists on our staff, we are able to test drive and review some of the latest models available on our roads as well as attend the latest model launches.

TRAINING

Knowledge is power. Training is key to up-skilling repairers as models launch onto our local roads faster than we can count. We also need to grow new talent into the collision repair industry. Courses are available to help and organisations are in place to train – this information is in Industry Index.

classic corner & resoration

Classic cars are the next big investment. As such the sector of restoration is growing in the realms of collision repair and it’s definitely the “sexier” side of the business. There are many opportunities to create exotic special-builds as well as keep timeless beauties in mint condition.

Driven

With three motoring-journalists on our staff, we are able to test drive and review some of the latest models available on our roads as well as attend the latest model launches.

TRAINING

Knowledge is power. Training is key to up-skilling repairers as models launch onto our local roads faster than we can count. We also need to grow new talent into the collision repair industry. Courses are available to help and organisations are in place to train – this information is in Industry Index.

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