VW may form EU alliances to lessen EV costs
Volkswagen, Renault and Stellantis are thinking the unthinkable, exploring tie-ups with sworn competitors to make cheaper electric vehicles and fend off existential threats.
As Chinese rivals and Tesla Inc. expose competitive weaknesses at Europe’s biggest mass-market carmakers, it’s become clear that a sense of urgency is growing and a business-as-usual approach is a losing option.
There’s a “perfect recognition that in the future, the companies which are not fit to face the Chinese competition will put themselves in trouble,” Carlos Tavares, chief executive officer of Stellantis NV — the company created from the 2021 merger of Italy’s Fiat and France’s PSA Group — said in an interview last week. He has previously said Europe’s auto industry faces a “bloodbath” if it doesn’t adapt.
Pushed by a slowdown in the pace of EV adoption, auto executives are discussing ideas ranging from pooling development resources to bundling businesses across European borders to better compete in the once-in-a-generation shift. The coming months are crucial.
Rather than muscling aside gas guzzlers, sales of fully electric cars this year are set to grow at the slowest rate since 2019, according to BloombergNEF, with the unexpected stall in momentum intensifying competition. Even for Tesla, the slowdown — which has led to widespread discounting — has had an effect. A 20% share slump this year has erased about $150 billion from its market capitalization — more than double VW’s value.
Headwinds for the sector include governments dropping incentives, rental firms balking at ballooning repair costs and consumers increasingly frustrated with climate policies affecting their pocketbooks. Elections in the U.S. and Europe could further fuel anti-EV sentiment, just as an inflection point approaches.
In 2025, tighter emissions rules come into effect in the European Union, meaning manufacturers need to sell more battery-powered cars or face hefty fines. In an unlikely worst-case scenario, Volkswagen AG could face penalties of more than $2.2 billion if it fails to sufficiently reduce fleet emissions, according to Bloomberg calculations based on company and regulatory data.
As pressure builds on European carmakers to sell more EVs, China’s statesupported manufacturers are entering the cooling market with models that are often better and cheaper.
BYD Co.’s Dolphin, for instance, is listed at about $7,564 less than a similarly equipped VW ID.3, which the German carmaker originally pitched as the Beetle of the EV era. The Chinese manufacturer will underscore its European ambitions by showing off several electric models at the Geneva car show next week, including a luxury SUV rivaling the Mercedes-Benz G-Class.
Failure for Europe’s carmakers to come up with a working Plan B risks upheaval in
an industry that employs some 13 million people and accounts for 7% of the EU economy.
“We have spent billions ... to make electric mobility possible,” said Holger Klein, the CEO of ZF Friedrichshafen AG, a German parts maker that employs around 165,000 people worldwide. “Now the question is: Do we have the right parameters?”
Renault SA CEO Luca de Meo has advocated an alliance akin to the tie-up that created a European planemaker to vie with Boeing Co. by pooling assets in Germany, France, Spain and the UK. The executive argued an “Airbus of autos” would help share the massive cost of building cheap EVs, while allowing them to benefit from greater scale.
Interest in broader cost sharing rose late last year, when Renault presented a concept for an electric city car that would cost less than $21,612 — half the price of VW’s ID.3. De Meo’s initiative is inspired by Japan’s kei cars. The popular mini vehicles are built by several manufacturers and get preferential treatment from regulators.
Different approaches are emerging. Stellantis’s Tavares has openly discussed an interest in mergers and acquisitions, whereas others are more focused on less-thorny collaborations.
Renault’s de Meo downplayed speculation on a major combination last week, telling Bloomberg Television that agility is more important than size. He confirmed that talks on a joint EV platform are taking place “left and right.”
“We’re ... open to share that kind of investment because it’s very difficult to make money with small cars,” said de Meo, who has previously worked for Volkswagen as well as Fiat. “We’re trying to find a way.”
A shakeup in Europe could spill over to the U.S., where General Motors Co. and Ford Motor Co. also are paring back EV investment and have indicated they’re open to partnerships with peers. President Joe Biden’s administration is considering giving manufacturers more time for the shift to electric cars.