Ethe European car industry stands at an imaginary crossroads. The demand for electric cars is not what politicians and manufacturers imagined years ago. Interest in emission-free cars is growing, but not nearly as fast as those mentioned would like. In addition, a number of dangers and obstacles in the form of the American Tesla or Chinese car companies are rushing to the backbone of many European economies.
At the same time, these manufacturers are beginning to establish themselves more significantly in Europe. After all, Tesla’s Model Y electric SUV was the best-selling car in Europe last year. And this car is starting to catch on significantly in the Czech Republic as well, i.e. in a market where electric mobility is still not very attractive to drivers. In the country last year, registrations of battery electric cars made up only three percent of all new car registrations. In the European Union, the average is fifteen. Only Slovakia was worse than the Czech Republic in terms of sales last year.
“It’s getting worse and worse,” Martin Brix, CEO of leasing company Drivalia Česká republika, responded succinctly in Hospodářské noviny Debate on the automotive industry when asked how the current European one is doing. “Although the range of European vehicles remains as we are used to, technologically we lag behind other parts of the world, be it Asia or the USA. It seems that under pressure from Asian manufacturers, who are becoming more advanced, Europe will have some work to do to compete with them,” added Brix.
At the same time, his words are not just spoken to the wind. China became the world’s largest exporter of cars last year, and has significantly begun targeting the European market, where it wants to compete with established brands from the Volkswagen or Stellantis concerns with its cheap electric cars. At the same time, European manufacturers are still not able to bring to the market an affordable electric car that would be sold below the price of 25,000 euros (roughly 630,000 crowns).
Chinese brands are not so active in the Czech Republic yet, MG and Dongfeng cars are sold here, but brands such as Nio, Geely or the world’s largest electric car manufacturer BYD are already much more active in the markets of Western and Northern Europe. Zdeněk Petzl, executive director of the Czech Association of the Automotive Industry, sees in the current events an analogy with the expansion of Japanese and South Korean car companies into Europe in the past decades.
“They have roughly a 20 percent share of cars sold in Europe. It wasn’t like these companies came in and the European automakers ended. Brands such as Toyota, Hyundai or Kia have found their place. We must not take a dramatic approach to Chinese expansion, rather be rational about Chinese models. China approaches industry differently than Europe, they have a certain competitive advantage,” Petzl calculates.
The European Commission (EC) noticed this last November and launched an investigation against Chinese imports of electric cars and is investigating whether electric cars produced in China receive unfair subsidies. Ursula von der Leyen called possible government support for the EC a distortion of the European market, which threatens traditional producers. The import of Chinese electric cars into Europe is currently burdened with a ten percent tariff, and the EC is considering increasing it.
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Vice President of the Union of Industry and Transport of the Czech Republic, Radek Špicar, said that Chinese electric cars are at the forefront of technological development, charging system and speed, as well as car software. It will therefore be difficult for European automakers to catch up, especially in a period of large-scale investments in electromobility. “I am an optimist, I believe in Europe’s potential to respond. But the reaction horizon will be longer. It may be ten years before we use someone else’s technology and drive vehicles made elsewhere than in Europe. But in the meantime, Europe will be able to consolidate and take action,” countered Drivalia’s Brix.
According to Petzl, one of the main problems of the European car industry lies in the fact that its political underbelly is significantly over-regulated. He has in mind both the Green Deal and the commitment that from 2035 it will practically no longer be possible to sell cars with an internal combustion engine, or expensive energy or the issue of mining precious metals.
“We are talking about not having enough raw materials. We are trying to create a strategy for the acquisition of Critical Raw Materials Act raw materials on European soil, so that we are not dependent on China and we can ensure the conditions for the European car industry so that it can continue to function in the future,” said Jan Kobliha, Director of the Department of Sectoral Expertise and Industrial Policy at Ministry of Industry and Trade. Metals such as nickel, copper or cobalt are especially important for electromobility.
“Europe is shooting itself in the foot. It is clear that progress, good research and development cannot be over-regulated. The Green Deal represents a huge cost that we must be able to earn. Business in Europe itself is expensive compared to the rest of the world,” adds Petzl. At the same time, however, he adds that it is not possible to completely turn the wheel and reject electromobility, because companies have invested high billions of euros in it.
Martin Peleška, CEO of Toyota Lexus Czech Republic, sees the situation a little differently. “It seems to me that in Europe we don’t know who we want to please. Whether to customers or to tough rules and regulations. The demand does not meet the plans,” he said, adding that the car industry was, is and will be a matter of supply and demand. According to him, electromobility has unnecessarily become political, and much earlier politicians and manufacturers should have explained to customers why electromobility is actually good. “We missed that and now we’re catching up in a panic,” says Peleška.
In the Czech Republic, the electric future is often evaluated with the label of dictates from Brussels. “Putting your head out of the sand and accepting what’s happening is missing,” Petzl summed up the topic.
The HN Debate also addressed the current topic of the change in the sale of new cars, when instead of the classic dealer network, traditional European automakers, following the example of Tesla and Chinese automakers, are switching to agency sales. Independent dealerships would become agents who would sell new cars at a stable margin determined by the automaker.
Even the largest domestic automaker Škoda Auto, Mercedes-Benz, BMW or the American Ford are planning to switch to such a sales model for electric cars. Car companies are taking the step primarily because they are looking for savings wherever they can in the challenging time of the transition to electromobility. Dealers would become primarily turnkeys and their freedom to trade would disappear.
“We operate a large number of cars in the Czech Republic, for which we need a wide range of after-sales services, and these are carried out by dealers. The agency model operated by Tesla does not fit our business model at all. In addition, it is used by a large number of corporate clients, who make up the majority on the Czech market,” commented Brix, adding that Tesla’s sales model will be particularly appreciated by digitally advanced customers.
“The agency model leads to the car companies’ costs being reduced by the dealer’s margin. We do not support this at Toyota and will stick to the standard car distribution system including the role and remuneration of dealers. It is an important link in the system for us. No one was able to explain the advantages to me, except for one, namely that the customer’s data is now at the dealer’s place, not the manufacturer’s,” Peleška said.
In addition to the transition to the agency model, we are also hearing more and more about carsharing. “It is a global megatrend that needs to be addressed. Young people prefer freedom, they don’t want to commit to owning a car for ten years or renting a car for five years. They prefer to rent it for one trip,” said Brix, adding that the way cars are used in the economy will be significantly different in a few years. “The number of company cars is decreasing in Western Europe. Company fleets are smaller, it’s still not in Central Europe, it’s still a status symbol. But it’s disappearing, we’re becoming more pragmatic,” Brix concluded.
