[Text/Observer Network Wang Kaiwen] The global auto industry is undergoing unprecedented changes. The rapid rise of China's electric vehicles has posed a severe challenge to Europe's老牌auto manufacturers.
"Europe once helped China learn how to make cars, but now the situation is changing," wrote the Financial Times website on April 16 in a long article, pointing out that Chinese automakers are already leaders in various advanced technologies. More and more European automakers seek cooperation with Chinese companies to avoid falling behind in key areas. The EU also tries to catch up with China's innovation by using market access as a method to exchange for key technologies.
The opening of the report told a story to illustrate the phenomenon of the rise and fall of the auto industries between China and Europe. Twenty years ago, German engineers often joked about the new car prototypes displayed by their Chinese joint venture partners, saying some prototypes were directly cut and pasted from German models' advertisements.
A software executive from a German automaker mocked: "They have no original ideas; they just copy."
However, recently, this engineer received a wish list of features for an operating system his company hopes to develop, which closely resembles functions already offered by China's electric vehicle manufacturers.
"We've come full circle back to the starting point," said the executive, who wished to remain anonymous.
As Chinese automakers rapidly rise, the EU imposed additional anti-subsidy tariffs ranging from 17% to 35.3% on Chinese electric vehicles, on top of the existing 10% tax rate, starting last year. However, at the same time, the EU and European automakers are seeking to leverage China's expertise.
On October 14, 2024, the 2024 Paris Motor Show opened, with several well-known Chinese automakers participating. Visual China
The report stated that to prevent themselves from falling behind in core areas such as software, batteries, and autonomous vehicle systems, which are crucial for the future of the auto industry, European companies are increasingly collaborating with their Chinese competitors. Volkswagen, Mercedes-Benz, Stellantis, and BMW have all signed agreements with Chinese companies to acquire relevant technologies.
According to the automotive industry action plan released last month by the European Commission, it is considering requiring Chinese companies entering the EU automotive market to establish joint ventures with European companies or transfer part of the technology licenses.
The report pointed out that if these proposals from the EU are met, it will mark a remarkable turning point in modern economic history, meaning that Europe is attempting to use a method previously used by China—exchanging market access for key technologies—to catch up with China's innovations.
"In a sense, it's a shift because it welcomes foreign investment into areas of European industrial development that Europeans take pride in," said Elisabetta Cornago, senior researcher at the London-based think tank "Centre for European Reform." She added: "This also acknowledges the gap between domestic European technology and external technology."
European industry executives unanimously agree that the EU's automotive industry action plan frankly admits that European automakers need the technical expertise of companies that are decades younger than them.
"We overestimated ourselves and absolutely underestimated others," said Robert Falck, founder and CEO of Swedish autonomous truck startup Einride. He stated, "What we need to do is face reality."
Raymond Tsang, an automotive technology expert based in Shanghai for Bain & Company, said that since 2020, foreign automakers have lost one-third of their market share in China, leaving them "no choice" but to cooperate with Chinese tech companies to survive.
"If you study the reasons for their failures, of course, the electric vehicle transformation is a major factor, but they also neglected information entertainment systems, connected vehicles, and advanced driver assistance systems (ADAS). If they don't address these issues, they won't have a chance," Tsang added.
Currently, the global auto industry is experiencing intense upheaval, facing challenges such as stagnant demand for European cars and the trade war initiated by the Trump administration in the U.S.
Some industry executives believe that the EU should be held accountable for the many adverse factors currently affecting European automakers. "Europe first shot itself in the foot and then blamed China for holding the gun," said one executive, referring to Europe's gradual phase-out of internal combustion engine vehicles, stringent emission penalties, and severing ties with Russia's cheap energy sources.
These industry executives also warned that the EU's imposition of tariffs on Chinese-made electric vehicles last year would make technology sharing more difficult.
Ola Kallenius, CEO of Mercedes-Benz and president of the European Automobile Manufacturers Association (ACEA), bluntly stated that increased protectionism would cause the greatest losses for European businesses, as they benefited most from globalization. He called for open markets and creating as fair a competitive environment as possible so that the best market participants could succeed.
The report noted that no country has captured the reversal of the global automotive order better than Germany. As the largest economy in Europe, much of Germany's wealth is built on exports to China. German automotive giants such as Volkswagen, BMW, and Mercedes-Benz have been pioneers in this field for decades, with a significant portion of their revenue and profits coming from the Chinese market.
The report mentioned that over the past few decades, German executives attending the biennial Shanghai Auto Show always talked about stories of Chinese brands imitating their best-selling models. However, these jokes came to an abrupt halt in 2023, as they clearly recognized the great progress made by Chinese electric vehicle manufacturers in software and battery technology.
In July 2023, Volkswagen announced a $700 million investment in China's electric vehicle manufacturer Xiaopeng Auto, acquiring nearly 5% of its shares and gaining an observer seat on Xiaopeng's board. The following year, the two companies announced plans to jointly develop smart connected vehicles for the Chinese market. Meanwhile, hundreds of Volkswagen engineers have been collaborating with Xiaopeng Auto in Guangzhou and Hefei to learn the expertise of this Chinese company in developing intelligent driving architectures.
In July 2024, Xiaopeng Auto and the Volkswagen Group signed an Electronic Electrical Architecture Technology Strategic Cooperation Joint Development Agreement. Xiaopeng Auto Official Website
Despite the evident progress of Chinese enterprises, a European executive working in China said that the old notion of Western technology having an advantage still lingers in certain fields.
"Many people struggle to adapt to the new reality of Chinese innovation," said the aforementioned person, adding that this might be due to a form of arrogance or naivety, or the belief that only so-called 'free societies' can produce real innovation.
Christoph Weber, head of AutoForm's China operations, a Swiss engineering software company, pointed out: "(Western brands) have tried to develop competitive software, but mostly failed." Even so, they still haven't "emotionally accepted" China's rise.
He added: "Some people are willing to believe that we can still delay the problem, ignoring the absolute advantages of electric vehicle technology and the era of software-defined vehicles coming soon."
The Financial Times noted that Western companies once worried about having their intellectual property stolen when doing business in China, but now they find that China has similar concerns. Automotive industry executives said that Beijing is making efforts to ensure that technologies developed in China do not flow into Europe through cooperation agreements.
On the other hand, as geopolitical tensions escalate, industry executives said that Brussels and China need to find a way to collaborate.
Stefan Borgas, CEO of refractory materials supplier RHI Magnesita, said: "European industry suffers greater losses than the U.S., so recognizing the necessity of cooperation with China must happen faster."
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Original source: https://www.toutiao.com/article/7494127579297874442/
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