TLDR:
- BMW CEO Oliver Zipse calls for cancellation of EU’s 2035 ban on fossil fuel cars
- Zipse argues ban would increase reliance on China for EV batteries
- German automakers struggling with EV sales and competition in China
- VW, BMW and Mercedes reported declining Q3 sales in China
- Zipse warns EU combustion engine ban could shrink European auto industry
BMW CEO Oliver Zipse has called for the European Union to reconsider its plan to ban new fossil fuel-emitting cars from 2035, citing concerns about increased reliance on China’s battery supply chain and potential shrinkage of the European automotive industry.
This call comes as German automakers face declining sales and intensifying competition in the crucial Chinese market, particularly in the electric vehicle (EV) segment.
Zipse argued that canceling the ban would allow European automakers to reduce their dependence on Chinese batteries and play to their technological strengths. He emphasized the need for a “strictly technology-agnostic path” in policy frameworks to maintain competitiveness.
The BMW chief’s comments reflect growing anxiety among European automakers about the rapid transition to EVs and the challenges it poses to their traditional business models.
The EU approved a landmark law in March 2023 requiring all new cars to have zero CO2 emissions from 2035, effectively banning diesel and petrol vehicles. The law also mandates a 55% reduction in CO2 emissions from 2030 compared to 2021 levels. Several carmakers, including BMW, Volkswagen, and Renault, have called for these targets to be loosened or delayed, fearing heavy fines due to lower-than-expected EV sales.
Recent sales figures underscore the challenges faced by German automakers in China, their largest and most lucrative market. In the third quarter of 2024, BMW reported its steepest sales drop in China in over four years, with a 30% plunge. Mercedes-Benz saw a 13% decline, particularly in its high-end models. Volkswagen Group, including its Porsche and Audi brands, experienced a 15% decrease in sales.
The struggle of German automakers in China’s EV market is particularly concerning. Despite controlling nearly 15% of the overall Chinese auto market, their share of EV sales is less than 10%. This decline comes as Chinese consumers increasingly favor tech-savvy and affordable plug-in vehicles offered by local manufacturers and Tesla over traditional German brands.
Zipse warned that the EU’s combustion engine ban could lead to a “massive shrinking” of Europe’s automotive industry. He argued that the plans are “no longer realistic” and that EV subsidies are “unsustainable.” The combustion engine has long been a cornerstone of Europe’s industrial landscape, and the transition to EVs poses significant challenges for the continent’s vast network of automotive suppliers.
The situation is further complicated by the fact that German automakers have invested heavily in China, operating a network of over 40 factories. This substantial footprint makes it difficult for them to consider pulling out of the market, unlike some other international brands that have scaled back their presence.
In response to these challenges, German automakers are intensifying their efforts to adapt to the Chinese market.
Volkswagen has partnered with local firms for autonomous driving and infotainment systems, while also investing in Chinese EV startup Xpeng. Mercedes-Benz is collaborating with CATL for batteries and Tencent for digital services, and BMW has joined forces with Great Wall Motor to build EVs for its Mini brand.
However, these partnerships and investments represent a significant gamble, potentially increasing German automakers’ exposure to China at a time when the German government aims to reduce such dependencies.
The situation highlights the complex balancing act faced by European automakers as they navigate the transition to EVs, intense competition from Chinese brands, and evolving regulatory landscapes.
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