What auto crisis? Carmakers are still making billions, NGO boss says

Ahead of the EU’s “strategic dialogue” on the future of the car industry, Brussels’s most powerful environmental lobbyist, William Todts, executive director of Transport & Environment (T&E), says that carmakers are not in a major crisis.

The “strategic dialogue”, headed by European Commission President Ursula von der Leyen, is set to kick-off this Thursday, amid a crisis in Europe’s automotive sector, which accounts for 7% of the EU’s GDP. It follows the model of a similar dialogue for the crisis-shaken farming sector.

What follows is an edited transcript.

Ahead of Thursday’s ‘strategic dialogue’ on the future of the automotive industry, everyone is talking about the crisis in Europe’s car industry. How do you see the situation?

TODTS: The car industry is very good at painting a picture of crisis. But the reality is that the car industry has had record profits in recent years. They have made record payments to their shareholders and to their CEOs, so they had a couple of really good years.

Then a couple of things happened. One thing is that they are being out-competed on electric cars in China. German carmakers are very dependent on China.

And in Europe, you have lower car sales. If you have a macroeconomic policy that makes interest rates higher and tries to slow down the economy, and you know that every new car is somehow financed, it’s not surprising that car sales are lower.

The third point is that you have problems that are specific to individual corporations. The CEO of Stellantis, Carlos Tavares, was fired. This had nothing to do with the EU rules for 2025. Then Volkswagen has other problems: related to China, to their structure and to software.

The car lobby has created this whole narrative that they are in crisis and that the EU is to blame for this. This is a complete fabrication.

Which part is a fabrication: that they are in crisis, or that the EU is to blame for it?

I don’t think they’re in a major crisis. And certainly, the EU is not to blame for that.

The transformation towards electric cars, which need fewer people to be assembled than conventional cars, is expected to cost thousands of jobs. Is this also less of a problem than it sounds?

There’s a clear need to transform the industry, and clearly, this is going to be disruptive for some carmakers and for some regions. But the transformation is necessary and inevitable, so we need to develop a good social plan together with the unions to allow those people to transition either into retirement, which is partially what is happening at Volkswagen, or to new jobs.

In Germany, we are not in a situation of mass unemployment. Instead, there are not enough candidates for a lot of jobs.

But that’s very different per region. In Niedersachsen, where Volkswagen is located, they are the biggest employer, leaving huge problems if it falls apart.

Indeed. There needs to be a social pillar to the transition of the automotive industry. This is clearly going to be part of the ‘strategic dialogue’.

This is not the first industry that goes through a transformation. The way we have dealt with that is that we created regional funds and regional initiatives to create new employment opportunities, to create training opportunities. This is currently lacking for the auto industry. So there’s a role to play for the European Union there.

That being said, I would imagine that if the EU would step in to support automotive regions in transition, I’m not sure the money would go to Germany, which is one of the wealthiest nations of Europe.

The car industry also wants to discuss the looming CO2 penalties in the strategic dialogue. What is your view on that?

The car companies are playing with fire. They say they want the overall transition to succeed, but they are constantly pushing the narrative that the EV transition is currently not succeeding.

The warning that they will have to pay €15 billion in penalties is a complete joke. That analysis is so poor. It assumes that the car companies make absolutely zero effort – and don’t sell all the electric models that they plan to launch and to produce – and then they might pay very high penalties.

In reality, as we saw in the United Kingdom, there were the same warnings for the zero emission vehicles mandate for 2024. But at the end of the year, all the carmakers met the ZEV mandate.

Policymakers need to ask themselves how is the European car industry going to compete in China, and worldwide, if it cannot even do 20% EV sales in Europe in 2025, whereas in China, the share is at 50%?

So you are saying that the carmakers don’t look at their own long-term perspective?

They are all publicly listed, they’re trying to make their quarterly earnings, their annual profit numbers. CEOs and executive teams are rewarded on the basis of that performance. I don’t have a problem with that, but if your competitors follow a different model – the Chinese have a longer-term perspective – then you need to adapt to that.

That is the role of the EU, to give them that long-term planning certainty.

In a way, we see the dialogue as an opportunity to bring a bit of calm to the debate. We should not rush it. The Commission should take the time to develop a proper, common analysis of what the real problems are and what they want governments to take action on.

[OM]