Making predictions about the future of the automotive industry seems very difficult at the moment: there are many variables to take into account. In recent years, the automotive industry, like many other industries, has had to face a lot of changes and many difficulties, such as the stoppage due to Covid-19, the difficulty in supplying raw materials and the shortage of chips, but also the surge in energy prices. All this against a backdrop of transition and transformation in the name of reducing environmental impact. In particular, this last point opens up challenges that many believe will have a tragic impact on the sector.
Automotive industry: challenges and opportunities for the future
In order to reduce CO2 emissions to zero by 2035 and achieve climate neutrality by 2050, Europe is aiming to stop the sale, and therefore production, of endothermic engine vehicles. This decision would have a fallout that should not be underestimated for a country like Italy, which is not only a car-producer country, but has a backbone linked to the automotive sector at every level. The supply chain in the strict sense represents 5.6% of Italian GDP, according to studies by Confartigianato, Figisc and Confcommercio. Moreover, there are 290,000 employees in Italy working in the direct automotive field, and 168,000 in component production for the automotive industry. The economic and social costs, therefore, would not be small: in this risk of deindustrialization, many companies would go bankrupt, and many jobs would be at risk.
The transition to electric power would also present other critical issues, especially from the point of view of infrastructure and electricity distribution. In Italy, the geographic distribution of car recharging points, for example, is not homogeneous and there are few columns that provide continuous current producing more than 100 kW. In addition, installing a charging point is time-consuming and expensive.
Not to be underestimated is the dependence that Italian and European car makers would have on those countries that have the availability of elements used to manufacture the rotor of an electric motor, a necessary component in electric cars, but not only, because we also find it in light vehicles such as bicycles. These are those countries, such as China, where the production of REE minerals (Rare Earth Metals) is concentrated, elements that are absent in Europe. In fact, European countries are completely dependent on Asian countries for the supply of these materials, and the production and sale of electric cars would therefore lead Europe to become inextricably linked to these countries.
Finally, there are about 300 million cars on the road in Europe today, of which only 1.4% are equipped with an electric motor. It will therefore take years for these proportions to change. Even if 15 million electric cars were sold per year, it would still take 20 years for the last car with a combustion engine to be taken off the market and for there to be a fully electric fleet.
Future perspectives and strategies
Against this backdrop of great uncertainty, Europe needs to adopt industrial policies targeted at the actual needs of those working in the automotive industry. The transition must be governed otherwise the economic and social costs will become unsustainable. At the national level, a strategy is needed that incentivizes research and development, collaborations between companies, and promotes direct foreign investment. Certainly, for companies operating in the automotive sector, it will be necessary to step out of their comfort zone, manage complexity and uncertainty, and project themselves towards innovation in terms of products and business models.
At Roncucci&Partners, we help companies develop themselves and their business, embrace change and evolve to thrive as a method and rigor within in a world that is increasingly complicated, treacherous, and requires many skills.