Luca de Meo is considering an "Airbus Alliance"

Is the European Electric Standard Small Car Coming? Currently, Chinese competitors and Tesla Inc. are exposing the competitive weaknesses of the largest European and American mass-market car manufacturers. In the USA, Ford and GM are already considering bundling their EV developments. Carlos Tavares, CEO of Stellantis, is also sounding the alarm. The news agency Bloomberg quotes him as saying:

“It is clear that in the future, companies that are not fit to face Chinese competition will run into difficulties."

He has previously said that the European auto industry faces a "bloodbath" if it doesn't adapt.

In light of a slowdown in the adoption of electric vehicles, auto managers are discussing ideas ranging from pooling development resources to merging companies across European borders to better compete in the unique transformation. The coming months are critical.

Instead of outpacing combustion engines, BEV sales are expected to record the slowest growth since 2019 in 2024, according to Bloomberg NEF, with the unexpected stall in momentum intensifying competition. Even for Tesla, the slowdown—which has led to widespread discounts—has had an impact. A 20% drop in stock this year has wiped out about $150 billion in market capitalization—more than double the value of VW! Though these are all virtual values...

Many challenges—and all at once

Challenges for the sector include the cessation of government incentives, rental companies shying away from rising repair costs, and consumers becoming increasingly frustrated with climate policy measures that impact their wallets. Upcoming elections in the USA and Europe could further fuel anti-EV sentiment, just as the mid-2020s were seen as the "turning point." Additionally, stricter emission regulations will take effect in the EU from 2025, meaning manufacturers must sell more battery-operated cars or pay hefty fines. In an unlikely worst-case scenario, Volkswagen AG could face fines of more than €2 billion ($2.2 billion) if it does not sufficiently reduce fleet emissions, according to Bloomberg calculations based on company and regulatory data.

While the pressure on European car manufacturers to sell more EVs increases, state-supported manufacturers from China are entering the cooling market with models that are often cheaper, though they too struggle, as raw materials are no cheaper in China either.

The failure of European car manufacturers to develop a functioning Plan B carries the risk of upheaval in an industry that employs about 13 million people and accounts for 7% of the EU's economy.

Moreover, suppliers are under pressure: Holger Klein, CEO of ZF Friedrichshafen AG, explains:

“As an industry, we have invested billions to make electromobility possible."

And now he has to ask whether they have the right parameters...

Which brings us to the CEO of Renault SA, Luca de Meo: He has advocated for an alliance similar to that which created a European aircraft manufacturer to compete with Boeing Co., by pooling assets in Germany, France, Spain, and the United Kingdom. The manager argues that an "Airbus of cars" would help share the massive costs of building cheap EVs while benefiting from greater scaling.

Japanese Kei-Cars as a model

Interest in broader cost-sharing increased late last year when Renault presented a concept for an electric city car that would cost less than €20,000—half the price of VW's ID.3. De Meo's initiative is inspired by Japan's kei cars. The popular mini-vehicles are built by several manufacturers and receive preferential treatment from regulators. Different approaches are emerging. Stellantis' Tavares has openly expressed interest in mergers and acquisitions, while others focus on less sensitive collaborations. However, when asked by Bloomberg, de Meo curbed his enthusiasm, telling Bloomberg Television that agility is more important than size.

But he confirmed that talks about a joint EV platform are happening "left and right."

What does this mean?

The pressure on the auto industry is higher than ever because it continues to struggle with affordable EVs. It remains to be seen whether the grand alliance will bring about or require the standard car.