A new industrial reconversion in Europe is coming?


The European economy has been based in the last decade on the so-called ‘alpine-Mediterranean diet’”, whose main ingredients were the urban boom, tourism, export and domestic consumption. Said formula created excellent minimalist dishes, highly suggestive appearance but empty of culinary content and printed expiration date.

The European economy would be burdened by excessive energy dependence on oil and natural gas (around 60%), uncertainty in the tourism sector ( 10% of GDP ), over-pivoting over the automotive sector ( 7% of national GDP and 10% of exports)insufficient investment in R&D&I, a worrying fragmentation of agri-food companies and a necessary diversification and search for markets.

Thus, after a sweet stage driven by favorable tail winds, the crisis of the automotive industry will cause a shock of the tectonic plates of the European industrial sector that could shake the flagships of brands such as Renault, Mercedes and Wolkswagen and which could have as a side effect the entry into recession of the European economy in the horizon of 2030.

In this context, the Volkswagen plant would be considering closing the Crystal factory in Dresden, where it manufactured the electric ID.3 due to the low demand for electric cars in southern Europe, the withdrawal of public aid from the German Government to buy electric vehicles, the lowering of prices of Tesla and the entry of Chinese marches as BYD makes it impossible for German electric cars to be competitive. This has caused a collective psychosis translated into cuts in production, delays in the development of projects and a savage fight between brands to reduce costs.

The German Automobile Industry Association (VDA) Germany expects a fall in sales of 14% in 2024 given the prevailing uncertainty in the market which could have as a side effect the suspension by major European brands of their plans for the production of electric cars.

Thus, both Renault and Mercedes and Wolkswagen would be considering a review of their strategy to manufacture only electric vehicles by 2030 and estimate that the production of combustion models will continue during the first years of the next decade.

As a result, the electric vehicle battery manufacturing sector has decided to reverse its expansion plans, cutting the 158 GW it planned to increase to supply more than two million plug-ins a year.In the Spanish case, the ambitious bet of the Volkswagen group to invest 1024 million euros in the 2023-2027 which involved the electrification of the Landaben plant in Navarre and the arrival of two new 100% electric models from the group and whose serial production was scheduled for 2026, could be put on hold as well as Hyundai’s planned battery assembly plant.

This could lead to the decline of the automotive industry in Europe, which employs some 13 million people and accounts for 7% of European GDP, so that we could witness a dizzying increase in unemployment rates, to the drastic reduction of state revenues and the consequent increase in deficits (the automotive industry accounts for 10% of total European exports) and the subsequent recession of European economies towards 2030, It is therefore urgent to draw up the main lines of the future industrial conversion which is on the horizon for the next five years.

Germán Gorraiz López