Transnational strategies in the automotive industry workshop Centre for Innovation Management Research (CIMR) Birkbeck, University of London 6th February 215 Beyond overcapacity: the new rules of the European automobile game Tommaso Pardi (IDHES-CNRS / Co-Director GIS GERPISA)
The past: the European automobile industry balanced development up to the 2s à reflected specific political rules of the automobile competitive game The present: since the 2s destabilisation of the European automobile industry (German hegemony + Eastern relocation) à new political rules of the automobile competitive game The focus: the integration in the EU of Central European Countries (CEE) and their missing markets for new cars: Why the expected markets for new cars in CEE have failed to emerge? Why the main stakeholders of the European automobile industry (in particular in France and Italy) have not even tried to protect those markets against massive imports of second hand cars? Is there a new balance emerging, and how does it look like? Introduction
Millions 16 14 12 1 8 6 4 2 Passenger cars national production (Western EU) 1% 8% 13% 27% 33% 11% 12% 23% 36% 12% 8% 13% 24% 33% 15% 11% 11% 23% 32% 17% 11% 7% 7% 1% 5% 2% 15% 12% 23% 16% 11% 4% 5% 15% 13% 4% 3% 16% 15% 35% 3 47% 48% 198 1985 199 1995 2 25 21 213 Spain UK Belgium Italy France Germany Source: CCFA / OICA The historical balance was based on the subordination of the European economic integration to the preservation of national industries and national champions à Old rules aimed at preserving this balance: Indirect competition The double exemption in distribution State aids and ad-hoc fiscal policies Comité des Constructeurs du Marché Commun (CCMC) The historical balance (up to 2) is destabilised
Fast growing market share of German carmakers (direct competition) à eviction of French and Italian carmakers from the premium segment + exports to China à New rules are build around the principle that «salvation is upmarket» à to preserve domestic production in high wages countries / to export to emerging markets / to introduce expensive green technology Source: CCFA First destabilising trend: German hegemony
Millions 16 14 12 1 8 6 4 2 12% 12% 15% 21% 15% 13% 23% 1% 11% 11% 1% 13% 1% 8% 12% 6% 6% 13% 5% 1% 8% 11% 4% 12% 4% 3% 13% 3% 2% 24% 18% 13% 12% 23% 23% 27% 32% 34% 37% 37% 33% 36% 32% 33% 198 1985 199 1995 2 25 21 213 CEE Spain UK Belgium Italy France Germany Source: CCFA / OICA Massive relocations of production from France, Italy (to less extent from Belgium and Spain) to CEE after their 24 integration in the EU New rules are built around the notions of competitiveness and overcapacity à political and economic support to FDI in CEE / A-B segment production cannot be profitable in high wages countries unless Second destabilising trend: Eastern relocation
35 Thousand 3 25 2 15 1 5 CEE* Passenger cars production CEE* Passenger cars domestic sales Most of the specialists anticipate a regional demand of 2,4 million new cars for 21. In the long term, and taking into account the population of these countries, the region has a potential of 4 millions new car sales per year. [ ] The region represents a strategic stake in the medium term where the die has not been cast yet. (Boillot & Lepape 24). 2 21 22 23 24 25 26 27 28 29 21 211 212 213 *, Hungary, Czech Republic, Slovakia, Romania and Slovenia Sources: CCFA Focus: The «missing markets» in CEE
35 Thousand 3 25 2 15 1 5 CEE* Passenger cars productio n CEE Passenger cars forecsted sales CEE* Passenger cars domestic sales Most of the specialists anticipate a regional demand of 2,4 million new cars for 21. In the long term, and taking into account the population of these countries, the region has a potential of 4 millions new car sales per year. [ ] The region represents a strategic stake in the medium term where the die has not been cast yet. (Boillot & Lepape 24). 2 21 22 23 24 25 26 27 28 29 21 211 212 213 *, Hungary, Czech Republic, Slovakia, Romania and Slovenia Sources: CCFA Focus: The «missing markets» in CEE
35 3 25 2 15 1 5 Base 1 in 2 EU Entry 2 21 22 23 24 25 26 27 28 29 21 211 212 213 real GDP per new Sources: World Bank / CCFA / OICA
35 3 25 2 15 1 5 Base 1 in 2 EU Entry 2 21 22 23 24 25 26 27 28 29 21 211 212 213 real GDP per new 7 6 5 4 3 2 1 Romania EU Entry 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Romani a real GDP per Romani a new Sources: World Bank / CCFA / OICA
35 3 25 2 15 1 5 Base 1 in 2 EU Entry 2 21 22 23 24 25 26 27 28 29 21 211 212 213 real GDP per new 7 6 5 4 3 2 1 Romania EU Entry 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Romani a real GDP per Romani a new 9 8 7 6 5 Russia Russia real GDP per 4 3 2 1 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Russia new Sources: World Bank / CCFA / OICA
35 3 25 2 15 1 5 Base 1 in 2 EU Entry 2 21 22 23 24 25 26 27 28 29 21 211 212 213 real GDP per new 7 6 5 4 3 2 1 Romania EU Entry 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Romani a real GDP per Romani a new 9 8 7 6 5 4 3 2 1 Russia 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Russia real GDP per Russia new 213 Real GDP per Capita 13648 $ 7,5 Romania 9499 $ 2,9 Russsia 14611 $ 18,1 New cars sold per 1 people Sources: World Bank / CCFA / OICA
1 6 1 4 Thousand 1 2 1 8 6 Annual increase of Passenger cars on the road Sales of new cars 4 2 Imported second hand cars 2 21 22 23 24 25 26 27 28 29 21 211 212 213 8% 7% 6% 5% 4% 3% 2% 1% % 22 23 24 25 26 27 28 29 21 211 212 2 18 16 14 12 1 8 6 4 2 Passenger cars fleet < 5 years (all cars %) > 1 years (all cars %) Source: Polish Automotive Industry Association
Polish passenger cars fleet 1% 8% 7% 6% 5% 4% 3% 2% 1% % 4% 5% 6% 7% 8% 1% 34% 35% 35% 35% 36% 37% 3 26% 27% 28% 28% 28% 32% 2 25% 22% 2% 1 17% 12% 12% 12% 12% 12% 12% 11% 11% 1% 26 27 28 29 21 211 212 Source: Polish Automotive Industry Association >31 years 16-3 years 11-15 years 6-1 years < 6 years Article 37 of the EU Charter states that a high level of environment protection and the improvement of its quality must be integrated in the EU politics according to the principle of sustainable development The EU treaty also states that the construction of the Common Market is based both on the development of competition policy and the reinforcement of environmental protection
Before 24: ban on imports of second-hand cars not compliant with Euro II standards and 22% VAT January 24: introduction of an excise duty on the imports of second-hand cars (up to 65%) September 26: the General Advocate of the EU tribunal states that the excise duty discriminates customers December 26: reduction of the excise duty by the Polish government January 27: the ECJ rules against the excise duty with retroactive effect February 27: withdrawal of the ecological tax bill by the Polish government 29-211:the impact of the crisis pushes the Polish lobby of foreign carmakers and suppliers to demand from the government new measures to develop domestic sales («Poles deserve newer cars!») : some attempts to resist, systematically neutralised by Brussels
9 8 7 6 5 4 POLAND EU ENTRY ROMANI A EU ENTRY Passenger cars production Passengers cars domestic sales 3 Romania Passenger cars production 2 Romania Passengers cars domestic sales 1 2 21 22 23 24 25 26 27 28 29 21 211 212 213 Source: CCFA / OICA Romania: the failed alternative
The alliance between Dacia-Renault and the Romanian State The launch in 24 of a 5 family car (the Logan) around 4% of the market Registration tax in 24 (declared in infringement of the article 9 of the EC treaty by the EU in 24 and 26) Pollution tax in 21 (declared illegal by the ECJ in 211) à A failed attempt to defend an alternative fordist path Romania: the failed alternative
The issue of second-hand cars imports in the CEE is nonexistent at the EU level The 212 final report of Cars21 (DG enterprise) 1. Consensus on overcapacity 2. Key targets: reduction of CO 2 emissions and improvement of road safety 3. Renault, PSA and Fiat participate to the consensus / trade unions and environmental NGOs too Why? The new rules consolidate the German (Northern) hegemony and the southern Europe restructuring: Exports of second hand cars are mainly from Germany (>5%) The new car sales left in the CEE are dominated by VW (3%) ACEA is not effective to raise such an issue and Fiat, Renault and PSA see relocation as an opportunity to reduce capacities in high wages countries, to transform their employment relationships and maximize short-term profitability according to the upmarket strategy The elephant in the EU «Cars21» s room