January 22, 2020 / 5:25 PM / a month ago

Auto industry seen consolidating as falling demand, higher costs bite

BRUSSELS (Reuters) - The auto industry faces further consolidation and jobs will migrate to lower-cost countries as companies struggle to develop cleaner vehicles in an economic downturn, European Auto Industry (ACEA) President Mike Manley said on Wednesday.

FILE PHOTO: A Volkswagen logo is seen at a construction completion event of SAIC Volkswagen MEB electric vehicle plant in Shanghai, China November 8, 2019. REUTERS/Aly Song/File Photo

Tighter emission rules introduced in the wake of Volkswagen’s (VOWG_p.DE) diesel pollution cheating scandal are forcing carmakers to cut average fleet emissions of carbon dioxide to 95 grams per kilometer in 2021, from an average 118.5 grams per kilometer in 2017.

The investments in low-emission powertrains are being made at a time when European passenger car sales are set to drop by 2% this year after six consecutive years of growth, so carmakers will have to cut cost to offset the expense, Manley told reporters in Brussels.

“There will be a migration of jobs to lower-cost countries,” Manley said, explaining that the cost of low-emission hybrid and electric powertrains are higher than those for combustion engine variants. “This needs to be rebalanced,” Manley said.

Carmakers and suppliers will need to make greater use of lower-cost manufacturing locations and seek broader partnerships to share the costs of the investment.

“We want to ensure a thriving industry. This will require some consolidation,” Manley said. “People are looking more rationally at regional requirements and regional scale. In terms of number of carmakers that survive, your guess is as good as mine.”

The European Union’s Green Deal should be used to strengthen the EU’s industrial base and the global competitiveness of its automobile industry.

Any efforts to shift towards a carbon-neutral economy need to be carefully thought through and reviewed. “There will be unintended consequences. Employment is an example,” he said, explaining that electric cars take less time to assemble than combustion-engined equivalents.

“The transition to carbon neutrality must be well managed, taking into account social and economic dimensions. Mobility must remain affordable for all European citizens, regardless of where they live or their financial means,” Manley said.

Manley called for an EU-wide network of charging points and refuelling stations for both passenger and commercial vehicles.

Reporting by Marine Strauss and Edward Taylor; editing by Nick Macfie

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