According to McKinsey management consultancy, the European auto industry needs a new China strategy. In the world’s most important car market, European manufacturers have lost around 5 percentage points of market share since 2019, and new competitors have a 51 percent market share worldwide for e-cars.

“A stronger adaptation to Chinese customer tastes with a strong focus on the latest technology, connectivity, driver assistance systems and consumer electronics” could stop the erosion in China, the industry experts wrote in a study.

More research and development in China is also necessary. While European manufacturers take four years from concept to pilot phase of a car, the best Chinese manufacturers make it in two years. A maximum of 20 percent of the workforce in the European auto industry has software knowledge, “among the challengers from the USA and China the proportion is 45 percent,” according to the study. Chinese manufacturers have a cost advantage of 20 to 30 percent for electric cars. The energy costs for the European auto industry are two to three times higher than in China and the USA.

However, the European auto industry “can still act from a position of strength,” said McKinsey industry expert Andreas Cornet. It generates three times as much sales as the Chinese car manufacturers, scores with customer understanding, design and brands, employs 14 million people and is an innovation driver with 30 percent of all research and development expenditure in the EU. European manufacturers have announced more than 150 new electric models by 2030.

However, the dependence on China for batteries is high: “90 percent of the capacities for refining lithium are in China, more than 70 percent of the cells are manufactured in China.” By 2030 there is a risk of a huge gap in batteries, “Europe could be missing 500 GWh of local capacity,” write the consultants. Europe needs 20 additional battery factories for 35 billion euros. Even with semiconductors, the supply is not secured. “37 new plants with an investment volume of 190 billion euros could reduce the risk.” In order to be at the forefront of driver assistance systems and autonomous driving, European corporations should work together more on data usage and the definition of technical standards.