Whilst Europe struggles to keep its own regulations under control, China continues to gain ground thanks to its pragmatic approach to change. This clearly illustrates the situation in the automotive industry in both markets and the way in which they approach it from two opposing perspectives.
The transition to cleaner energy in transport, the development of new technologies and trade tensions are the three main challenges currently facing the automotive industry. After more than a century of history, we are now witnessing a radical transformation in the way we buy and use cars.
Is regulation an asset or a hindrance?
Both China and Europe are keen to reduce their emissions in the coming years.
The difference lies in how this goal is to be achieved. On the one hand, the European Union has made a legal commitment to achieve climate neutrality by 2050. To do so, it plans to reduce its net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. One way of achieving this is to promote the adoption of electric vehicles.
This transition must be accompanied by a system of severe penalties, with car manufacturers that fail to meet the targets having to pay fines to the authorities. Instead of having a positive impact, this regulation is becoming a real nightmare for all car manufacturers operating in Europe. They must invest heavily in zero-emission engine technologies without any certainty that consumers will buy these vehicles.
At the same time, they are being forced to abandon the production of petrol and diesel cars, their main source of income.
On the other hand, China aims to achieve carbon neutrality by 2060, with a target of reducing emissions across its entire economy by 10% from peak levels by 2035. The Chinese government wishes to promote the adoption of new energy vehicles (NEVs) in order to achieve a 91% reduction in emissions from passenger cars in the long term.
The main difference lies in the role of regulatory authorities and car manufacturers within the economy. In China, NEVs are essential to the country’s future economic growth. Manufacturers know that they have no competitive advantage with combustion-engine cars, but they do with low-emission vehicles. This is why central and local governments provide numerous incentives, support and subsidies to car manufacturers.
In Europe, government incentives do exist, but penalties are the key element of the regulations. European car manufacturers are stepping up their electrification programmes because they do not want to pay fines. Rather than facilitating the transition, European regulations are making it more complicated.
