The automotive sector has been shaken by the strengthening of environmental standards Economy

The automotive sector is at the forefront of the transition to carbon neutrality

Renault has just announced that it is separating its electric and thermal car production activities finances investments to accelerate development in the field of electricity.

The Billancourt-based manufacturer faces its own challenges (low profitability, low level of capital on the balance sheet, declining volumes, sales concentrated in low-cost models, withdrawal from the Chinese car market, withdrawal from the Russian car market, sales of Renault-badged Dacia cars outside Europe, Renault after the ouster of Carlos Ghosn -The poor performance of the Nissan-Mitsubishi alliance, the chaotic operation of the alliance with Nissan after the overthrow of Carlos Ghosn, the image associated with successive commercial failures. higher market segments, etc.), as well as several players in the automotive sector (manufacturers, equipment manufacturers, (dealers) share: recent sales declines, market volatility, a bleak economic picture, as well as tightening environmental standards that go as far as “brutal and structuring” sales bans.

In this context, low carbon mobility (electricity, hydrogen) is considered as the main, mandatory and inevitable development axis for the next decades in the European market.

The the race for innovation in metals and technologies is intensifying and global players have entered into fierce competition.

Access to metals and supply chains, investment opportunities and rare skills are essential.

The electrification of cars has become a global competition.

Whether developed or developing economies, mining countries… everyone is gearing up not to miss the low-carbon mobility ship.

China is a major player in battery production with 60% of global lithium processing capacity, 77% of global battery cell production and 60% of global battery component production.

Decarbonization is high on the political agenda of OECD countries.

In addition to environmental concerns, economic issues (job losses, factory closures, job creation, reindustrialization) and industrial sovereignty are important.

Subsidizing car purchases is routinely used by governments to support activity and stimulate consumption.

Chinese and American authorities have recently implemented it subsidies for the purchase of electric vehicles by households. These two countries can rely on their large domestic markets to develop the automotive industry.

In France, the government is considering “social leasing” to help the poorest households buy electric cars, in addition to conversion bonuses. the ban on the circulation of old thermal vehicles can have a large social impact in the short term on the mobility of Low Emission Zones. (ZFE-m).

Given the bleak economic outlook and inflationary context, one may wonder how sustainable these procurement subsidies will be.

Major players in the automotive sector are also working on one vertical integration of value chains.

Thus, several manufacturers and equipment manufacturers have announced the creation of joint ventures with joint ventures in the field of lithium-ion batteries and hydrogen.

It’s a challenge supply and cost control at each stage of the industrial process (raw material, battery, engine, vehicle)..

The development of this market should allow the creation of opportunities for all subjects of the production chain.

Structural pressure on auto equipment manufacturers and dealers is likely to increase.

It is mainly related to short-term risk availability of resources needed to produce electric vehicles and batteries. It relies on specific raw materials (lithium, copper, nickel, etc.), and the massive and rapid transition to low-carbon vehicles is putting strong pressure on production and supply. Given the energy storage needs, this risky situation should continue in the medium to long term.

In the short term, The risk of dependence of European car manufacturers and equipment suppliers on certain countries and suppliers is significant. This is especially the case where the ban on the sale of thermal vehicles until 2035 in Europe is based on immature re-industrialization projects (mining projects and gigafactories) and increases the risk of vulnerability to shocks in the supply chain. and so on.).

Finally, the gloomy economic picture will definitely have a negative impact on the automotive sector.

Car sales are closely linked to the health of economies, and Coface forecasts global GDP growth to slow to 1.9% in 2023 (2.8% in 2022).

Weak household confidence and rising credit prices may affect car demand.

The price of low-emission cars will remain very high in the medium termin the context that the cost of energy affects the entire value chain (production costs, concession operating costs, etc.).

Source : Coface

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