The IAA Hall 2023 in Munich and the future of the automotive market

In Munich, the IAA Motor Show has opened its doors, where, as usual, a series of innovations are produced that give us an idea of where the sector is headed. But in these times when vehicles powered by combustion engines are in their phase of decline that leads them to disappear, while electric vehicles are in an upward progression, and new trends in the world market are established in the substitution of the first for the seconds.

For example, it was this week when at the Munich Motor Show (Germany), the CEO of Opel, Florian Huettl, announced that “from 2025, all new Opel models will be launched as fully electric vehicles, of battery”, advancing its initial plans by three years.

With this acceleration in its total electrification strategy, in line with that of the rest of the Stellantis group brands, and in parallel with other brands, Opel will be ahead of other large manufacturers in its total electrification, to comply with the decision of the European Union to prohibit the sale of new cars with combustion engines from 2035 and with Euro 7 emissions regulations.

Taking advantage of the IAA in Munich that is being held this week, BMW has also announced the project with which it seeks to reinvent itself. Its objective is to adapt to the new electric era with a generation of zero-emission cars that offer performance and prices equivalent to those of gasoline models.

In addition, those from Munich promise that these new electric cars will be more affordable than the ones they currently sell. There are many promises and there are only two years left to see if BMW is capable of fulfilling them, so time is of the essence, but we can already get an idea of what will be one of the keys to achieving its objectives: the new Shenxing battery that CATL presented ago some weeks.

BMW has been using CATL batteries for years and, although neither BMW nor CATL have confirmed that the BMW i3 that will arrive in 2025 will use this new battery, everything indicates that this will be the case. Not only because CATL’s battery characteristics would match those of BMW’s new Gen6 lithium-ion batteries, with prismatic cells and thinner than current units to be 20% more energy dense. Also because CATL’s Shenxing technology would make it possible to achieve the objectives of greater autonomy, faster charging and lower cost that BMW promises.

At the same Munich Motor Show, CATL has confirmed that it will manufacture its Shenxing battery in its German plant in Thuringia and in a new factory located in Debrecen (Hungary). Thanks to this, production costs would be lowered, one of the conditions to ensure that the future BMW i3 is sold at the price of the gasoline BMW 3 Series. It is estimated that changes in the design and production processes of these new batteries will reduce costs by up to 50%.

On the other hand, we must take into account the interest that CATL has in producing in Europe. With the threat of Chinese cars to European industry, France is preparing aid based on CO2 emissions and, if the electric car battery that can benefit from this aid comes from China, it would not be able to benefit from it.

To this we should add the future demand for electric vehicles that will exist on our continent, simply due to the law that will prohibit the sale of combustion cars from 2035. For this reason, foreign manufacturers are rushing to bring part of their production to Europe and CATL, which is the world’s largest battery manufacturer, does not want to be the exception.

Many in the industry, from manufacturers to analysts, keep warning of the danger that Chinese cars, especially those with electric propulsion, pose to our Western economies. However, few remember that in reality we have the enemy at home. The problem is not the Chinese brands, but the Western brands themselves that manufacture there and export what is manufactured to Europe or North America.

China a punto de convertirse the second largest car exporter, hot on the heels of Japan and overtaking Germany, the United States and South Korea. It is a situation that carries risks for Europe and North America, and will generate new tensions with their trading partners and rivals.

To achieve this, Chinese manufacturers take advantage of the opportunities of shows such as the IAA in Munich to present their new products, and demonstrate that in a matter of a short time, Chinese brands have made it clear that they can be just as strong (or stronger) than the Westerners, and who are not satisfied with manufacturing cheap electric cars.

You only have to see the latest creation of the giant Geely: the Zeekr 001 FR, an electric saloon that intends to put Tesla Model S Plaid himself in trouble. This is the high-performance variant of the Chinese model and Zeekr has taken advantage of the IAA in Munich to present it in Europe.

Overseas shipments of Chinese-made cars have tripled since 2020 to exceed 2.5 million last year, according to data from the China Tourism Car Association. In 2021, China exported more than 435,000 cars to the European Union, according to Eurostat data. According to data from Jato Dynamics analysts, the second largest producer of electric cars sold in Europe is China. No less than about 25% of the electric cars sold in the Old Continent in 2022 (about 397,000 cars) were manufactured in China, a situation that we owe mainly to Tesla, whose Model 3 and almost all of the Model Y sold in Europe they came from China.

Among the Western brand models that are sold in Europe but are manufactured in China, there are more than one imagines, and most of them are cars with high added value. Specifically, they are the following models (although in the case of Tesla they are not all units): BMW iX3, Citroën C5X, Dacia Spring, DS 9, Polestar 2 and 4, Tesla Model 3 and Model Y, Volvo S90, which We must add the CUPRA Tavascan and Audi A6 Avant e-tron to the 2024 and 2025 horizon.

Among the reasons that lead European or American brands to manufacture in China, are that the models that crown a manufacturer’s range but with little demand in Europe compared to China are manufactured there in order to satisfy, as a priority, the market that most He asks for them, which is the Chinese. This is the case of the Volvo S90 (which arrives in Europe by train, curiously) and the DS 9, since in China the demand for sedans remains and in Europe it is already anecdotal outside of the Audi, BMW and Mercedes trio. The same goes for the Citroën C5X, a model designed primarily for China.

In other types of electric cars, such as the Dacia Spring or the Polestar 4 through the Tesla Model 3 or the future CUPRA Tavascan, there is no mystery there, it is a question of supplies and costs. In fact, it is considered that manufacturing an electric car in China means doing it for 10,000 euros less than in Europe due to the supply chain.

In terms of supplies, China controls the manufacturing of batteries for electric cars, from the mine until it is installed in the car. For example, it produces 78% of the cathodes and 91% of the anodes. And it manufactures 70% of the batteries for electric cars in the world.

The very low cost of energy in China is also decisive, especially in the manufacture of an electric car. Not to mention that CO2 emissions are not a legal problem there when 57% of the country’s electricity is generated by burning coal.

But tensions are brewing. The United States, with the Inflation Reduction Act, has opened the ban on protectionist measures to stop the rise of China and remove it from the battery supply chain. The US, let us remember, provides aid of up to $7,500 for the purchase of an electric car, as long as the materials, its battery and the manufacturing are North American, which includes Mexico and Canada.

The goal is to attract manufacturing to its soil, and it is working. Tesla will take part of its cell production from Germany to the US and Mercedes already manufactures the EQS SUV there, while Honda and Hyundai plan to manufacture electric cars locally so as not to be left out of aid.

Europe, for its part, has devised a European ecological tax for imports of all kinds of products and especially cars. It is a measure designed to limit Chinese imports. Its objective is to nullify the economic advantage that products manufactured at low cost outside Europe have thanks to lax laws regarding the environment or highly polluting energy, as is the case of China. But as always at the European level, its implementation is slow and will take a few years to take effect.

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