The electric vehicle: an opportunity for the French automotive industry?

Notes:

Bernard Jullien, Université de Bordeaux, GREThA

Texte complet:

Should we believe Macron when he said in May 2020 that he would save the French car industry? Should we take him at his word?

After May 2020 and the arrival of Luca de Meo at the head of Renault, he has declared himself in favour of a reengagement of Renault in France. This means that an electric vehicle (EV) in the B segment costing less than 20,000 euros must be manufactured and assembled in France. De Meo has called on Luciano Biondo, former boss of Toyota Valenciennes and a figure of Made in France, to lead this large-scale project, which will see 400,000 EVs assembled in Douai by 2025 and the creation of a gigafactory to supply them with batteries. Rarely have there been so many factors that make it possible to believe in a recovery of the French automotive industry. In addition, since 2012, we have had a monetary policy which means that the state can support these investments from a budgetary point of view.

On the other hand, electrification is synonymous with a drop in employment. This is reflected in several reports. Added to this are the relocations that have caused France to lose 40% of its automobile production over the last 15 years. Furthermore, if the volumes sold increase because of the additional costs of EVs, this would mean that production volumes would fall. The three phenomena combined would potentially mean the end of the French automotive industry. France would fall out of the world's main car producing countries. Moreover, deindustrialisation is also a problem of job quality. We do not have the same quality of jobs in industry as in services (whether or not they are outsourced).

Since 2014, Brussels has allowed European projects of common interest to be set up. This makes it possible to subsidise car production. Vehicle purchases in France are also subsidised. What are the counterparts to this massive commitment by the State in terms of jobs? The car industry is used to asking for a lot (subsidies) and giving little (jobs).

Today we are faced with an unusual window of opportunity for the future of the automotive industry. However, everything remains to be done in the field of electric vehicles in France. Who dominates production and technology? Asia. In France, production capacity is relatively low compared to the needs of 2030. Public support will be crucial. The mass-market vehicle will not emerge on its own, and will not emerge easily. The average price of a car in France is 27,000 euros, two years of minimum wage. It will be difficult to sell the electric vehicles needed to achieve carbon neutrality in 2050 in this case, especially as the EV is substantially more expensive than an equivalent thermal vehicle.

At Stellantis, they are convinced that the B-segment is not for France, electric or not electric. However, without the B-segment manufactured in France, the automotive industry will be largely in deficit. This is the only segment where France had a competitive advantage (with the A). A national strategy must be proposed, similar to what de Meo proposed for Renault. As long as the "made in France" electric car remains limited in the market, there will be production in Morocco, Turkey, etc. On the other hand, if France seeks to relocate its production in France via electrification, this may have consequences for relations with the countries of Southern and Eastern Europe which have benefited from relocations until now.

There is a steep hill to climb. There are years and years of liabilities. France has been the champion of relocation, due to high wage costs and production focused on B-segment vehicles. Volumes in France are decreasing. Firstly, it was the assembly sites that were relocated. Then, to supply the sites in Turkey, parts are no longer sought in France, but in Turkey where the suppliers have also relocated their production. Finally, to supply the sites in France, we now look for parts in Turkey. Thus the automotive trade deficit has increased, reaching 15 billion euros in 2020.

French manufacturers have seized on European enlargement as a means of resolving the "social question". The industry was suffering from a social problem: turnover, number of strike days, wage costs. The Americans were pioneers in this phenomenon: Ford decided to relocate its English factories to Spain in 1980. In Europe, putting sites in competition with each other has become the method used by manufacturers when they have a social problem in their factories.

We can see that, with a constant volume, there has been a transfer of volumes from Northern Europe to Central and Eastern Europe, Turkey, and more recently to Morocco and Algeria. Romania has taken advantage of this situation, for example, with sites that manufacture 400,000 vehicles per year. This is the return of the social problem: to avoid conflicts in Romania, sites are created in Morocco.

Why does this phenomenon not concern Germany? Is there competition from sites in Germany? VW has built itself up in Europe by joining forces with other brands, which has avoided competition between sites. In France, there is a tendency to put them in competition with each other (Poissy vs. Trnava, for example), which leads to the suppression of assembly lines. However, it has been observed that when sites are not put into competition, they remain efficient. If we are to rely on electrification, we must get away from the idea of competition between sites. Renault's ElectriCity goes in this direction? Douai should be made the Wolfsburg of French electric vehicles.

Before Covid, we noticed that we were once again experiencing a wave of relocations. The upturn of the years 2013-2018 was a parenthesis. In 2020, the drop in production was everywhere, but particularly in France. This is why we need to get a foothold on electrification to get back on track.

The Economic Analysis Committee states that the problem of the French site is that PSA and Renault cannot compete there. Is it a question of production costs or volume? For Bernard Jullien, it is a question of volumes. France still has the advantage of having a large production apparatus which allows it to have a large production volume. Reducing the volume of production means that the unit costs of production increase, which makes the factories even less competitive.

Renault would be on the right track with ElectriCity. But what about Stellantis? This firm does not want to make a French electric Peugeot 208, but a French electric Peugeot 3008 and DS7, so low volumes (200 or 300,000 vehicles per year). At Renault, the B segment is agreed between the management and the unions. It must be at the heart of the French industrial strategy. There is a New Deal to be negotiated in the companies, at state level and in Brussels.

Question: In 2009 we were already discussing these issues and how the EV could save the car industry. Moreover, it should be noted that the French markets are in Southern Europe, where would EVs be sold?

What is the difference in strategy for a manufacturer between its home market and its conquest market. There is a manufacturing competitiveness that is not the same as others. A company succeeds if there is a successful model: size effects do not work if the organisation or the model is bad.

Should the French site be saved? Do the managers of Stellantis and Renault really want to do this? When they say they are worried about de-industrialisation, isn't it a communication effect? Finally, they do not believe in these relocation strategies.

The two strategies described have coexisted: market conquest and large volumes in high-cost countries. VW is an exception in Germany. We can see what happened at Opel, where there was competition between sites and closures. The three types of agreement that you defend (at company level, at state level and between states) is right: there is now a window. The risk is that manufacturers will continue to obtain subsidies and continue to relocate.

Answer: Is there more chance of success today than in the past? Yes, because manufacturers were resisting electrics in 2009. PSA was against the EV. Today manufacturers are committed to EV, especially Renault. Between 2011 and 2016, the opposition to electric was powerful, they were banking on diesel. Today, the combustion engine is dead. Today everyone says that the EV is the solution.
Is there anything to be done with Southern Europe? Yes and no. EVs should be compatible with the average income of southern countries. However, we are clearly competing with the Spanish sites. For rechargeable hybrids, it is Spain that is responsible, even though these are expensive vehicles that generate profits. At Stellentis we have Italian competition (cf. the Italian gigafactory, which will be the largest in the ACC project of Stellantis and Saft). There is also competition from Trnava, which wants to keep an EV. Geopolitical tensions are likely to be high. Let's take the example of short-time working, where Stellantis is putting French and German sites in competition. Technical unemployment in France is beginning to dry up, which means that Stellantis is bringing volumes into France to work the workforce, which is to the detriment of the German sites. The relationship between assembly and market can be important. The idea that value chains are global and that they can only be global is challenged by Covid.

Question: There are lots of sites that have been set up with the aim of moving into growth markets. Except that this is often complicated in the long run. These sites then become competitive with sites in the country of origin.

When it is said that there is a delay compared to Asia in terms of technology, or compared to the Germans in terms of volumes, it is not so serious because everything remains to be done in France.

Question: How can we believe the managers after 15 years of relocation? But the question is not so much about the manufacturers as about the State. The latter is one of the majority shareholders of these two groups. The State has long had the means to question the deindustrialisation curve, but it has not done so. When manufacturers say that B-segment vehicles cannot be manufactured in France, the State agrees. Moreover, the competition between sites is the product of performance indicators. It is difficult to want to change the logic from one day to the next. These groups are financialised and the factories function according to bechmarking. This cannot be changed by simply deciding to produce B-segment EVs. For a New Deal, we need the will of the industrialists and the will of the State, as well as a change in the performance indicators, and therefore a change in the governance of the groups as it has existed for a long time.

In the past, the Ministry knew the files as well as the manufacturers. Today, the ministry's civil servants are not very specialised, they do not stay long and therefore cannot know how the automobile sector works. One question that needs to be asked today is who knows the workings of the automotive sector and the files. The answer is: the trade unions.
There is no European policy. For a New Deal in France to work, you need a powerful coalition. In China, the state even regulates the use and operation of batteries. This does not exist in France. In Brussels, there is no group that represents the interests and policy of the PFA. We come back to the same question: why don't we do now what we didn't do twenty years ago? There is inertia.