Can the energy transition be a lever for the reindustrialisation of France?

Notes:

Nicolas Meilhan, France Stratégie

Full Text:

Would the electrification of the automobile offer simply shift the problem? With the electric vehicle (EV), the emissions are no longer on the street, but where the electricity or the vehicle is manufactured. Today, almost one in two EVs (battery-powered and hybrids) is sold in China, the world's largest market, followed by Germany. More surprisingly, more EVs are sold in Germany than in the US. Finally, twice as many EVs are sold in Germany as in France.

China has a strong hold on the EV value chain. The companies that produce EVs are Chinese, or manufacture in China. For batteries, six of the largest manufacturers are Chinese. As far as cobalt is concerned, China still mines the ore. It is extracted from the Congo, but the mines are Chinese. It is then transported to China for refining. Moreover, 80% of the world's cobalt refining is controlled by China. China therefore controls the refining bottleneck (and the emissions that go with it)

To deal with this situation, France must put in place an industrial plan to be autonomous across the entire value chain in the production of EVs. This raises issues of industrial sovereignty. In terms of demand in 2030, the recycling of Cobalt will not be at all sufficient for the demand. We can also produce batteries without cobalt, but this will shift the constraint to nickel or phosphate.

EVs are seen as the solution by a number of stakeholders. However, as mentioned earlier, the battery cells are not made in France, but in China and in coal. The cells of the Renault Zoe are made of materials manufactured in China, and the batteries are then assembled in Poland. So the EV does not solve the problem.

When we look at CO2 emissions, local emissions in France have gone down. But in terms of the footprint, things are more complicated. Imported emissions have increased, which is half of France's carbon footprint. In these imported emissions, we find those of the battery for EVs. It is mainly in industry that local emissions have fallen, mainly because of deindustrialisation. Finally, reducing these emissions in France increases emissions in other countries.

We are also faced with the problem of the trade deficit in energy and in the automotive industry (which has contributed half of the increase in the deficit since 2002). The tipping point for the car industry was 2007. The small electric car was killed off at that point. This had repercussions on employment. In car manufacturing, the workforce was cut in half, from 200,000 to 100,000. With the indirect jobs, the jobs lost are three times greater.
Today, three quarters of the vehicles sold in France are imported. It is the same proportion for EVs. An industrial policy around EVs would help reduce France's trade deficit in terms of energy. But for the moment, no EVs are manufactured in France. There is a significant delay in the manufacture of batteries. Germany is far ahead: battery factories are being set up in Germany, because the market is there.
Renault recently announced the ElectriCity project and the manufacture of 400,000 cars by 2025. We think this is a good thing, but Macron had announced one million EVs by 2025, and two million by 2030. The likelihood of Stellantis doing the same as Renault is unlikely. Carlos Tavares has no plans at the moment to relocate the B-segment to France, nor to mass produce EVs in France.

Finally, it should be remembered that the carbon footprint of batteries is not good: electricity must be decarbonised, with natural gas, for example. The perfect car in Europe, from the point of view of regulations, today is the Tesla type, very heavy and electrified. Smaller vehicles should be produced.

Discussion :

Question:
What is the political feasibility of the proposals made? What is the timeframe envisaged? Which political coalitions to do it? It is said that the weight bonus should be abolished in Europe. However, no one is discussing how to change it. The 27 should agree, or the European Commission should do so.

Response:
Everyone agrees (Bruno Lemaire, Emmanuel Macron, etc.) to abolish this rule. But how to do it? Removing the emissions/weight rule is very complicated, once you have given this gift to the German car industry. France will have the EU presidency in a month, so this could be an opportunity. French manufacturers are the ones who make the lightest cars in their categories. So removing this rule would favour French manufacturers. However, the three German manufacturers are working hand in hand to get what they want through Brussels.
In Europe, we have an industry that employs a lot of people and seeks to sell heavy cars. The margin on cars is proportional to the weight of the vehicle. Making light vehicles is incompatible with the business model of manufacturers today. This is why margins must be given to small models. Finally, the carbon footprint of battery manufacture should be reduced. France should anticipate European regulations and relocate manufacturing in Europe or in France.

Questions :
When you talk about small cars, the A segment, there are fifteen or twenty models, so it is a very competitive segment, and then the volumes are low. It is very difficult to sell a car at a competitive price. The market for A-segment vehicles is set to disappear.
The manufacturers produce where they have their market. But also, manufacturers have difficulty finding buyers for certain cars, especially those made in France. China has regulations that force manufacturers to make EVs and that force consumers to buy EVs. This favours the autonomy and energy efficiency of the battery. Shouldn't there be an energy efficiency criterion per KW/Kilometre/h?
One of the most efficient vehicles is the Dacia Spring, which weighs less than a tonne. It is clearly a car that meets the energy performance criteria, but it is imported from China...

Response:
The real question is this: how can the Dacia Spring, which is the right electric car, which is adapted to the right uses, be produced in France and not in China? How can small EVs be made in France? I can only agree on the Dacia Spring. People think that the EV is a vehicle for rich people living in the city, yet it can be cheaper than a thermal car, like the Renault Zoe.

Question:
Can we expect lighter batteries? Is the light hybrid a long-term solution? Will the nuclear industry be able to meet the challenge? What is the impact of battery manufacturing on the global cobalt economy? What is the feasibility of industrial relocation, why shouldn't manufacturers stay in low-wage countries?

Answer:
The EV is perfect for daily commuting. It is not a car for long distances (which represent only 20% of journeys). You need a light battery, you can't fit so many big cars with so many batteries. By distributing the batteries better, we can drive more.
On hybrids, the European Commission is wrong about 100% electric cars, because the infrastructure is not ready and the EV, as it is designed today, is not very well suited to everyday use. Hybrids can be a solution in the medium term: electric for short journeys, thermal for long journeys. 100% electric is industrial suicide.
The question of electricity is central. France and Germany are the major producers of electricity in Europe. Japan is an example of why people don't buy EVs: people take public transport, they live in large buildings, so they can't charge it and Fukushima happened.
Relocation in France: the most important thing is the economies of scale, that's what allows costs to be reduced. In France, we have reduced the load in the cars, you increase the unit cost, so we close the factories. The industrial fabric has become very thin. It is difficult to obtain supplies when you set up.

Question:
Clios manufactured in Brusa, Turkey, are not sold in Bursa. We must question the strategies of the big groups. We see this in the situation of the foundries. So it is not just a question of regulations, but of economic policy. In order for the Dacia Spring to be manufactured in Europe, political will is needed, and the competition based on margins, which encourages relocation, must be challenged.
Similarly, manufacturing a Clio in Flins produces more emissions than in Bursa, because the factory is older. The question of location is very important.

Response:
France has put sites in competition with each other. It has used Europe to do this. How can we question competition by margins? Secondly, there should be a totally decarbonised battery factory.
Renault belonged to the State until 1990. However, it is also the manufacturer that has relocated the most. The state's participation was not a barrier to relocation. Moreover, Renault did not create its factories elsewhere, in Eastern Europe, or in Turkey, etc., in order to close its factories in France. It did so to conquer emerging markets, markets which never materialised.
The new vehicle is 20% of the market. The second-hand vehicle is 80% of the market. In the new vehicle sector, we are moving towards a more upmarket market. There is a market crisis, we are selling few cars and above all far fewer combustion vehicles. We are moving towards a reconditioning market.