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The Electric Vehicle Battle: Can Europe’s Automotive Industry Keep Up with China?

Germany's aging workforce poses a critical challenge for manufacturers, with up to 5 million workers retiring by 2030. This blog explores how Tset helps retain knowledge and expertise by replacing outdated Excel processes with smarter, standardized tools.

In 2024, Chinese EV giant BYD sold over 1.8 million vehicles, surpassing Tesla and setting a new benchmark in the global automotive market. These numbers mark a historic power shift, as a Chinese manufacturer claims the EV throne for the first time, where Chinese manufacturers are now leading the charge. European automakers, long dominant in the global automotive market, now face an existential challenge in the transition to electric vehicles. The solution lies in adopting innovative strategies and tools to optimize costs, foster collaboration, and enhance sustainability. These changes will determine whether Europe can maintain its position as a global automotive leader.

The Rise of China's EV Empire

China’s rise in the EV market is no accident. It stems from a combination of government support, technological advancements, and aggressive market expansion strategies. The Chinese government has played a crucial role by heavily investing in the EV sector through subsidies, tax breaks, and infrastructure development, thereby creating a fertile environment for growth. These policies have not only fueled the success of companies like BYD, but have also positioned China as a global leader in EV innovation.

A bar chart comparing the global electric vehicle lithium-ion battery production capacity by country in 2021 and the forecast for 2025, highlighting China's dominant share.

Chinese manufacturers have also leveraged their strengths in battery technology and production efficiency. BYD, for instance, has achieved vertical integration by producing its own batteries and chips. This approach has significantly reduced costs and boosted competitiveness, which allowed Chinese EVs to offer high quality at affordable prices. This competitive edge has enabled companies like BYD to expand beyond China, with their acquisition of Hedin Mobility in Germany marking a bold step into the European market.

Market Realities: Europe's Response to the EV Challenge

The rise of China’s EV manufacturers has disrupted Europe’s automotive sector, leaving many established players scrambling to adapt. Germany, Europe's traditional car-making powerhouse, saw its EV sales fall by 27% in 2024. This sharp decline shows how European manufacturers are struggling to compete. These companies face the dual challenge of competing with cost-efficient Chinese alternatives while maintaining their reputation for premium quality and innovation.

A line graph showing the export trends of passenger cars from major countries, indicating China's rapid increase in exports since 2020.

Europe's automotive sector is already mounting its response. Several European automakers are taking steps to regain their competitive edge. Stellantis and China’s CATL have committed €4.1 billion to building one of Europe’s largest EV battery factories in Spain, a move aimed at securing a steady supply of advanced batteries and reducing reliance on imports. Similarly, Hyundai has pledged $16.6 billion to advance EV and hydrogen technologies, reinforcing its commitment to sustainable innovation. In the UK, JATCO’s newly opened facility in Sunderland is set to produce advanced 3-in-1 EV powertrains for Nissan.

These developments show European manufacturers actively rebuilding their competitive position in the global EV market. By prioritizing sustainability, innovation, and localized production, they are beginning to address some of the challenges posed by global competition. Yet, these efforts alone may not be sufficient. The rapid pace of change in the EV industry demands more than incremental improvements. To survive and thrive, European automakers should embrace a comprehensive strategy that includes optimizing costs, fostering deeper collaboration with suppliers, and investing in research and development.

This need for a more proactive and strategic approach sets the stage for exploring how European manufacturers can position themselves for long-term success by balancing their premium quality with market-competitive pricing.

"EV shipments will reach 18.4 million units in 2024 and 20.6 million units in 2025. However, we are moving from ‘gold rush’ to ‘survival of the fittest’. This means the success of companies in this space is now heavily conditioned by their capabilities to respond to the needs of early mainstream EV adopters."

Gartner, 2024

Three Strategic Priorities for Success

European automakers can’t afford to stand still. In order to remain competitive and meet consumer demand for affordable EVs, they need to adopt a proactive approach to cost control and strategic planning. Here's how they can respond effectively: 

Enhance Cost Efficiency

Automakers need to rethink their production processes—from material sourcing to final assembly. By using detailed cost calculations powered by advanced software, they can uncover inefficiencies, reduce costs, and still deliver exceptional quality.

Foster Collaboration

Stronger relationships with suppliers are critical for success. Cloud-based platforms that enable real-time data sharing and streamlined communication can break down silos, boost innovation, and improve supply chain performance.

Invest in Innovation

To stay competitive with rapid advances from Chinese automakers, European companies must prioritize R&D in areas like battery technology and production techniques. Adopting tools that integrate cost and CO2 data will help tackle these challenges while maintaining profitability.

How Tset Can Help

Tset is more than a Cost Engineering tool - it’s designed to modernize how manufacturers approach cost and sustainability management. Here is how we set ourselves apart: 

  • Advanced Automation: Our software provides fast, accurate, and customizable cost calculations, thereby enabling manufacturers to save time, reduce errors, and focus on strategic decisions.
  • Cloud-Native Flexibility: Tset integrates seamlessly into existing tech stacks (e.g., SAP) without the need for internal IT maintenance, ensuring fast deployment and scalability.
  • Integrated Cost and CO2 Tracking: Unlike many legacy systems, Tset combines cost and sustainability data in a single tool, making it easier to align profitability with environmental goals.
  • Ease of Collaboration: With an intuitive, user-friendly interface, Tset is easy to use for everyone, even non-experts, making collaboration between OEMs and suppliers simple and effective.

Conclusion

The rise of Chinese EV manufacturers is a wake-up call for Europe’s automotive industry. However, with the right strategies and tools, these challenges can be transformed into opportunities. By leveraging advanced cost and carbon calculation solutions like Tset, manufacturers can optimize their operations, drive innovation, and remain competitive in this new era of mobility.

Learn more

Are you ready for the automotive industry's critical shift towards sustainability? Explore the urgency of climate action and business resilience in our whitepaper: "Carbon Reduction in Automotive Supply Chains".

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Whitepaper preview: "Carbon reduction in automotive supply chains"

Author

Maria Skvoznova
Marketing Content Specialist

29.01.2025

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