The return of Donald Trump to the White House is shaking European car manufacturers. With promises of a trade war and displayed hostility towards electric cars, the new president could suddenly slow down the sector's energy transition.
The return of Donald Trump to the White House is shaking European car manufacturers. With promises of a “trade war” and displayed hostility towards electric cars, the new president could suddenly slow down the energy transition in the sector.
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The hammer blow to European industry
The market reaction was not long in coming: BMW, Mercedes-Benz and Porsche shares plummeted on the Frankfurt Stock Exchange as soon as the results were announced. This sudden fall reflects investors' concern about the intentions of the American president, who is fiercely hostile to electric cars and a supporter of an aggressive protectionist policy.
European manufacturers find themselves particularly exposed after having invested massively in electrification. BMW, Mercedes and the Volkswagen group have committed tens of billions of euros to this transition, they have followed to the letter the European directives which impose the end of new thermal vehicles by 2035.
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The threat of a devastating trade war
Donald Trump hammered it home during his campaign: he plans to impose punitive customs duties on imported cars. Concretely, this means an explosion in the prices of European cars on the American market, with tariffs that could reach 25% of their value. This massive increase would drastically reduce their competitiveness against GM, Ford… and of course Tesla.
The big winner from this situation? Tesla, whose CEO Elon Musk has strategically moved closer to Donald Trump. Cars produced in the United States would escape protectionist measures, which could create a distortion of competition in the premium electric car market. A considerable advantage for the Californian manufacturer, which already largely dominates this segment.
Cascading repercussions
The shock does not stop at the manufacturers. The entire European electric car ecosystem is faltering. Equipment manufacturers specializing in electrical components, battery manufacturers, semiconductor companies and even charging station suppliers find themselves under threat. The planned elimination of tax credits and purchasing aid in the United States will automatically cause demand to fall, suffocating European exports.
Even more serious: this situation endangers the research and development programs of European manufacturers. The latter counted on the comfortable margins of the American market to finance their innovations. Without this financial windfall, certain essential projects will have to be frozen or abandoned, which will leave the field open to Chinese manufacturers who benefit from massive support from their government.
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The European automobile industry finds itself in an untenable position, stuck between two giants who are doing it no favors. On the one hand, Chinese manufacturers like BYD, Xpeng, Geely, Nio or SAIC (MG) are flooding the market with technologically advanced and cheaper electric cars (and now hybrids).
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Their secret? Years ahead in battery production, optimized supply chains and a gigantic domestic market that allows them to quickly reach profitability. Chinese manufacturers can thus offer electric cars and hybrids at unbeatable prices, sometimes up to 20% cheaper than their European equivalents.
The urgency of a European response
Faced with this tsunami, the European Union must react quickly and strongly. It is no longer simply a question of protecting an industry, but of safeguarding European technological independence in a strategic sector. Strengthening support for innovation and accelerating the deployment of charging infrastructure will not be enough. Europe will probably have to adopt a more offensive posture, with commercial reciprocity measures and new strategic partnerships.
The survival of the European electric automobile industry will be decided in the coming months.
