Innovative Policies Needed to Drive EU's Automotive Engine

Shadowed by the debt crisis of Greece and anemic economies of peripheral European countries, the European Union (EU) saw a sharp decline of 7.1% in new commercial vehicle registration in January.

According to the European Automotive Manufacturers Association (ACEA), registrations varied among countries: France (-20.7%) and Italy (-16.9%) recorded double-digit declines each, while Spain posted a 2.5% growth, with Germany (-0.4%) and Britain (0%) remaining stable; while Portugal (-47.4%) was battered but still eclipsed by the worst performer Romania (86.4%).

In fact, most European carmakers have been reducing production in reaction to falling demand. Major carmakers such as Peugeot Citroen, Renault, GM, and Ford have all cut production to reduce inventory pressure. GM plans to furlough workers at its Opel-Vauxhall factory in Spain for 60 days while Peugeot Citroen, Renault, and Ford's Belgian's factory all have cut the factory work days for 2012.

Despite pervasive pessimism, Bloomberg cited a number of market reports showing that the market may continue to shrink, but unlikely at double-digit pace this year.

Jonathon Poskitt, a market analyst at JD Power, said that consumers are apprehensive and wouldn't replace their cars without stable jobs.

Policy Integration
Without clear signs of an end to the gloomy economic situation, some automotive industry leaders call for integration of transport industry and innovation policies to strengthen global competitiveness of Europe-made cars, essential for European carmakers to remain competitive.

The European automotive industry is essential to the strength and competitiveness of Europe. According to the ACEA, the automotive sector provides direct employment for over 2.3 million people and indirectly supports another 10 million jobs.

“The automotive sector makes great contributions to the European economy and it needs consolidated innovative policies to sustain its competitiveness,” said Paul Mascarenas, Ford Chief Technology Officer, at the meeting of the European Council for Automotive R&D (EUCAR) held last November in Autoworld, Brussels for its annual reception & conference, emphasising the industry's role in innovation and the need for enhanced automotive R&D for the industry.

Vice-President Siim Kallas, European Commissioner for Transport said at the opening reception how R&D must support transport policy goals and European industrial competitiveness: “Innovation has always been the competitive advantage of the European industry. It needs support to maintain the global competitiveness of the European automotive industry.”

In another meeting held in February 2012, the automotive industry once again addressed the need to refocus on its industrial future. “Europe is at a critical juncture,” said ACEA President Sergio Marchionne, CEO of Fiat S.p.A., who argued that the pillars of economic growth and of future prosperity must be strengthened to secure the future of Europe and its citizens. The Fiat CEO was likely referring to the European automotive sector as one of the pillars of economic growth.

Challenging Year
The ACEA President predicted a challenging year for Europe and the automotive industry in 2012. In terms of auto sales in Europe, the “most optimistic forecast” is that new vehicle registrations in Europe will be flat through 2014. “The fact is that, today, very few manufacturers make money in Europe. This is not sustainable, and it has to change,” said Marchionne, who called for an open and honest debate about the underlying factors, including excess capacity.

Marchionne assured his counterparts in Brussels that the European auto industry wants to be part of shaping the future for the region. “The European automobile industry is a world leader, operating globally. At the same time, we are fully part of European society and its local communities.”

The ACEA is one of the major automotive industrial associations in Europe, representing leading European carmakers which annually invest over 26 billion euros in R&D, or 5% of turnover.

“The EU depends on the innovative power of leading European industries to compete globally, secure growth, meet ambitious environmental objectives and, as such, ensure a healthy economic environment for its citizens,” said Alfredo Altavilla, Chairman of the ACEA commercial vehicle board and CEO of IVECO.

“The EU would greatly benefit from a much stronger link between the various strategies for industrial growth, sustainable transport, international trade and research & development,” said Altavilla, who believes that the automobile would be a key industry to foster Europe's economic power especially when hit by unfavorable factors.

“Automotive manufacturers face a challenging environment in Europe, with the prospect of economic growth being only marginal if not negative, in the near and mid-term,” said Altavilla.

Fuel Efficiency
“We need to decarbonise our economies and reduce our dependency on oil. Unfortunately, we do not have the power of magic to give us immediate solutions. But our industry will further lead in delivering the mobility solutions of tomorrow,” said Altavilla.

Commercial vehicle manufacturers have already committed to a further 20% improvement in fuel efficiency by 2020 (compared to 2005 levels), despite parallel steps to reduce hazardous emissions.

The industry, furthermore, supports the European Commission's efforts in establishing an accurate methodology for measuring full-vehicle CO2 emissions to underpin subsequent reduction policy tools, which will help get the all-important market of transport operators on board.

EU policies must support our industry to further make a difference in R&D, Altavilla said, who believes that Europe has a tremendous technological heritage and advanced innovation capacity, in particular also in the commercial vehicle industry. “To keep and to enhance this situation, we have to act and act fast. For a start, the upcoming new funding framework for research and innovation should allocate resources to automotive in line with the importance of our sector for the European Union.”

Innovation and Investment
Siim Kallas also highlighted the importance of innovation and investment in the transport sector to support the Europe 2020 Strategy, the growth strategy set by the EU for the coming decade, also emphasizing the significant role the European automotive industry will play, as a partner to the Commission, in developing the European transport system of the future and providing the innovation required to meet the policy objectives of the EU's ‘Roadmap to a Single European Transport Area.

EUCAR Chairman and Managing Director of Ford of Europe Research Centre Pim van der Jagt detailed how the industry and EU can most effectively cooperate: “EU R&D initiatives are needed on priority themes, including Green Cars, ITS for mobility, materials and manufacturing, integrated safety, advanced powertrains & fuels, and heavy-duty vehicles & green corridors, with an increased budget for automotive R&D investment in the future, reflecting the automotive sector's economic and social contribution to Europe.”