Why does Julia Poliscanova say Chinese carmakers are not just cheap?

She calls the assumption that Chinese products win on price a 1990s misconception. In her reading they arrive with better product, better service and better technology, which is why she treats their expansion into Europe as a wake-up call rather than a nuisance. The commercial context reinforces it. Chinese companies are ready, they have the technology, and they want to expand, and because they are not welcome in the United States, Europe becomes a clear landing zone. Her main worry is speed: they are moving fast, and she does not think anyone in Europe has a good answer yet.

Should Europe put up trade barriers against Chinese EVs?

No, in her view. She says plainly that Europe should not protect and close off its market but should become better so it can compete. The hard part is doing that quickly. Her answer is industrial policy, innovation, and a change in the culture and mindset of the European car industry, which is the piece she thinks is missing. She frames this as the big open question from the conference and is honest that she does not think anyone, herself included, has a good answer to how Europe moves fast enough.

What does she think about e-fuels and hydrogen for cars?

She is dismissive without being absolute. A whole panel at the conference went to e-fuels and hydrogen, and her response is that they might serve some niche markets but that the train has departed. Hydrogen survives in the regulation because it is treated equally to battery electric under the 2035 target, so she expects a little of it alongside a largely electric fleet of new cars and vans. Her stated hope for the following year is that major car CEOs stop mentioning e-fuels in interviews and simply say the plan is all electric.

Is the EU's 2035 target for new cars settled?

She treats it as settled. Europe finally closed the chapter on the European car CO2 discussions, and despite what she calls a little diversion on e-fuels, there is a clear zero target in 2035. In practice that means pretty much all new cars and new vans will be largely electric, with some hydrogen because it is treated equally under the rules. That clarity is why she describes the moment Europe is in as being about execution and implementation: the direction is set and the frameworks exist, so the question is delivery.

Where is EU regulation on batteries heading next?

Upstream. She says the new set of regulations is defined by a move from what, meaning electrification, to how, meaning where the metals come from. That covers securing raw materials, making supply chains transparent, sourcing metals responsibly, and doing some of that work here in Europe. She welcomes the shift. Her argument is that the technologies and practices needed to mine and manufacture sustainably already exist, so the job of regulation, and of tools such as the battery passport, is to make using them the default rather than something a company can undercut on cost.

What would count as progress for European battery manufacturing?

More factories that actually work. Her hope for the following year is one or two more European success stories about gigafactories beyond Northvolt, and ideally another gigafactory announcement in the UK. She flags the risk running against that, namely incentives such as the United States IRA, and notes there are plenty of plans on the table already. The wider condition she sets is speed. Europe has to get better quickly rather than defend its market, which she ties back to industrial policy, innovation and a change of mindset in the car industry.

Episode 111 · 30 August 2023 · 00:07:31

The Chinese are coming, and not because they are cheap

Automotive Markets in Europe

T&E's senior director on why the e-fuels train has departed, why Chinese carmakers now win on product rather than price, and the gigafactory news she wants to hear beyond Northvolt.

Read the article: The Chinese are coming, and not because they are cheap

Julia Poliscanova

Senior Director, Vehicles and Emobility Supply Chains, Transport & Environment (T&E)

T&E is a European campaign group working on transport decarbonisation, and publishes analysis on battery supply chains, critical raw materials and EU industrial policy.

Recorded in London, at the FT Future of the Car Summit

What this episode covers

The second of Julia Poliscanova's three takeaways from the conference is the one she presses hardest. Chinese carmakers are arriving in Europe far faster than most people realise, and the reason is not price. She calls the cheap-Chinese-product assumption a 1990s misconception. They are coming with better product, better service and better technology, and she wants that treated as a wake-up call rather than as a reason to shut the market. The commercial position reinforces it: Chinese companies are ready, they have the technology, they want to expand, and they are not welcome in the United States, which makes Europe a clear landing zone.

Her first takeaway is the other side of the same problem. European automakers still strike her as reluctant and slow, not getting the speed of what is happening. A whole panel at the conference went to e-fuels and hydrogen, which she allows might suit some niche markets, though her verdict is that the train has departed. On policy she thinks the frameworks are finished: Europe is going electric, there is a framework for sustainable battery production, and plants are planned. What remains is execution, which is why she wanted to hear from the industry rather than from policymakers.

The third takeaway is what the room talked about. It was a cars conference where the discussion kept moving to batteries, supply chains and raw materials, with sustainability alongside resilience, even among the cars crowd. She reads regulation the same way. The European chapter on car CO2 is closed, with a zero target in 2035 that means new cars and vans will be largely electric, plus a little hydrogen because it is treated equally. New rules are moving upstream instead: securing raw materials, making supply chains transparent, sourcing metals responsibly, and doing some of that work inside Europe.

Asked what she would like to see by the time the same event comes round again, she names two things. One or two more European success stories about battery factories beyond Northvolt, ideally including another gigafactory announcement in the UK, against the pull of United States IRA incentives. And major car CEOs who do not mention e-fuels when they are interviewed. On mining and manufacturing she argues the technologies and practices already exist, so the gap is consistent implementation and incentives strong enough that no company thinks it can go cheaper and dirtier. That is where she puts regulation, and tools such as the battery passport.

Questions from this episode

Why does Julia Poliscanova say Chinese carmakers are not just cheap?: She calls the assumption that Chinese products win on price a 1990s misconception. In her reading they arrive with better product, better service and better technology, which is why she treats their expansion into Europe as a wake-up call rather than a nuisance. The commercial context reinforces it. Chinese companies are ready, they have the technology, and they want to expand, and because they are not welcome in the United States, Europe becomes a clear landing zone. Her main worry is speed: they are moving fast, and she does not think anyone in Europe has a good answer yet.
Should Europe put up trade barriers against Chinese EVs?: No, in her view. She says plainly that Europe should not protect and close off its market but should become better so it can compete. The hard part is doing that quickly. Her answer is industrial policy, innovation, and a change in the culture and mindset of the European car industry, which is the piece she thinks is missing. She frames this as the big open question from the conference and is honest that she does not think anyone, herself included, has a good answer to how Europe moves fast enough.
What does she think about e-fuels and hydrogen for cars?: She is dismissive without being absolute. A whole panel at the conference went to e-fuels and hydrogen, and her response is that they might serve some niche markets but that the train has departed. Hydrogen survives in the regulation because it is treated equally to battery electric under the 2035 target, so she expects a little of it alongside a largely electric fleet of new cars and vans. Her stated hope for the following year is that major car CEOs stop mentioning e-fuels in interviews and simply say the plan is all electric.
Is the EU's 2035 target for new cars settled?: She treats it as settled. Europe finally closed the chapter on the European car CO2 discussions, and despite what she calls a little diversion on e-fuels, there is a clear zero target in 2035. In practice that means pretty much all new cars and new vans will be largely electric, with some hydrogen because it is treated equally under the rules. That clarity is why she describes the moment Europe is in as being about execution and implementation: the direction is set and the frameworks exist, so the question is delivery.
Where is EU regulation on batteries heading next?: Upstream. She says the new set of regulations is defined by a move from what, meaning electrification, to how, meaning where the metals come from. That covers securing raw materials, making supply chains transparent, sourcing metals responsibly, and doing some of that work here in Europe. She welcomes the shift. Her argument is that the technologies and practices needed to mine and manufacture sustainably already exist, so the job of regulation, and of tools such as the battery passport, is to make using them the default rather than something a company can undercut on cost.
What would count as progress for European battery manufacturing?: More factories that actually work. Her hope for the following year is one or two more European success stories about gigafactories beyond Northvolt, and ideally another gigafactory announcement in the UK. She flags the risk running against that, namely incentives such as the United States IRA, and notes there are plenty of plans on the table already. The wider condition she sets is speed. Europe has to get better quickly rather than defend its market, which she ties back to industrial policy, innovation and a change of mindset in the car industry.

Listen to this episode Watch on YouTube

Part of Europe: policy and money

Transcript

About this transcript. Generated automatically from the recording, then corrected against a glossary of company and guest names. It has not been checked line by line. Machine transcription mis-hears technical terms, numbers and names, so treat any figure here as a prompt to check the recording rather than a quotation of record. Spotted something wrong? Tell us.

0:00Introduction

Dr Simon Engelke

0:00Unfortunately, I see that European automakers are still quite reluctant and slow. They're not really getting the speed. The Chinese are coming a lot faster than any of us realizes. Not to protect our market and close it off, but to accelerate and become better so we can compete with them. But we're just in a situation where Chinese companies are now ready, they have the tech, and they want to expand. They're not welcome in the US. So I hope that by next year, there will be one or two more European success stories about gigafactories.

Julia Poliscanova

0:33Time will tell. Time will tell, indeed. We're coming back.

Dr Simon Engelke

0:36You have to be positive because you never just win. You always lose, but you have to keep going forward.

Julia Poliscanova

0:51Hi, Julia. Good to see you.

Dr Simon Engelke

0:52Yeah, great to see you. Always really great to see you here in London.

Julia Poliscanova

0:56And London today, definitely a new place, which is exciting because we're here for the financial time and the future of the car summit.

Dr Simon Engelke

1:01Yeah, absolutely. What a timing as well. So much is going on in the world.

Julia Poliscanova

1:05So much in the world, so much in the automotive sector, so much in the world of batteries. And yeah, I just want to have a quick conversation, some of your takeaways, some of your thoughts.

Dr Simon Engelke

1:14Yeah, absolutely. Look, I think it's really key timing to have this conference. From the European side, lots of policies, frameworks are done now, right? So we're going electric. We have a framework also for sustainable battery production in Europe, lots of plants. So for me, at the moment we are at the moment in Europe where it's about the execution, implementing, right? That's why it's so cool to be here at the FT conference to actually listen to the industry. How are they implementing? What are they doing? So maybe I'll highlight three highlights for me from this conference. Number one, unfortunately, I see that European automakers are still quite reluctant and slow. I feel that they're not really getting the speed of this.

1:57Three takeaways, and why the Chinese are not cheap

Dr Simon Engelke

1:58They still talk about other alternatives. There was a whole panel of talking about e-fuels and hydrogen. Yes, maybe some niche markets, but that train has departed, right? So that's one. Number two, the Chinese are coming a lot faster than any of us realizes. And they're not just coming because they're cheap, you know, that kind of 90s, 1990s misconception. They're coming because they have better product, better service, better technology. And I think that's really something that should really be a wake-up call to us in Europe, not to protect our market and close it off, but to accelerate and become better so we can compete with them. And number three, what is really interesting, so this is a cars conference, right? It's about cars, but the whole discussion is actually about batteries, supply chains and raw materials. So the entire debate has moved to upstream, to how, to what, to not just resilience, but also sustainability, even among the cars crowd.

Julia Poliscanova

2:57I think that's a really important point. And I think for last year, right? I think the turn of fuels definitely came up again. I think that was, I think, last year. And I think, as I said, but I think China definitely was, and I speak of a conversation just a year ago, or Asia more generally.

Dr Simon Engelke

3:14Absolutely, absolutely. And I think, of course, it's in the more global dimension of geopolitics, right? But we're just in a situation where Chinese companies are now ready, they have the tech, and they want to expand. They're not welcome in the US. So Europe is a clear landing zone for them. And they're coming really fast. And big question is, what do we do? And I don't think anyone has good answers, because in my view, we should not be protectionist. We should be better. But how? How can we do it quickly? That's such a key question. And it becomes about industrial policy, innovation, and just changing the culture and the mindset among our car industry. And I think that's where we're not getting there yet.

3:54What she hopes to see a year from now

Julia Poliscanova

3:54And maybe if you want to think about in a year's time, we might sit here again, or the event will happen again. And any thoughts? What has happened until then? Anything you wish happened? Yeah.

Dr Simon Engelke

4:07So to be honest with you, what I really hope will happen is that we'll have a few more success stories around battery factories in Europe beyond Northvolt. So there's lots of plans at the moment, as you, of course, know. You've covered lots of them as well in the podcast. But there's also a big risk, for example, from the US IRA, right, and incentives. So I hope that by next year, there will be one or two more European success stories about gigafactories. Maybe even another gigafactory announcement in the UK. So that would be great. So that certainly would be one. And two, I think I just really hope that when some of the major car CEOs are interviewed last year, they do not mention e-fuels. They say, right, it's all electric. And that's what we're doing to accelerate.

Julia Poliscanova

4:55Time will tell.

Dr Simon Engelke

4:56Time will tell, indeed.

Julia Poliscanova

4:57We're coming back.

Dr Simon Engelke

4:58Always stay in a positive. If you work in an NGO like myself, you have to be positive. Because you never just win. You always lose. But you have to keep going forward. So hope is very important in that sector.

Julia Poliscanova

5:10And I think a lot of progress has also happened. I think that's also one thing. If I think back a year, regulations are slow. And you're the best one to know that. One of the best ones being quite closely familiar with it. But I think there has been progress. And I think there's still, yeah, as you say, there's a lot of optimists out there. But yeah.

Dr Simon Engelke

5:28So we are kind of, you know, with regulations, we're just so happy that we finally close the chapter on the European car CO2 discussions. And regardless of that little diversion on e-fuels, we have a clear zero target in 2035, which means that pretty much all the new cars, new vans will be largely electric. Maybe a bit of hydrogen because they're treated equally, but mostly electric.

5:50Regulation moves upstream to raw materials

Dr Simon Engelke

5:51So that's such a clear direction, right? Now it's just like, let's be doing. Where regulations are going at the moment. And some people on panels today, for example, Sarah Montgomery, she covered that really well. Well, regulations are actually moving upstream to secure raw materials, to make supply chains transparent, right? To source metals responsibly and to do some of that here in Europe. And I think that's really what today defines the new set of regulations. Moving from what? Yes, it's electric. To how are we going to actually source the metals needed for all of that? And that's really welcome. A really welcome development in my view. So much can be done. When we talk about mining, for example, or just producing batteries, the technologies, the practices to make it sustainable are all out there. It's just about consistently implementing them and incentivizing companies to always do that. And that's where we need regulations and things such as the battery passport, for example, to make that a no-brainer for the company. So they don't even think that they can do something cheaper and dirtier, right? That this is the standard of doing things and that standard is always high.

Julia Poliscanova

6:59Julia, with this, I think we're at the end of time. But I want to thank you so much for joining again and sharing all of your thoughts and your insights. And yeah, with this, I just want to say thanks everyone for listening and watching. And yeah, thanks so much for being curious and interested in these topics. And I'm sure we're going to hear more about this in the future as well.

Dr Simon Engelke

7:18Thanks. Thanks a lot, everyone. Thank you, Simon.

Julia Poliscanova

7:21Thank you, Julia. Bye-bye. Bye-bye. Bye-bye.