Coronavirus is turning back globalization in the auto business

Mitsubishi is withdrawing from Europe, other car brands will follow. The coronavirus is causing a global reorganization in the auto business.

Mitsubishi withdrawal from Europe

The announcement from Japan last week also came as a complete surprise to German dealers: the automaker Mitsubishi Motors is no longer bringing any new models to Europe. The cars currently available are still sold in Europe. But nothing follows after that. Mitsubishi is thus initiating its withdrawal from the European car market.

Nothing at all can be expected from the Japanese, especially with the increasingly important models with electric drive. Mitsubishi Motors has had difficulties in Europe for a long time – and the Japanese automaker would certainly have held out on the European market for a few more years. But with the coronavirus, another problem has arisen, forcing automakers to think more about costs and to be more frugal.

More automakers may follow

The Japanese manufacturer is unlikely to be the last company to leave Europe for the foreseeable future. The corona crisis is accelerating selection. Weaker car brands will almost certainly have to give up, and at the same time a stronger process of concentration begins.

There are quite a few wobbly candidates among automakers and brands. The withdrawal from a world region, as in the case of Mitsubishi with Europe, is an attempt to prevent the worst – namely the complete end of a brand.

Mitsubishi is concentrating on regions where it is still worth selling a car and where the return is reasonably adequate. In Europe this had not been the case for a long time, the sale of cars had become a subsidy business. Mitsubishi is securing its future primarily by concentrating on its Japanese homeland. Short transport routes and closer ties to familiar customers make economic survival in times of the Corona easier.

Passenger car sales in Europe, February 2018 to June 2020 – (data source: ACEA)

A look at the European registration figures shows that other car manufacturers from Asia also have to think about whether they can stay in Europe longer. Honda, for example, only sold around 117,000 cars in the EU last year, fewer than Mitsubishi. Subaru, also from Japan, is hardly noticed these days. Ssangyong is no longer a Korean hope for the future, but just a small player in the niche.

Car manufacturers need electric models in Europe

The selection process will not be limited to the Asian manufacturers alone. Brands from Europe are also in immediate danger. Lancia from Fiat has completely disappeared from the salesrooms outside of Italy. Fiat has to ask itself how long this brand can survive at all if the coronavirus gnaws at returns across the group. The same applies to the Alfa Romeo brand. Last year the Fiat subsidiary sold just 4,000 cars in Germany. With a total market of 3.6 million vehicles, the importance tends to zero.

Regardless of the coronavirus, another factor ensures that the selection process among car brands inevitably continues. As of this year, the strictest carbon dioxide limits in the world apply in Europe. Financially weak automakers have to consider very carefully whether they can even afford to appear in Europe in the future.

Because the new emission limits cannot be met at all with conventional drives with gasoline and diesel engines. This is only possible with the electric drive. The car manufacturers must therefore have at least a few plug-in hybrids on offer, or they are developing purely battery-powered vehicles with which the average carbon dioxide values ​​of the respective manufacturer’s fleets can be reduced even more significantly.

Cut in R&D budgets

However, the corona crisis has meant that research and development budgets have been cut across the board over the past few months. Anyone who had hardly any or only a few electric models in the planning stage will possibly withdraw completely from the development of such vehicles after the corona impact. Which then inevitably leads to the withdrawal from Europe, because no car manufacturer can afford the high fines of the EU. In the worst case, the EU Commission in Brussels will ask for billions.

General Motors recognized three years ago that the auto business in Europe was getting more and more difficult and therefore sold its Rüsselsheim subsidiary to the French PSA group at an early stage. At the same time, this was combined with the insight that a large car manufacturer like GM no longer has to be represented with its own vehicles in all regions of the world.

What was already true for General Motors three years ago is even more true for the entire industry in Corona times. The virus will de-globalize the vehicle business. All car manufacturers will no longer be able to afford the global presence. Maybe one or the other brand will disappear completely. But there is no alternative, the economic facts speak for themselves.

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