Why the European Union is so important to the automobile industry

Message from ACEA’s Secretary General – May 2019

In these times when key EU principles such as the freedom of movement and free trade are increasingly being threatened, I believe that it is more important than ever to make the case for a united and well-functioning European Union (capable of taking decisions and asserting those). And that is not just for ACEA’s 15 member companies that need to make a healthy profit and invest.

The EU is even more important to the 13.3 million Europeans whose jobs depend on our sector. Above all, the EU is a powerful catalyst for economic growth and jobs that has enabled Europeans to thrive. In our case, auto makers have access to a market of half a billion consumers now, who in turn benefit from EU-wide competition to choose from the best vehicles at the lowest price.

However, the importance of the EU goes beyond our industry, and the challenges that we currently face are more fundamental than disagreeing on the direction that Europe should take. What we see today is that the achievements of the European project, and even EU membership as such, are openly being questioned by candidate Members of the European Parliament (MEPs).

1) The Four Freedoms of the Single Market

In this context, auto makers want to reiterate that they greatly value the four freedoms of the EU Single Market for enabling the free movement of goods, people, services and capital – all of which are key to our sector’s competitiveness and growth. While finished vehicles might be assembled in one country, parts and components are sourced from across the entire European Union.

A single engine block, for example, might go through production steps in different countries – crossing EU borders up to half a dozen times – before it is fitted in a car. Without the four freedoms, the EU-wide production and logistics operations of the auto industry would simply grind to a halt.

While Brexit still hangs as a dark cloud above us today, I have to say that it has proven to be a very helpful way of illustrating the EU’s importance to the auto industry. People on all sides of the political spectrum now recognise that our highly-integrated supply chains, based on ‘just in time’ delivery, simply would not work without the Single Market nor after re-introducing border checks.

2) A Strong International Trade Player

Europe’s automobile manufacturers are truly global companies. In fact, exports of motor vehicles generate a trade surplus of more than €90 billion for the EU each year. And, in turn, each billion euro of exports creates and sustains tens of thousands of jobs across the EU. In this respect, the global trade tensions that have emerged in recent months, hostile rhetoric about ‘walling off’ national markets and Brexit pose a serious threat to jobs and growth in the automotive industry.

That is because we can only thrive in a trade environment that is both free and fair, with respect for international rules. Hence, we believe it is extremely important that the 28 member states of the EU continue to form a united front on trade issues. Especially now that global trade is becoming increasingly uncertain, the fact that Europe acts as one voice has considerable advantages.

I, for one, can simply not image going back to a continent of small and medium-sized countries that are trading on loose terms with each other and the rest of the world. Let alone that anyone should think that our individual nations – with even the biggest EU countries being dwarfed on the world stage – would be able to protect national interests in negotiations with the United States or China.

3) Common Rules and Standards

Equally important to our industry are the common rules and standards that are agreed at EU level, which subsequently apply in all member states. Without harmonised EU legislation, manufacturers would not have a level playing field to compete nor the certainty needed for long-term investments. Likewise, EU rules are also important to assure consumers that their vehicle meets all relevant environmental, safety and security standards – regardless of the country where they bought it.

And yes, I have to admit that the EU did not exactly give our industry an easy ride in recent years. From stringent CO2 targets and electric-car quotas to demanding vehicle safety requirements and the EU’s first-ever CO2 standards for trucks – EU regulatory pressure, and especially the pace at which new rules come and should be implemented, has reached an all-time high.

Nevertheless, we strongly believe that we have to embrace EU decision making, also in hard times.  Because the much higher cost of doing business in 28 isolated countries, each with a different set of rules and standards, would only be of detriment to the consumer. Indeed, the positive benefits of European integration by far outweigh its imperfections.

4) Preparing Europeans for the Future

Now that a growing wave of new technologies and trends is about to redefine mobility, it is of vital importance that the millions of Europeans working in our industry are sufficiently prepared. Given the fast pace of developments, and with other world regions keen to take the lead, we can only leverage the strengths of the EU workforce if we jointly address these seismic changes.

Think, for example, of the very different skills and training that employees will need in the future for the production, maintenance and recycling of vehicles with alternative powertrains, or self-driving ones. At the same time, we should not forget the impact of the digital and energy transition on today’s jobs and automotive regions. Indeed, the 3.4 million high-skilled jobs in automotive manufacturing represent more than 11% of the EU’s total manufacturing employment.

Only by working together we can ensure that the entire European automotive supply chain transforms at a sustainable pace, while protecting employment and our long-term viability.

And although we still need to see who will get elected, building on the four themes that I just covered there are some key recommendations for the next Parliament and Commission that I already would like to share with you. In our view, the EU should:

1. Pursue the completion of the internal market, especially in view of supporting the introduction of connected and automated vehicles.
2. Take leadership in defending an ambitious trade policy on the international stage. This should include reinforcing the rule-based trading system within the WTO.
3. Ensure consistency and coordination between different rules and policy domains, leaving technical decisions up to experts.
4. Deliver a strong industrial policy for Europe’s key sectors, including dedicated measures to equip our workforce with the right skills for the digital and energy transition.

There is one more thing I would like to underline. While the EU certainly is not perfect, and we might not agree with all decisions taken over the past five years, less Europe is simply not the answer. Without an EU that is unified, well-functioning and competitive, a successful European auto industry will be something of the past.

Regardless of our political colour, we cannot allow the EU’s greatest achievements, such as the Single Market and its four freedoms, to be undermined for short-term political gains. It is our joint responsibility to defend and explain the importance of the European Union.

Five years from now, mobility, the vehicles we drive and the jobs in our sector, will be very different from today’s – and the next Parliament will have an important say in that. As manufacturers, we are ready to work with newly-elected MEPs and the next Commission to deliver affordable mobility for everyone. But more than ever, it is your vote that counts in shaping this future.

Erik Jonnaert
Secretary General of ACEA