Europe's Automotive Industry Lagging Behind China in Speed and Innovation, Experts Warn

Europe's automotive industry is at a critical juncture, facing unprecedented shifts due to electric mobility, digitalization, and geopolitical changes. Experts Professor Zheng Han of Tongji University and Professor Andreas Herrmann of the University of St. Gallen recently discussed the contrasting approaches of European and Chinese manufacturers, highlighting key areas where Europe can learn from China's rapid innovation and market strategies.

Europe's Strategic Position In The Global Automotive Market

From a Chinese perspective, mobility has been a strategic government focus for decades, with electric mobility identified as a core pillar. This foresight has yielded significant success in China's domestic market, and the nation now aims for international prominence, with Europe being a crucial target. Despite Europe's historical significance as the birthplace of the automobile, Chinese manufacturers see it as a prestigious market with high quality standards, albeit one that presents unique challenges compared to their home market.

The Pace Of Innovation: China vs. Europe

• Speed and Agility: Chinese manufacturers prioritize short development cycles and rapid market launches, often using their domestic market as a testing ground for early-stage innovations and optimizations based on real-world usage. Europeans, conversely, tend to focus on perfection, which can lead to slower market entry.

• Software and Digitalization: China's automotive sector emphasizes software development and a willingness to innovate, with a readiness to fix issues through over-the-air updates. Europe, while possessing strong engineering know-how, struggles with creating large-scale software giants and often adopts a fragmented approach to technological development.

• Industrial Policy: Europe's "watering can principle" in industrial policy, supporting numerous small projects, is seen as less effective than China's and the USA's strategy of concentrating resources on large flagship projects to achieve critical mass and foster "shining lights" during disruptive times.

Strengths and Weaknesses

While Chinese manufacturers are rapidly improving in branding and marketing, often by recruiting European experts, European companies still hold an advantage in these areas, though this lead is not guaranteed to last. Chinese firms are adept at learning from market challenges and investing in local expertise. However, European consumers are generally more risk-averse than their Chinese counterparts, which plays to Europe's strength in quality. Yet, a strong customer service strategy, a key competitive advantage for Chinese companies, is an area where European manufacturers could learn valuable lessons.

The Future Of Mobility

Looking ahead, the automotive landscape is expected to shift significantly, with Chinese producers likely gaining a larger structural share. While German manufacturers will persist, they may occupy different niches. The dominance previously enjoyed by European automakers is waning as local brands increasingly cater to the Chinese market. Business models will transform, with digitalization potentially increasing the importance of the service sector. A decrease in private car ownership and an expansion of B2B mobility services are also anticipated, with urban mobility increasingly relying on public transport and ride-hailing services, especially in densely populated areas.