A new, alarming report from the International Energy Agency (IEA) does not just describe the market - it rings a bell for Western automotive giants. According to the document, titled "What's next for the global automotive industry", all the growth in the global market in 2024 will be entirely due to electric and hybrid vehicles. This is the sad truth: traditional cars with internal combustion engines (ICE) have declined by almost a third since 2017. The report unequivocally shows that the industry as we know it is in free fall and only electrification is keeping it afloat.
The IEA's analysis outlines not just a change, but a catastrophic imbalance that is shifting the center of gravity from established markets to a new, aggressive dominator: China. The geography of global automotive production is undergoing a cataclysmic upheaval that leaves Europe and North America as minor players. Today, China holds a staggering 40% of global automotive production capacity, while the traditional powers - Europe and North America - have been reduced to 15% each.
Here are the bitter facts that confirm the reversal of power:
In 2024, China will officially dethrone the European Union to become the world's largest car exporter.
70% of electric vehicles sold worldwide are assembled in China. That's a mind-boggling dependency.
In other words, our own transition to “green“ technologies turned out to be a Trojan horse that opened the doors to Chinese dominance.
Three blows to the back of traditional industry
The IEA Executive Director, Fatih Birol, does not spare a critical tone, pointing out three large-scale trends that are putting Western industry in check: the displacement of production, a change in the regions that shape demand, and the most painful - the technological transition to electric propulsion, which requires billions, with no clear guarantee of success.
Traditional manufacturers in Europe and the US are pressed into an impossible corner: they must simultaneously maintain the expensive production of the already fading internal combustion engines for some markets, invest insane amounts in risky EV projects and compete with new, unscrupulous players who are quickly taking over the market. It is a two-front battle that few will win.
And why are Chinese electric cars so cheaper?
The reason is not only cheap labor. According to the report, much of the advantage is due to vertical integration and large-scale production. The Chinese simply built the entire chain from raw materials to finished cars, while the West struggled with bureaucracy and outdated factories.
The key element: batteries. The price of batteries in China is 30% lower than in Europe and 20% lower than in the US. Moreover, a full 40% of the difference in the price of the final EV product comes from cheaper powertrain components.
Is there any hope of catching up? The IEA report is pessimistic. Although 50% of China's advantage is due to manufacturing efficiency, to achieve similar results, developed economies need investments and increased production, which are currently practically unrealistic against the backdrop of economic uncertainty. It seems that the battle over price is lost, and with it – and control over the future of the automotive industry.