5:59 v originále: Wolfgang Münchau on the European Car Industry’s Conundrum

Chinese chips are set to make their way back into European car plants. The feared production shutdowns have so far failed to materialize — but the industry’s fragility has once again been laid bare. And the headwinds are mounting.

The worst-case scenario has not materialized — at least for now. That is the current outcome of the tensions surrounding the supply of chips for the automotive industry. Manufacturers, including those in Europe, have for several weeks been voicing concerns mainly about the availability of chips produced in Chinese factories owned by Nexperia, a company at the center of a dispute between the Chinese and Dutch governments.

Recently the tensions had eased. However, the dispute once again highlighted the vulnerability of a sector that, in the Czech Republic and several other European countries, ranks among the key pillars of the economy.

„We are very much in the wrong segments of the market, we haven't invested for many years and private investment is falling,“ says a well-known economic journalist Wolfgang Münchau from Eurointelligence agency, referring to Europe’s automotive industry.

Listen to the full interview with Wolfgang Münchau in English:

Rozhovor ve verzi s českým dabingem si můžete poslechnout zde.

According to him, the declining profits of German carmakers have little to do with the current problems in chip supply. Germany, he argues, has simply fallen behind and failed to catch the wave of electromobility - a trend that over the years has become the fastest -growing segment of the global automotive industry.

„German cars are considered to be outmoded. Chinese cars are ahead, technically advanced and cheaper at the same time. China is ahead in important technologies, not only in batteries, (…) where the Chinese are really ahead of us, like ten years and more, is in software. And especially in the data collection business,“ the journalist explains.

In an interview for the 5:59 news podcast, the seasoned economic writer and analyst explains that cars will most likely still continue to be manufactured in Europe - particularly in Germany. But this segment of the market will be far less profitable than before.

„The money will go elsewhere because the profit in the car of the future will be in software and in battery technology. And the profit in the current generation of cars and the old generation of cars was the engine, the transmission system, all the technical stuff that we make here in Europe. That means that from a value-added perspective, which is the best way to look at it, the value added will go to China and away from Europe. We still make cars here. There are still some crumbs for us to pick up, but the cake is no longer in Europe,“ Münchau adds.

What lies ahead for the industry to which the Czech economy has so tightly bound its fortunes? And could a potential postponement of the EU’s planned 2035 ban on new combustion-engine cars offer European automakers a lifeline? Find out by listening to the full 5:59 podcast in the audio player above.