European car manufacturers are facing challenges

Horizons article
December 5, 2022

Car manufacturers in Europe are facing challenges. In this edition of the Horizons, we discuss their dependence on China for raw materials and batteries and we investigate how far the industry has come with recycling cars.

The dependence of the European car industry

The decision of the European Union to ban the sale of new fossil fuel cars in 2035 has put pressure on the European car industry to pivot to electric cars. A segment where China is in the lead: the country has a dominant position in both raw materials and batteries. Over half of all the necessary batteries in the world are produced in China. Moreover, China also has a head start in the software department. Already, this seems to pay dividends, as Volkswagen is preparing to invest $1 billion in software technology in China. It shows how Europe’s car industry is becoming more dependent on China. Since relationships with China are already tense, further deterioration could have disastrous effects. A recent calculation of the IFO institute found that Germany would face costs almost six times as high as Brexit. China might well use its position as leverage. By limiting its battery supply, China could put the European car industry, and therefore the goal to phase out fossil fuel cars, under a significant threat.

Broaden your horizon
  • The dependency on China in the electric battery market has increased the call for new initiatives. Recently, Renault and Airbus announced a partnership to develop a new generation of electric batteries for cars and planes.
  • Almost everyone considers fully recycled manufacturing in the car industry very desirable, however it may take some time until we get there. This article examines why it still takes some time to get to the fully recycled car.
  • Circular manufacturing is part of the European Green Deal, which establishes the groundwork for new regulations for car companies. This article discusses the feasibility of entirely recycling a car.
When will we reach full circularity?

A circular car might help Europe to reduce its dependence on China. A fully circular car is a car that produces zero material waste and, in theory, zero pollution during manufacturing. Since 2015, European regulations force companies to recycle 95% of the weight of the car. For some parts, however, there is no solution yet, for instance for oil filters. In electric vehicles, batteries form a challenge. Although processing EV batteries is relatively complicated and labor-intensive, up to 83% is recycled. For the commercial market, several manufacturers are working on a recyclable model. BMW’s I Vision consist of 30% recycled material and for the Renault Scenic Vision this percentage is more than doubled (70%). Currently, the major issue to close the gap to a 100% circular car is the massive increase in quality and safety of materials that has taken place over the last decade. Expectations are that a fully commercial circular car will not be available in the coming years; analysts of BMW and Volvo speak of 2040 as a target to reach this goal.


Explore more Horizons, our insights on the issues that matter most in business and finance.

Newsletter sign-up