00:00David Bailey is professor of business economics at Birmingham Business School in the UK.
00:05Hello, David. So Stellantis is setting up deals with Dongfang and also with Leap Motors.
00:13What's in it for all parties?
00:16So from the point of view, Stellantis, they are way behind, like other European firms, Chinese brands.
00:22China's been making electric cars for 25 years. They can produce them at much lower cost.
00:26They can develop them more quickly and they have superior battery technology.
00:30So European auto brands need Chinese help.
00:35If you think about it the other way around, Chinese brands coming into Europe face significant barriers in setting up
00:41in getting their brands recognized.
00:43So companies like Peugeot, Citroën, part of the Stellantis group can help them by saying, right, you still have our
00:49spare capacity and we'll also help you to sell their cars.
00:52So it's a kind of marriage of necessity, really. Both sides bring something to the table.
00:58What are the unique requirements of the European car market?
01:03So, you know, a car that's made to sell in, say, North America, where the roads are big and the
01:09parking spaces are big, simply isn't going to work in Europe.
01:12Europe has had a preference traditionally for smaller cars, given that the kind of smaller roads, which predate date from
01:20before cars were created, smaller parking spaces.
01:23So this idea that you can have a kind of global car and sell it in different parts of the
01:27world is, I think, starting to become a bit more difficult.
01:30So the cars have got to be small and they've also got to be very good value.
01:35One of the big challenges for making an electric car is to get the cost down so that they can
01:42become more accessible to European consumers.
01:44And the big challenge in particular is being able to make a car that costs less than 25,000 euros.
01:50How much of this is about also avoiding tariffs and meeting that made in Europe label?
01:57I think that's a big part of it.
01:59We've seen the European Union put in place tariffs of up to, when you include the basic 10 percent tariff,
02:04up to 45 percent on Chinese electric vehicle imports.
02:08Remember as well, the U.S. has got 100 percent tariffs.
02:11So increasingly, the world is becoming regionalized and car makers are looking to make cars in the final market, whether
02:20that's Europe or potentially the U.S., in order to avoid tariffs.
02:23So leapfrogging tariffs is important.
02:26But I also think there's something else going on.
02:28The European car industry has got excess capacity.
02:31In the case of Stellantis, it only operates at about 50 percent capacity.
02:35And so by producing Chinese cars at those plants, Chinese brands, it buys political acceptance.
02:43It not only makes the brands known to people, but European policymakers are going to be happy that European car
02:49making production capacity is kept in place.
02:51We know that European car manufacturers have really been struggling at a time of great transition.
02:57Could this sort of partnership provide the lifeline to keep them going?
03:02I think it could if it's managed properly.
03:04I mean, at the moment, essentially, the European auto industry faces an existential crisis because they're being outcompeted by the
03:12Chinese producers.
03:13And so if they can collaborate increasingly with Chinese firms and learn from them in so doing, then there's a
03:20potential win-win for both sides.
03:22Chinese firms get access.
03:24European brands learn how to develop cars much more quickly, improve their technology and get their costs down.
03:30And remember, this is what Chinese car makers did 25 years ago when European brands went to China.
03:36They learned from them.
03:38Now the tables are turned.
03:39The Europeans actually have to catch up.
03:41Bringing in the Chinese, I think, is a really important step in that.
03:44Thank you so much, David Bailey, Professor of Business Economics at Birmingham Business School.
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