The electric shock behind Europe’s stuttering EV future – and how China has leapfrogged major car-exporting nations

Published

7 months ago

December 6, 2024

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Across Europe, car companies are cutting jobs and shutting factories – to the extent that some question their very existence. So it’s worth asking the question: what’s gone wrong with Europe (and for that matter America’s) car industry?

While some will reach for their own pet conclusions (Brexit! Electric vehicle deadlines! Government regulations!) in practice there’s something bigger, deeper and less parochial going on here. As the world shifts from petrol and diesel cars to their electric counterparts, a seismic shift is taking place in the global motor industry.

It is a shift which threatens to cause even more pain and disruption at carmakers in developed economies. And given most of these countries’ high-skilled and highly-paid manufacturing jobs are to be found in or around the car-making sector, this is no trivial matter.

Look at a chart of global car exports and you see a very striking sight indeed.

The lines for the traditional car-making countries – Japan, Germany, South Korea – are more or less flat, save for the period around the pandemic. But now look at the line for China. This country which, only a few years ago, was one of the minnows of the global car trade with barely 250,000 car exports each year, has suddenly launched into the stratosphere. In the space of barely two years, it has leapfrogged all the other major car-exporting nations to become the world’s biggest car exporter – in terms of the sheer number of cars.

This arresting chart might give you the impression that Chinese dominance is a very recent thing – a sudden and unexpected spurt. Except that that’s somewhat misleading, because this shift has been a long time coming. To see why, it helps (strange as this will sound) to ponder the innards of a typical car.

A conventional petrol or diesel car is an assembly of lots of different components. There’s the radiator, the exhaust pipe, the wheels and the brakes, but most of all, there is the engine. An internal combustion engine is – even in 2024 – an extraordinary piece of machinery. We take these things for granted (and, given their carbon emissions, some sneer at them). But the ability to take fuel and explode it in a controlled way that turns wheels remains a great mechanical achievement.

To be able to make these engines – contraptions of many different parts, each of which undergoes enormous stresses – at a low cost and in a way that ensures their long-term reliability is all the more impressing an achievement.

Indeed, making reliable engines was such an enormous industrial challenge that it defied China for most of the past century. Part of the reason Chinese car exports were so low for so long was because China struggled to make decent engines.

So it won’t surprise you to learn that the engine is comfortably the most expensive component in a typical car – accounting for more than a fifth of the total value of a car. Much of Britain and Europe’s car industry is focused on this 21% of the car value – because that’s where our expertise has been built up over decades.

Taking bits of steel and combining them into this complex contraption is part of the industrial story of Europe (and America). Millions of people are employed across Europe working either at carmakers or their suppliers making these engines. This is where some of the best-paid, highest-skilled manufacturing jobs are to be found, even today in 2024.

But here’s the critical thing. In an electric car there is no engine. Instead, the vast majority of the value lies in something else: the battery.

Making a battery is very, very different to making an engine. It’s chemical engineering – not mechanical engineering. The skills built up by European carmakers over decades are simply not directly transferrable. Even if Europe was the only continent in the world making cars, it would still be an almighty challenge to shift from one industrial model to a very different one, without having a rollercoaster ride along the way.

But Europe’s problem (and America’s and South Korea and Japan’s too) is that it’s not alone in making cars. China, which struggled to compete on those car engines decades ago, has been investing in electric carmaking for some time.

In doing so, it has been helped by subsidies far more generous than those their Western competitors tend to receive (nearly all carmakers get subsidies – one way or another). Beijing has long been determined both to dominate this next phase of car production and reduce its reliance on Middle Eastern oil imports – both of which point towards mass electrification of road transport.

And those subsidies – alongside cheap energy costs helped by China’s relaxed attitude towards coal-fired power – are one part of the explanation for why China has been able to produce cars with far cheaper costs than their Western competitors. Analysts from Swiss bank UBS recently tried to break down the costs of a German-produced VW ID3 compared with the component costs of a Chinese car, the BYD Seal.

They found that the BYD was cheaper to produce – not just overall, but for every single component part. And since it was far cheaper to produce, that meant it could be sold at far cheaper rates.

Some of that is explained by state aid but, even more so, it’s a consequence of something else. China’s interest in batteries is not a recent trend. It has been investing in their production for many, many years. It has been attempting to dominate not just the production of cells but also of the cathodes and anodes that go inside them – not to mention the chemicals used to make those electrodes. It has been firming up the entire supply chain – all the way down to the mines. And while you can find only so much lithium and cobalt in China, Chinese firms have been buying up mines in Africa and elsewhere for years.

The upshot is that China is the dominant country not just in the production of EVs and the cells inside them but in nearly every component that goes inside those cells. If you want to make a battery today you will be hard pressed not to use at least some Chinese technology or products. It’s that dominant.

The late business writer Clay Christensen coined the term “disruptive innovation” to describe moments like this. When a new technology comes along that completely changes the industrial structure in a sector, it’s incredibly difficult for the incumbent businesses to respond and adapt. They simply aren’t set up for it. Think about how digital photography displaced traditional film, or how smartphones have displaced traditional computers.

What makes this moment so tricky for European carmakers is that they are trying to compete with a disruptive innovation which has been supercharged by Chinese industrial strategy. The upshot is that China is so far ahead on battery production – particularly of low-cost batteries – that it’s hard to see how Europe and America – and, to some extent, South Korea and Japan, can catch up.

All of which is why so many countries are reaching for the most drastic of all economic remedies: large, expensive tariffs on imports of Chinese EVs. The US and Canada have imposed 100% tariffs, India is following suit with similar rates. Europe has introduced a sliding range of extra tariffs. Japan has yet to do so, but is protected to some extent by the fact that their consumers habitually typically buy Japanese.

The main outlier here is the UK. This country has not yet imposed any extra tariffs on Chinese imports. The upshot is that this is one of the most attractive places in the world for Chinese producers to market their cars right now – and one of the cheapest places to buy a Chinese car. But that has profound consequences for domestic car producers.

With energy costs having risen so much, it is getting harder, rather than easier, to compete with Chinese production domestically. It raises profound questions about the ability of this country’s car industry to survive or compete.

The logic of these transitions is that they often move in slow motion but become quite self-fulfilling. Britain and Europe had opportunities to invest in batteries in years gone by; they have been spectacularly slow-moving in setting up new supply chains. But the cards were always stacked against them. The coming years will probably get tougher, as the 2035 EV deadline approaches, pushing consumers towards a market which is becoming ever more dominated by one country.

Business

Former Centrica chief Laidlaw in frame to chair embattled BP

Published

2 days ago

June 21, 2025

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Former Centrica chief Laidlaw in frame to chair embattled BP

Sam Laidlaw, the former boss of Centrica, is among the candidates being considered as the next chairman of BP, Britain’s besieged oil and gas exploration giant.

Sky News has learnt that Mr Laidlaw is being considered by BP board members as a potential successor to Helge Lund, who announced in April that he would step down.

BP’s chair search comes with the £62bn oil major in a state of crisis, as industry predators circle and the pace of its strategic transformation being interrogated by shareholders.

Elliott Management, the activist investor, snapped up a multibillion pound stake in BP earlier this year and is pushing its chief executive, Murray Auchincloss, to accelerate spending cuts and ditch a string of renewable energy commitments.

Mr Lund’s departure will come after nearly a quarter of BP’s shareholders opposed his re-election at its annual meeting in April – an unusually large protest given that his intention to step down had already been announced.

BP’s senior independent director – the Aviva chief executive Amanda Blanc – is said to be moving “at pace” to complete the recruitment process.

A number of prominent candidates are understood to be in discussions with headhunters advising BP on the search.

Mr Laidlaw would be a logical choice to take the role, having transformed Centrica, the owner of British Gas, during his tenure, which ended in 2014.

Since then, he has had a long stint – which recently concluded – on the board of miner Rio Tinto, which has been fending off activist calls to abandon its London listing.

He also established, and then sold, Neptune Energy, an oil company which was acquired by Italy’s Eni for nearly £4bn in 2023.

Last December, Mr Laidlaw was appointed chairman of AWE, the government-owned body which oversees Britain’s nuclear weapons capability.

He also has strong family connections to BP, with his father, Christopher Laidlaw, having served as its deputy chairman during a long business career.

One person close to BP said the younger Mr Laidlaw had been approached about chairing the company during its previous recruitment process but had ruled himself out because of his Neptune Energy role.

The status of his engagement with BP’s search was unclear on Saturday.

Another person said to have been approached is Ken MacKenzie, who recently retired as chairman of the mining giant BHP.

Mr MacKenzie headed BHP during a period when Elliott held a stake in the company, and is said to have a good working relationship with the investor.

Shares in BP have continued their downward trajectory over the last year, having fallen by nearly a fifth during that period.

The company’s valuation slump is reported to have drawn renewed interest in a possible takeover bid, with rivals Shell and ExxonMobil among those said to have “run the numbers” in recent months.

Reports of such interest have not elicited any formal response, suggesting that any deal is conceptual at this stage.

BP is racing to sell assets including Castrol, its lubricants division, which could command a price of about $8bn.

This weekend, BP declined to comment, while Mr Laidlaw could not be reached for comment.

Business

Hundreds of jobs at risk as River Island takes axe to store base

Published

3 days ago

June 20, 2025

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Hundreds of jobs at risk as River Island takes axe to store base

Hundreds more high street jobs are being put at risk as part of a sweeping overhaul of the family-owned fashion retailer River Island.

Sky News has learnt that the clothing chain, which trades from about 230 stores, is proposing to close 33 shops in a restructuring plan which will be put to creditors in August.

The fate of a further 70 stores is dependent upon agreements being reached with landlords to slash rent payments.

Money latest: Why Aldi ‘could be forced to rethink’ business model

Confirmation of the plans comes less than a month after Sky News revealed that the company, which was founded in 1948 by Bernard Lewis, was working with PricewaterhouseCoopers (PwC) on a restructuring plan.

In a statement issued on Friday, Ben Lewis, River Island’s chief executive, said: “River Island is a much-loved retailer, with a decades-long history on the British high street.

“However, the well-documented migration of shoppers from the high street to online has left the business with a large portfolio of stores that is no longer aligned to our customers’ needs.

“The sharp rise in the cost of doing business over the last few years has only added to the financial burden.

“We have a clear strategy to transform the business to ensure its long-term viability.

“Recent improvements in our fashion offer and in-store shopping experience are already showing very positive results, but it is only with a restructuring plan that we will be able to see this strategy through and secure River Island’s future as a profitable retail business.

“We regret any job losses as a result of store closures, and we will try to keep these to a minimum.”

The company declined to comment on how many jobs would be put at risk by the initial 33 shop closures, or on the scale of the rent cuts being sought during talks with landlords.

In total, it is understood to employ about 5,500 people.

Sources said that new funding will be injected into River Island if the restructuring plan is approved in August.

Previously named Lewis and Chelsea Girl, the business, it adopting its current brand during the 1980s.

Accounts for River Island Clothing Co for the 52 weeks ended 30 December 2023 show the company made a £33.2m pre-tax loss.

Turnover during the year fell by more than 19% to £578.1m.

A restructuring plan is a court-supervised process which enables companies facing financial difficulties to compromise creditors such as landlords in order to avoid insolvency proceedings.

An identical process is being used to close scores of Poundland shops and slash rents at hundreds more.

In its latest accounts at Companies House, River Island Holdings Limited warned of a multitude of financial and operational risks to its business.

“The market for retailing of fashion clothing is fast changing with customer preferences for more diverse, convenient and speedier shopping journeys and with increasing competition especially in the digital space,” it said.

“The key business risks for the group are the pressures of a highly competitive and changing retail environment combined with increased economic uncertainty.

“A number of geopolitical events have resulted in continuing supply chain disruption as well as energy, labour and food price increases, driving inflation and interest rates higher and resulting in weaker disposable income and lower consumer confidence.”

Retailers have complained bitterly about the impact of tax changes announced by Rachel Reeves, the chancellor, in last autumn’s Budget.

Since then, a cluster of well-known chains, including Lakeland and The Original Factory Shop, have been forced to seek new owners.

Business

Post Office Capture scandal: Sir Alan Bates calls for those responsible for wrongful convictions to be ‘brought to account’

Published

3 days ago

June 20, 2025

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Post Office Capture scandal: Sir Alan Bates calls for those responsible for wrongful convictions to be 'brought to account'

Sir Alan Bates has called for those responsible for the wrongful convictions of sub postmasters in the Capture IT scandal to be “brought to account”.

It comes after Sky News unearthed a report showing Post Office lawyers knew of faults in the software nearly three decades ago.

The documents, found in a garage by a retired computer expert, describe the Capture system as “an accident waiting to happen”.

Sir Alan said the Sky News investigation showed “yet another failure of government oversight; another failure of the Post Office board to ensure [the] Post Office recruited senior people competent of bringing in IT systems” and management that was “out of touch with what was going on within its organisation”.

The unearthed Capture report was commissioned by the defence team for sub postmistress Patricia Owen and served on the Post Office in 1998 at her trial.

It described the software as “quite capable of producing absurd gibberish” and concluded “reasonable doubt” existed as to “whether any criminal offence” had taken place.

Ms Owen was found guilty of stealing from her branch and given a suspended prison sentence.

She died in 2003 and her family had always believed the computer expert, who was due to give evidence on the report, “never turned up”.

Adrian Montagu reached out after seeing a Sky News report earlier this year and said he was actually stood down by the defending barrister with “no reason given”.

The barrister said he had no recollection of the case.

Victims and their lawyers hope the newly found “damning” expert report, which may never have been seen by a jury, could help overturn Capture convictions.

‘These people have to be brought to account’

Sir Alan, the leading campaigner for victims of the Horizon Post Office scandal, said while “no programme is bug free, why [was the] Post Office allowed to transfer the financial risk from these bugs on to a third party ie the sub postmaster, and why did its lawyers continue with prosecutions seemingly knowing of these system bugs?”

He continued: “Whether it was incompetence or corporate malice, these people have to be brought to account for their actions, be it for Capture or Horizon.”

More than 100 victims have come forward

More than 100 victims, including those who were not convicted but who were affected by the faulty software, have so far come forward.

Capture was used in 2,500 branches between 1992 and 1999, just before Horizon was introduced – which saw hundreds wrongfully convicted.

The Criminal Cases Review Commission (CCRC), the body responsible for investigating potential miscarriages of justice, is currently looking at a number of Capture convictions.

A CCRC spokesperson told Sky News: “We have received applications regarding 29 convictions which pre-date Horizon.
25 of these applications are being actively investigated by case review managers, and two more recent applications are in the preparatory stage and will be assigned to case review managers before the end of June.

“We have issued notices under s.17 of the Criminal Appeal Act 1995 to Post Office Ltd requiring them to produce all material relating to the applications received.

“To date, POL have provided some material in relation to 17 of the cases and confirmed that they hold no material in relation to another 5. The CCRC is awaiting a response from POL in relation to 6 cases.”

A spokesperson for the Department for Business and Trade said: “Postmasters negatively affected by Capture endured immeasurable suffering. We continue to listen to those who have been sharing their stories on the Capture system, and have taken their thoughts on board when designing the Capture Redress Scheme.”