Automotive sector seen as key to achieving goal

EU aims to have 20 percent of GDP come from manufacturing, official says

Automotive sector seen as key to achieving goal

Workers at Porsche's factory in Leipzig, Germany, assemble the Macan compact SUV. The auto industry employs over 12 million people in the EU.

Photo credit: Bloomberg
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BRUSSELS -- The European Union wants to boost the bloc's share of economic output coming from manufacturing by a quarter by 2020 to 20 percent from 16 percent now, its official in charge of automotive regulation told the Automotive News Europe Congress on Wednesday.

A strong automotive sector is key to achieving that goal, Carlo Pettinelli of the EU's Directorate General for Enterprise and Industry said, noting that the car business is a major employer in the EU with over 12 million people working at jobs from service to engineering to manufacturing.

"This is a huge challenge, but we are fully committed to it," Pettinelli said.

To reach that goal, the EU is focusing on four main areas, Pettinelli added. The first is to support manufacturers in continually improving their product so that they can remain competitive on global markets, particularly in improving the transfer of research and development into the finished product -- an area where EU companies sometimes stumble, he said.

Secondly, the free flow of goods in the internal market must continue to increase. For the auto market, that means better circulation of used cars, he said. Lastly, the EU needs to support manufacturers in the sort of advanced training that workers need to build ever-more competitive cars.

The commission’s goal to increase manufacturing’s share of GDP in the EU is at odds with the reality faced by automakers like PSA/Peugeot-Citroen, Ford of Europe, Opel, and Fiat. The EU’s mass-market automotive sector is suffering, as consumers have only started resuming the car purchases that they put off during the recession. Ford and PSA have closed factories, and executives say more plants need to shut. Yet the manufacturing sector is an important source of jobs in any economy, and has traditionally been a ladder enabling lower income families to climb into the middle class.

The EU has earmarked 1 billion euros in funds available for automotive companies to spend on innovation from 2014 to 2020, said Pettinelli. For small companies, the EU has set aside 2.3 billion euros, plus a further 2.8 billion euros for early stage start ups.

“The automotive sector, with a significant share of SMEs, could be one of the major beneficiaries of this funding,” Pettinelli said.

But it’s a drop in the ocean compared to the billions spent each year by each of the EU’s biggest automakers, which spend an average of 5 percent of revenue on R&D each year. Future challenges like new post-2020 carbon emissions restrictions and a move to autonomous driving means that automakers must keep spending to keep up.

On the positive side, the EU is taking a closer look at the results of its Free Trade Agreement with South Korea, which Pettinelli admitted was not a success story for European automakers. More cars from South Korea have been sold in the EU than vice versa, he noted.

“It was not a success story for the auto industry, this is true,” he said. “Now we are working to remove the non-trade barriers in South Korea, and the situation is improving. “

Pettinelli said after his speech that the current round of talks with Japan for a FTA will take a more prudent approach to non-trade barriers.

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