Luca De Meo is a fine CEO. He has brought Renault back to profitability despite losing €2.3 billion in the forced sale of their Russian subsidiary AvtoVAZ to Putin’s government. He is also one of the best communicators in the industry, frequently using LinkedIn and newspapers to communicate. Last week he wrote an op-ed for France’s leading business newspaper, Les Echos, explaining why Europe needs an automotive industrial policy to counter the threat from Tesla and Chinese EVs. “We are talking about an industry accounting for 8% of the EU’s GDP, 30% of its R&D spending, and 13 million jobs. It’s very simple: strip out the automotive industry and Europe will find itself with a structural trade deficit!”
De Meo has a strategic plan for Renault to navigate these tricky times. Late last year he created Ampere, an EV/software company to compete with the likes of BYD and Tesla. He wanted to raise €10 billion from a November 2023 IPO, which he postponed to spring this year, and then cancelled this week due to unfavourable market conditions. De Meo is frustrated with European investors, telling the Financial Times, “I don’t know what European investors are doing, but if they want to protect Europe they should back projects like this one, where someone has the guts to have a substantiated, holistic response to the challenge that the Chinese and Americans are giving us.”
Is €10 billion too much to ask from investors for an EV startup? Polestar, an EV brand part-owned by Volvo and Geely (a Chinese company) listed in 2022 with a valuation of $21 billion; in 2021 Vietnam’s VinFast listed through a SPAC and was valued at $23 billion, while Rivian’s IPO raised $11.9 billion on the Nasdaq and was valued at $66.5 billion. Why is it so hard for a European EV startup, backed by Renault’s legacy, to get a decent valuation?
De Meo wants the EU to coordinate its EV response to the threat from the East and the West. In 2022 I heard Frans Timmerman give a keynote at Europe’s POLIS Conference to discuss mobility. (Timmerman was VP for the European Green Deal, and the EU Commissioner for Climate Action.) He explained that the EU had done its bit by setting clear legislation; now it was up to the automotive sector to remain competitive. At the time I wondered if Timmerman understood the scale of the competition.
The €800 billion NextGenerationEU fund was meant for the digital and green transition, but funding has been snared in red tape. Compare this to the success of Biden’s IRA fund which achieved the following by its first birthday: clean energy projects that generated 170,606 new jobs in 44 states; and 272 new clean energy projects in small towns and big cities nationwide, totaling $278 billion in new investments. See Clean Energy Boom Anniversary Report
De Meo calls for harmonising mobility policy for Europe’s 200 largest cities. I’ve hosted multiple mobility summits in Berlin, Paris and London and am rarely able to get the auto industry and city authorities to share a stage. With the odd exception, European cities want 80% of modal share to be a combination of walking, cycling and public transport by 2040. In my opinion, the auto industry has underestimated the power of city authorities to set the mobility agenda. Eurostat (the EC’s stats office) reveals that the continent is bifurcating between wealthy young urbanites and ageing poorer rural-dwellers; who have very different attitudes to mobility. How do automakers bridge that divide?
There is an untested hypothesis that consumers will snap up EVs when the price comes down, like they did with smartphones and flatscreen TVs. Europeans use their cars less than they used to, and when they do it’s for weekends away and holidays, when range is an issue. Ampere wants to lead with affordable EVs, made in Europe. But how will it compete with Tesla’s made-in-Germany Model 2, and with BYD, who are setting up a factory in Hungary, which could become Europe’s new home for battery and EV manufacturing?
The bottom line:
It’s a setback for De Meo after investors spurned Ampere, and so it is for Renault and the European auto industry. Unfortunately, capital is not chasing a European EV startup.
The EU’s Green Deal (policy initiatives to set Europe on the path to climate neutrality by 2050) is meant to boost industry and jobs. But if a man with De Meo’s pedigree and Renault’s footprint (4,700 dealership sites and 30,000 EV trained people in Europe) is unable to raise funds for an EV startup then Brussels, we have a problem!
In his op-ed De Meo asks: “Does Europe have the will to equip itself with a genuine industrial policy for our sector, with a holistic ambition, instead of just piling up deadlines and fines”? He has a point. European policymakers have not quite succeeded in creating a policy environment that enables the green revolution. European businesses unable to compete with American and Chinese imports will increasingly think about a move to America to take advantage of Biden’s IRA.
Decarbonising transport is shaking up the industry, rewarding bold innovators. The EU needs to figure out how to make Europe the primary destination for innovators and investors. If not, it will be stuck writing legislation to block better-funded companies from entering its market.
By Ross Douglas