23008_Nearshoring Report

The legacy of automotive manufacturing in Europe creates a series of strong anchors to retain production in or close to Europe as well as spurring the evolution of supplier industries in proximate locations. Automotive and vehicle manufacturers have not only high sunk costs in their investments in European locations and plants, but the ecosystem of skills and knowledge as well as supplier networks that have developed in these locations mean that there would be challenges to relocating operations elsewhere. In addition, manufacturing plants within Europe are typically used to build products to feed the European market because the vehicles have particular characteristics or technical standards which are unique to consumer tastes or product regulations in the region. Over the past several decades, European automotive manufacturers and their supplies have invested in production facilities in lower-cost locations close to primary manufacturing and consumption markets. These have tended to be focused in CEE countries but also in countries outside Europe, such as Türkiye and Morocco. These locations offer lower costs but, being in close proximity, mean short journey times for often-heavy components as well as the speed to be able to meet JIT manufacturing demands.

But automotive manufacturing is changing: national and international sustainability goals are driving technological developments in automotive and vehicle technology. These in turn are spurring investments in European production facilities, particularly involved in new vehicle and battery technologies. The EU and the UK have committed to banning the sale of non-renewable energy vehicles (UK from 2030 and EU from 2035) and in order to meet the demand for new vehicles both in the lead-up to and beyond these deadlines, significant manufacturing capacity will need to be created to produce the vehicles required. Already, 18% of new cars sold in the EU in 2021 were electric, up from just 2% in 2018. And the expectation is that sales of electric vehicles (EVs) in Europe will more than double between 2021 and 2027 to meet the demand generated by policies and targets indicated by the EU and other European countries.

AUTOMOTIVE

The automotive sector is a crucial industry for Europe: within the EU, the turnover generated by the automotive industry represents over 7% of EU GDP.

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