McKinsey’s New Report Says It’ll Cost a Pretty Penny. 💶🚗
Last week, McKinsey dropped a new report on Europe’s economic path to vehicle electrification. I’ll spare you reading the typical McKinsey bland and boring report and get you the good stuff in this post (and some bad too). The report outlines just how costly the EV transition will be for EU automakers and offers a mix of insights and recommendations. Some points I found on target; others feel a bit more like McKinsey sales tactics for consultancy gigs. Let’s break it down.
Here’s What Stood Out:
- 💸 €400B – That’s what the EU could lose by 2035 if automakers botch the EV transition, mostly impacting tier-one suppliers. Do it right? Still an additional €300B.
- 🚗 8% of EU GDP – That’s how much automakers contribute, employing around 5.5 million people and putting up €64B in R&D yearly (30% of the EU’s total).
- 🔋 40-50% of EV components are non-traditional (think batteries and semiconductors). The question is whether EU automakers can master BEV technology as they did with ICE.
- ⚡ Some Chinese EV players are developing cars twice as fast as their EU counterparts—and at 20-30% lower cost. Ouch.
What Needs to Happen?
I’m with McKinsey on a few points here:
1. Expand Domestic Battery Manufacturing – EU automakers must prioritize localizing cell production and scaling up in electrochemistry and materials.
2. Build Partnerships – Teaming up with US and Asian partners could accelerate manufacturing scale-up.
3. Streamline Regulation – EU automakers will need industry collaboration, localization, and regulatory clarity to stay competitive.
But beware: they face hurdles like talent shortages and high energy costs.
What Feels Off?
1. Company-Wide Initiatives To Transition To EVs – McKinsey suggests OEMs should launch massive internal transformations. Not gonna work. These legacy giants are entrenched in their ways; it’ll take decades to pivot, and by then, they’ll be lagging even further behind.
2. PHEVs and Hybrids? – They suggest hybrids will help the transition to full BEVs. Really? This will just drag out the agony. Propping up ICE assets with PHEVs will divert investment and delay the inevitable EV shift, losing precious time and resources.
So, there you have it. The EU’s EV transition is a race against the clock. Europe needs to think less about keeping everyone happy and more about committing fully to the EV future.
Here is the link to the McKinsey report: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/europes-economic-potential-in-the-shift-to-electric-vehicles?stcr=82164B8E9BCB4C36930067C9603877C5&cid=other-eml-alt-mip-mck&hlkid=7aceaae8920a4053b18aec311018c1a3&hctky=15046272&hdpid=5e8b74c7-b166-4dbe-8ff2-10c97b4d8546#/