Automotive: the future can be different
The automotive industry is experiencing uncertain times aggravated by the rapid expansion of COVID-19. The international automotive market was already saturated, large companies pressured by tariffs, trade tensions were already beginning to diversify their supply chains in order to reduce risks, and the search for alternatives was already underway. However, this is a long process that takes time.
Manufacturers were seriously affected by the sudden drop in demand, the confinement of customers, the closure of distributors, the obligation to reduce the workforce to protect workers and the difficulties in global supply chains. And the big unknown is the behaviour that demand will present in the target markets. Without a doubt, it is the industrial sector that is being hit hardest by this health and economic crisis. A key factor has been the breakdown of its own sourcing model, as 80% of the world's auto supply chain is connected to China.
Nevertheless, the sector has shown resistance and potential. The reactivation of industrial factories is a good sign and allows to reconnect global production chains. The automotive ecosystem of various Mediterranean countries can position itself to take advantage of the opportunities offered by continuous planning in this sector and anticipate recovery.
In the Mediterranean region, the data prior to COVID-19 showed the good figures for the sector, especially in Spain, Turkey and Morocco. Spain is the second European manufacturing country, after Germany, and the first in the Mediterranean. 83% of this production is exported. France is the second largest manufacturer in the region, followed by Turkey and Morocco, countries that had registered strong growth with 73% of regional manufacturing destined for export.
The sector has a multiplier impact at an economic and social level due to the creation of new companies, the generation of massive employment and the creation of stability and wealth, in a region with a high rate of youth unemployment that requires 50 million new jobs by 2025. For decades, the automotive industry has been weaving complex global supply chains based on maximum efficiency, rigorous punctuality, and just-in-time parts supply. But, due to the pandemic, this procedure has triggered a complete halt in vehicle production in Europe. Perhaps the time has come to regionalise the sector and to bet on proximity and alliances between the two shores of the Mediterranean, as the next frontier of growth.
Big manufacturers have invested billions in the Mediterranean and Africa in recent years, attracted by growth prospects no longer offered by more mature automotive markets. New car sales in the US, China and Europe are declining after an extraordinary decade. The new automobile manufacturing group, largely aimed at serving local and regional demand, could become the model for companies to rethink their global supply chains as trade barriers around the world increase.
The automotive industry makes sense in an integrated Mediterranean region. Europe has 500 million inhabitants, the eastern part of the Mediterranean another 600 million, and sub-Saharan Africa has 1,000 million more. Integrating the three zones is the obvious solution. In comparison, the population of the entire American continent (North, Central and South America) is only 1 billion. Other advantages of the Mediterranean region are cheap energy, the availability of raw materials, the young workforce that can be trained in the required skills and a large potential consumer market.
It is common to think that between the North and the South of the Mediterranean there is competition, but this is a mistake. In a globalised world you have to compete with other regions, especially with Asia. Therefore, the vision must be changed. Creating a Mediterranean hub to manufacture vehicles has enormous possibilities, becoming it a regional platform that would facilitate industry, commerce and logistics worldwide. All experiences show that North-South complementarity can promote the region and make it play a leading role in the global automotive scene. It is a matter of time to restructure the sector, implement adequate support and financing mechanisms, and launch the Mediterranean business ecosystem.
The Mediterranean region can become an international centre for manufacturing and assembly from which to access Africa, Asia and Europe, and influence world markets. It is possible to place the region on the world stage, attract more investment and incentivise a sector that can expand its capacity to manufacture, export and create jobs. We have to bet on efficiency in supply chains, develop a sustainable electric car, and take advantage of opportunities and experience to face the competition. Regional integration is the path to sustainability and survival.
Anwar Zibaoui, General Coordinator of ASCAME