Foto: Enel
The Romanian car industry must quickly make the transition from cars with internal combustion engines and subassemblies to investments in production lines for electric cars, as the world economy is accelerating towards electrification. Tens of thousands of jobs in the automotive and components production sector in Romania are in danger threatened by the growing emphasis by Western countries on electric cars and various models of restructuring if the global automotive industry, an analysis by Frames & FACTORY 4.0 reveals.
- Read the full Frames analysis below:
The manufacture of cars and car parts has become the most important industry in Romania. In addition to the Dacia and Ford factories, Romania has become the most important European supplier of subassemblies and components, from wiring to gearboxes.
There are over 500 factories operating in this sector in our country, and investments are stimulated, first of all, by the low labor costs. Among the most famous names are Continental, Dräxlmaier, and Leoni, whose investments in our country have increased significantly.
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However, the competitive advantages of the Romanian industry today – gross, cheap labor, low operating costs – may become irrelevant in the next 10 years amid the “industrial revolution” that the car industry is going through.
,, The pandemic has strongly accelerated the plans for companies in the automotive sector towards robotization, digitalization, the transition to electric propulsion, and green energy. In order to remain competitive on the market, it is crucial that Romanian companies, both in the area of car production and subassemblies, quickly modernize their production but especially to secure a place in the world of vehicles that incorporate a new type of added value, and even new business models.”, Says Marius Haratau, the manager of FACTORY 4.0
According to a McKinsey & Company report, the real revolution in the car industry is also fueled by the European Union’s ambitious plans to eliminate much of the car’s carbon dioxide emissions from urban areas by 2035.
Major car manufacturers, from Volkswagen to Ford, Volvo, GM, etc. they have already launched dozens of electric models, and 2022 will be the year the market will grow significantly.
,,Except for the challenges posed by batteries, the production of an electric car is faster, less polluting, and even more profitable for manufacturers, because it includes fewer components and an automated production process. In new car factories, such as Tesla, for example, robots have taken the place of workers in the vast majority of production processes, ” the analysis shows.
According to estimates by the European Federation for Transport and Environment (AISBL), the industry is preparing to produce more electric vehicles than required by the EU CO2 Regulation, probably to gain global market share.
“This presents a unique opportunity to accelerate the transition to EVs beyond the minimum CO2 targets, which, on their own, are not sufficient to meet the goal of carbon neutrality in time. To support the commitments of carmakers, the EU and its Member States need to put in place ambitious and supportive measures to accompany the transformation of the car industry and ensure that it is fast, fair and that it benefits all Europeans, ”said AISBL experts.
The technological shock will be significant
For the Romanian car industry still focused on primary work, the technological shock will be significant.
According to the Frames & FACTORY 4.0 analysis, an accelerated decline in demand for cars with internal combustion engines in Europe is expected for the next 5-10 years, and it will significantly impct Romanian manufacturers, with direct consequences including state revenues in this field and the loss of dozens of thousands of jobs.
The most affected will be car manufacturers and some manufacturers of parts and sub-assemblies. This is because the production of electric motors requires 90% less labor than in the case of traditional engines.
The analysis shows that first to disappear will be the cabling for gas-powered engines along with the gearboxes, where Romania is one of the most important European manufacturers. According to a UBS report, Lear, Autoliv, or Hella will be among the affected companies, and at a lower level Schaeffler and Faurecia.
Currently, suppliers of subassemblies have come to cover 89% of the total workforce engaged in this sector, compared to 49.5% in the European average and 32% in Germany.
,,Even if we produce many sub-assemblies, we have missed, at least so far, the chance to attract international manufacturers for electric batteries, a vital component of electric cars. Romania practically does not exist on this map, in which Sweden, Germany, Austria, France, Great Britain and even Hungary have invested significantly “, say the experts.
The good news for Romania is that we have a number of manufacturers, such as Continental, that will not be severely affected by the changes the industry is going through, because electric cars also need tires, body parts, lighting elements and safety equipment ( airbags, seat belts, etc.).
Moreover, electric cars need a larger number of electrical wiring, and Romania is one of the main players in Europe in this field.
According to Marius Haratau, it is thus absolutely necessary for the Romanian government to support the development of new car technologies, especially now that it has access to financing via the resilience program at its disposal.
“We have almost 30 billion euros from which we can allocate funds for research and development of new technologies, but also in preparing the workforce in this vital sector for the Romanian economy,” he added.
,,There are almost 200,000 employees in this sector, and the focus on technology and digitalization will make many of the jobs in this sector disappear / or be fundamentally transformed in the perspective of the next 10 years. There is a need for professional reconversion courses for them and not only for them, for all Romanians who want to specialize in new technologies. ”, Said Marius Hărătău.
According to the European Sector Skills Council, the evolution of the industry will also be affected by the demographic situation. Currently, 23% of employees in this sector are between 50 and 64 years old and are about to retire.
Business model innovations in the manufacture of electric vehicles
Automotive companies should proactively manage their exposure to future market changes. Suppliers who are not prepared to meet the challenges of increasing adoption of electric vehicles could pose a risk to carmakers at the same time as the risks to their own business.
It would be wise for OEMs to evaluate their supply chains in the future to determine if key suppliers are taking the necessary steps to maintain their place as valuable partners in a changing world.
The list of these changes includes, according to the World Battery, Hybrid and Fuel Cell Electric Vehicle Symposium: materials leasing (much lower purchasing costs; encouraging a complete economic model of the life cycle from suppliers; product management.); open source design (short time to market; customer participation in the design process; continuous product development); design for re-manufacture (vehicles become “technical nutrients” or active in the market; the total cost of manufacture being lower over several generations); low-volume production (many technologies are viable at low volumes; investment can be scaled on demand, with lower start-up costs and low risk; production of batteries, hybrid systems and fuel cells needed for electric vehicles will be priced lower); customer-oriented factories (much higher levels of customer service; minimum logistics chains for the finished product).
Research in the foreground
In an attempt to adapt to the technological shock, all the big players in the industry have invested significantly in research. The best-known example is that of Renault, which employed over 2,000 employees in the engineering division of Renault Technologie Roumanie.
Bosch, Autoliv, Continental, Hella have also invested in the development of research and development centers with over 8000 employees in total, and Schaeffler, TRW, and Kromberg & Schubert have also invested in the development of new technologies such as Advanced driver assistance systems (ADAS), essentially cameras, radar systems and ultrasonic sensors.
However, compared to what other countries do, our research and development represent just over 2% of employees and 4% of value-added.
For comparison, in Poland, the amounts invested in research are over 8 times higher, and in Hungary 5 times.
Digitization in the automotive industry
Currently, in Romania, the digitalization of production processes has registered significant progress, but still an insignificant one.
First of all, the automation of production in the Romanian car industry, especially in the subassembly sector, is difficult to implement due to the specialization of products, such as car wiring.
In essence, their manufacture by automated processes is not viable, so manufacturers will always look for cheap and specialized labor. And this is what Romania has to offer.
For example, the salary cost in the Romanian car industry is 5.1 times lower than in France and 6.6 times compared to Germany. Even compared to our neighbors, salaries are lower. Hungary has an average salary of 60%, the Czech Republic with 72%, and Slovakia with 74%.
This is also the reason why, in Romania, the automotive components industry has grown significantly, one in which the manual assembly of parts is fundamental. This is how Romania became one of the most important employers in Europe, over countries such as Spain, Great Britain or Italy.
According to the analysis, against the background of the fundamental changes in the industry, it is hard to believe that the Romanian producers will be able to operate on this business model.
“The future is closer than we thought before the pandemic. The digitalization of services, technological processes, investments in automation will make more and more the difference in terms of competitiveness “, says Adrian Negrescu, Frames manager.
What manufacturers do
The first steps towards technologization have already been taken. The plans of the two Romanian manufacturers aim, in the first phase, at the production of cars with light hybrid motorization.
Ford started producing the first Romanian hybrid in Craiova, and Dacia will switch to this technology, most likely, in 2023. It is estimated that the share of hybrid cars could reach 32% of total car production in Romania in 2025.
Meanwhile, Dacia gave up Diesel on the new Logan & Sandero generations and switched to stop/start engines.
“The strategy of Dacia, Romania’s main exporter, remains to produce cheap cars, and the development of the first electric car, Dacia Spring, is a signal meant to shape the future,” experts say.
According to him, the solution found by Dacia with the Spring model is designed to test the success potential of a cheap electric car.
And the first signals are positive. In Romania, over 5,000 people signed up in the early days to buy this model, even though the electric charging infrastructure is still deficient. Romania ranks last in Europe in terms of the number of charging stations relative to the surface.
,,The green trend also caught in Romania proof that, at the level of 2020, out of the total number of registered cars, 8902 were green cars (electric & hybrid), increasing by 33.3% compared to the previous year. The category of full-electric cars increased by 89% and the plug-in hybrid by 158% “, the analysis shows.
According to AISBL (European Federation for Transport and Environment) estimates, even if the market for new cars in the EU + EFTA will not exceed, in the horizon 2025 – 2030 the level of 2018, 15.5 million cars, we will see a significant increase in the sales of green cars, especially as their price will continue to fall as technology develops.
How do we protect our car industry?
According to the analysis, in the current context, companies in the industry will have to choose between investing in technology and moving their production facilities to other destinations, where they will benefit from lower costs – Serbia, Morocco, etc.
“In the context in which in Romania there is no national strategy to support this vital sector for the economy, it is not excluded that many companies, weakened by the crisis, will make their success in Romania,” Negrescu said.
Beyond the necessary funds for research and development, the Rabla and Rabla Plus programs, the Romanian car industry also needs legislative/fiscal protection mechanisms.
“Without an effective barrier to imports of old cars from the West, Romania will become, in the coming years, Europe’s garbage can,” the analysis shows. According to experts, as Western states will limit the movement of cars with heat engines, Romania must come up with measures to limit imports.
,,The need for an administrative measure to limit the registration of used cars is absolutely necessary given that, already, 80% of the Romanian car fleet is more than 10 years old. A car tax that penalizes older and polluting cars could be a solution, ” experts say.
According to APIA statistics, during the period when the car tax was in force in Romania, sales of used cars decreased from 301,000 in 2008 to 95,000 in 2011. Since 2017, when the pollution tax was eliminated, sales of second-hand cars hand increased to over 500,000 / year.
In the first three months of 2021, according to DRPCIV data (Driving Permits and Vehicle Registration Regime Directorate), 101,299 used cars and 20,762 new cars were registered in Romania.
At the level of 2020, the number of registered second-hand cars exceeded 385,000 units (75% of total registrations), while the number of new ones was 126,351.
In total, in the first quarter of this year there were almost 118,000 cars on the local market, down 4% compared to the same period last year according to data from the Romanian Automobile Manufacturers Association (ACAROM).
Experts from renowned technology companies such as Bosch Rexroth, Phoenix Contact, Kuka, ifm electronic, Dell Technologies, have launched a much-needed information and training resource in this dual economic and health crisis, FACTORY 4.0 WORKSHOP, in support of the competencies of the employees in the Romanian industry for the digitalization of the companies by developing the competencies of the human resource.