The Cancer Killing European Automotive (And No, It’s Not China)

The European automotive industry is on the brink, clinging to outdated models while the
future races ahead with software-driven innovation, writes David Fidalgo, Founder & CEO,
Y-Mobility

When both Volkswagen and Stellantis – who together control nearly half of Europe’s automotive market – are in trouble, we need to wake up.

VW reports a disappointing 5.4% operating margin and begs for “urgent cost reductions.” Meanwhile, Stellantis reports a shocking 48% drop in profits, with CEO Carlos Tavares calling the results “disappointing and humbling.” This isn’t just about two companies struggling – this is about the backbone of European industry cracking.

But here’s what really annoys me: Everyone’s tiptoeing around the truth. Nobody wants to say it out loud. So, I will.

The European automotive industry is dying. Not struggling. Not “facing challenges.” Dying. Think I’m being dramatic? Let’s talk about what’s really happening in 2024.

Remember when we thought the post-COVID recovery would save us? Yes, car sales are up 4.6% across major European markets. The UK is up 6%, Germany’s following at 5.4%. Sounds good, right? Wrong.

We’re selling more cars but making less money.
Monthly payments have shot up 6.1% since January. In Italy, people are paying €1,393 monthly for new cars. The Netherlands? From €1,160 to €1,420 in six months.

We’re essentially selling more cars at a discount just to keep the machines running.

And the most painful thing is that we bet everything we have on electric vehicles, but the market’s giving us a serious reality check. Regulations and infrastructure were not in place, we ran before we could walk.

That massive price gap between EVs and traditional cars is now disappearing. From €201 to €80 in months. Tesla’s Model Y sales have dropped 23% this year. This is a strong message from the market that we got it wrong.

Meanwhile, Trump’s threatening 10% tariffs on everything we ship to America. Our stocks have dropped 4-7% across the board. And China? They’re not just coming. They’re here. With cheaper cars, lower standards, and a plan to eat our lunch.

The worst part is that our solution is to do more of what’s not working.

Insanity is doing the same thing over and over again and expecting different results.

We’re building cars like it’s 1990 while pretending it’s 2025. We’re killing ourselves with complexity, bureaucracy, and an inability to see the world as it is.

Premium brand’s pricing power is decreasing, as they increased prices by 10% this year, down from 29% in 2023. That’s not a strategy – that’s desperation. We’re squeezing the last drops out of a dying business model.

We’re like Kodak in the digital age, Nokia when the iPhone launched, Blockbuster when Netflix started streaming. We see the future coming, but we think we can meet it with incremental changes to our past.

The really scary part isn’t just the cars, I’m worried about Europe’s industrial future. When our biggest manufacturers start failing, we don’t just lose jobs – we lose our industrial lifeline.

Some will say this view is too harsh, pointing to new models and slight improvements. They’re missing the point. This isn’t about whether we can build good cars. It’s about whether we can survive in a world that’s changed while we were busy congratulating ourselves on past successes.

Which leads me on to the real questions: How did we get here? What’s the real problem? How do we solve it?
Let me be very clear: We’re not failing because of China. We’re not failing because of EVs. We’re not even failing because of costs. We’re failing because we’ve built an entire industry on fundamentally broken thinking. And it’s about to destroy us.

The Architecture Delusion
Want to know why Tesla and Chinese manufacturers are cashing in and we are not?

While we’re still building cars like it’s 1990 – component by component, supplier by supplier – they’re building software platforms that just so happen to have wheels.

Look at how Tesla rolls out updates. One push, millions of cars get new features. Their entire fleet evolves overnight. Meanwhile, we’re scheduling model year updates like we’re still in the old times of mechanical typewriters.

BYD aren’t only building cheaper, more affordable cars – they’re building evolving ecosystems. Their software platform allows them to roll The Cancer Killing European Automotive (And No, It’s Not China) The European automotive industry is on the brink, clinging to outdated models while the future races ahead with software-driven innovation, writes David Fidalgo, Founder & CEO, Y-Mobility. TECHNICAL INSIGHT www.futuremobilitymedia.com December 2024 | Future Mobility Media | 17 out new services, features, and improvements across their entire fleet continuously. We’re still arguing about whether over-the-air updates are “premium features.”

We’re proud of our “premium engineering.” We boast about our “component excellence.” But the thing is, we’re master watchmakers in an Apple Watch world.

Procurement: The Silent Killer
The cancer that’s really killing us is…. procurement.
I recently watched a European OEM reject a groundbreaking software solution because it cost €8 more per unit than the outdated alternative. The potential value? Millions in new services and features. But procurement saw only the unit cost.

This isn’t an isolated incident. It’s systematic suicide.

In every European automotive company, there’s a procurement department with one mission: squeeze suppliers for every cent. They celebrate saving €5 on a component while killing innovation worth millions.

Here’s a real example: A major European OEM spent six months negotiating prices on a new sensor system. During those six months, their Chinese competitor integrated a completely new generation of technology and launched it in their vehicles.

I feel like we’re using fax machines to send emails – and celebrating that we saved money on paper!

The Leadership Vacuum
This might be uncomfortable for some to hear, but most automotive executives in Europe don’t understand software. They don’t get platforms. They don’t comprehend modern architecture.

Walk into any European automotive executive meeting. Count how many people understand the difference between component integration and system architecture. Count how many can explain their software platform strategy. I’ll wait.

This isn’t just a knowledge gap – it’s a mindset that’s worlds away.
Look at Rivian or NIO’s leadership team: they are packed with software architects, system thinkers, platform strategists. Look at Tesla: engineers and architects leading product decisions. Now look at European automotive leadership: finance experts optimising component costs and marketing guys planning model year updates.

Look at Rivian or NIO’s leadership team: they are packed with software architects, system thinkers, platform strategists. Look at Tesla: engineers and architects leading product decisions. Now look at European automotive leadership: finance experts optimising component costs and marketing guys planning model year updates.

What Victory Looks Like
Let me show you what success looks like:

• Architecture-First Thinking: Start with the platform. Everything else is implementation detail. BYD’s entire vehicle lineup runs on a unified software platform. When they improve one vehicle, they improve all vehicles.

• Value-Based Procurement: Stop measuring savings. Start measuring value creation. Look at how Tesla evaluates suppliers: not by unit cost, but by innovation potential and platform contribution.
• Technical Leadership: Put people who understand both software and systems in charge. NIO’s success comes from having architects at the helm, not accountants.
• Platform Economics: Build once, deploy everywhere. XPENG’s software platform costs them nearly nothing to deploy across new models. Each new vehicle adds value to the entire ecosystem.

Never Let a Good Crisis go to Waste – Winston Churchill

THE SOLUTION ISN’T COMPLICATED, BUT IT’S HARD:
Kill the component-first mindset:

• Start with system architecture
• Design for software first, hardware second
• Think platforms, not products
• Build for evolution, not just production

Revolutionise procurement:

• Evaluate total value creation, not just cost
• Partner for innovation, don’t just buy parts
• Think ecosystem, not supply chain
• Measure speed and adaptability, not just savings

Transform leadership:

• Put technical leaders in charge
• Build architectural thinking at every level
• Create software-first organisations
• Reward platform thinking, not just product delivery

Rebuild the business model:

• Treat software as an appreciating asset
• Build platform value, not just product value
• Create continuous value streams
• Think ecosystem economics, not unit economics

The Truth
This transformation will be painful. Some companies won’t make it.
Some careers will end. Some egos will be damaged.

But you know what’s more painful? Watching the entire European automotive industry become irrelevant while we argue about supplier costs and component specifications

I’ve seen European OEMs spend years perfecting door handles while Tesla reinvented the entire concept of what a car can be. I’ve watched procurement teams celebrate 2% cost savings while Chinese competitors built entire digital ecosystems.

This isn’t just about survival – it’s about relevance. In ten years, will European automotive be known for premium engineering, or museum pieces?

The choice is simple: Transform or die. Not next year. Not next quarter. Now.

Because while we’re busy optimising our procurement processes and celebrating our premium engineering, our competitors are building the future. And they’re not waiting for us to catch up.

The question isn’t whether we can change. The question is whether we have the courage to change before it’s too late.

The Way Forward
But there’s hope. While others are trapped in component-thinking paralysis, myself and my team at Y-Mobility provide two powerful solutions that address both the technical and strategic challenges facing automotive today, specifically the issues I have highlighted in this article.

Technical Excellence
At Y-Mobility, we architect and deliver across the entire technical stack:

• E/E Architecture: Building scalable, software-defined platforms
• Systems Engineering: Creating true platform architectures that separate software from hardware
• Data Governance & Architecture: Establishing robust data management frameworks that enable value creation
• Validation & Verification: Implementing rigorous testing frameworks at both component and system levels
• Functional Safety: Compliance built into the architecture, not added on as an afterthought
• Edge-to-Cloud Integration: Optimising from semiconductor level to cloud infrastructure

Our comprehensive chip-to-cloud expertise enables automotive companies to move on from component-thinking, unlock continuous software value, and build future-proof platforms that evolve with technology – turning traditional vehicle programs into dynamic, value-generating assets.

Accelerated Growth & Strategy We don’t just solve technical problems – we transform organisations:

• Executive Advisory: Guiding leadership through technical decisions that drive business value
• Procurement Evolution: Training teams to evaluate software and system value, not just component costs
• Organisational Design: Architecting structures that enable software-first thinking
• Strategy Development: Creating roadmaps for true platform-based development
• Value Chain Transformation: Rebuilding supplier relationships for innovation, not just cost reduction

When a major OEM needs to transform from component-based development to platform architecture, we don’t drown our clients in reports – we create! We architect solutions and guide teams through implementation. When procurement teams struggle with software evaluation, we don’t just suggest frameworks – we train them to understand and create value.

We don’t believe in incremental improvement, for us it is about fundamental architectural transformation. It’s about building companies that understand software platforms are the future, not just the vehicles that carry them.

The crisis is real. The solution requires both technical and strategic minds. The time is now.

Disclaimer: The views expressed by the author are his own and do not necessarily reflect the views of FMM magazine.