Today, I found an EIB press release in my inbox that really frustrated me.
The first bullet point read, “EU firms are less likely to innovate or adopt new technologies than their US peers.”
Well, duh!
Billions of subsidies are being directed towards old companies like Volkswagen, Stellantis, Total, and Shell, while new and innovative companies struggle to secure funding. We have seen Lightyear and Sono Motors fail. We fund old industries, neglect newcomers, and are surprised by the lack of innovation.
Europe needs to address these structural challenges if it hopes to keep pace with global competition and meet the enormous climate challenge we face. Instead of funding the old, Europe needs to embrace and fund the crazy ones, the misfits, the rebels, the troublemakers, and the round pegs in the square holes; the ones who see things differently and who are willing to challenge the status quo. These companies will bring about true innovation and disruption to traditional industries.
We need to fund the rebels
The reality is that Volkswagen’s motivation for building electric cars is not rooted in a desire to protect the environment, as evidenced by the dieselgate scandal a few years ago. The only reason Volkswagen even considered an electric future is because they saw the success of Tesla and knew they had to adapt to stay relevant. If it weren’t for Tesla’s impact, the automotive industry may have continued to rely on fossil fuels for decades to come. It’s worth noting that Tesla has also been supported by tax breaks and subsidies, not just in the US, but also in Europe where EV tax breaks have mostly benefited Tesla, given that they were by far the largest EV producer. In this way, EU funds have contributed to Tesla’s success in the US.
Similarly, Europe’s tendency to rely on traditional and established companies with a long history in the oil industry is not a recipe for success in solving the climate crisis. We can’t equate subsidies with innovation. True innovation comes from a threat to survival, as seen with Apple, whose famous “Think Different” commercial I paraphrased above, in the late ‘90s. Apple was most innovative when it was on the brink of collapse.
Unfortunately, Europe seems to be invested in funding profitable companies, hoping they will eventually start thinking differently. However, these companies have little incentive to modify their ways when they are already making profits and receiving tax breaks. The truth is that if we truly desire to witness real innovation and progress toward a sustainable future, we must fund and support new and disruptive players, rather than continuing to rely on the same old companies that have been around for decades. However, European investors tend to be more risk-averse than their US counterparts, and government-related investments often prioritize vested interests. As a result, the opportunities for rebels and disruptive newcomers in Europe are limited.
