The scale of the future challenge facing the automotive industry in the UK and the rest of Europe from China, India and other low-cost Asian countries has been spelt out in London by Carlos Ghosn, Nissan chairman and chief executive officer.

Delivering the Automotive Academy’s second annual lecture, Ghosn told an audience of senior industry executives: “I am not sure everyone in Europe has a clear idea of what is happening in Asia. If you ignore it, that could be a problem.

“China’s motor industry will be driven by an economy with a billion people looking for jobs and opportunities. Europe will have to compete on quality, knowledge and added value – and see China as an opportunity to compete, not as a threat.”

Most European carmakers are looking for ventures in the Chinese market. BMW has a link with China Brilliance, the company once courted by MG Rover. Renault, meanwhile, expects its joint venture to be China’s third largest car producer by 2007, when it forecasts 500,000 sales compared with 20,000 two years ago.

Europe can never compete with China on price but it has a lot of potential because of its sophistication and engineering innovation, Ghosn believes. He supports the Automotive Academy’s efforts to raise UK manufacturing training to a global standard. Ghosn took two questions from the floor – asked by chief executives Christopher Macgowan (SMMT) and John Neill (Unipart Group of Companies) – and both related to the potential challenge from China and Europe’s ability to deal with it.

Patricia Hewitt, secretary of state for Trade and Industry, told the invited audience: “We need world class training products from the Automotive Academy, not the appalling complexity of qualifications which have left potential trainees confused. The challenge for the EU is not to think of itself as a closed entity that can do what it likes but as part of an open global market – there is a tendency in Europe to deal with a problem through regulation.”