Not so long ago, a VW board member declared that the “roof was on fire”. The reason: demand for the Wolfsburg-based company’s electric cars had collapsed after the summer of 2023. Now brand board member Thomas Schäfer has gone one step further – this time, however, announcing tough cuts.
Volkswagen is no longer competitive
Schäfer explained that the company was no longer competitive. This was partly due to Germany’s wrong energy policy and “a few” other things. More on this in a moment.
The Chinese market has played a large part in the Wolfsburg-based company’s success to date. It is currently undergoing a rapid transformation towards electromobility. Chinese OEMs are presenting new vehicles almost every week. According to JATO Dynamics, 235 different electric vehicles are currently on sale in China, 125 in Europe, and only 49 in the USA.
The European electric cars have been written off
Chinese consumers love large, comfortable vehicles because they like to sit in the back and be chauffeured around. In addition, digitalization and entertainment in vehicles (including combustion engines) play a major role. The infotainment system in these vehicles is generally fully networked, right down to the cheapest vehicles, and offers features such as the latest and most modern smartphones. Not to forget the model policy, which offers the individual vehicles almost completely in the “basic equipment”. There are equipment details for which you have to pay thousands of euros more for German cars.
While the average electric car in China costs 31,165 euros, in Europe, you have to spend more than twice as much: 65,274 euros (JATO Dynamics).
The gap is accelerating
The gap with German and European competitors is accelerating, particularly in terms of equipment. Even infotainment systems in Chinese subcompact cars have a 10-year lead over German mid-range vehicles. The largest and most innovative battery manufacturers, CATL and BYD, also come from China. They lead an industry that is dependent on low electricity costs due to its energy-intensive production. All of this has already led to China becoming the world’s second-largest car exporter after Japan in 2022.
China overtakes Japan and Germany
In 2023, the Center of Automotive Management expects China to overtake Japan as the world’s largest car exporter. Japan currently still holds the title, while Germany was already overtaken by the Chinese in 2022.
Danger in delay
The German automotive industry has always been described as the country’s flagship industry. Alongside the chemical industry, by the way, which is also on the decline due to misguided energy policy, excessive bureaucracy, and crazy EU regulations – and is considering emigrating. The supplier industry is also suffering from the now “sour” location. Michelin has just announced the closure of two tire plants – they are no longer competitive, which is also due to the cost of electricity, which has risen by 260%.
Will the premium car industry save the location?
For a long time, the German car industry believed it would simply switch to premium models. Audi, BMW, and Mercedes-Benz have already initiated this. But Audi, as a member of the VW Group, continues to fall short of expectations. This is probably why they are relying on electric platforms from SAIC, especially its subsidiary IM.
Is the German car industry dying?
If the trend continues like this, and if the Germans do not accelerate their development speed to catch up (not to mention “overtake”), the future will be bleak for the German car industry. VW is just the beginning; the other OEMs, also in Europe, will follow or will only be able to catch up with Chinese “help”.
Have the managers realized this, or will Germany continue to be left behind? 3rd place in 2023 and even worse in 2024? One is reminded of NOKIA, a cell phone giant that was literally destroyed by Apple and Android smartphones within a very short space of time. Or RIM (Research in Motion, aka Blackberry). The management there also reacted far too slowly and thought they were safe.
The forecasts are disturbing.
