European Auto Manufacturing Confronting An ‘Existential’ Crisis

Well…huh?

I wonder why?

Mandates and Green dreams still can’t change what people want and are willing to pay for, it seems.

European automotive suppliers are experiencing unprecedented turbulence as electric vehicle market uncertainties trigger a wave of dramatic workforce reductions. Major manufacturers are confronting a perfect storm of economic challenges that threaten the industry’s traditional foundations.

In a stark illustration of the sector’s volatility Robert Bosch, ZF Friedrichshafen, Continental and Schaeffler have collectively announced 54,000 job cuts in 2024. This figure represents a record number of redundancies surpassing those announced during the pandemic years of 2020 and 2021 combined according to the European Association of Automotive Suppliers (CLEPA).

The projections for a 2025 rebound in EV sales come on the heels of retooled models – smaller and cheaper – along with a big favorite of any industry dependent on government largesse: handouts. As much as they’d sworn not to subsidize further what they were forcing Europeans into against their will, the Brahmins of Brussels are going to have to fork over more cash to do.

This time, the competition from cheaper Chinese imports is the excuse for an industry that has consistently proven it cannot stand on its own feet by virtue of customer demand.  

The European Union is considering using subsidies to support its electric vehicle (EV) industry. The move would aim to counter the influx of Chinese imports lowering the profit outlooks for domestic automakers.

Projections suggest that cheaper Chinese EVs could cost European automakers nearly $8 billion by 2030, according to an Allianz Trade study. In response, the EU increased tariffs on Chinese EV models in June 2024. They claim their prices were artificially low due to subsidies provided by Beijing and therefore undercutting the offerings of Europe’s own auto brands.

At the same time that the EU is considering forking over cash because of the Chinese, manufacturers like Volkswagen are being forced to lease or sell their now excess auto plants to anyone who can pay for their upkeep – and the expensive union workers who come along with them – in order to try to keep the shrinking bottom line under control.

ENTER THE DRAGON

VW prepared to hand its factories to Chinese electric carmakers

Volkswagen is prepared to let Chinese electric carmakers take over production lines in its struggling factories as Germany’s automotive industry is struck by a downturn. 

Executives at the car-making titan signalled they would be open to tie-ups with Chinese rivals to use up some of the excess capacity in their factories as they scale back production. 

Gernot Döllner, chief executive of Volkswagen’s Audi brand, told the Financial Times that deals with electric car companies would “lower the entrance barrier of these competitors”, saying: “For sure, that is thinkable.”

David Powels, chief financial officer at Volkswagen’s eponymous VW brand, told the newspaper: “We’re open for any discussion on any topic with any partner. In a dynamic world, you have to keep all options open.”

As if that weren’t enough, EU manufacturers, again like VW, are staring at massive fines coming down the pipe because they cannot meet the artificial sales goals set by those same bureaucrats in Brussels. 

…A $1.6 Billion Bill Is Coming

Speaking to analysts on a call on Wednesday, VW’s head of investor relations, Rolf Woller, spoke about potential penalties for exceeding the EU’s emissions targets. The company estimates that, if they are to fail in meeting those targets, they’ll be landed with a 1.5 billion Euro ($1.6 billion at current exchange rates) bill.

And it’s looking increasingly likely that they won’t be able to meet the EU’s target. Volkswagen didn’t launch any new EVs last year, nor will they offer anything this year. Instead, we’ll have to wait until 2026 until the new ID.2 makes an appearance. Bloomberg relates how Woller also spoke on VW’s shrinking bottom line, which is further eroded by VW having to sell more EVs at the expense of more profitable combustion-engine models.

This is a snek-meet-tail situation, if ever there was one. Nothing is driving this disaster but artificial goals set by authoritarian climate cultists with zero understanding of how the real world works. Until leadership experiences a radical shift in Brussels or individual governments in Europe itself can declare some sort of regulatory independence from crippling rules and sanctions, this is a doom loop.

The EU proved that with their newly announced ‘revised’ plans to ‘revive’ innovation and remove red tape. Everyone’s favorite Bond villainess was practically giddy telling the world, ‘See? We can be reasonable!’

It is time to restart Europe’s innovation engine.

We have the Compass.

We have the political will.

Now, what matters is speed and unity.

Because the world is not waiting for us ↓ https://t.co/4iollrSWxi

— Ursula von der Leyen (@vonderleyen) January 29, 2025

This is great at a press conference, but when you read into it, they haven’t changed a thing of substance and are relying on slogans to act as if everything’s copasetic now.

…Von der Leyen stressed that the commission would maintain its targets to cut net greenhouse gas emissions by 55 per cent by 2030, and have them at zero by 2050.

“We stay the course. The goals are cast in stone,” she said. “The goals stay, the objective stays, but we want to reach it better and faster. And for that, we have to reduce complexity.”

According to the EC, there were three core areas for action: Technological innovation, decarbonisation with the upcoming Clean Industrial Deal and focusing on affordable energy and security.

…Businesses have struggling with high energy costs and low investments, a product, according to many, of misguided green policies.

To address this, the EC promised to trim down many of its environmental, social and governance inspired regulations.

…Instead of targeting entire industries with emission directives, the EC said it would prioritise the 100 most emitting sites accounting for more then half of Europe’s industrial emissions.

Low carbon products, such as “green steel”, would still be supported, it added, despite little success in that sector so far.

There is so much argle-bargle cheerleading in the ‘new and improved’ version that sticks to what caused the problem initially as far as REAL manufacturing issues go, this can only be viewed as a propaganda piece.

The continent isn’t a one-off, either. I’ve covered the state of the British auto industry time and again, thanks to Green Dreams, and they’re sinking away.

Vehicle production dips amid EV transformation and intense market pressure

🚗British vehicle production slips -11.8% to 905,233 units in 2024, with cars down to 779,584, as industry continues transformation to EV production
🚚4.0% growth in commercial vehicle production fails to… pic.twitter.com/IIYc3FFNRp

— SMMT (@SMMT) January 30, 2025

With the precarious state of German manufacturing in general…

…Timo Wollmershäuser, of the Ifo Institute in Munich, said: “Germany is going through by far the longest phase of stagnation in post-war history. It is also falling behind considerably in an international comparison.”

…paying fines repeatedly with numbers like these is potentially ruinous. 

They are also one more stake in the heart of Green Dreams in the country as the snap-elections draw ever closer.