Demand for German cars has been hit in various ways by the effects of the EU’s coerced ‘transition’ to electric vehicles.
The Beijing regime’s onslaught on the German auto sector is also causing severe damage to the engineering companies that have traditionally serviced Germany’s carmakers.
I mentioned this in a recent Capital Letter:
[T]he German engineering sector is under a double-pronged attack. It is hit indirectly by weakness in the German auto sector. According to Germany’s VDMA, car manufacturers still account for around 10 percent of the engineers’ value-added (roughly speaking, sales net of input costs) and around 10 percent of the sector’s one million jobs.
And it faces head-on competition, too. Germany now runs a trade deficit with China in capital goods.
And from the Capital Letter before that:
Germany’s Machinery and Equipment Manufacturers’ Association reckons that Chinese companies now control one-third of global production in the machinery sector. That will grow. The Journal reports that “under its ‘10,000 Little Giants’ initiative, the Chinese government funneled massive subsidies, tax breaks and state resources into thousands of specialized midsize firms, explicitly designed to replace Germany’s famed “hidden champions.”
And now this from the Financial Times earlier this week (emphasis added):
One of Germany’s largest automotive suppliers is axing 3,500 jobs and will close four German sites as the crisis engulfing the country’s flagship industry deepens. Schaeffler, a car parts maker with €23.5bn in annual revenue and 110,000 staff globally, announced on Tuesday that three quarters of the cuts would be in Germany. Including a sweeping restructuring in late 2024, the company will have slashed a quarter of its workforce in its home country. Germany’s automotive industry is one of the backbones of European manufacturing but has come under existential pressure in recent years from the shift to electric vehicles, high labour costs, aggressive new competitors from China and lacklustre demand for new cars across the continent.
Chinese mercantilism is not the sole culprit. Demand for German cars has been hit in various ways by the effects of the EU’s coerced “transition” to electric vehicles, although that includes the boost it has given state-supported Chinese manufacturers, a boost turbo-charged by the elimination of much of the incumbency advantage built up by Western automakers over a century of manufacturing internal combustion cars. The more general slowdown in demand for autos in Europe can also be partly attributed to the disruptions caused by the EV transition. Adding to the pain being felt by German automakers (and those that supply them) is the dramatic collapse of their sales in China, a product both of tough competition in that market and sluggish overall demand.
To give one example, Volkswagen deliveries in China fell 39 percent year-on-year in the third quarter.