Eurocommissioner Thierry Breton is deeply concerned about the European car industry. Breton reports that unrest has broken out within the European Commission over developments within the sector. The reason is the problems at German car manufacturer Volkswagen, which is considering closing plants.
Volkswagen is in dire straits. The German carmaker is considering closing factories for the first time in its 90-year history. Top executive Oliver Blume called the situation alarming in Germany's Bild and said major changes are needed to secure Volkswagen's future.
Weak car sales
Volkswagen says the problems are partly due to weak car sales in Europe. Car sales have not recovered after the COVID-19 pandemic, Blume argues. In addition, the top executive points to growing competition from Asia. He argues that this makes the pie ever smaller, while more parties want a share of it. Blume sees the problems are not just limited to Volkswagen, but states that there are major challenges for the entire European car industry.
So one of the measures that Volkswagen is considering is closing plants. It would be the first time in the carmaker's 90-year history that a Volkswagen plant has closed its doors. The news therefore hit like a bomb in Germany, leading to great discontent among staff. Volkswagen updated staff on the situation on Wednesday 4 September, with protests by angry workers.
Impact on employment still unknown
Details of Volkswagen's plans are lacking. For instance, the company is leaving open which plants it would like to close. As a result, it is also unclear what the impact will be on employment at the carmaker. In total, about 120,000 people are employed by Volkswagen in Germany. The state of Lower Saxony, which is one of Volkswagen's largest shareholders, is said to support the measures.
The Wolfsburg-based carmaker announced cuts earlier this year; the company hopes to save a total of €10 billion. According to Volkswagen, this is necessary in view of higher raw material prices and inflation, among other things. At the time, it still ruled out closing factories and cutting jobs until 2029. It did, however, introduce an early retirement scheme for employees born in 1967.
'Economic conditions significantly worsened'
So the company on this now backtracks; Blume argues that economic conditions have deteriorated significantly in a short period of time. Far-reaching measures such as plant closures cannot be ruled out as a result, according to the top executive.
Talking to Bild, Blume stressed, incidentally, that he wants to continue to rely on Germany for car production. He points to the car company's long history in the country and its role as an employer, and says he wants to continue this role.
Sister brand Audi is also in dire straits. For instance, future of an Audi plant in Brussels, Belgium, is uncertain. Audi and the Volkswagen Group are no longer allocating new models to the plant, which still produced the Q8 e-tron until 2027. This was announced by the plant's management at a works council, unions report to Belgian media. This means that two options remain to ensure the plant's long-term survival: finding an investor willing to take over the plant or producing parts for another plant.
European Commission is concerned
The European Commission is concerned about the situation in the European car industry. Thierry Breton, European Commissioner for the Internal Market and Services, expressed his concerns in an interview with the German newspaper Handelsblatt. Although the European Commission has accelerated the transition to electric driving, Breton believes this must not be at the expense of the competitiveness of European car manufacturers. Breton describes it as essential to combine European climate targets with European competitiveness.
Pointing to current developments in the German car industry, Breton reports that this is causing concern within the European Commission. The Eurocommissioner highlights the importance of maintaining knowledge, innovative strength and competitiveness of the European car industry.
Stagnating demand for EVs
The Eurocommissioner attributes the problems in the sector to, among other things, stagnating demand for electric vehicles (EVs). Car manufacturers have not been sufficiently successful in convincing European customers to buy electric mobility, according to Breton. For how much European demand for EVs has increased by 1.3% this year, EVs' share of the total car market has fallen from 14.6% last year to 12.5% this year.
Breton also expresses to Handelsblatt his concerns about the declining production of EVs in Europe. For EVs, the trade deficit with China has now reached €8.8 billion; the EU imports significantly more EVs from China than it exports to the Asian country.
The European Commission had previously stated that Chinese car manufacturers were competing unfairly with their European counterparts. To offset this, it introduced higher import duties on Chinese-made EVs.
Author: Wouter Hoeffnagel
