Germany’s Auto Giants Are Now Struggling!

Major domestic auto manufacturers such as Volkswagen, Mercedes-Benz Group and BMW have issued profit warnings in recent weeks.

This is a result of recent historic job cuts and possible German plant closures at Volkswagen, an abrupt end to Germany’s electric car subsidy program and Berlin’s recent failure to prevent fellow European Union member states from voting in favor of EU tariffs on Chinese EVs.

Experts in the automotive and brand industries have suggested that these major brands should swiftly increase productivity, change their organizations, and modify their product portfolios in order to maintain their status and relevance for decades.

In the age of electrification, Germany’s automotive industry, long known for producing innovative and dependable internal combustion engine (ICE) automobiles, is struggling to maintain its relevance.

In recent weeks, auto giants like Volkswagen, Mercedes-Benz Group, and BMW have issued profit warnings, citing weak economic conditions and sluggish demand in China, the largest market in the world for automobiles.

Volkswagen’s electric car subsidy program abruptly ended late last year, and Berlin failed to prevent other EU member states from voting in favor of EU tariffs on Chinese EVs. There have also been historic job cuts and the possibility of plant closures.

Concerns that the high-quality “made in Germany” label may be losing its appeal as a result of the move away from ICE vehicles have been stoked by this avalanche of issues.

In an interview with CNBC, Rico Luman, senior sector economist for transport and logistics at Dutch bank ING, stated,

“I believe the German quality label generally still holds, but that’s not enough as the world of automotive is changing rapidly.”

It’s always a combination of price, quality, and product. Additionally, quality is associated with the past, despite the current model range overhaul. Therefore, customers are already considering novel ideas,” Luman added.

“The question is whether German car makers manage to adjust their product portfolios, change their organizations, and ramp up productivity quickly enough to preserve the status and relevance they had for decades.”

Luman said that as the industry moves toward electrification, it will be more important for German automakers to scale up tech-rich supplies for EVs, especially for batteries, even though this hasn’t been done yet in Berlin.

The government of Germany has stated that it is considering ways to assist Volkswagen during a period of cost reduction without closing domestic plants.

The European Automobile Manufacturers’ Association (ACEA), a car lobby group, director general Sigrid de Vries stated that she finds it “really hard to believe” that Germany’s auto industry is struggling to adapt to electrification.

The ACEA represents 15 significant Europe-based automakers, including Volkswagen, Mercedes-Benz Group and BMW.

Meanwhile, a number of automakers have taken advantage of the opportunity to introduce inexpensive EVs in an effort to reclaim some of the market share currently held by Chinese brands and stimulate demand.

VW’s Concentration Is Now On The Fully Electric ID Buzz

Julia Poliscanova, senior director for vehicles and e-mobility supply chains at the campaign group Transport & Environment, stated that there were two distinct issues to consider when assessing the health of Germany’s auto sector. He said slowing down on electrification is “not the answer.”

The fact of the matter is that the automotive industry in Germany and a few automakers like Volkswagen actually face serious issues on a global scale. However, the issue is significantly more extensive than the European regulations.

China’s increased competition, the “patriotic” trend of Chinese consumers choosing domestic vehicles over European ones, and overall car sales failing to return to pre-Covid-19 levels are some of the challenges facing Europe’s auto giants.

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