Do you remember the days when German cars were a symbol of quality and reliability? It seems those days are long gone. The European auto industry is going through tough times, and even giants like Volkswagen and Audi are being forced to cut back on production and close plants.
Profits at Germany's leading automakers have plummeted: Volkswagen—by 64%, Audi—by 91%, BMW—by 84%, and Mercedes-Benz—by 54%.
At the same time, Chinese automakers are steadily gaining ground in the European market by offering affordable electric vehicles and controlling a significant portion of the production of batteries for them. Will the European auto industry be able to withstand Chinese expansion, or will Europe’s roads soon be flooded with Chinese cars? “Made in China”?
What, then, is the cause of this crisis in the German auto industry?
Competition from China
Chinese automakers are hot on their heels, offering more affordable electric vehicles, which is undermining the position of European companies.
Decline in Demand
Due to economic difficulties and the elimination of government subsidies, car sales—including those of electric vehicles—are declining in Europe.
Production Issues
Production disruptions, such as the recall of 1.5 million BMWs due to brake defects, are also having a negative impact on the auto industry.
Electric Cars: A Panacea or a Poison?
The European Union has set an ambitious goal— ban the registration of new cars with internal combustion engines starting in 2035. This decision is forcing automakers to invest heavily in the development and production of electric vehicles, which, for now, significantly more expensive than their gasoline and diesel counterparts.
Elimination of Subsidies for Electric Vehicles In Germany, for example, this led to a sharp drop in demand on them. As a result, the share of electric vehicles in the EU market is only 13,2%, which suggests that they are not yet very popular.
Why aren't electric cars popular?
High cost: Even with subsidies, electric cars remain significantly more expensive than cars with conventional engines.
Limited range: The longer an electric vehicle's range, the higher its price, which creates additional challenges for buyers.
Alternative Paths
Toyota CEO Akio Toyoda has repeatedly criticized the idea of forced electrification, arguing that it will lead to job losses and will not solve environmental problems. He believes that We need to develop hybrid vehicles and hydrogen technologies, and the craze for electric cars is just a passing trend.
Environmental standards are a financial burden
Introduction of an Environmental Standard Euro-7, albeit in a milder form, also will lead to higher car prices. This is particularly painful given that the European auto industry is already facing serious difficulties.
The China Factor
China not only offers more affordable electric cars, but also controls most of battery manufacturing for them. The EU is trying to protect itself from Chinese competition by raising tariffs, but that does not solve the root of the problem.
The Russian Connection
Sanctions against Russia have also had a negative impact on the European auto industry. European manufacturers lost the lucrative Russian market, and export ban The import of luxury cars into Russia deprived them of a significant portion of their income.
What does the future hold for the European auto industry?
So far, the situation looks like this pretty gloomy. A combination of domestic problems and external challenges threatens the future of European auto giants. Experts believe that German companies may lower prices on the main models and deteriorate the quality products in order to survive.
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