Volkswagen in crisis Italians bury the "myth of the German car"

Germany's car industry is fighting for survival. A major Italian newspaper, of all places, criticizes the structural problems of German car manufacturers in unusually harsh terms.

The German car industry is not doing well. Volkswagen managers have been threatening to close plants for months and have already decided to make redundancies. This has also been noticed in Italy. The newspaper "Corriere della Sera", the country's largest daily newspaper, sharply criticizes the German car industry and writes: "the end of the myth of the German car".

Specifically, the journalist responsible analyzes the German car industry in four points:

Energy costs have risen sharply. The reason: Russia's war of aggression against Ukraine. Without cheaper gas, the production of vehicles has become significantly more expensive.

Sales have slumped in the most important Chinese market - even though electric cars are booming there. The Chinese government's protectionist policy means that Chinese manufacturers are favored. This makes it difficult for foreign companies to gain a foothold in the Chinese market.

German car manufacturers have overslept the trend towards electric vehicles. China dominates the market for batteries and software, leading to a loss of international market share for German companies. Chinese manufacturers are increasingly asserting themselves globally.

Declining sales figures mean that German factories can no longer fully utilize their production capacities. There was no timely reaction. Last year, only a good four million cars were produced in Germany out of a total capacity of a good six million.

The report from Italy emphasizes that the problems of the German car manufacturers are structural and not temporary. VW CFO Arno Antlitz (54) recently stated that they still have "two years at most to turn the situation around."

Expert assesses the situation in Europe

Roman Wenk is an expert for the automotive industry at KPMG Switzerland. He says: "In particular, increased costs, intense competition from a wave of new electric models, mainly from China, and declining demand are putting pressure on manufacturers in Europe." Initial price reductions and higher discounts in the market are the result.

This transformation phase will also lead to further mergers in the industry. "Despite the current difficult situation in the European market, today's leading car manufacturers in Europe should still be setting the pace in ten years' time," says Wenk.

The question remains: how did such a crisis come about? Wenk says: "The crisis was triggered by the coronavirus pandemic and the decline in sales figures. In addition, the well-coordinated global supply chains were disrupted, resulting in supply bottlenecks, for example."

China or South Korea would have been less affected than Europe due to the high proportion of value added within the country and would have picked up speed again more quickly.

These are the factors behind the crisis

A number of factors play a role here. Wenk explains: "Various factors are having a negative impact on the automotive industry in Europe." On the one hand, the economic environment is challenging due to geopolitical tensions, wage increases and inflation - with negative effects on sales figures.

On the other hand, the rapid development in China with its clearer focus on electromobility had been underestimated. "In Europe, the transition is slower and more expensive than expected," says Wenk.

What needs to be done to bring about change

Thomas Rücker is the director of auto-schweiz. He knows what needs to change: "Numerous measures have already been taken by manufacturers and suppliers to adapt to the new challenges as quickly as possible." However, the political framework conditions often stand in the way of this enormous change - in Europe as well as in Switzerland.

In Switzerland, the Federal Council extended the four percent automobile tax to electric cars at the beginning of 2024, making them artificially more expensive. "In our view, this measure came 5 to 6 years too early and should be reversed accordingly," explains Rücker.

In Germany, the purchase premium for electric cars, the so-called "environmental bonus", was abolished virtually overnight for financial reasons - since then, new registrations of e-vehicles in Germany have slumped by two thirds in some cases. Rücker continues: "Politicians must make clear decisions that can be planned for the long term and not make short-term maneuvers that run counter to their own climate targets."