（Source：China Daily，2024-12-05）
All is not well in the European automobile sector. Multiple automakers have announced plant closure and job cut plans, with experts attributing these decisions to sluggish demand, rising labor costs and poor performance.
Slow transition to electric vehicles and supply chain disruptions have further complicated the situation, they said.
A prominent indication of the current turmoil came in the form of multinational carmaker Volkswagen proposing a 10 percent wage cut, saying it needs to slash costs and boost profits to defend market share in the face of competition and a drop in car demand. The company has also warned of plant closures in Germany for the first time in its nearly 90-year history.
The closure plan itself is not expected to cause an immediate crisis but it does carry major symbolic weight, said Jian Junbo, deputy director of the Center for China-Europe Relations at Fudan University's Institute of International Studies.
As car making is often seen as the crown jewel of industry, the move undermines confidence in the manufacturing sector. It also raises concern about the sustainability of Germany's competitive advantages and its future in high-quality manufacturing, he told China Daily.
Volkswagen workers struck work on Monday at nine plants across Germany after the company dismissed cost-saving proposals of 1.5 billion euros ($1.6 billion). The strike organizer, labor union IG Metall, reported that nearly 100,000 workers took part in the protest.
The brand's chief executive Thomas Schaefer said in a recent interview with the Welt am Sonntag newspaper that the company sees little chance of avoiding layoffs and plant closures in order to cut 4 billion euros ($4.2 billion) in costs.
The potential closure and other layoff move is primarily due to profit losses at the local plant, which are caused by high production and labor costs, compounded by a shrinking export market, Jian said. These factors have led to losses the company cannot offset with profits from other regions.
Volkswagen apart, other European automakers and auto ancillary suppliers have also made similar announcements.
Bosch, a major car parts supplier, plans to lay off some 5,500 employees in the next several years globally, including 3,800 posts in Germany, the company said on Nov 22.
Ford said on Nov 20 that it plans to cut 4,000 jobs in Europe by the end of 2027. Of the total cuts, 2,900 jobs would be lost in Germany, 800 in the United Kingdom and 300 in other European Union countries.
These job cuts highlight the challenges facing the European automotive industry, said Zhang Xinyu, associate professor of industrial economics at the School of Economics at Liaoning University.
Supply chain disruptions and weak demand after the pandemic have further strained operations. Combined with economic uncertainty and slow adaptation to market changes, companies are struggling to maintain profitability, she told China Daily.
The European Union passed a policy last year that will ban sales of new CO2-emitting cars in 2035, effectively ending sales of vehicles running on petrol and diesel.
More imminently, European carmakers face stricter emission targets from 2025 as EU rules require a 15 percent cut relative to 2021 levels in the average amount of carbon emitted per car per kilometer for registered new cars.
While the regulations are aimed at accelerating Europe's green transition, it risks disrupting an industry that has traditionally been a cornerstone of the continent's economic strength, observers said.
BMW's chief executive Oliver Zipse said the 2035 cutoff point ban could threaten the European automotive industry in its heart.
The warning came at a time when, in January-October 2024, battery-electric vehicle registrations in the EU dropped by 4.9 percent compared with the same period last year, according to data from the European Automobile Manufacturers' Association.
Meanwhile, the European Union in October decided to increase tariffs on Chinese-made electric cars up to 45.3 percent.
Carlos Tavares, then CEO of Stellantis, warned earlier in October that the proposed tariffs on Chinese cars would accelerate plant closures in Europe by prompting Beijing to shift manufacturing to the continent, thereby directly competing with European brands.
But Jian of the Center for China-Europe Relations at Fudan University's Institute of International Studies said electric vehicles from China are not the reason behind job cuts and plant closures at European automobile manufacturing companies. At the current stage, Chinese brands still have a small market share in Europe, so they do not pose a real or significant threat to local car production in Europe, he said.
According to the environmental group Transport & Environment, about 20 percent of electric vehicles sold in Europe last year were made in China.
Data from the China Passenger Car Association, shows that from January to October 2024, new energy passenger vehicles were essentially dominated by domestic brands, with few models from European brands occupying the top 50 best-selling new energy vehicles.
The root cause of European automakers' struggling is their lack of competitive advantage, stemming from high costs, limited pricing power, and slow adaptation to industry changes, Zhang said.
European automakers should focus on building automated manufacturing lines to reduce costs. Further investments in artificial intelligence while optimizing financial structures are the way out, she said.
Chen Yitian contributed to this story.
