We knew one thing like this was going to occur. However now we all know the numbers. After greater than a 12 months of working in an unprecedentedly robust atmosphere in Europe and China, issues got here to a head for the Volkswagen Group this week because it posted its third-quarter monetary outcomes. And there is definitely a path ahead for one of many world’s largest automakers, nevertheless it is not going to be a straightforward one.
The continued Euro-pocalypse is the main focus of right this moment’s Important Supplies roundup of tech and mobility information. Ensure and join updates too as we get able to deliver it to your inbox as effectively quickly. Let’s dig in.
30%: VW’s Q3 Earnings Hit Pandemic Ranges Of ‘Uh-Oh’
Volkswagen ID.7 in Germany
We have spent a lot of the previous few months overlaying this “poisonous cocktail” going through the VW Group and Stellantis specifically. Extremely-high rates of interest, eroding market share in China, excessive prices to make electrical automobiles that may meet the long run (and future emissions laws) and intense competitors on their dwelling turf from Chinese language newcomers have mixed to make life extraordinarily arduous for Europe’s greatest automakers.
VW introduced right this moment that these elements—plus the necessity to spend money on these future electrical fashions to remain aggressive—are why its working revenue went down 42% in Q3. And as we reported on Monday, VW is now plant closures for the primary time ever in its native Germany.
Here is some evaluation from Automotive Information right this moment:
Group earnings have been hit by a weak efficiency on the VW model, together with excessive prices in its German dwelling market and investments in new fashions.
VW mentioned the outcomes reinforce the necessity for drastic measures in Germany, the place labor leaders are resisting the potential closure of not less than three factories and the elimination of hundreds of jobs. The corporate can also be wanting to scale back wages for round 140,000 employees by 10 p.c.
The core VW model — the place a lot of these cuts would fall — earned a 2.1 p.c working margin within the first 9 months, in contrast with 3.4 p.c in the identical interval final 12 months.
“This highlights the pressing want for important price reductions and effectivity features,” VW Group Chief Monetary Officer Arno Antlitz mentioned throughout an earnings name on Oct. 30.
“VW by no means had actually excessive margins over the course of occasions, however these are totally different occasions,” Antlitz mentioned. “VW is just not incomes the cash it must spend for all the brand new merchandise.”
He mentioned the automaker has spent €4.9 billion on growth and investments for the EV transition, bringing down VW model’s earnings to €1.3 billion by the top of September.
I do not doubt this can be framed in some sectors as “look what the EV transition is doing to the auto business.” And it is true that pivoting to batteries and software program is proving endlessly extra pricey and tough than when automakers like VW assumed they might pull it off a couple of decade in the past now. However for many corporations, the playbook goes like this: finance these costly EV and battery investments with robust gross sales of the present gas-powered vehicles. It is how Normal Motors is, maybe mockingly, paying for its EV transition with Escalades and Silverados.
However in VW’s case, your complete European new automobile market has shrunk amid rising prices, folks aren’t shopping for EVs there after subsidies disappeared and the competitors is each cheaper and higher than ever. If it is not transferring its present metallic, then Anlitz is correct: it may possibly’t make investments sooner or later. And that is not an choice.
What’s an choice is aggressive reducing to make labor and manufacturing unit prices extra aggressive throughout the board, which is certainly one of VW’s greatest challenges. But that is going to be a horrible scenario for the precise employees at VW’s numerous manufacturers, hundreds of whom might lose good-paying, extremely protected jobs with nice advantages.
Antlitz mentioned that the VW model—simply the core model, not even the broader group—wants to chop greater than €10 billion (about $11 billion) in price financial savings to remain aggressive with its friends. And it is received to fulfill Europe’s aggressive new CO2 targets that can principally require an finish to inside combustion. Can VW survive this present second? Most likely, however getting there’s going to be painful.
60%: Audi To Shut Brussels Plant After All
It is not simply the core VW model that is having bother, although. Audi is doing some actually spectacular issues within the EV area nevertheless it’s nonetheless going to be on the receiving finish of the primary VW Group plant closure in a long time.
This could be the Brussels, Belgium plant which, for the previous few years, has solely made Audi’s Q8 E-Tron and Q8 E-Tron Sportback (previously simply known as the E-Tron.) And I am not stunned as to why. The Q8 E-Tron was a groundbreaking automobile when it first arrived—it predates the Tesla Mannequin Y, imagine it or not—nevertheless it’s costly and never as aggressive because it as soon as was. Gross sales have tanked as of late.
The brand new Q6 E-Tron, with higher vary, tech and pricing, ought to do higher for the model. But it surely does imply the Brussels plant is getting the axe.
As lately as a month in the past, it appeared like Audi would possibly discover a purchaser for that plant, probably even a Chinese language automaker. The European mobility publication Electrive studies that did not work out:
The successor to the Q8 e-tron can be manufactured in Mexico, and Audi is not going to award any new fashions to the Belgian plant. As some German websites inside the VW Group at the moment are additionally on the point of collapse, the possibilities for Brussels – even with one other Group model – have diminished additional. In mid-September, Audi’s Chief Working Officer Gerd Walker acknowledged in an interview that the corporate was focussing on the seek for potential traders.
Round a fortnight in the past, Audi then introduced that it had been unable to discover a appropriate investor for Brussels, which led to the state of affairs of a plant closure materializing. There have been in all probability 26 events and potential traders, however based on Walker, they have been unable to current a “viable and sustainable idea” for the way forward for the manufacturing unit. An inside search inside the Volkswagen Group for future automobile manufacturing or different makes use of for the plant had additionally remained unsuccessful.
So between this and sure plant closures in Germany, you get why it is a four-alarm fireplace over there.
90%: The EU Would not Take This Mendacity Down
Photograph by: InsideEVs
So what is the European Union speculated to do right here? Let scores of jobs go by the wayside (the VW Group employs 300,000 folks in Germany alone, for instance) whereas MG, BYD, Nio and Xpeng are available in and snatch up all of the enterprise?
In a phrase: non. Right here come the tariffs, hotter than a baguette contemporary out of the oven and hitting each firm that builds electrical vehicles in China and exports them to Europe. From Reuters:
The European Union has determined to extend tariffs on Chinese language-built electrical automobiles to as a lot as 45.3% on the finish of its highest-profile commerce investigation that has divided Europe and prompted retaliation from Beijing.
Simply over a 12 months after launching its anti-subsidy probe, the European Fee will set out further tariffs starting from 7.8% for Tesla to 35.3% for China’s SAIC, on prime of the EU’s commonplace 10% automobile import obligation.
The Fee, which oversees EU commerce coverage, has mentioned tariffs are required to counter what it says are unfair subsidies together with preferential financing and grants in addition to land, batteries and uncooked supplies at below-market costs.
It says China’s spare manufacturing capability of three million EVs per 12 months is twice the scale of the EU market. Given 100% tariffs in the US and Canada, the obvious outlet for these EVs is Europe.
The brand new tariffs go into impact subsequent week and should have a profound influence on automobile pricing in Europe. Extra on this as we get it, together with the influence on EV pricing in Europe. The U.S. presently has 100% tariffs on EVs made in China, however that hardly impacts any vehicles presently on sale, past the Polestar 2 or the upcoming Volvo EX30, that are transferring manufacturing to Europe to get round that drawback. Europe, nonetheless, has tons of Chinese language manufacturers and Chinese language-made EVs proper now; I will be very curious to see how costs spike.
Apparently, Germany was in opposition to the tariffs as a result of its automobile corporations nonetheless must do enterprise in China, comparable to it’s nowadays.
100%: What Do The European Auto Business’s Issues Imply For The U.S.?
I suppose not less than among the solutions to that query can be decided by who wins the election subsequent week, although neither former President Donald Trump nor Vice President Kamala Harris appear terribly inclined to again off on anti-China automobile tariffs. However what does this case in Europe imply for the U.S., too? Is that this a part of the world insulated sufficient from China’s rising dominance within the area, or is it a preview of what is to return?
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