We knew one thing like this was going to occur. However now we all know the numbers. After greater than a yr of working in an unprecedentedly powerful surroundings 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 won’t be a straightforward one.
The continued Euro-pocalypse is the main focus of right now’s Vital Supplies roundup of tech and mobility information. Make certain 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 masking this “poisonous cocktail” dealing with the VW Group and Stellantis particularly. 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 rules) and intense competitors on their residence turf from Chinese language newcomers have mixed to make life extraordinarily arduous for Europe’s largest automakers.
VW introduced right now that these elements—plus the necessity to put money into 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.
This is some evaluation from Automotive Information right now:
Group income have been hit by a weak efficiency on the VW model, together with excessive prices in its German residence market and investments in new fashions.
VW stated the outcomes reinforce the necessity for drastic measures in Germany, the place labor leaders are resisting the potential closure of no less than three factories and the elimination of hundreds of jobs. The corporate can also be trying 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 yr.
“This highlights the pressing want for vital value reductions and effectivity features,” VW Group Chief Monetary Officer Arno Antlitz stated throughout an earnings name on Oct. 30.
“VW by no means had actually excessive margins over the course of instances, however these are totally different instances,” Antlitz stated. “VW isn’t incomes the cash it must spend for all the brand new merchandise.”
He stated the automaker has spent €4.9 billion on improvement and investments for the EV transition, bringing down VW model’s earnings to €1.3 billion by the tip of September.
I do not doubt this will likely 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 expensive and troublesome than when automakers like VW assumed they may pull it off a few decade in the past now. However for many firms, the playbook goes like this: finance these costly EV and battery investments with sturdy gross sales of the present gas-powered vehicles. It is how Basic Motors is, maybe mockingly, paying for its EV transition with Escalades and Silverados.
However in VW’s case, all the European new automotive 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 isn’t shifting its present steel, then Anlitz is true: it could’t make investments sooner or later. And that is not an possibility.
What’s an possibility is aggressive chopping to make labor and manufacturing unit prices extra aggressive throughout the board, which is certainly one of VW’s largest challenges. But that is going to be a horrible state of affairs for the precise employees at VW’s varied manufacturers, hundreds of whom may lose good-paying, extremely protected jobs with nice advantages.
Antlitz stated that the VW model—simply the core model, not even the broader group—wants to chop greater than €10 billion (about $11 billion) in value financial savings to remain aggressive with its friends. And it is bought to fulfill Europe’s aggressive new CO2 targets that may principally require an finish to inside combustion. Can VW survive this present second? In all probability, however getting there’s going to be painful.
60%: Audi To Shut Brussels Plant After All
It isn’t simply the core VW model that is having hassle, although. Audi is doing a little 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 couple of 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 automotive 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. Nevertheless it 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, presumably even a Chinese language automaker. The European mobility publication Electrive reviews that did not work out:
The successor to the Q8 e-tron will likely be manufactured in Mexico, and Audi won’t award any new fashions to the Belgian plant. As some German websites throughout the VW Group are actually 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 said 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 most likely 26 events and potential traders, however in keeping with Walker, they have been unable to current a “viable and sustainable idea” for the way forward for the manufacturing unit. An inside search throughout the Volkswagen Group for future automotive manufacturing or various makes use of for the plant had additionally remained unsuccessful.
So between this and certain plant closures in Germany, you get why it is a four-alarm hearth over there.
90%: The EU Would not Take This Mendacity Down
Photograph by: InsideEVs
So what is the European Union alleged 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 recent 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 yr after launching its anti-subsidy probe, the European Fee will set out additional tariffs starting from 7.8% for Tesla to 35.3% for China’s SAIC, on high of the EU’s commonplace 10% automotive import responsibility.
The Fee, which oversees EU commerce coverage, has stated 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 yr is twice the scale of the EU market. Given 100% tariffs in america 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 automotive pricing in Europe. Extra on this as we get it, together with the influence on EV pricing in Europe. The U.S. at the moment has 100% tariffs on EVs made in China, however that hardly impacts any vehicles at the moment on sale, past the Polestar 2 or the upcoming Volvo EX30, that are shifting manufacturing to Europe to get round that drawback. Europe, nevertheless, 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 towards the tariffs as a result of its automotive firms nonetheless need to do enterprise in China, equivalent to it’s nowadays.
100%: What Do The European Auto Business’s Issues Imply For The U.S.?
I suppose no less than among the solutions to that query will likely 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 automotive tariffs. However what does this example 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?
Contact the creator: patrick.george@insideevs.com
