The automotive industry faces a herculean task
The job cuts at VW and Conti are just the beginning
By Christina Lohner
November 13, 2023, 6:10 p.m
Electromobility is gaining momentum. Tens of thousands of jobs in the German auto industry are likely to be lost as a result. According to experts, manufacturers could catch up with competition from abroad – but only under a “survival condition”.
Volkswagen wants to reduce its personnel costs in administration by a fifth; according to information from the “Handelsblatt”, 4,000 to 6,000 employees will leave, especially through partial retirement. Continental is also cutting thousands of jobs in its car division worldwide, probably in the mid-four-digit range. The people of Hanover also want to save money, especially in administration. According to industry experts, these are not isolated cases.
“I clearly expect job cuts in the entire automotive industry,” says Stefan Bratzel, head of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, in an interview with ntv.de. The reason: electric cars are becoming more and more widespread. Frank Schwope, lecturer in automotive economics at the Hanover University of Applied Sciences, also tells ntv.de: “The German auto industry has to save, save, save.”
Nothing has changed in Bratzel’s assessment from five years ago that e-mobility would mean that around a fifth of the approximately 800,000 jobs at car manufacturers and suppliers in Germany would no longer be necessary – that would be up to 160,000 jobs, plus positions in automotive Trade and service. “We’re seeing that now,” says Bratzel. Significantly fewer people are needed to produce electric cars; with around 1,000 components, the engine of a combustion engine has around four times as many as an electric drive.
“In administration you have to ask yourself how many people you need,” says Bratzel. “Tesla can do it with significantly less than VW.” Capacity utilization in German manufacturers’ production is currently not good. However, the expert does not assume that there is a risk of further major plant closures like those at Ford in Saarlouis. Schwope expects that at least large car manufacturers will avoid redundancies for operational reasons. On the other hand, according to experts, it is to be expected that Chinese manufacturers will open plants in Europe and that new jobs will be created there. Schwope even thinks it is conceivable that Chinese manufacturers could take over factories from European producers that have become redundant.
VW has to make money from electric vehicles in order to survive
The fact that the new European emissions standard Euro 7 has been significantly defused could also play into the German manufacturers’ hands. As a result, combustion engines could sell better again. “A lot also depends on political decisions,” says Schwope.
In its current state – “too slow, too sluggish, too complicated” – VW brand boss Thomas Schäfer calls his own company “unable to survive”. Bratzel also believes it is a “condition of survival” that VW manages to make money with battery-powered cars. The brand’s return on investment is below average both within the group and compared to the competition, which makes the owner families and investors dissatisfied. “VW needs the money for investments,” says Bratzel.
According to the industry expert, the biggest challenge for the Wolfsburg-based company is Tesla’s price war; the US car manufacturer is expected to have a model for 25,000 euros by 2025. “It has to be ready by then at the latest,” warns Bratzel. VW must therefore examine the entire value chain for savings potential: from raw materials and materials to design and production, not to mention administration.
Too expensive, not innovative enough
According to Bratzel, cost reductions are an important adjustment in order to become competitive again. In addition, the Germans also need to become more innovative again. “If you’re not more innovative than your competitors, you can’t be more expensive either.” VW is not bad, but also not better than competitors – but more expensive.
Tesla in particular, but also Chinese manufacturers like BYD, are becoming more and more innovative. One current analysis by Bratzel According to this, Chinese producers are, for the first time, more innovative than German producers. According to Bratzel, the latter must become faster in implementing product ideas until they are ready for the market. “This also applies to the area of networking, where the Germans are making too slow progress.”
The competition is here to stay. Schwope expects that, in addition to the top dog Tesla, 20 to 30 Chinese competitors will enter Europe in the next few years – five to ten of which are likely to stay permanently. Just as Japanese manufacturers came in the 1970s and Korean car manufacturers in the 80s and 90s, almost all of which stayed. Except that there are significantly more companies from the much larger China – which are already leaders in electric cars. These cost less because they can be produced more cheaply in China. Chinese manufacturers may also pay less for raw materials. The transport to Germany is hardly significant at a few hundred euros.
“Herculean challenge” for German car manufacturers
Bratzel makes it clear that German car manufacturers will not be able to match the prices of their Chinese competitors. That’s why electric cars from Germany would have to score points, for example with higher charging power and range or digital charging systems. “They have to be at least as innovative as they are more expensive, otherwise it won’t work in the long run.”
According to industry experts, German manufacturers can definitely become competitive again. “Absolutely – if they become competitive in battery cell technology and software and can translate their premium demands, which many customers also have, into e-mobility and the digital world,” says Schwope. “I will still impress my neighbors more with a BMW or Porsche than with a BYD or Nio.”
In Bratzel’s eyes, however, German car manufacturers are facing a “herculean challenge”. They would have to do different things and do things differently. “It doesn’t ignore the big names either.”