Two weeks ago, recruitment experts visited Frankfurt to assess the magnitude of the crisis in which the German auto industry is now.
A few days after the visit, Mercedes-Benz Daimler and the Volkswagen Audi brand announced more than 20,000 layoffs. "The auto industry is in the midst of a far-reaching upheaval,” said Volkswagen chief executive Herbert Diess.
“No one will survive in the form they exist today,” predicted Ralf Kalmbach at consultancy Bain & Co, who has spent 32 years advising German carmakers.
After assessing the situation, it can be assumed that the German auto industry, which employs 830,000 people, will be forced to invest about €40 billion into battery-powered technologies over the next three years.
“We have seen the first few chapters of the transformation, but this is a book with many chapters,” warned Ola Kallenius, Daimler chief executive, last month, as he confirmed the carmaker would post significantly lower profits for at least two years.
Image: Financial Times
Daimler, Audi, Continental and Bosch announced that by the end of this year, 50,000 workers may be fired as their traditional business (producing gas-powered vehicles) becomes less profitable. The current situation has forced them all to revise their forecasts.
The auto giants expected they would sell more than 100 million cars in 2019, but given that there are only a few weeks left by the end of the year, this figure will be only about 90 million cars.
Today, more and more people think about the environment. They no longer believe in the lie that climate change is a myth, so the demand for electric cars is increasing every year. Unfortunately, German automakers have relied on quick money and preferred to continue to develop gas-powered cars. But their shortsightedness became their punishment. The desire to earn as much money as possible turned into their losses.
While Daimler and Audi focused on short-term prospects, many other companies were actively developing electric cars. That is why Tesla is now a few steps ahead of any other automakers.
"The German auto industry needs to learn to adapt faster, to change faster,” warned auto analyst Arndt Ellinghorst at Evercore ISI.
BMW, similarly, has been keen to play-up its traditional expertise.
“We believe there is still much room for growth in the automotive sector,” BMW’s chief executive Oliver Zipse said, dismissing the earnings potential of so-called mobility services, such as car sharing and self-driving taxis.
“There is a long-term growing demand for individual mobility worldwide, especially in the premium segment. The fundamentals behind it are much stronger than the current dip in the overall market, which is mainly due to economic slowdown.”
But judging by the schedules, BMW is lagging behind its competitors, and if the automaker does not change its strategy, it is in great danger of losing a lot of its customers.
In the next decade, almost a quarter of a million auto jobs will be lost in the country, according to Ferdinand Dudenhöffer, the director of the Center for Automotive Research at the University of Duisburg-Essen.
Car sales in China, which helped Germany’s biggest brands weather the financial crisis, have slowed for 17 months in a row, drastically reducing a key source of revenue at the precise moment it is needed to fund new technologies.
“We have kind of the worst situation now,” Mr Källenius told investors two weeks ago. “We have got to do the heavy lifting in the next three years.”
German automakers stubbornly ignore the fact that the EU has strict carbon-emissions regulations. EU goals for 2030 may mean that by the end of the next decade there should be between 7 and 10.5 million battery-powered cars on German roads.
Volkswagen is “convinced that the transition to electric-mobility will gain traction next year,” according to VW’s Mr. Diess.
He announced plans last month to build a further 4m battery-powered vehicles, Mr Diess think that “electrification is not a gamble”. But he warned that “the conversion to e-mobility requires resources,” which must be financed from VW’s “traditional businesses”.
Meanwhile, Daimler and BMW are not seeking to finance the development and development of electric cars. “For the moment, you have to consider that with every electric vehicle, manufacturers are losing a tremendous amount of money,” said Mr. Kalmbach at Bain. That is not expected to change until the middle of the next decade.
Volkswagen was able to transform one of its plants without losing jobs. Porsche even created 1,500 new jobs to create Taycan.
The German auto giants don't want to begin an intensified transition to the production of electric cars, because they set themselves the wrong goals. With their actions, they put a lot of people who work at their factory in a very bad situation. Workers who will be fired in the near future will be the first to suffer from their actions, and in the long run, their policies will harm humanity.
I sincerely hope that German automakers will be able to reorganize their business as soon as possible and follow Tesla’s example, which means that they will begin to develop and manufacture environmentally friendly cars.
The leaders of these companies blame electric vehicles for their problems. But the truth is that only their obstinacy and thirst for immediate earnings are guilty of their situation now.
Featured image: france24