Roger Atkins’ Post

Bloomberg [excerpt]: #Volkswagen AG is considering factory closures in #Germany for the first time in its 87-year history, parting with tradition and risking a feud with unions in a step that reflects the deep woes roiling #Europe’s auto industry. After years of ignoring overcapacity and slumping competitiveness, the German #auto giant’s moves are likely to kick off a broader reckoning in the industry. The reasons are clear: Europe’s efforts to compete with Chinese rivals and Tesla Inc. in electric cars are faltering. “VW is recognizing just how serious the situation is,” said Harald Hendrikse, an autos analyst with Citigroup. “We’re living in a difficult geopolitical world, and Europe has not won that battle.” With car sales still nearly a fifth lower than pre-pandemic levels in Europe, manufacturers including VW, Stellantis NV and Renault SA were operating more than 30 factories at levels analysts consider unprofitable, according to data from Just Auto. That includes Volkswagen’s sprawling home factory in Wolfsburg — Europe’s largest. The continent is uniquely exposed to the twilight of the combustion era. Unlike in the US, the region’s auto industry continued to prop up high-cost plants after the global financial crisis. The massive investments required to compete in electric cars, the loss of cheap Russian energy and dwindling prospects in #China mean those days are coming to an end. Troubling signs have been on the rise. Volkswagen’s shares are near the lows reached in the aftermath of the 2015 diesel crisis. In July, the group cut its outlook for the year after sales declined in the first half. ... .... Europe has led a global slowdown in the EV transition after a range of countries including Germany and Sweden reduced or removed incentives. Chinese EV manufacturers including BYD Co. and MG — owned by VW-partner SAIC Motor Corp. — have jumped into the breach. The sluggish uptake has put the EV market in reverse this year, at a time of an expected steep rise. As a result, investors are showing little faith in the sector. Tesla is worth more than triple the combined value of VW, Stellantis and Renault. And more than double if BMW AG and Mercedes-Benz Group AG are added. ...The company showed it was shifting into downsizing mode in July, when the group’s luxury Audi brand announced plans to cut 90% of the 3,000 workers at a plant in Brussels. Germany was generally off limits, but Monday’s announcement changes that and raises the stakes for CEO Oliver Blume, who is also working to reverse a loss of market share in China, VW’s biggest market. “What is ultimately at stake is the future viability of industry in this country and a corresponding knock-on effect,” Daniela Cavallo, VW’s top employee representative, said in a works council newsletter. “We will not allow VW to sell out Germany as a #business location.” #news #business

EXCERPTS: “We think exiting China from a pure profit and strategic standpoint makes sense, to focus on where you’re making money— which is North American trucks,” John Murphy, BofA auto analyst, said on Tuesday per The Detroit News and CNBC. Thanks to a longstanding history in China via its century-old Buick brand, GM once minted money in the nation during the 2010s, earning upwards of $2 billion annually at its peak when it sold 4 million vehicles. But the rising strength of homegrown rivals like BYD and Geely mean volumes and profits are drying up. GM sales in China dropped to 2.1 million vehicles in 2023, and it posted a loss of $106 million in the past quarter—only its third in 15 years. COMMENTS: While I too wonder how long GM or any Western automaker can compete with Chinese EVs in the near to mid-term, the over financialization of opinion and decision making could (continue) to drive the "making of things" that are globally competitive in America towards extinction, re-shoring or not. Do we not understand that GM was the largest largest automaker in the world for 77 years before losing the top spot to Toyota in 2008? Also, do we not understand that up until last year GM sold more vehicles in China than in the U.S. (see chart below from GM's 10-K). Finally, do we not understand that, notwithstanding the lagging technology in U.S. autos, that the Chinese still love the likes of Buick and Cadillac? BOTTOM LINE: giving-up and not competing based on an analyst recommendation would simply be pathetic in my opinion. This can be applied to most other industries. I support Bill Russo and his views.

Volkswagen to Shut German Plants for the 1st Time in its 87-yr History. Volkswagen, the German automobile giant, is facing unprecedented challenges. The company is considering closing some car plants in Germany, a move never seen in its 87-year history. The last time Volkswagen shut down a plant was in 1988 in the US state of Pennsylvania. Reasons for Potential Plant Closures: The main reason behind this drastic decision is the rise of Chinese electric vehicles (EVs). These have heavily impacted Volkswagen's market share both in China and Europe. Impact of Chinese EVs: Chinese brands such as BYD, Nio, and SAIC Motors have taken over significant portions of the EV market. This shift has hurt Volkswagen's sales in China, once its largest market, and is now challenging it in Europe as well. Challenges in the EV Market: Volkswagen's shift to EV production has been problematic. European EVs are more expensive to produce due to higher wages, making them less competitive compared to cheaper Chinese models.

Western EV manufactures focus on quarterly reports, do not understand that cost recovery for re-inventing the automobile takes years. Ford loses $100,00 per EV sold. Consequently, legacy automakers are shifting the emphasis to more profitable PHEVs. China’s EV financing covers innovation, development phases, minimizing production costs and start-ups. Struggling start-ups take their innovations with them when they merge with the large players. Western economies financing is for factories. That is why Chinese companies like BYD are currently making profits, expanding, and Chinese EV and battery technologies are more advanced than elsewhere. While Hyundai/Kia have a long term vision and as such will survive, will there be some legacy automakers soon looking for government bailouts as they did during the previous Japanese invasion? Are some U.S. firms on hold to see if Trump gets elected?

What goes down, must come back up

"With car sales still nearly a fifth lower than pre-pandemic levels in Europe, manufacturers including VW, Stellantis NV and Renault SA were operating more than 30 factories at levels analysts consider unprofitable, according to data from Just Auto. That includes Volkswagen’s sprawling home factory in Wolfsburg — Europe’s largest. The continent is uniquely exposed to the twilight of the combustion era. Unlike in the US, the region’s auto industry continued to prop up high-cost plants after the global financial crisis. The massive investments required to compete in electric cars, the loss of cheap Russian energy and dwindling prospects in China mean those days are coming to an end. [ ] Europe has led a global slowdown in the EV transition after a range of countries including Germany and Sweden reduced or removed incentives. Chinese EV manufacturers including BYD Co. and MG — owned by VW-partner SAIC Motor Corp. — have jumped into the breach. The sluggish uptake has put the EV market in reverse this year, at a time of an expected steep rise. As a result, investors are showing little faith in the sector. Tesla is worth more than triple the combined value of VW, Stellantis and Renault. And more than double if BMW AG and Mercedes-Benz Group AG are added."

Volkswagen, burdened by 230 billion euros in debt and a 20% decline in profit by 2024, is facing a crisis that looms over its dominance. The German automaker, struggling since the 2015 emissions scandal and €31 billion in fines, is hit by Germany’s sluggish economy, high energy costs, and an EU ban on petrol cars by 2035. Transitioning to EVs, VW faces dwindling subsidies, stiff competition, and declining exports, especially in China and the U.S. Amid falling sales, VW plans drastic cost-cutting, potentially closing factories and risking thousands of jobs. This turmoil jeopardizes not only VW’s future but also Germany’s critical automotive industry.

Volkswagen is facing tough decisions, including possible factory closures in Germany, as covered in a recent Bloomberg article. Our Head of Research, Pierre-Olivier Essig, commented, "If even VW mulls closing factories in Germany, given how hard that process will be, it means the seas have gotten very rough. The situation is very alarming." These are challenging times for the auto industry. For the full analysis and insights, read the full article below. 🔔 Follow AIR Capital- Advanced Investment Research for expert analysis on European equities. #AutomotiveIndustry #IndustryInsights #Finance #EV

Really good visual and discussion by Pieter Demaeght on the challenges faced by most EV only vehicle makers. Major consolidation appears inevitable here, especially if the cost of borrowing remains elevated. Most established automakers EV divisions P/L records likely look fairly similar, and I think is the core reason they aren't excited about going all in on EVs.

Losing ground It’s a rough time for Europe’s auto industry. With the continent’s efforts to compete with Chinese rivals and Tesla in electric cars faltering, German and French carmakers are heading toward a disruptive wave of factory closures. Volkswagen is considering shutting down plants in Germany for the first time in its 87-year history. With car sales still nearly a fifth lower than pre-pandemic levels in Europe, manufacturers including VW, Stellantis and Renault were operating more than 30 factories at levels analysts consider unprofitable, according to data from Just Auto. #economy #thenetzeroeffect.