While China is negotiating tariffs on its electric vehicles, Europe is on the brink of running out of electric cars on its own soil. Two legendary manufacturers have announced their unexpected closures. In fact, Europe is not experiencing its best moment in terms of sales. In August, it recorded its worst figures in the last three years, with an 18.3% decline and just over 640,000 cars sold.
Sales of all vehicles, except hybrids, have decreased, leaving petrol, diesel, and plug-in cars in a precarious situation. Pure electric models have suffered a sharp decline of over 40%. Meanwhile, the market for used models continues to grow, along with their prices. With 643,637 cars registered, it marks the worst month since sales began to improve in 2022, according to data from THAT, the European manufacturers’ association.
The key markets of Europe have reported some alarming figures. For example, Germany experienced a decline of -27.8%, France recorded -24.3%, and Italy saw a -13.4% drop. Spain has also seen a decline, although more modestly, with new vehicle sales down by 6.5%.
What’s happening in Europe? It could run out of electric cars
Volkswagen (Germany) is considering the possibility of laying off 15,000 employees, while Dacia (Romania) plans to lay off 11,000. The automotive industry is experiencing significant turbulence in Europe, as both companies are starting to implement historic staff cuts amid the decarbonization process. The Germans have earmarked between 3.4 and 4 billion euros for their restructuring, primarily focused on Germany.
This plan anticipates a reduction in demand in the coming years, which will likely lead to the closure of two or three factories along with the layoffs of around 15,000 workers. This scenario is a major setback for Volkswagen, as it will not only result in significant job losses but will also halt the production of between 500,000 and 750,000 units annually.
Oliver Blume, CEO of Volkswagen, states that one of the reasons for this decision is the intense competition from Chinese manufacturers. Another player resisting in the current landscape is the Romanian brand Dacia, which is part of the Renault group. The company has confirmed that it will begin a staff adjustment process in October, which includes early retirements and the layoff of 11,000 workers, representing 8.5% of its total workforce across three factories.
Dacia aims to trim its workforce in areas that are becoming automated and digitized, as well as in sectors experiencing a decrease in activity. The company anticipates a significant reduction in demand in the coming years without a planned transition to electric models.
Europe is facing challenges with its electric cars
A transformation that Dacia wants to initiate at its Romanian plant is pending approval of a new state aid of 7.4 million euros for modernization, which will total 17 million euros. The company asserts that the European context is conducive to a further reduction in emissions limits by 2025.
Furthermore, Luca de Meo, the general manager of Renault, recently warned that the European automotive industry could incur fines for excessive emissions that could reach 15 billion euros. These fines are linked to the reduced demand for its electric cars and the delayed consumer adoption of hybrid models.
These factors, combined with the threat posed by Chinese trade, place Europe in a precarious position in the electric car market. This situation is compounded by the fact that a European country is on the verge of banning electric vehicles.
Europe’s Electric Vehicle Crisis: The Looming Challenges
As China seeks to negotiate tariffs on its electric vehicles, Europe is facing an alarming situation where it might run out of electric cars on its own territory. Two legendary manufacturers have announced unexpected closures amidst a drastic decline in vehicle sales, marking a significant downturn in the automotive market.
Current Sales Trends in Europe
August brought distressing news for the European auto industry, as they recorded their worst sales figures in three years, with an 18.3% drop in sales and a total of just over 640,000 new cars sold. The decline was especially pronounced for pure electric models, which plummeted by over 40%.
Declines Across Various Vehicle Categories
- All vehicle sales are down, except for hybrids.
- Petrol and diesel vehicles are also struggling in the market.
- Used car sales are on the rise, alongside increasing prices.
Alarming Market Figures
The significant markets within Europe are showing concerning trends:
| Country | Sales Decline (%) |
|---|---|
| Germany | -27.8% |
| France | -24.3% |
| Italy | -13.4% |
| Spain | -6.5% |
Major Manufacturers’ Challenges
Volkswagen (Germany) is evaluating a plan that could lead to the layoff of approximately 15,000 employees, while Dacia (Romania) is looking at reducing its workforce by 11,000. This automotive turbulence is aggravated by the ongoing decarbonisation process.
Volkswagen’s Economic Strategy
Volkswagen has earmarked between 3.4 and 4 billion euros for restructuring, which includes the potential closure of two to three factories. This will result in a reduction of annual production by 500,000 to 750,000 units. Such layoffs represent a significant challenge for the company, as they face intense competition from Chinese manufacturers.
Dacia’s Restructuring Plans
Romanian brand Dacia, part of the Renault group, plans to adjust its workforce as part of an early retirement strategy and layoffs affecting 8.5% of its total employees across three plants. Dacia aims to automate certain sections and reduce headcount in response to decreasing demand.
Europe’s Automotive Transformation
Dacia is undergoing significant transformation at its Romanian plant, vying for state aid of 7.4 million euros to fund modernization efforts, which will ultimately total 17 million euros. The backdrop to this transformation is the expectation of further emission reductions by 2025.
Governmental Pressure and Environmental Policies
Recently, Luca de Meo, the general manager of Renault, cautioned that Europe’s automotive industry may face up to 15 billion euros in fines due to excessive emissions resulting from a lag in electric vehicle demand and slow consumer adoption of hybrids.
Impact of External Factors on the Market
The competitive landscape is becoming increasingly strained not only by internal factors but also by external threats such as the emergence of Chinese manufacturers. These developments are complicating Europe’s position in the electric automotive market.
Consumer Behavior Shifts
The challenges faced by electric vehicle manufacturers in Europe are compounded by shifting consumer preferences. As used cars gain popularity, manufacturers must adapt to meet evolving market demands while ensuring that new vehicle production aligns with sustainability goals.
The Future Outlook
To navigate these turbulent times, European manufacturers must undergo significant transformations that not only address production efficiency but also align with consumer preferences for greener, more sustainable transportation solutions. A focus on hybrids and innovation in electric vehicle technology will be critical for surviving this period of economic and competitive strain.
