German car industry faces ‘day of reckoning’
Financial Times, 11/25/2020
Days later, Mercedes-Benz owner Daimler and Volkswagen’s Audi brand announced more than 20,000 job losses, in the first real signs of the huge human cost of the sector’s transition from combustion engines to electric vehicles.
“The auto industry is in the midst of a far-reaching upheaval,” said Volkswagen chief executive Herbert Diess, whose company is seeking to reinvent itself as a world leader in battery-powered cars.
“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.
It is estimated that the German car industry, which directly employs 830,000 people and supports a further 2m in the wider economy, will be forced to plough some €40bn into battery-powered technologies over the next three years.
“In this industry you can only cut jobs in a crisis,” he added. “Deep down, they all know that. They all know they’re going to have to, they are just trying to postpone the day of reckoning.”
When staid, and pro-auto publications like the FT start talking about massive job cuts in Germany’s auto industry, things are looking dire indeed.
Here is the key point of this article, in my opinion:
The market for petrol and diesel engine components will decline at 7 per cent a year, according to a recent McKinsey study.
If the market for ICE is going to decline by “7% a year”, it follows that gasoline/diesel would likewise decline in the EU market. This is an existential crisis for the oil industry in that market. A crisis I expect they will not take lying down.