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Continental, Tesla, automotive supplier ZF, Miele, SAP, Vaillant, Samsung, Schenker. Reports of thousands of job cuts at major industrial companies in Germany continue unabated. Entire sites are even being relocated abroad. Why is this happening? What is going wrong in this country? If you want to find out, join us on a virtual journey. Imagine you are the CEO of the Volkswagen Group. No, we don't want to question Oliver Blume, the current CEO of Volkswagen AG. This is purely a thought experiment. And we have chosen an automotive group because everyone knows and understands the product: the car. Most people have one or more at home.
So you are now the CEO of VW. Congratulations! Your company is one of the largest car manufacturers in the world and currently employs around 684,000 people! You generate annual sales of €322 billion worldwide, which is around 72% of the entire federal budget. In addition to the core Volkswagen brand, your group also includes Porsche, Audi, Seat and Skoda, as well as the luxury brands Bentley, Bugatti and Lamborghini. Not to be overlooked are the truck business with MAN and Scania, as well as the motorcycle brand Ducati. Of course, the group also includes financial services. After all, someone has to finance or lease all those cars, because almost no one buys a car with their own capital anymore.
Of course, Volkswagen also manufactures electric cars. These include the VW ID.3, the ID.4 and the electric cars from the Cupra brand, which belongs to Seat. To ensure that its electric fleet continues to be powered in the future and remains independent of competing products, VW is currently building its own battery factory in Nysa, Poland. We have certainly left out some parts of the company. Given the large number of major brands, we hope you will overlook this.
The owners of your globally operating mobility group include the Porsche and Piëch families, the Emirate of Qatar and, with a 20% stake, the state of Lower Saxony. Having the public sector on board gives you a good feeling, because the state will ensure that the legal framework does not get out of hand. Think about it...
Everything could be so nice and simple. If it weren't for the grey – sorry, colourful – eminence of climate protectionists such as Deutsche Umwelthilfe. Until 2024, manufacturers must now comply with the limit of 122 g CO2/km (under the old NEDC procedure, the limit was 95 g/km). For cars with petrol engines, this would correspond to fuel consumption of approximately 4.1 l/100 km, and for diesel engines, approximately 3.6 l/100 km. From 2025, the limit will be reduced by a further 15 %, and from 2030 by another 37.5 %. Do you still want to be CEO?
Unfortunately, people in our country like to drive SUVs. Or other powerful, motorised vehicles. In 1999, VW wanted to establish a 3-litre car called the Lupo. But the project failed at the time. Today, the 3-litre car is commonplace, but not in terms of fuel consumption, rather in terms of engine capacity! We have listed the luxury brands belonging to the group a little further above. Most vehicles of these brands are not necessarily suspected of emitting 95 g CO2/km or less.
But what's the problem? There are electric cars! They can run on 0 g CO2/km. The EU is being generous here and allowing the devastating CO2-Balance sheet for battery production gallantly swept under the carpet. And once again, there is a problem that you, as CEO, have to deal with. The Germans mainly bought electric cars in order to take advantage of government subsidies. And the car manufacturers only invested billions in new plants and production lines because they were confident that the government would subsidise the purchase of the relatively expensive electric cars. However, the €6,750 environmental bonus will be discontinued at the end of 2023 because the finance minister urgently needs to make savings. So: no purchase premium – no electric cars – no compensation for CO2-Replacement of SUVs, luxury limousines and mega sports cars.
To drive a Lamborghini with 495 g CO2 To compensate for this, four Stromer bikes with 0 g CO2, to bring average consumption close to 100 g CO2 But nobody wants electric cars, whereas everyone wants a Lambo. VW is even said to be awash with sales contracts for large cars, with insiders talking about 100,000 units. The dilemma is that VW cannot deliver them, because doing so would result in hundreds of millions of euros in fines for exceeding the legal average fuel consumption limit.
But you are a clever and forward-thinking CEO: VW began producing its electric cars in China a few years ago so that it could sell them at significantly lower prices in this country. Even without a purchase subsidy. A good plan, right?
But this door was also slammed shut in Brussels when the EU decided to impose punitive tariffs on all cars built in China and imported from October 2024 onwards. The tariff on Volkswagen's Chinese electric cars is set to be 21.3%. As a result, electric cars, which are already more expensive than combustion engines, are now gathering dust at dealerships.
The car market has really changed fundamentally. Older readers will remember how we used to play quartet in the schoolyard during breaks. Today, of course, that would be uncool. Is it even possible on a smartphone? Anyway, we played quartet. And sometimes we played with cars. Our star was a cream-coloured 1959 Cadillac Fleetwood – a dream of metal, leather and chrome! Whoever had that usually won the game: 5.70 m long, 325 hp, V8, 6.3 l displacement, top speed 195 km/h – but that was its Achilles heel, because the sports cars in the game were faster and could beat the Cadillac. Awesome. In fact, car quartets still exist today. But the displacement is the CO2emissions. And today, it is the lowest consumption that stands out – no longer the top speed. Why not the range of the battery? Or the proportion of recycled materials?
If you want to lead an automotive group like VW as CEO, you have to cut a Gordian knot. You have to offer competitive cars at moderate prices that can travel as far as possible on a single tank of fuel or battery charge and emit as little CO₂ as possible, or at least very little.2 emit. Of course, you have to generate profits. Your shareholders want to see returns and collect dividends.
And there is one thing you must not do under any circumstances, dear Chief Executive! Even if the legal framework you have relied on changes. Even if no one wants the cars you build anymore. Even if you cannot sell the cars that everyone wants. Even if the Chinese are heavily subsidising their competing vehicles and even building their own ships to transport Chinese electric cars to Europe en masse. Even if shareholders are clamouring for returns that you cannot generate. Even if the trade unions are making wage demands that you can never meet. Even if you can never meet the environmental targets demanded by the EU. You mustn't even think about duping the trade unions. That's out of the question! You know that! If you terminate collective agreements because you can no longer employ all your staff and trainees in view of the slump in business, the media will be all over you. And so will the politicians, of course. Hmm – who held 20 % of VW shares again? Well – do you still want to be CEO of the Volkswagen Group?
Further sources:
https://de.wikipedia.org/wiki/Volkswagen_AG
https://www.zdf.de/nachrichten/wirtschaft/eu-china-zoelle-e-auto-100.html
