By Aditi Shah
aditi.shah@thomsonreuters.com
Greetings from New Delhi!
The city of Delhi, in fact most of India, is decked up in lights and flowers as the country gets ready to celebrate its biggest festival this week - Diwali. The mood is joyful as friends and family come together to eat, drink and make merry. It’s like Christmas, but with way more sweets and fireworks.
Travel 4,000 miles (6,437 km) west to Germany and the mood is more somber as the country's biggest carmaker, Volkswagen, plans to shut at least three plants and cut tens of thousands of jobs as part of a massive cost overhaul.
Why?
The pressure is piling on from all sides: high energy and labor costs, stiff Asian competition, weakening car demand in Europe and China and a slower-than-expected electric transition. VW said some of its German factories were not productive enough and were operating 25-50% above targeted costs, making the company less competitive than peers.
Others are hurting too. Ford Motor tempered its full-year profit forecast this week, blaming supplier disruptions and a global price war that has resulted in a pile-up of inventory with car dealers. Hyundai last week warned of slowing demand and intensifying competition, with its CFO saying that the “business environment for the car industry is worsening". And India’s biggest carmaker, Maruti Suzuki, reported its slowest quarterly revenue growth in nearly three years.
The only ones in a celebratory mood, like India, are Tesla investors that saw their wealth increase by $150 billion after the electric vehicle maker’s shares surged the most in a decade last week following Elon Musk’s 20-30% sales growth guidance for 2025 and the promise to launch an affordable vehicle next year.
Which brings us to today’s Auto File…
VW plans to shut three German factories
Musk makes a bold EV forecast for 2025
EU-China to talk more on EV tariffs
VW caught between a rock and hard place
After weeks of a stand-off with its workers over plans to revamp its business and cut costs, Germany’s biggest carmaker is now planning to close three car factories resulting in the loss of thousands of jobs.
While the move signals growing conflict between Volkswagen’s workers and management, the carmaker said it was no longer using this as a negotiating tactic and restructuring was needed to remain competitive. VW said it would make concrete proposals for how to cut labor costs this week.
The closures, being considered on VW's home turf for the first time, are a blow to Germany's industrial supremacy and pile further pressure on the government to act to revive the world’s third-largest economy. It also reflects a broader trend in a country which is seeing its dominance challenged by more nimble and cheaper rivals in key areas, including in the auto industry, its industrial backbone.
Mercedes-Benz and Porsche have also vowed to step up cost-cutting measures after posting profit drops.
And while VW has not revealed which factories will be affected, here are some possibilities.
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Musk’s bold EV forecast
Elon Musk is back on form. At least that is what some of his investors had to say after their wealth increased by $150 billion in a day.
The Tesla chief forecast last week 20-30% sales growth next year and promised to launch an affordable vehicle in the first half of 2025, sending the company’ shares soaring after third-quarter results. The EV maker slashed production costs which boosted its industry-leading margins – giving Musk a rare win at a time when peers like Ford and Hyundai are facing profit pressures.
While Musk has been pivoting Tesla into an artificial intelligence and robotics company with plans to offer a robotaxi, investors were pleased to see he is still “passionate and invested” in the core business of building EVs. At least seven brokerages raised their price targets on the stock.
EU-China to talk more on EV tariffs
The last word on tariffs on Chinese-built EVs in the European Union has not been written.
The EU and China plan to have more technical negotiations on possible alternatives to imposing tariffs on EVs built in China and sold in the region. So far, the EU is set to levy tariffs of up to 35.3% for a period of five years starting next month but has said talks can continue after then.
The two sides have held eight rounds of discussions and are now looking at possible minimum price commitments from Chinese producers or investments in Europe as an alternative to tariffs.
Will investments from China be good for economies or European nations or will that spell more competition for local players like VW and Stellantis?
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(Editing by Emelia Sithole-Matarise)
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