The German car industry could face widespread layoffs or bankruptcy

Recently, German authorities said that the German auto industry may face the risk of large-scale layoffs or bankruptcy. Germany, as a leader in the field of machinery industry, has sophisticated technical talents in the production of automobiles, and as an "old technician, old master" in the automobile manufacturing industry, why would it suddenly face the risk of possible closure and layoffs?

German automobiles are a traditional industrial power with a century-old history of automobile design and production and a complete industrial supply chain. However, in recent years, with the acceleration of the trend of automobile new energy transformation, Germany's "master" has encountered new problems. Many traditional auto parts manufacturers have encountered operating difficulties recently. Recaro, a German car seat manufacturer that once produced seats for well-known car brands such as BMW, Mercedes-Benz, and Lamborghini, filed for bankruptcy. The once proud supply chain is no longer prosperous, reflecting the multiple challenges faced by German cars in the electrification transformation.

According to data from German consulting firm Falkensteeg Holding, in the first half of 2024, a total of 20 German auto parts suppliers with annual revenues of more than 10 million euros filed for bankruptcy, a year-on-year surge of more than 60%. Some companies have to lay off employees or close non-core businesses in order to reduce costs and increase efficiency.

The fundamental reason for the difficulties faced by German auto parts manufacturers is that, on the one hand, the weak economy and the continuous reduction in domestic production have led to a decline in demand. On the other hand, the wave of new energy transformation in automobiles has also had a great impact on the traditional supply chain. The global automotive field has transformed from mechanical internal combustion engines to new energy electric motors. Compared with traditional fuel vehicles of German cars, the number of parts required for electric vehicles has been greatly reduced, which is a big blow to German automakers.

According to German media forecasts, the number of jobs in the German automotive supply chain will be reduced from the current 270,000 to 200,000 in 2030. This move will greatly weaken the influence of the German automotive industry and cause a large number of people to be laid off.

In 2023, the German government issued a "early termination of electric vehicle subsidies", which triggered a series of reactions. Consumers expressed disappointment and said they would no longer buy electric vehicles produced in Germany. The market trend has further slowed down the pace of Germany's transformation to energy, allowing other brands to quickly replace German domestic cars.

The sales of German cars have been greatly reduced, causing many electric transmission production lines in the German automotive industry that have invested a lot of money to be partially idle. As a result, most parts production companies have suffered capital losses, so there is not enough money to distribute to employees. Now German automakers and auto parts processors are short of cash flow and have production deficits. The market has been taken away by new energy vehicles, and the sales of German internal combustion engine vehicles have dropped sharply, resulting in the low-end configuration and interior decoration of the electric new energy vehicles produced by the country, but the high price makes consumers stay away.

Originally, German internal combustion engine vehicles were proud of the world's automobile field, but they gradually declined under the policy of the German government to cut off subsidies for new energy vehicles. Germany's internal combustion engines will be replaced by new energy vehicles from other countries, and German cars will lose the market. Under the pressure of the new energy vehicle market, the German automobile industry will face multiple economic and financial blows. A large number of layoffs of employees in the German automobile industry will also be a trend, and they may even face bankruptcy.