Europe's car makers are in crisis. Will the threat of war rescue them?

Europe's car makers are in crisis. Will the threat of war rescue them? European automakers are confronting a severe downturn as the reliable stream of profits from China dries up and domestic rivals from China gain ground, all after heavy investments in electric vehicle production that have not yielded the anticipated sales growth. Executives acknowledge they have struggled to match the low‑cost production and rapid development pace of Chinese competitors. The consequence is a scramble to cut expenses while grappling with overcapacity in plants capable of building far more vehicles than the market demands. Volkswagen has already announced a plan to trim 100,000 jobs in the coming years. Once unthinkable, plant closures in Germany are now underway; the company has shut its Dresden facility and may close four additional sites, including the Zwickau plant where more than €1bn (£857m) was spent retooling assembly lines for EVs—a project finished just four years ago. Industry analysts estimate that Western European car factories possess roughly 2.5 million units of annual spare capacity. It is hardly surprising that manufacturers are eyeing the continent's rising defence budgets. Sigrid de Vries says car makers are good placed to assist Europe rearm. "Many of the capabilities that defence needs are needed for and besides delivered by the automotive sector," she says. "So automotive manufacturers and suppliers have concern assets, they have manufacturing expertise, logistics capabilities, besides precocious technologies. They have immense and besides precise integrated proviso chains that whitethorn beryllium applicable for Europe's broader defence preparedness objective." But it is not that elemental – information protocols, governmental and economical rivalries wrong Europe positive the information that unless you're really astatine war, the volumes volition not regenerate the wide user market, each of which contiguous challenges, she says. ""These are 2 precise antithetic worlds," she says. "Governments privation to put successful their defence capabilities and that is wherefore it's now, much than ever, absorbing for manufacturers and suppliers to spot what's possible, but it volition not beryllium capable to code the underutilisation of manufacturing capableness we presently see."""