A third of Europe’s car factories are running at idle speed and that doesn’t bode well

The European car market is not celebrating at the moment, and to be honest, it has been like that for a long time. Firstly because the Covid-19 pandemicthen the shortage of semiconductors, not to mention geopolitical conflicts, including in particular the war in Ukraine which led to the temporary closure of some factories.

A very delicate situation

Although sales then started to rise again, not everything is rosy, quite the contrary. Because registrations of electric cars have been progressing less quickly in Europe for several months, due in particular to the reduction or elimination of purchase subsidies such as the ecological bonus. However, we know that it is the price that still dissuades many motorists from taking the plunge. As a result, demand is plummeting, and factories are no longer operating enough. So much so that Volkswagen is considering closing two of them soon.

The latter has even terminated a 30-year employment guarantee agreement and is now expected to make layoffs. But the German firm is not the only one facing major difficulties, as explained in an article on the American website BloombergThe latter indicates that around a third of the largest European manufacturers such as BMW, Mercedes, Stellantis and Renault are not operating their factories at full capacity.

Actually, they would even be largely under-exploiteddue to insufficient demand. They would produce only about half of their maximum capacity. Among them, we can cite Douai factorywhere the Renault 5 E-Tech is assembled, as well as the Mirafiori plant, which belongs to Fiat and hosts the production of the electric Fiat 500. Sales of the city car have plummeted, with only 20,700 units sold in Europe between January and July.

Annual sales of new cars on the Old Continent remain 3 million lower than pre-pandemic levels. Matthias Schmidt, independent analyst sums up by explaining that ” More and more manufacturers are fighting for a slice of a smaller pie ” According to him, “ Some production plants have to close “And this is obviously not without consequences, particularly on employment. Because these closures risk condemning many employees.

Closures are being seriously considered

And for good reason, you should know that in Europe, the automobile industry counts for more than 7% of total jobswhich represents about 13 million employees. Not to mention the fact that the factories also create business indirectly, by attracting the families of the employees to the surrounding cities. With the threat of closures due to the drop in sales, it is the economy of many regions that risks being directly affected. And This is particularly the case in Germany.where the situation is very tense.

Because it is obviously important to know that a factory that only operates at 50% makes the manufacturer lose money. However, this is the case for many sites, while not all brands are in the same boat. For example, Mercedes is having a lot of trouble returning to pre-Covid levels, while the firm is lagging behind a bit on the electric car. For its part, Volkswagen has abandoned its project of building a new production site across the Rhinesince the manufacturer must make significant savings.

Audi is set to close its Brussels plant following poor Q8 e-tron figures, while Stellantis faces a sharp drop in its profits. But the electric car is not the only one responsible for this situation, which can also be explained by poor strategic choices on the part of manufacturers. Not to mention the competition from Chinese brands, which also risks undermining European companies. Nevertheless, Bloomberg points out that Renault has recently decided to recruitwhile its sales are doing well.