“The industry is sinking into crisis.” Mercedes, Volkswagen and BMW are already feeling the impact of China on their car sales

When we want to take the measure of the progress of the electric car, we look at Tesla’s results. When it comes to knowing How is the European motor industry doing? We look to GermanyAnd it is not doing too well according to the figures for the first half of the year. Partly due to the disappearance of aid for electric cars, which has slowed demand, and due to Chinese competition.

In front of an earnings season described as “disappointing” We find Volkswagen and Mercedes-Benz. “The automotive industry is sinking deeper into the crisis,” says the Institute of German IFO research.

China, overcapacity and high costs form a bitter cocktail

According to the IFO, industry capacity has fallen to around 78%, nine percentage points below the long-term average, as carmakers such as Volkswagen cuts production at high-cost factories. And they do not expect an improvement in the coming months. According to data collected by Autonews Europethe business outlook for the German automotive industry deteriorated in July to -18.3 points, compared with -9.5 points in the previous month following very tepid financial results.

Volkswagen’s sales have fallen by 11% in the first six months of the year, and Porsche’s by almost 20%. The German consortium’s profit margins They’re falling due to restructuring costs and are relying on upcoming launches to achieve their goals.

Audi sales also fell by 17% and Mercedes by 12% in the first half of 2024. In fact, Volkswagen recently warned that it could close the Brussels plant of its luxury brand Audi due to a sharp drop in demand for high-end electric cars, ending production of the Audi Q8 e-tron.

BMW saw its profits fall 9% in the second quarter due to declining sales in China, a market hit by a severe property crisis. The same for Volkswagen, which fell almost 20% year-on-year as domestic EV makers such as BYD continue to launch longer-range, lower-priced electric cars. The company attributed the drop to a “highly competitive environment.”

And there is more of this slowdown in the Western automotive sphere. Production overcapacity and delivery delays are being felt at major groups such as Stellantis, which is facing months of delays on key models such as the Citroën e-C3 or the e-3008 due to delays in final software checks for use in mass production or a lack of components. And its first-half net profit has been halved amid plans to cut staff.

It remains to be seen whether traditional manufacturers can weather the storm before their financial statements take a real hit.