VW is at the heart of a protectionist battle; new local content initiative could provide a lifeline but isn’t a silver bullet
Which takes precedence: industry or company? This battle has always been at the heart of policy making when it comes to the automotive industry, and it’s about to get tougher.
We all want car makers to survive. Without the historic names of Peugeot, Fiat, VW, Land Rover etc, there would be no automotive industry in this part of the world. But the interests of individual companies aren’t always the interests of the industry.
Recently this discrepancy has been seen in the fight between unions and the VW Group in Germany.
The company needs to cut costs by shutting plants and reducing its German headcount. Workers’ unions and politicians are pushing back. What good, they ask, is a local industry if it wants to offshore their jobs?
The battle is intensifying amid pressure from China. The likes of BMW, Mercedes and the VW Group have made so much money in China that they’re reluctant to speak out against the rise of Chinese brands in Europe, up to a 10% share in 2025.
That profit fountain is now drying up, though, sparking new fight among European car makers to stay relevant in a fast-changing market.
They know that Chinese car makers represent a very formidable competitor – the industry’s ‘final boss’.
The EU knows this too, and is scrambling to protect its industry from a remorseless rise in exports of ever more competent Chinese cars.
This sets off more conflict, between protection of jobs in Europe versus protection of profits in China.
The EU has put tariffs on Chinese EVs and reportedly is looking at tariffs on PHEVs. The VW Group hates this idea, fearing a backlash in China, but European car makers without big Chinese interests are privately in favour of this protectionism.
However, there’s a better way to boost the industry that doesn’t deny local car buyers the fruits of frenetic competition in China, and the EU is heading down that path with its Automotive Omnibus proposal. Under this, if a company makes a small EV in the EU with locally made parts, it will unlock a host of benefits.
Win-win, right? Not quite. Car makers are concerned this treads on their strategy of sourcing as cheaply as possible. “Local content is good, but if you just rely on local content, you have an issue on affordability,” one senior executive warned.
An uneasy compromise here is far better than the loss of an industry that has sustained generations of European workers, though.
