lThe storm was predictable. It broke on Monday evening with Volkswagen’s announcement of possible factory closures in Germany. A profound cultural shock for a country that has placed industry at the heart of its social model for more than a century. And it is not over yet.
The steelmaker Thyssen is preparing a massive restructuring and, according to Reuters, the American electronics company Intel is expected to present to its board of directors within a few weeks a savings plan that could lead to the freezing or abandonment of its gigantic manufacturing project in Dresden (Saxony). An investment of almost 30 billion euros, including 10 billion in subsidies, to produce the latest generation of chips.
Germany is at the centre of this storm because it is the nerve centre of European industry, but the alarm is everywhere. In the automotive sector, the Stellantis group has been facing the wrath of the Italian government since it announced in June that it was suspending the creation of a battery factory in Termoli, in the south of the country. Industrialists around the world have been folding their tarpaulins for several months in the face of the gathering clouds.
Registrations are down
The causes are known and stem from the global disarray resulting from the health and geopolitical crises of recent years. The rapid recovery from the pandemic has led to global inflation, which has been combated by a rise in interest rates. These have seeped into the economy until demand has been met. But they have also damaged state budgets and their room for manoeuvre. The car market has thus halted its growth, including the electric car sector. In August, registrations fell by 24% in France, compared to a particularly strong month of August 2023. But in July, sales of electric cars fell by 37% in July in Germany following the sudden end of purchase subsidies.
Added to this drop in demand are rising costs and increased competition from China. Energy prices have calmed down, but they have not returned to the period before the gas crisis and the end of Russian supplies, particularly in Germany, where much of industrial competitiveness depended on it. Especially in a context of energy transition that requires heavy investments.
Finally, we must not forget the pressure from China, which is being felt by the arrival of whole shipments of electric cars, but also by the uninterrupted flow of batteries, steel and all kinds of products and components at rock-bottom prices that China’s low consumption cannot absorb. The current storm may pass more quickly than expected, but no one knows what the landscape will be like.
