European Car Makers Face Existential Crisis Amid China’s Rise

Once a vibrant European automotive sector is today seeing a notable fall. Just look at the stock values of the top automakers — Volkswagen down by over 20%; BMW falling over 30%; Porsche seeing a 16%; Mercedes-Benz seeing an 11%; Stellantis facing a dramatic 36%.

How could have this collapse come about? Let’s investigate the matter further. BMW, for example, had to change their profit estimate from 10% to 7%, which immediately dropped their shares by 11%, the biggest single-day decline since the epidemic started. Surely, basic problems are involved here. Two key causes of this dilemma according to experts are a declining demand and a failed gamble on electric vehicles (EVs).

Sales in big European automotive markets including France, Spain, Italy, and Germany have dropped by 16% from year before. Consumers have been discouraged from making big purchases including cars by economic uncertainty including Germany’s technical recession last year, high interest rates, and ongoing inflation. This trend is not limited to Europe alone; even in nations like India, car sales are on a declining spiral with dealers sitting on a stockpile of 780,000 unsold vehicles.

The industry’s problems have also been much influenced by the change towards electric vehicles. Although running expenses are less for EVs, their initial purchase price is much more than for conventional combustion engine cars. Profiting on this pricing difference, Chinese EV companies such as BYD provide…