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Job Cuts at Volskwagen, electrics....

A Horse With No Name

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Volkswagen’s Human Resources Chief (and a member of the company’s top management board), Karlheinz Blessing, recently made an interesting comment on that subject. He noted that he expected a shift to electric vehicles to result in up to 25,000 job cuts over the next decade. (To be extra clear, this figure relates only to Volkswagen.)

Notably, Blessing did also claim in the interview with the Frankfurter Allgemeine Zeitung newspaper that there would be no “forced dismissals,” but rather that positions would only be cut as older employees retire.

That last bit reveals something important about the earlier points. It’s probably unthinkable politically at this point to publicly state that Germany’s auto industry may well be forced to downsize over the coming years.

The simple fact, though, is that electric vehicles are much simpler than internal combustion engine (ICE) vehicles. Most of the proprietary elements of next-gen electric vehicles will be software based, with battery technologies and drivetrain technologies making up the remainder.

Where does all of the technical know-how accumulated by German auto manufacturers over the last 100 years fit into this? Probably not at all. That’s the issue.

I suppose that you could argue that the German firms haven’t been on the top of their game for quite some time (reliability problems, drops in market share, etc.) and that they have largely been trading on name value, status association, and brand loyalty. That being the case, how long can they maintain their current position? Judging by the rate at which Tesla has swallowed market share since the launch of the Model S, I’m guessing they can probably only do so until an obviously superior competitor appears on the market, which will probably be occurring in the 2017–2018 timeframe as the Tesla Model 3 hits the market.

To be clear about that last point, it may well be the case that German auto manufacturer sales remain solid in Germany itself, but if sales in the rest of Europe, the US, and China dip significantly, then the companies in question are going to be in a very bad situation. Models like the BMW 3-Series are cash cows, with high profit margins. The companies can’t stand to lose significant market share to the Tesla Model 3 in markets as big as the US — not without facing existential crises anyways.

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